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all right everybody welcome back to the number one podcast in the world the Allin podcast with me again today jamath
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poaa your chairman dictator how you doing brother how you feeling doing great Fresh Off The Holiday Spectacular
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oh good times and then uh getting ready for a little ski you and I will be doing
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a little skiing together with Friedberg that'll be quite nice freeberg I don't think you've skied
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with me and Jason Jason is an excellent skier I mean I've heard his for have I you Jason I don't think I have his
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brother is excellent too they're both Josh the black bomber is good yeah yeah shout out to Josh the black bomber it's
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gonna beas's got those hips he's got he's got skiing hips they kind of shift left right right yeah child it's kind of
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like when I the hips are wider than the shoulders yeah it reminds me of I went to the Tom Ford uh out I went when I
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went to Tom Ford to get my suit I'll do that in just a second but with us again of course you're cackling Sultan of
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science freeberg how are you doing have you guys seen that clip of the guy with the fake bum that runs around the city
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yes with security guards it's like some sort of a crypto put on or something it's hilarious this guy he's got like a
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big Brazilian butt and he just runs around in tight Tac you find a clip of this guy oh my God it's so ridiculous so
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funny all right with us the cackling with his afterlove from the Holiday Spectacular let's call it what it is
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it's the Christmas Spectacular we're going to pick a side freedberg how did you like our Christmas why are you being
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anti-semitic bro how dare you how dare you you can have the Hanukkah special with your two specials and now with us
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in The Red Throne it's fit Sachs it is stylish Sachs it is goes to work every day in Venture Sachs his name is Keith
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raboy how are you my brother welcome great great Jason thanks happy to be here you know it's great being more fit
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and more fashionable with socks is a pretty low bar yes so I'm really excited to drill
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[Music] let your winners [Music] ride and instead we open sources to the fans and they've just gone crazy with it
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queen of and as we love about you you've got a little American exceptionalism Supremacy
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dare I say you don't f with dictators that's true you with them yeah I don't really love dictators they're not good
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for society they're not good for America but you know it's not always America's job to fix all of that all right well
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listen what about running companies should company CEOs be dictators Yes actually um so I believe in the founder
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mode the Brian chesky founder mode I held a conference in New York recently that Brian was nice enough to speak at
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called hiring the art of hiring for founder mode so specifically for people who subscribe Founders that subscribe to
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that view how do you hire people and how is that different which you would hire in a standard you know monstrosity of a
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company like Google or something yeah good founder mode in New York by the way just history if I remember correctly
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lots of good founder mode in New York J do you want to give Keith's background the of course went to Stanford with the
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boys saaks and Peter teal went on to do PayPal he had a stinet square he started
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a bunch of other companies Founders fund he work he worked he he went to LinkedIn
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that's how it all started LinkedIn was pretty key like re left PayPal started LinkedIn I joined him so yes that's true
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and then after that I went back with back stion from PayPal days to slide which is on the as of History we don't
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have to talk about that but then uh I did jump into square as the 20th employee and helped build a pretty good
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company yeah and then Founders I got Lac you know became lazy you know decided to be VC in 2013 spent six years
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at Coastal Adventures five at Founders fund the last year almost last year now before we jump in I actually have a
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question for you starting already how does that happen Keith how do you you're at Founders sorry and then you
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get what like what pulled you to go and work with v note and then what pulled you back like how does that process work
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because these things are typically meant to be sort of forever jobs that's true so I you know had the benefit of having
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the note on the board of square which I think is typically how Executives uh wind up turning into VCS is you forge a
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relationship with board members so like for example Roa B who runs tooa had Mike
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Mor on his board roaf was our CFO at PayPal and Mike recruited him so that's a very common same thing Ravi at Sequoia
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today was the COO and CFO of instacart again same thing Mike recruited him into scya so I think that's typically uh how
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people become VCS I always knew I wanted to be a VC since 2003 I was a very active inial investor as you know even
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when I was was you know concentrating on all these other jobs I was writing a lot
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of checks and so anybody who's writing a lot of active Angel checks probably has
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in the back of their mind one day I might want to be a professional investor we could talk about the merits or
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demerits of that but like the goal was pretty clear in my mind and then at some point I think you have to make a
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decision what do you want to be in life um you know venture has long time Horizons it is a job for life like 15 20
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years is pretty much what you have to commit to so you don't really want to start Venture when you get to old
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because 20 years you know you'll be like Donald Trump age yeah so I can run for president I can run for president in 25
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years or something Keith why did you leave Founders fund to go to kosa so kosa was great I spent six years there
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the truthful reason why I left it's kind of funny given covid and how history changed is I hated commuting a sa Hill
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Road every day we were one office period in office every single day and I felt like the future of investing was more in
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sanan Francisco than in paloalto at the time and I just despised sitting in a car 45 minutes each Direction turns out
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you know Co changed everything how people do their work like we're recording this by Zoom before covid we'd
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probably all be in the same studio recording a podcast like this and so but the node and the team was very
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inflexible about it and Founders phone was located in the city obviously I knew Peter since College as Jason alluded to
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and I decided that you know it was better for me I remember talking to Sam Alton
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and I said am I crazy for changing funds mostly on a commute basis and Sam said you're human and every single study of
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human happiness is it's inversely correlated to your commute time it's like there's nothing wrong with being
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human in any event there are a lot of similarities between FF and KB both are great funds that have put up you know
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incredible returns have funded iconic Founders and companies but they're very different KV is involved as early as
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possible and FF is a momentum investor and is maybe the best in the Planet as at being a momentum investor so almost
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every successful investment of Founders fund over eight funds was invested at $500 million or more in true valuation
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and almost every single investment at KV in eight funds was like the seed or series a investment with very few
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exceptions ever and so andreil and ramp were the only exceptions at Founders fund and at KD The Only Exception would
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be stripe which I led in you know 2013 or so which is an order of magnitude higher valuation than any KV investment
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initial investment ever so KV is much more an input driven organization Founders funds much more output driven
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and you know there's great technology companies that are input driven think Amazon apple and there's great
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technology companies that are output driven so you can choose but certain people are going to be better in some
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environments and other people are going to thrive you know in other environments
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i f in really really well at KV you enjoy the early stage you enjoy year zero year one year two
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I'm very good at it you know I think I prefer to invest as early as possible on a keynote deck only like if I meet a
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founder and there's a keynote deck there's no product there's no metrics that's my sweet spot because I also know
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nobody else in Venture is good at that nobody else is still active in Venture what's the secret what's the secret from
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a key note to a check it comes out a Founder assessment at the end of the day the only data point is is this founder
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capable of building an iconic company period And I prefer to compete when there's no metrics because you all the
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metrics are going to do is confuse you that said there's a lot of investors who are very good once there's product
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metrics Financial metrics and so I have to compete with people who are pretty good at what they do so I'd prefer to go
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as early as possible and then secondly I like companyb building like I think part
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of my role is to help the founder increase the amplitude or probability of success and I enjoy that at FF that's
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very controversial yeah ah right yeah the founder Reigns Supreme and everybody else is there to get out of the way
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right yeah I've had both KV and FF as investors lead investors in both climate and at ohal now so I know both firms
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really well and it's really I always people always ask me about the difference between the two that's always
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what I get to it's like Founders fund they have this kind of Mantra they find great Founders and just get out of the
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way let them run and they don't want to be helpful that's not their objective they feel like if they have to be
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helpful it's not the kind of founder I mean Keith obviously speaking outside of yourself and then at kosla as you know
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venod has been extremely and and the whole team there especially climate and always have always been extremely
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helpful so adding board members introducing commercial Partners being like very traditionally proactive
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participatory VCS on the board very different both very valuable when I had a board issue at Founders fund and there
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were some board members that did not like my strategy had issues with what I was doing with the company at climate
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Corp at the time Founders fund actually stepped up and protected me and they got
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the board the rest of the board together to protect me uh in a way that was like
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actually at a very kind of crucial moment for the for the business and as a result we had a massive exit
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within a year I saw Brian singerman uh is leaving so does anybody know which ambassadorship he's taking I mean the
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timing's a little interesting is it not I don't know he's go compete with our friend Kenny Howry yeah Ken Howry where
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is he off to next hope hopefully some great destination I'm sure I know we can all crash yeah something warm this time
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okay Sweden's a little bit much swed I'll send in my wish list for you yeah let's go like maybe like is there like
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Turks and caos or something what about an embassy tour we should do an embassy tour this year St Barts do they have an
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embassy there St Barts yeah that's a great idea they don't unfortunately it's a French protectorate but well you know
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what everything's on the table now we could make them the 51st second third or fourth state I mean we're in the game
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right now Canada is coming on board did you not want to roll uh in the administration yourself no you know the
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than you I love politics if you you know follow my Twitter feed I pay a lot of attention I used to be involved in
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politics before I got into TCH however what I realized about where I am in my career in Tech is if I stop doing what I
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do I'm never going to come back like technology is rapidly emerging we're going to talk about all the latest
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developments this week like you can't take your foot off the gas and the network building parts of venture for
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two to five years and come back when you're like 50 years old and so I felt like I'm not ready to give up on Venture
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I'm in like the prime of my Venture career I'm only 12 years in actually chth so figure five 10 more years like
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is is The Sweet Spot and so I'd like to see the companies I was involved in grow
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up become public companies Etc and I didn't feel like I could ever come back if I quit at some point when I like to
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get involved in politics probably yes but it's a decade out well the household's involved uh big announcement
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your husband Jacob is joining the administration maybe you could tell us a little bit about that obviously very
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proud of that yeah it's extremely exciting for him obviously for the country I think which is he's going to
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be the chief economic officer really for the for the for the country his job is to build foreign policy from the
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business standpoint which if you think about it what's the foundation of power in the world it's economic success why
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did the United States win World War Two is we had an economic Engine That Could outcompete Germany plus Russia plus
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Japan we could build more tanks you know blah blah blah blah Etc and so the economic engine is critical to this
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Administration obviously Trump understands that we had a great three years under his first Administration as
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he likes to say best economy ever before covid which may you know may be true and
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we need to rebuild American strength and Jacob's job is to export that you know philosophy and sometimes you can build
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economic strength through working through Foreign Affairs and so that's his main job is to be the primary Point
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person under Secretary of economic Affairs and then they've got a bunch the Democrats and
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the W people added a bunch of other things to the title it used to be just under Secretary of State for economic
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um and they added like a you know environment and all these politically correct things so hopefully they'll
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subtract all that stuff and just go back to under Secretary of State for economic
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Affairs and interestingly what what's turning out to be interesting as Trump assembles this group I love to get the
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panel's thoughts on it is not everybody thinks the same Jacob's position on Tik Tok which we'll get to in this show very
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different than some other people in the administration and even Trump himself flip-flopped a little bit on that so
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what are your thoughts as we get started here just on that assembly of people you know
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including saxs obviously who couldn't be here this week but we'll be on future episodes there's your announcement folks
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what are your thoughts on that the sort of diversity and opinion in the administration and how that all sorts
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out because some people exem exciting I think it's very obvious watching from afar that the way Trump makes decision
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is he likes to ask a lot of people a lot of different questions and then he makes
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the decision that's why to some people the media enem is very unpredictable is he doesn't just take
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one source of input and so you can never totally predict the output but he arrays
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an interesting cast of characters and listens to them like so for example I haven't spent that much time with him
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but in so far as I have he would go around the room and ask every single person a dinner what's your view on act
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and literally go around the room of 28 people and listen to every single person so I think that's how he makes decisions
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X being a topic not the website X not X yeah everybody knows what op I think he likes X chth any thoughts on this um The
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Wider team as we see it get assembled we obviously don't have saxs here he joined
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the team but just your thoughts on the collection of characters and Executives here's an interesting tweet that I saw
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Nick can you just share it with the with the guys oh net worth of each one now the reason why it was interesting to
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me was not the net worth per se but I think this is the first time that I can remember in modern history at least that
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I've been in the United States and following us politics where such an enormous number of business people have
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been motivated to come and work inside of the administration and I think that it creates this very interesting
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contrast and compare I think that the Democrats would never have assembled a group of people like this even though
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the Democratic party has a version of this chart that they could have made there's a lot of extremely talented
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business people that support the Democratic party the problem is that they believe it's deeply
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unfashionable to get strong competent business people to take a pause in their business career and come work in
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government and you almost look down on people that are successful whereas the Republican alternative Here If it
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creates a movement so to speak so that subsequent presidents tap folks on the shoulder I think we'll be much better
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off and the reason is pretty simple I think that the United States economy is too complicated to be managed by
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theoreticians by folks with random phds in absolutely no working experience in the real world and when you bring those
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people in to oversee those phds I think you probably get better outcomes so I hope this becomes a standard which is
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ask these very talented clearly demonstrated successful people with judgment to hit the pause for a year or
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three or five whatever it is step into government help the country and then go back and this was what the founding
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fathers Dave actually prescribed this is what they wanted they wanted people who
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were in business to do a tour of Duty to serve their country and then to get out
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they were not interested in career politicians correct I've said this a number of times but of the founding
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fathers had jobs had professions and they stepped in to serve their country as a civic duty participated in the
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process of executing the the responsibilities of government and then stepped out and went back to their
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private lives I think it is such a more powerful model for government than people who choose to to be politicians
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to represent people as a living because it creates extraordinarily nasty and incentive structures if that's the model
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which is for example to Curry favor With Private Industry participants and then go cash that favor in after you leave
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and I think that this alternative where you have people who are everyone looks at them oh they're all billionaires and
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so on they're actually as because they're independently wealthy and they have enough money than they'll ever
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spend I think Larry pagee once said you can never spend more than a billion dollars in your life no matter how hard
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you try it's literally impossible people think like oh you could spend all that money actually when you buy stuff most
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of the stuff you buy are capital assets that you end up selling later it's very hard to spend at that level so when you
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have people that are truly independently wealthy their motivation is actually quite different than someone who's
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trying to make it from 100K to 500k of net worth or 50k to a million of net worth and I think it actually creates a
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higher degree of freedom and it aligns the people much more in the long-term outcome of government rather than their
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own personal interests and they're just smarter so I'll give you a a simple example maybe we'll talk about this
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later jcal I'm not sure but when I saw the doj's theoretical guidance on the Google antitrust
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matter their idea is to divest the browser and I kind of scratched my head thinking would any reasonable business
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person think that that was the right remedy meanwhile three weeks later Google's like here's a super chip in
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Quantum Computing here's a Quantum Computing that breaks the world yeah and thought how is it that these folks are
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so disconnected from reality that they don't understand what's actually sitting inside this company and I think it's in
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part because they don't know the right questions to ask and the reason they don't know what the right questions to
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ask is they've never worked in the real working world we have a professional class of politicians and and their
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understanding is 10 years old but it's not just politicians this is also bureaucrats so my point is these folks
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need to get off the sideline and work in a company for a while know the ballot they'll be much better able to guide
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these Regulatory Agencies if they actually just know what's going on so if the right answer is some
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antitrust issue with a company where you need to divest wouldn't it be great where like a 100 smart businessmen
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looked at that said that makes sense but let me give you the counter to that jth
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because the counter to that which it comes up a lot just so you can like frame the response is why are all these
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people coming out of Pharma companies to regulate Pharma why are all these people
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coming out of big a companies to regulate big a why are all these people that come from energy companies coming
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to regulate energy the common refrain is business people are basically bringing business interests into the government
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by transporting themselves into these regulatory bodies versus having career politicians or what you call bureaucrats
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be kind of independent regulatory authorities so what's the response in that context to that that refrain
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they're absolutely right and that's how it should work the United States can no longer afford to be a bleeding piggy
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bank for bad ideas so yeah like if a bureaucrat thinks the right thing to do is to divest a random browser to fix
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Google's monopolistic Tendencies that's not a remedy or spend tens of billions of dollars on a super on a high-speed
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rail like you were talking about earli this week this is not logical it's not meaningful it's misguided so if what we
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want is kindergarten soccer where everybody gets to touch the ball that's what we are getting right now which is
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it's not useful so I would rather have a business person with a direct point of view and by the way with the level of
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transparency the big issue I guess fre Brook that that would create is could these people Advantage themselves
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somehow to make more wealth but the reality is that would be so obvious and laid bare what happens today is they
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burrow at this midlevel of an organization and they do exactly this but it's not laid bare yep so I'd rather
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be a transparent where some guy tries to take the government for $500 million and
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we castigate that person than what's happening today which is you slip in the back door you get paid four 500 Grand
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from a company then you come back to the government then you go back nobody knows
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who these people are Nobody Knows the decisions they're making and they're altogether misguided because they're not
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grounded in an understanding of the real economy Keith where do you fall yeah well I share actually you're both right
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in some ways if you look at what who's Trump's picked these successful people they're not typically being assigned to
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Industries they came from so it's not like he's taking drug you know he's actually taking the opposite like think
00:22:09
of RFK for example so actually I think you can take successful people who have proven
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themselves through Merit like I think what that's one of the other benefits of the real world is the only way you get
00:22:21
ahead is you're in a darnis experiment with other people that are comparable and to be successful you have to out
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think outwork Etc and that shows up ultimately in promotions and net worths and various other metrics so Trump has
00:22:36
taking a lot of successful people and I think we want a society where we Aspire for our kids to be successful we want to
00:22:42
emulate successful people that needs more that will yield more success like having Elon involved in the government
00:22:48
will yield more success than you know if you penalize successful people you'll get you stigmatize it you get less of so
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I think if you transplant successful people into industries that they're not from and that they have no interest in
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going to after the government you might get the best of both worlds because I can see some of the critiques of you
00:23:06
know you're regulating you know your friends companies and you're going to make money later that said most of
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Trump's people are not going to do that you can also pass laws like you know you
00:23:15
can't Lobby you can't work for for X years after there's also this great data point I think it's in the last 60 years
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Trump is the only president whose net worth went down after office every other president that you know took a
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relatively modest net worth or mediocre net worth and turned it into the stratosphere so you think about the
00:23:34
president as the you know signature example it's great that Trump like is setting the opposite illustration well I
00:23:41
mean we've discussed this on the other pod Keith a couple of times which is domain expertise can be an ankle for a
00:23:48
Founder you know you got a founding team that works in the hotel business they're
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going to look at something like Airbnb and say this will never work you got somebody who worked in transportation
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they're going to look at Uber and say that'll never work look at PayPal if they worked in finance and they did say
00:24:00
to you and the team that's never going to work yeah I mean I think it's critical
00:24:06
adventure to not really fall for that trap I always mention that I don't like people with um expertise typically as
00:24:14
Founders uh I think and when I call Dil due diligence and call experts I only ask one question which is what is
00:24:21
metaphysically impossible about this working like is there a law of physics that I don't understand that makes this
00:24:27
actually possible and if they can't isolate a very specific principle that makes it or fact that makes it actually
00:24:34
impossible then I just ignore everything they say and you know write a cheat yeah
00:24:39
because it it's just all Vibes and opinions Etc so well they're experts in a prior world right they've learned why
00:24:44
not and this is actually like to combine a couple topics here the reason why Trump is so effective so the most
00:24:49
interesting question to me over the last year was how is this guy who everybody in the media and everybody in you know
00:24:56
the legal groups of various things is trying to attack and hatte and all these people publish these you know books why
00:25:02
is he on the price of being elected president of the United States twice you must have a superpower or two most
00:25:07
people do not get elected president of the United States twice and most of the people who are attacked by everybody who
00:25:12
has power in the establishment definitely do not get elect the president so what it come came down to
00:25:17
and I interviewed a lot of people who are critics of him but knew him well like ex-cabinet people that don't like
00:25:21
him comes down to he just asks a lot of why like why do we do this why do we have to do it this way why have we done
00:25:28
this way and it turns out in politics and in DC most of the answers are pretty mediocre or weak or poor or haven't been
00:25:34
rethought for 20 30 40 50 60 70 years and so he just constantly Dives in and says why why why why and that's actually
00:25:41
what predicts success for Founders is in a domain they don't know anything about
00:25:45
they're just like why why do we take these Hotel things for granted in the Airbnb case why should they be so
00:25:50
expensive why should scarcity you know Prevail in New York for four months of the year etc
00:25:55
etc all right let's get to our docket we got a ton of stuff to get to Google's new Quantum chip is super impressive
00:26:02
freeberg and I were talking about that on the group chat on Monday Google announced its latest Quantum chip it's
00:26:08
called Willow here's the chip if you haven't seen it it's uh beautiful it was fabricated in Google's new chip plant in
00:26:15
Santa Barbara they started this project back in 2012 their Quantum Computing project
00:26:20
and the headline basically is Willow performed a standard Benchmark computation under five minutes that
00:26:25
would have taken today's fastest Supercut 10 septian years or 10 to the 25th power which is billions of times
00:26:32
older than the universe if you don't know what Quantum Computing is freeberg will expand on it but basically
00:26:38
computers are binary you've heard this before one and zeros quantums use cubits you know those are Z1 or both at the
00:26:44
same time and uh Google got a a 5% pop they're up 13% in the last 5 days probably on the other news that Gemini
00:26:55
2.0 is out as well which is unbelievable have been playing with it what do you think freedberg of this big announcement
00:27:03
Google's announcement is a paper published in nature that follows a pre-print they
00:27:09
actually put out in August so this news has been out for a little bit there's obviously a press cycle this week around
00:27:13
it to kind of make a big thing about it but it is a very kind of important milestone in the evolution of quantum
00:27:23
Computing so do you want me to kind of talk about Quantum Computing again I think we've talked about this in the
00:27:27
past I mean maybe a brief primer for people but like what what does this mean practically I think what people want to
00:27:33
know is when did these things actually have an impact in the way say nvidia's gpus have had yeah the big breakthrough
00:27:40
here is that the whole basis of a quantum computer is called a qbit or Quantum bit it's radically different
00:27:47
than a bit a binary digit which we use in traditional digital Computing which is a one or a zero a Quantum bit you can
00:27:55
kind of think about it as a wave function it's sort of a Quantum state of a of a molecule and if we can contain
00:28:04
that Quantum State and get it to interact with other molecules based on their Quantum State
00:28:11
you can start to gather information as an output that can be the result of what we would call Quantum computation and
00:28:19
that sounds complicated but what it really means is that instead of doing kind of binary computation where we're
00:28:25
adding numbers together or doing kind of other traditional arithmetic there are really interesting
00:28:30
functions you can do with cubits cubits can for example be entangle so two of these
00:28:38
molecules can actually relate to one another at a distance they can also interfere with each other so canceling
00:28:44
out the wave function and then when you read it out you get a a result that is basically a very very complex problem
00:28:52
that is solved through this Quantum interpretation it's really hard to of highlight how different this is from
00:29:00
traditional Computing so Quantum Computing creates entirely new opportunities for algorithms that can do
00:29:06
really incredible things that really don't even make sense on a traditional computer they're not possible to kind of
00:29:11
resolve on a traditional computer and sorry let me just State one thing the quantum bit needs to hold its state for
00:29:18
a period of time in order for a computation to be done and so the Big Challenge in Quantum Computing is how do
00:29:24
you build a quantum computer that has multiple cubits that hold their state for a long enough
00:29:30
period of time that they don't make enough errors that you can actually do a computation with them so what Google was
00:29:37
able to demonstrate here is they created these call it logical cubits so they put several
00:29:44
cubits together and by putting several cubits together they were able to kind of have an algorithm that sits on top of
00:29:49
it that figures out hey this this group of physical cubits is now one logical Cubit they balance the results of each
00:29:56
one of them so each one of them has some error and as they put more of these together
00:30:00
what they were able to demonstrate for the first time ever is that the error went down so when they did a 3X3 Cubit
00:30:07
structure the error was higher than when they went to 5x5 and then they went to 7
00:30:10
by seven and the error rate kep going down and down and down so this is an important Milestone because now it means
00:30:16
that they have the technical architecture to build a chip or a computer using multiple cubits that can
00:30:22
all kind of interact with each other with a low enough fault tolerance or low enough error rate that they can start to
00:30:27
do these Quantum calculations this is a a big area of opportunity one of the very interesting areas that a lot of
00:30:33
people are talking about is in cryptography so there's an algorithm by a professor who was at MIT for many years
00:30:41
named sh it's called sh's algorithm and in 1994 1995 I think around that time he
00:30:47
basically came up with this idea that you could use a quantum computer to factor numbers almost instantly and all
00:30:55
modern encryption standards so all of the RSA standard everything that bitcoin's blockchain is built on all of
00:31:01
our browsers all server technology all computer security technology is built on algorithms that are based on number
00:31:10
factorization so if you can factor a very large number a number that's 256 digits long theoretically you could
00:31:17
break a code and it's really impossible to do that with traditional computers at
00:31:21
the scale that we operate our encryption standards at today but a quantum computer can do it in seconds or minutes
00:31:28
and that's based on Sha's algorithm and if you want there's some great YouTube videos that describe sh's algorithm and
00:31:33
how it works but it's like mind-blowing when you look at it it's like this really like non-intuitive but simple set
00:31:39
of steps that when you put them together on a quantum computer it's like this thing can instantly figure out all the
00:31:43
factors and then you can break a code one of the things that this highlights is that in a couple of years
00:31:47
theoretically if Google continues on this track and now they build a large scale cubid computer they theoretically
00:31:52
would be in a position to to start to run some of these Quantum algorithms like shortes algorithm
00:31:58
and so we're now kind of spitting distance or a couple of year it's not really clear is it three years five
00:32:02
years seven years but a couple years away from having computers that theoretically could crack all encryption
00:32:07
standards and there are a set of encryption standards that are called postquantum encryption and all of
00:32:12
computing and all software is going to need to move to post Quantum encryption in the next couple years so there's like
00:32:16
this big kind of push now to like how do we do that how do we accelerate it I saw
00:32:19
Sundar post it I saw it in my feed I ended up missing my next meeting because I had to figure out how long will it
00:32:27
take for us to crack the encryption standards that we use for Bitcoin Nick here's the answer because I was so
00:32:34
tilted by this idea so if you think of Willow as essentially like one stable logical Cubit
00:32:45
equivalent in a chip we need about 4,000 to break RSA 2048 and we need about 8,000 to to break sha 256 which is the
00:32:55
underlying encryption framework for Bitcoin so I think you're right I think we're in
00:33:01
the sort of like the end game two to five year shock clock no I mean I think what'll have to happen is some of these
00:33:08
chains will need to obviously reimplement something at a pretty foundational level the weird thing as free Brook says
00:33:17
is like the willow chips error correction gets better the more of these things you start to use together now
00:33:26
there are some really big problems in see inside these chips like logical interconnects are very complicated if
00:33:31
you put two chips on a board like the ctoc communication is comp this all this stuff that we haven't figured out how to
00:33:36
do but this is a big deal and I was I was really like my God what's going on here other projects at Google are
00:33:45
finally Landing you have whc and you have this now I mean project Lon might be gone but you know I think those
00:33:53
projects we're going to see a couple of them change the world yeah just to give you a sense on the numbers like Google's
00:33:58
Target for fault Tolerance on a Quantum chip to make it logically useful is 1 * 10 -6 right now this Willow chip is kind
00:34:07
of running at 99.7% so it's still a few orders of magnitude away they have a long way to
00:34:14
go in getting the fall tolerance low enough to actually build uh logical Gates using cubits that can resolve kind
00:34:21
of computational output and so there's still there's still a build cycle ahead and that pathway is a little bit unclear
00:34:27
but what they've shown is this almost feels like the shockly transistor moment it's
00:34:31
like you know here's this this transistor now everyone's like you have a lossy transistor and then you'll
00:34:36
figure out P injunctions you'll figure out all of these ways of just like getting the error correction down but by
00:34:42
the way this reinforces what you said before which is it's hard for an outsider like us to comprehend what's
00:34:49
really happening inside of Google because the business they built was able to fund this I mean and and I I went
00:34:55
down a rabbit hole because I'd never heard of who this guy was that that runs his helmet Nevan he's in Santa bar they
00:35:00
have a whole team in Santa Barbara they've been running for like 10 years he has his own law nevan's law and then
00:35:05
I went down the rabbit hole of that but what's amazing is so valuable for Humanity Google had the money to fund
00:35:11
him for the last 12 years exactly and the greatest money printing machine of all time is paying dividends yeah but
00:35:18
isn't it great to know that Google takes these resources from search and sure maybe there's waste and or maybe they
00:35:26
could have done better with the black George Washington or maybe they could have done better with YouTube but the
00:35:33
other side is they've been able to like incubate and germinate these brilliant people that can toil
00:35:40
away and create these important step function advances for Humanity it's really awesome Deep Mind is on that list
00:35:49
as well Keith what are your thoughts de mind yeah yeah so I I think first of all
00:35:53
I think there's a long time before this becomes a commercial product or application of any sort so you know it's
00:36:00
great that they're taking money but think about it like almost like Stanford takes money or the US government funds
00:36:05
basic research in some ways this is at least a decade out kind of thing um there's another I mean this area Way
00:36:12
Beyond my expertise but I've been talking to a lot of smart people because I do do Financial Services Innovation
00:36:16
and obviously encryption is pretty critical whether it's Bitcoin or other places and there's a couple concerns one
00:36:22
is it's not even clear that you can verify that this is true um by the way like Computing to explain sort of the
00:36:29
magnitude of difference standard Computing would take 10 to the 25th years uh to verify that what uh Google
00:36:37
analys is accurate so there's a chance that it's not even true for the thing for the for the sampling test they ran
00:36:44
yeah to 20 50 number of years that's the big I think hole in the whole RCS Benchmark that they use that it only is
00:36:52
it's a it's a framework that only a quantum computer could theoretically even so how how you know the answer is
00:36:57
correct is I guess the question it takes that long to solve and then to be practical like so assuming you solve all
00:37:03
this and it's accurate and blah blah blah you make it fast all second then there is the postquantum Computing
00:37:08
encryption which you know a lot of people a lot of things a lot of important things have switched over to
00:37:13
so you have historical Communications that were encrypted under an old Paradigm that would be vulnerable
00:37:19
and you know every year that goes by like the embarrassment level or the threatening level of old historical
00:37:25
Communications will probably has some Decay function or some halflife so if it takes another 10 years Communications
00:37:31
that were drafted 20 years ago yeah there'll be some embarrassing things and blah blah blah blah but the more time it
00:37:36
takes the more safe you know sort of private Communications and exchanges will be so I think that's positive
00:37:44
third is there's a question of order magnitude here you mentioned you need like three orders of magnitude sort of
00:37:50
improvement is each step function you know incrementally easier and faster or is each step function you know 10 years
00:37:57
and I don't know that anybody knows the answer to that that's right that's right
00:38:01
yeah a lot more work here to to to be done you're not buying any Quantum Computing stock yet uh not yet we have
00:38:08
looked at KB you know talk about like technology forward you know VCS over the years I've sat three partner
00:38:14
presentations and we've never really pulled the trigger um there's other reasons like including like even if you
00:38:20
have Quantum Computing you have to rewrite software on top of it uh from a different it's a completely different
00:38:25
you know world and who know nothing Maps nothing m at all so you're starting from
00:38:29
scratch so you have an application layer which might be actually an interesting business
00:38:33
opportunity yeah how are these things actually going to be coded and how our developer is going to interact with them
00:38:38
if at all Maybe by that time it'll just be AI running how do you build a compiler who the hell knows how do you
00:38:43
build language properly these are all complicated yeah Who's Gonna Write the basic who's gonna write like the
00:38:48
Microsoft basic the interesting thing is there's a lot of work that's been done in the space like thinking about Quantum
00:38:53
Computing and Quantum algorithms is like an entire Branch people do spend a lot of time thinking about this and working
00:38:59
on this and there are ways you can kind of simulate and test and start to build out models for how you could utilize
00:39:06
quantum computers but obviously we just don't have you know industrial scale systems at this point there was one
00:39:14
Interstellar Marvel Easter egg in their announcement that I wanted to get your thoughts on freeberg Google said that
00:39:21
this massive jump in performance quote lends Credence to the notion that Quantum computation occurs in many
00:39:27
parallel universes in line with the idea that we live in a Multiverse so is that
00:39:34
somebody in PR is high AF or reads too much science fiction you know you know the crazy down for us so the crazy thing
00:39:44
about quantum physics is such a mind have you guys taken quantum mechanics like have not I have yeah I remember the
00:39:51
summer I took it like the quantum the first quantum mechanics class and I was like glad it was a summer course you
00:39:57
really have to like think like pretty deeply about what you learn in quantum mechanics there's just nothing about it
00:40:04
that's intuitive like the way we kind of think about the world is not the way the
00:40:09
quantum World operates in the case of a cubit as soon as you measure the Cubit it collapses to a value if you try and
00:40:17
measure it if you try and look at it it goes to zero or one the probability by which it goes to zero or one is defined
00:40:23
by you know the the quantum state right at the moment You observe it it's just such a mind so effectively this thing is
00:40:30
existing in a super position in multiple States at the same time until you try to
00:40:35
observe it and that's the case of quantum mechanics so what's kind of happening I think in that
00:40:41
language jcal is nothing novel was kind of discovered or represented that's just
00:40:46
quantum mechanics it's a mind and you could go watch hours of YouTube videos if you want to like get taken down the
00:40:52
Mind Rabbit Hole of quantum mechanics and realize like one thing I've always found fascinating about this discipline
00:40:57
is that looking at a cubit changes it like it understands it's being particle there's a slit experiment and if you try
00:41:07
and observe a light as a particle versus a wave it actually changes what happens
00:41:14
what the the outcome is of it being a particle or a wave same with electrons the thing about quantum mechanics is the
00:41:19
observation of a particle changes what happens serious question serious question here it comes
00:41:26
here Buckle in when you look at the the quantum bit can you get a better idea of
00:41:33
the scale of Uranus let's move on no let's move i s jamat was doing a joke he was queuing up a joke at the same time
00:41:42
no I was I was thinking about Schrodinger's cat that's like a another ridic ridiculous thought experiment that
00:41:48
when you you go the same concept it's the same qu the quantum state of the cat is it's both in the box and not in
00:41:55
the Box you don't know whether it's in the box until you open the box and then you open
00:41:59
the box and there's a x probability that it's in the Box X probability it's not in the box but when when you don't see
00:42:04
it it's both it's both and if you're a cat lady you have three of those boxes and I'm a dog
00:42:13
person well we got more engagement from Keith on that science Corner than we have
00:42:17
from so he's more he's more open science inness I need to I need to Def they both
00:42:26
said this is stupid and I'll never touch it except Keith was Kinder and more articulate in getting
00:42:34
there would have just been snoring yeah he would have done this he would he would have done his move where he goes
00:42:40
stupid and then like he would next topic there's an advantage of Monday partner meetings is I get to
00:42:48
watch the science fiction stuff you know every week if I don't really understand
00:42:51
it but like a decade of watching science fiction you pick up some tricks you play chess with Peter teal while
00:42:59
that discussion is going oness actually so I don't play Chess at all ever Okay the reason why is if I do something I
00:43:06
want to be really proficient at it and I don't have the time got it got it also you have a life you have a life yeah I
00:43:11
like to do other things things in the real worlda big big shout out to gesd my my my Indian friend 18 years old new
00:43:19
world champion I saw Champion yeah know world champion did was he playing Magnus is that
00:43:28
every Brown guy that's done any random useful thing in the world we all know each other we're in a huge group chat oh
00:43:34
is it really yeah how it is the name of the group chat isn't like the top 10 tech companies the group chat's name is
00:43:41
what can Brown do for you what can Brown do for you okay there it is also UPS is
00:43:47
filing a treadmark infringement case hey um speaking of Chip news apple is making
00:43:52
its own AI server chips for internal use a report just came out that broadcom and
00:43:58
tsmc are helping them develop AI inference chips you know inference chips like rock uh H moth and there are
00:44:06
obviously gpus like Nvidia gpus those are like the giant dump trucks that help you build large language models these
00:44:13
infrin chips are kind of like speeder bikes you know motorcycles quickly getting you the results from those same
00:44:18
ones it's called balra btra I don't know what that's in reference to mass production in 2026 they don't plan on
00:44:25
selling the chips they don't plan on cloud computing the reason they're doing this obviously is because they really
00:44:32
want the iPhone to be the interface and they have planted their flag that they want to have privacy and have ai working
00:44:41
off of your local device and not having access to your data but having a compelling AI experience gosh my my
00:44:48
iPhone does not work I'm sorry I'm just going to say it okay I don't know what happened in you upgraded your software
00:44:54
is what happened you're on iOS 18 it doesn't work I after 3 years I upgraded to the newest phone I upgraded to the
00:45:00
newest OS the phone doesn't work meaning like to call people I can't call my wife
00:45:04
anymore I can't call my kids anymore the phone bricks constantly my photos app doesn't work it is just really bad and I
00:45:12
think for a company of this scale I don't understand how it does not go through a more complicated test harness
00:45:17
that catches all of this I'm I'm not trying to complain but because I know it's hard for them and I know it's
00:45:22
complicated and but it's really bad you're not the only person people are freaking out about the infras changes on
00:45:29
photos crashing is a major thing and apple intelligence just doesn't work so it does seem Keith that Apple has gotten
00:45:37
off their game of making Polish stuff to race to try and I guess catch up to their perception of you know AI being a
00:45:46
disruptive Force at the interface level I.E your phone or desktop what what are your thoughts on uh this new story about
00:45:52
them doing more chips they've obviously had great success with the processors and phones now the M4 incredible if you
00:45:59
haven't tried the Mac Mini best computer for the dollar in the world right now but what are your thoughts on Apple so
00:46:04
the most important thing about Apple is to remember it's vertically integrated and vertically integrated companies when
00:46:10
you construct them properly have a competitive advantage that really cannot be assaulted for a decade 20 30 40 50
00:46:17
years and so chips classic illustration go all the way down to the metal in build a chip that's perfect for your
00:46:24
desired interface your desired use cases your desired UI and nobody's going to be
00:46:28
able to compete with you and if you have the resources that you know because you
00:46:31
need balance sheet resources to go the chip Direction um it just gives you another five to 10 year sort of
00:46:38
competitive advantage and so I love vertically integrated companies uh you know I posted a pin tweet I think it's
00:46:43
still my pin tweet about vertically integrate is the solution to the best possible companies uh but it's very
00:46:49
difficult you need different teams with different skill sets and you need probably more money truthly more Capital
00:46:54
but Apple's just going to keep going down the vertical integration software Hardware you know all day long and
00:46:59
there's nobody else who does hardware and software together in the planet which is kind of shocking in some ways
00:47:04
is there a world class company a company that's world class it's both software and Hardware other
00:47:09
than yeah maybe Nvidia well may not really could they do a world class UI you know maybe maybe
00:47:18
there's a foundation you have have a different Vision maybe a different team not clear Tesla's close I guess I'd say
00:47:25
the software's good if you Define software as it touches a consumer Tesla Apple in some ways
00:47:35
Google maybe meta with the meta glasses trying trying attempting you can't say Nvidia because I think Nvidia
00:47:43
touches the consumer through an app that then sits on top of Cuda which I think is that's a brilliant strategy for them
00:47:50
but it's it be apple then Tesla and then a long tail of people right anyway the point a lot of competitive advantages
00:47:59
that they you know been actually leveraging for about 15 years now and even back then Steve there's some old
00:48:04
great Steve videos I I'll see if I can find you a clip where he talks about this very intentionally from the 1990s
00:48:11
you know when he came back to Apple he said we're doing vertical integration basically using those words of software
00:48:17
and hardware and there's going to be nobody else that can compete with us I think it's in an interview he did in
00:48:22
it's published in uh in the company of giants I believe and he's perfect on point he just follow that strategy for
00:48:27
you know the next 25 years now you're seeing some of the manifestations though of a competitive strategy that gives you
00:48:34
incredible advantages is you get very sloppy in other places especially over time because you have such great
00:48:40
competitive modes that you don't have to compete at The Cutting Edge of this like
00:48:43
the photos app is completely unusable I'm the biggest apple Fanboy in the world like I I I remember interviewing
00:48:48
once with a job for Tim Cook and I walked in and I said he's like why you know why are you interested and I said
00:48:54
well you know I own every skew of every product you've ever produced except I don't have every color of each you know
00:49:01
iPod and he was like blown away and but now like my photoos app is completely unusable so I totally understand you
00:49:07
know about the frustration and they they're showing like the Decay function you know culturally and otherwise that
00:49:14
eventually somebody will figure out an angle to rip them out yeah I'll tell you we talked about dictators at the
00:49:19
beginning of this shath and obviously this is your real house as a dictator yourself is you know there has to be a
00:49:26
constant fear that some a-hole is going to come to your office and be like what did you do to the photos at and that
00:49:35
fear does not exist inside of Apple it's not like the mobile me you ever hear the
00:49:40
mobile me story where he brought the mobile me team in he said how is mobile me supposed to
00:49:45
work they said well it's supposed to back up everything when you buy your new phone you get everything you never have
00:49:49
to worry about losing a f slammed his hand down and said well why the F doesn't work that way fired the person
00:49:55
brought the next person in and said now make the way he said it's supposed to be
00:49:58
game over I don't think Tim Cook's doing that Johnny IV's not there and obviously
00:50:02
Steve Jobs not there to terrorize people well I don't think you look you don't need to necessarily terrorize people but
00:50:08
I do think you have to go through uat so I think it's pretty reasonable when you
00:50:13
have a large footprint of consumers using an app to go through user acceptance testing is like first base
00:50:19
and typically what happens is you can do a process of a few months where several
00:50:23
hundred thousand people get it all over the world and as long as you do an okay job of getting a decent distribution of
00:50:29
people this would have come out but I want to just talk about what Keith said as well it's literally not just photos
00:50:36
it's like the phone doesn't work so there are just core structural issues with this operating system now
00:50:43
that makes the Iphone maybe 10 to 30% less usable and that everything is everything really
00:50:52
frustrating the command center you know when you pull up your little Command Center to change the brightness and the
00:50:57
your airpods it's just like what are they doing here I mean by the way so do you need a chip do you need a machine
00:51:03
learning chip to do inference to figure out that when you constantly run your phone at a certain level of brightness
00:51:09
you should just allow the phone to be at a certain level of brightness stop changing the damn brightness why does it
00:51:15
re like I me this is not this is not complicated software engineering guys no but this is my point there's no Arbiter
00:51:23
of taste anymore who is the back yeah let me let me pause double click on that for a second so I think taste is
00:51:33
great if you have it but there's only so many people on the planet that are going
00:51:35
to have you know Cutting Edge taste and be right if you don't have taste what most tech companies do is they use data
00:51:42
data is something that's approachable and leverageable because Apple has like this the antibodies to using data to
00:51:49
measure success with the user experience to measure whatever success if you subtract taste even by a
00:51:55
bit you don't have the scaffolding that every other company would use and so you
00:52:00
see the worst of Both Worlds that's a great take that's a great good take the rails right you go off the rails so
00:52:06
Keith do you think that you think that what happened is like when Steve Jobs isn't there and Johnny IV isn't there
00:52:12
there's still a bunch of folks that probably think they have taste but the real taste folks left and there's really
00:52:17
no scaffolding left to more scaffolding you had at Facebook meta obviously or that Google uses would catch some of the
00:52:25
stuff without a doubt about it you know that users are less thrilled and they' use things less and you'd fix it and
00:52:31
maybe even you take that too to extreme you never develop taste like I could argue that about Google or meta they
00:52:36
don't really have taste but like yeah you could AR You could argue the paradigms but fundamentally if you don't
00:52:41
have that back stop if the taste of tracks even 10% not all the way down you're just not going to catch this
00:52:47
stuff and I think there's only like how many people in the world really have Cutting Edge technology user experience
00:52:52
taste I don't know too many I would fund them right away he might have it it's an incredible
00:52:58
point because I if I'm being really insecure I would want to say oh yeah no we had a lot of taste at Facebook back
00:53:07
in the day but actually we had so much scaffolding around data probably because intuitively we knew that that was way
00:53:14
more reliable for us it's more predictable scal it's certainly more scalable right like you take Steve out
00:53:19
you don't need a dictator but you do need a a taste and taste is Artistic the same thing Venture like you know like
00:53:25
scaling venture is really really challenging because early stage investing is more like taste than data
00:53:32
driven and later stage you can use data and scale it and Scaffolding so I think there's just Fields it's a little bit
00:53:39
also you see like the sports teams they just happened at Stanford when Jim Harbaugh
00:53:43
left it took years for the Decay function for like the next coaching regime to show they were completely
00:53:50
incompetent like the next year they're pretty good next year they lost one more game than they should have next year
00:53:54
they lost two more games than they should have blah blah blah then eventually they became like horrible and
00:53:59
you know there's a Decay function with an organization when you take out the person who is the original thinker or
00:54:03
the leader or the dictator or whatever and so I think some of this is showing up now and then you know playing on a
00:54:10
field that's not favorable to them which is there are advantages Apple has in AI
00:54:15
but there's some significant organizational structural disadvantages and that's the field that people are
00:54:20
going to be competing on for the next five years from a consumer perspective and they're playing on a field where
00:54:26
they don't have all the advantages in their favor yeah yeah true let's go to the app level here Tik Tok is scrambling
00:54:33
right now after an appeals court upheld the January 19th deadline for divestment
00:54:38
here we go here we go I refer you to my Twitter feed my I mean you and Jacob must sit I mean
00:54:48
what do you do you just sit at dinner and feed the kids and then uh talk about Tik Tok in China it's it's well I think
00:54:54
Tik Tok is pretty obvious like you don't even have to have a conversation in my view like Tik Tok is a
00:55:00
threat to the National Security of the United States and that's why whyl to people who are like it's just an app
00:55:06
it's just an app why why so I think there's different dimensions one of the problems is there's so many things wrong
00:55:11
with Tik Tok that actually sometimes people get confused because there's not just one it' be easier sometimes if
00:55:16
there's just one thing so they are definitely using the app to track data about Americans and there's evidence
00:55:24
that regardless of what alleged protections exist there are people in China monitoring what certain people in the
00:55:30
United States are doing and the CEO lied under oath to congressional committees about this and the evidence is now in
00:55:38
the public domain hopefully this justice department will prosecute him for lying
00:55:42
under oath I think setting a really good example that you cannot just purg yourself before Congress sorry Keith can
00:55:47
you double click into that so what how did it come into the into the open source that what he said was a lie like
00:55:53
what so there are people in China who on the record have said they had access and
00:55:59
have had access to American user data which he swore to under oath to the Congress that they were storing the data
00:56:06
in Texas somewhere and that there's no possibility that you know Chinese Nationals in China could access the data
00:56:13
there is now several um instantiations of this in the public record let alone what's privately available yeah I mean
00:56:19
the case specifically too back in 2022 by Dan the parent company of Tik Tock had used an app to track Loc
00:56:26
had used their app to track the location of journalists because they were trying
00:56:30
to track leaks outside then secondly let me let me keep going here because it's worse so there's
00:56:36
a law the fundamental problem is in China there's a law that says if you're a Chinese company upon request of the
00:56:43
CCP you must provide all user data so any Chinese company is subject to that law period there's no court intervention
00:56:51
you don't need a subpoena blah blah blah and so it any Chinese any executive of that company is subject to significant
00:57:00
penalties on the record for not providing any user data at the request of the CCP so as long as that law exists
00:57:09
there's a real structural threat to the United States now then there's the is the app being used manipulated on a
00:57:15
Content basis to influence you know policy in the United States to disadvantage this or that or create
00:57:22
hostilities I don't really know the answer I think there's been studies that suggests that and you know pretty
00:57:28
rigorous methodologies but that's a second level and then third is there's the why the hell are we allowing Chinese
00:57:37
companies to compete with us when no American content based organization is allowed into the Chinese
00:57:43
market whether it's meta Google a you know there's a strong argument there that Reddit if you don't
00:57:52
allow our content or non you know non chines content into your Market why should we be enabling Chinese companies
00:58:00
to be successful in quotes in the US market and that's more of a a fair trade free trade Keith do you think that the
00:58:07
Pegasus spyware that can infiltrate WhatsApp so that you can turn on the mic and listen remotely and it has no
00:58:14
fingerprints it's very difficult to detect do you think an equivalent let's call it a back door
00:58:20
exists inside of Tik Tok yes so my evidence for this that I believe is in interpolation of what's in the public
00:58:27
domain is if you looked at that vote to ban Tik Tok it was extremely bipartisan despite you know controversy and what
00:58:36
happened was that vote was taken a week after there was an intelligence briefing
00:58:41
to both the House and Senate intelligence committees that was that's confidential and the votes you know all
00:58:47
of a sudden flowed through I think there's things that are not in the public domain about Tik Tock that
00:58:52
spooked a lot of elected officials and led to this bipartisan consens is how many bar parters votes do we see on an
00:58:59
allegedly controversial issue that you know basically didn't the vote was like you know like not even close in either
00:59:05
house 360 to 58 yeah when do you see a vote like that on something meaningful never right they got they definitely got
00:59:14
spooked and I mean if you just think about Navy SEAL Special Forces they're not allowed to use a lot of these apps
00:59:20
government officials aren't to use these apps because they know that all you have
00:59:23
to do is if you track somebody's child and their Tik Tock usage now you know where the parent is you start thinking
00:59:29
about the security and safety of individuals in our government it's crazy so 352 votes for an incredibly popular
00:59:37
product yes think about how bad something has to be to get a consensus of 352 votes on a on an out that's used by you
00:59:46
know huge fraction of the American public pass the Senate 79 to8 and you are right if you say you're going to ban
00:59:53
Tik Tok the was against TI to but then he opened one because that's where voters are you you're going to lose that
01:00:00
generation of Voters arguably arguably Theory there's some risk I I can see that Biden can if he's awake extend this
01:00:12
window by 90 days I don't know if grandpa is up for it but he could extend it a bit and obviously this with the
01:00:18
Trump campaign you know he says a lot of different things Trump has flip-flopped
01:00:22
a couple of times during his first time he tried to band it wait till he gets the readout that the rest of these guys
01:00:29
got yeah and well and then he had a mega Dona and Tik Tok investor Jeff y gave Pax $50 million and he owns 15% of it
01:00:38
when I had dinner with him that's is this is the one of the things that I pointed out to him was this specific
01:00:44
thing I said you have to look at the Pegasus like equivalent INF infiltration of WhatsApp having been done on Tik Tok
01:00:54
because the reality is if Tik Tok has 200 million users it is true that you know
01:01:02
199,999 th000 just don't matter so you could turn on the microphone you're not going
01:01:08
to hear anything but there is probably a thousand to 10,000 to 15,000 people and
01:01:14
I do suspect that state actors are smart enough to figure out how to triangulate
01:01:20
who you would want to be able to turn it on when that phone is in your pocket or
01:01:25
when that phone is on a desk and I'm sure you will hear all kinds of random things and many of those things could be
01:01:32
quite sensitive in nature so I think that this is something that the the government's going to have to look at
01:01:38
really intensely there's such a simple test here what are they doing with their own people in China they are in a police
01:01:44
state there they make the stazzy jealous how much they're tracking individuals in
01:01:49
China so if they'll do it to their own people they would have no problem doing it to an adversary and ask yourself if
01:01:55
the shareholders care about money they would be willing to divest right no problem they want to take the company
01:02:02
public so if you won't divest and get off the board as a CCP it's because you see this as a valuable tool right I mean
01:02:09
just work through the basic logic folks right it's some price point right like what I would do if I were president I'd
01:02:14
say you tell me the fair market price for Tik Tok and I'll go f you know I'll make sure that there's buyers right
01:02:21
because CCB won't name any price there is no great tool the point right that would be like giving up your nukes I
01:02:30
don't think they should have to sell at a less and fair market Price I think that's you know legit like I believe in
01:02:35
capitalism but there any free market should allow for you know some price Discovery and if they can't name any
01:02:42
price period that suggests that you're doing something that's nefarious there there's Reason by the way Cham you
01:02:49
probably know this you know if you meet like at least you know some of the times
01:02:52
I've met with the president they take your phone away why they why do they take your phone away 100% why exactly
01:02:59
pretty obvious yeah exactly also there are phones that can be designed to be weapons as we've seen a number of people
01:03:05
got some nutshots with their pagers recently all right let's talk about Venture as we wrap up here man Keith for
01:03:11
boy cooking with oil new sacks new red meat sacks are you a steak guy too ke you you eat a steak once in a while oh
01:03:19
of course what's your cut what's your cut are you kolette are you a ribeye guy I like Tom eight to 10 12 ounces Max
01:03:28
medium you know solid I don't really care pretty much wagu I'll be a little non-american go wagu you know like
01:03:36
Australia or Japanese yeah sure all right all right I think uh just shout out to my friend Kimo I'm a you know red
01:03:42
meat Republicans of course of course I'm a big fan of this kolette slash on it yes I just bought recently a
01:03:51
Denver Cut which i' never tried incredible Denver Cut okay cut all right let's wrap up with Aventure update here
01:03:58
at The Darkest Hour Keith sometimes before the dawn VC deal activity has uh getting close to uh
01:04:06
preco numbers in 2019 obviously major funding drop off happened in 2022 yeah it's been a couple of years of this but
01:04:14
deals uh the number of deals is coming back the amount being put to work coming back to I would say the steady state
01:04:20
perhaps even normal level uh and um but VCA exits sadly are not keeping up but we did have service now go public today
01:04:30
up 50% and the wrath of lenina con is officially over she's out Andrew Ferguson is in this looks like a great
01:04:39
appointment another one by Trump in the column of somebody who wants to allow business to occur and wants a free
01:04:49
market he wants to do basically everything Lena KH con uh didn't do which is allow some m&a boy what's your
01:04:56
pulse like here uh and what's your take on the Venture industry and then we'll go into m&a and exits we'll start with
01:05:03
just investing is it is it ramping up you seeing high quality companies well I'd say that you should cut that data by
01:05:09
Ai and non- Ai and you might see a t to different cities my anecdotal experience
01:05:15
is there's AI companies where the Market's pretty hot maybe cooling a little bit but hot and AI companies with
01:05:21
the right team are getting funded you know frequently quickly Etc and then there's non AI companies and I think
01:05:28
you'll see a very different you know sort of chart there I do think net net you're probably at a city state that
01:05:33
looks reasonable across 40 years you know like Etc but um it would be interesting and you know you have to
01:05:39
make some methodological decisions about what's an AI company what's not but if you could do that it'd be interesting to
01:05:44
see if the lines you know look similar or not but it's pretty hot like people starting companies found Founders are
01:05:51
optimistic crypto companies also you know are back in Vogue obviously due to the change in Administration I think a
01:05:57
lot of people had been hesitant to start new crypto companies and you know there's belief and confidence in the new
01:06:02
Administration thec Etc so we'll see if Innovation accelerates you know with all
01:06:07
the new capital and all the new Founders uh back in crypto in Enterprise software it had been pretty cool non AI
01:06:16
based enterprise software but you know like as you mentioned with the IPO this week
01:06:21
trading very aggressively I think you know maybe there's some inspire inspiration there for you know more
01:06:27
traditional boring companies stripe stripe stripe should go public but uh you know they don't listen to me
01:06:34
so yeah you didn't know why aren't they going public Keith what's what's the story with the boys over there why
01:06:40
they're waiting to get disrupted by crypto stable coins I mean seriously talk about
01:06:45
missing your window get out there boys they bought that crypto stable Coin Company for like a billion dollar
01:06:50
defensive yeah defensive I I personally believe and subscribe to the view that Comey should go public as early as
01:06:54
possible I'm on the group bill girley you know sort of school of thought what amount of Revenue what amount of Revenue
01:06:59
put 50 million minimum but predictability matters you know definitely so not just 50 like but 50
01:07:05
with line of sight to 100 and knowing 100 to 200 I wrote a whole chapter in Eli Gill's you know high growth handbook
01:07:11
on why call me should go public as early as possible so I've been on this Chris a
01:07:15
forever I like accountability transparency discipline I think they're good things and you know there's a
01:07:21
critique that like oh you're not going to be Innovative anymore if you look at some of the companies we've been talking
01:07:25
about what are some of the most Innovative companies in the world they're public companies it just takes
01:07:29
the Right leader to say I'm going to be Innovative and I don't care with the bureaucrats and lawyers you know I'm
01:07:35
just not going to get distracted with that and so I I like public companies and so I think you'll see a lot of the
01:07:41
companies I am involved in go public at a fairly rapid clip by his historical standards different Founders though have
01:07:48
different yeah sort of abuse on this it's very reasonable stripe SpaceX you know for example found in 2003 who knows
01:07:56
you know when it's going to be a public company so you can have a very successful company like SpaceX or stripe
01:08:01
but my preference is to go public early and then you have the capital resources Equity or Capital to be strategic and
01:08:11
per your point about potentially missing window now they were able to transact you know in that particular case and get
01:08:16
ahead of the curve or at least not miss the curve but sometimes when you're a private company there are strategic
01:08:22
assets that you can't get your hands on and you know think Facebook buying Instagram we talked about the taste
01:08:28
issue Instagram had taste at the time like Kevin had taste and think about where meta would be had they not been
01:08:37
able to acquire Instagram yeah totally totally different timeline or the public currency to have bought what'sapp yeah
01:08:44
or what'sapp so optionality increases as you have that public currency if you're
01:08:49
a private buying a private the acquired company needs to believe that you're going to get it over the finish line
01:08:55
they're going to have some liquidity at some point whereas with the public government they just sell within
01:08:58
whatever their window is jamat your thoughts well I was just going to ask Keith a question which is what is the
01:09:02
game theory behind stripe not going out like what's the what's the Strategic rationale you
01:09:10
know honestly yeah without sharing like you know one-on-one conversation sort of
01:09:13
stuff I think the question the burden they they inverted the burden which is why should we go public a lot of a lot
01:09:20
of people ask the question the opposite way which is you know why wouldn't I go public I think their first principal
01:09:28
thinkers like put per my point about Trump and I think true of Elon they ask like why and they're like well what
01:09:33
advantages would we get and I actually think the m&a one is very real it is but I think I think they've been able to
01:09:41
construct alternatives to most of the advantages but not every company's going to be able to do that it took a lot of
01:09:47
effort energy and then the question is would you substitute that energy into something else that might be higher
01:09:52
value creation if you weren't to like Pro you know creating the alternatives to a public
01:09:57
structure it's a great answer freeberg your thoughts here on public markets m&a the end of the wrath of Lena Khan and
01:10:05
what we might see in the New Year Post January you I I disagree with the conflation of Lena KH into all this
01:10:12
stuff too much it's she's a big company break aart kind of mandate it has nothing to do with tech m&a small like
01:10:18
the typical kind of deal flow stuff that I think you're focused on I've said this
01:10:21
a number of times I'll just say it again but I think on the um on the ener liquidity thing I don't think that the
01:10:26
thing holding up Acquisitions and IPOs is markets I actually think it's investor and board expectations on
01:10:32
valuation relative to where they put money in the last couple of years so if you look at the valuations from 21 to 23
01:10:40
you know early 23 so much money went in at such high prices those investors can take those companies public today there
01:10:47
are public there's a public market appetite at all times for anything just depends on the valuation and the real
01:10:54
issue right now is that a lot of the VCS the late stage private equities the ones
01:10:58
that did the big markups and the late stage D rounds e- rounds Etc they don't want to take these things out and take a
01:11:04
60 70% haircut on the IPO they'd rather kind of let this thing sit private and see if they can earn their way back into
01:11:11
the valuation that they did the Mark at when they put the round together so I 100% agree 100% agree with this yeah I
01:11:17
mean there there is these overhangs are very real I don't think the exit liquidity dir fundamentally is driven by
01:11:23
markets I think it's just driven the the sell side and the investor expectations there's also a culture
01:11:29
thing I have to say like in talking to a number of like the leaders of these public companies that were very
01:11:34
inquisitive and m&a they are taking the position it's easier for us to build a competing function a competing adjacency
01:11:42
than do any tuck-ins they just told the the Corp Dev people pencils down and they are not wanting to spend a year or
01:11:49
two on a deal when they have a breakup fee when they see what happened with ad doobe or they just think well why don't
01:11:55
those are big deal our those are big deals the small deals are different the small deals are more the small deals are
01:12:01
the fact that over a couple years like Google bought at cyber security like there are these Acquisitions that
01:12:05
happened at 800 million that maybe should have been done at 200 250 and again it's the same problem that the
01:12:11
sellers of the high quality companies demand too high a premium that the buyers of these rational scaled
01:12:16
companies are like that's not worth it just like IPO candidates so I don't know keth if you've got a experience well I
01:12:22
also agree so I used to be an anti trust litigator which I know knows and I think
01:12:28
I hate like you know the current leadership the an trust Division I called her a fraud and I think she is
01:12:33
intellectually a fraud why why she well she published a paper that was false like like there her whole claim to fame
01:12:40
is this paper about Amazon and the data in the Amazon the data she used in the in the paper at Yale was false and int
01:12:48
she's too smart to have done it accidentally Benedict Evans wrote a good critique of it if you want to read all
01:12:52
about the data second thing is you look at Amazon which is this alleged like quintessential example have you heard of
01:12:58
Shopify Shopify is one of the biggest success stories of the last decade right down the middle competitive with Amazon
01:13:05
and there was nothing Amazon could do they lost the core Market to a competitor that was started and you know
01:13:10
went public at a very low valuation and Shopify is dominating DTC Commerce nobody builds a DTC Commerce brand
01:13:16
except on Shopify so everything about her is like a fra that said I don't believe that what
01:13:23
she's done has affected did you know exits very much at all because like the truth is in highend Venture like
01:13:28
institutional Venture Capital other than the WhatsApp and like maybe like a plot
01:13:33
acquisition or something you know one every two years you don't drive returns in venture to an Institutional Venture
01:13:39
Capital fund through an m&a like like whatap may be the only one that really drove a fund returning exit to a serious
01:13:47
fund it just doesn't happen that way I need IPOs like to return our funds our funds are like billions of dollars you
01:13:53
don't get Returns on lot Acquisitions at $50 million to $100 million yeah but $300 million fund 10 yeah but there but
01:14:01
most funds have ballooned for lots of reasons L big ones and that's actually led to some of the perversity that you
01:14:07
know David talking about if the funds get large their tendency to do these things also increases so yes a seed fund
01:14:15
can drive Returns on m&a Acquisitions that might be deterred in a bad you know hostile
01:14:22
Administration Venture fund of 500 million to2 billion do Drive returns through m&a
01:14:28
no no I mean they could fill in the first one X maybe yeah I've been lobbying officials for a long time on
01:14:34
this Crusade they come in and they expect that oh you know m&a blah blah blah blah and I'm like no no no I could
01:14:40
care less only my most mediocre companies are acquired and the IPO window has started to crack open just to
01:14:46
give you a couple more data points Gentlemen We Ride the chinese-based uh self-driving car company went public
01:14:52
on the NASDAQ last month 4. .5 billion market cap Pony AI another chinese-based uh self-driving car company went public
01:15:01
in November Clara plans to go public in the US I think they quietly filed service Titan today the taping of this
01:15:08
on Thursday and Sheen the fast fashion company well she's gonna have some real problems in
01:15:14
the new Administration yeah right tariffs as we wrap here that's a good place to wrap on
01:15:20
what what do you think of I guess two issues Keith we'll end with politics since we started there two things seem
01:15:27
perplexing to people in finance one is tariffs and how that's going to work and the other is inflation and what the
01:15:38
impact would be on 15 million people being shipped out of the country and the impact that would have on inflation Visa
01:15:47
the unemployment rate getting even lower than the historic low it's been in our lifetimes what do you think of those two
01:15:52
issues take either one well I think first of the treasury secretary understands this like I think Scott
01:15:58
actually from everybody I've talked I don't know him but I I've interviewed about 10 or 12 people that are very
01:16:03
successful Wall Street and every single one of them universally has a claim for him and they've all made points to me
01:16:08
that these kind of subtleties he really does grock and so when he when he says you can raise
01:16:15
tariffs without inflation he understands how all the substitution works and is running an equation in his brain he's a
01:16:22
very successful Trader and that that's a really good skill Also chat's earlier points about Daris
01:16:28
evolution of brilliant people being successful understanding how the economy actually works he's perfect so I think
01:16:34
you're going to see real tariffs like especially against China and the Trump Administration is completely committed
01:16:41
to reducing inflation the cost of eggs you know and groceries and I think those things can be reconciled I know amateur
01:16:48
Economist you know with random degrees from Wharton don't think so but as Trump pointed out in the debate and you know
01:16:54
JD pointed out with some research his first Administration imposed all these tariffs and there was no
01:17:02
inflation and then JD Vance pointed out that the FED Reserve has a study that says you know housing prices which are
01:17:08
primary driver of affordability for a normal American are inflated because of illegal immigration so I I think this
01:17:16
Administration and not making more units I mean well I think this Administration
01:17:20
there there is substitution right if the price of one good goes up consumers typically have you know unlike people on
01:17:26
this podcast typically have a limited budget and at the end of the day if one price goes up you have to substitute
01:17:32
somewhere else so the net inflation might be negative even so in any event this Administration is not naive and the
01:17:38
people that Trump has put in place to drive this in treasury the National Economic Council absolutely understand
01:17:44
this and they're committed to driving down actual prices the hardest area is going to be Healthcare that is really
01:17:51
really difficult and it is a major driver of cost to a normal person and ObamaCare has been a disaster the
01:17:57
question is what do you do about that and I don't have an answer for you right away I have some
01:18:02
ideas uh chth your thoughts on tariffs Andor immigration and inflation and that seems to be a place where even across
01:18:10
the a you got people debating it I think Keith said it pretty well which is that
01:18:14
we do have a lot of experience with how tariffs can be implemented and that the the Practical experience is not what the
01:18:23
fear-mongering is that being said I think the devil will be in the details which markets for which Goods what is
01:18:29
the Tariff and why what I hope happens is that if we can really study the second and third order degree impacts of
01:18:39
some of these markets what the Tariff does is it acts almost as a reverse subsidy for American companies to
01:18:46
compete I'll give you one very narrow example if you believe in electrifying the Amer economy one of the underlying
01:18:57
things that you need are electric motors right electric motors and electric batteries and just to double click on
01:19:02
electric motors for a second electric motors needs a permanent magnet if you look inside of a permanent magnet there
01:19:08
are these rare Earths that are just required to make these magnets but as it turns out it is impossible for any
01:19:17
company that is not a Chinese company to be able to manufacture these magnets in
01:19:23
an economically viable way and the reason is because not only can China make it and they can make it in the
01:19:30
absence of a lot of environmental controls they'll also subsidize so if anybody tries to compete they'll just
01:19:36
inject a subsidy into that economic supply chain where they're always cheaper so what do you do Jason if you
01:19:43
can observe that and realize that we want supply chain diversity what the Tariff does is it starts to push back on
01:19:51
those kinds of activities because it doesn't allow it to continue to work then if you take that with what the
01:19:57
United States government already does through the doe which is through subsidies and
01:20:03
underwriting this is what I mean by it could be a really amazing new moment for the American economy and that would
01:20:10
please a lot of people including a lot of people on the left if they just took the time to understand what's being
01:20:15
proposed I mean look at rare Earths you you mentioned them we have some of the great deposits in the world in our
01:20:22
country why can't largest deposits in the world it's because of environmental regulations and it's the same thing with
01:20:29
Starship going up we got a lot of regulations this country I understand people want to do the right thing but we
01:20:33
also have a lot of debt and if we could start mining rare earth metals here and maybe loosen the regulations the lithium
01:20:40
supply chain is another really good one that's emblematic of all of this but there are so many other markets like I'm
01:20:47
sure that if you looked in something that's a little bit more down the middle like
01:20:51
appliances what you would also see is the same thing where wh poool will try to make an appliance or Bissell will try
01:20:58
to make a vacuum cleaner and the Chinese equivalent makes it almost like fighting
01:21:05
uphill and there has to be a way to course correct that well I mean look at byd some of these cars they're just
01:21:10
copying wholesale everything Tesla's done in their design and uh feature set and they're
01:21:17
half the price and so they were selling really well in countries that allowed them and they would decimate us
01:21:22
automakers and German automakers by the way a different a different version of this I wrote this in my Weekly
01:21:28
Newsletter but I was curious why these Chinese models are so good and I was like the training of these models seems
01:21:35
to be quite fast the quality of these models are really good the Alibaba model Etc and part of what you realize is when
01:21:43
they do their training runs the Chinese models have no guard drills in the sense
01:21:48
that there's no copyright checks no there's just none of these things that otherwise slow down in ameran company to
01:21:55
make a useful model they don't have any of those things so that's another example where maybe there's not an
01:22:01
economic tariff but there has to be a simple reciprocity and in the absence of reciprocity I think it's reasonable to
01:22:09
say that there needs to be checks imbalances freir you anything to add there on tariffs or okay four jamath P
01:22:16
haaa your chairman dictator the Sultan of Science and new Sachs better BMI hates dictators what's your take on
01:22:24
Ukraine maybe we could fire up a Ukraine discuss I how do you feel [Music] Ukraine ke by the time you have me back
01:22:36
hopefully that's solved hopefully that's solved day one we're gonna solve it on day one okay Keith you excellent you're
01:22:43
EXC tremendous Keith boy excellent husband very very effective great great American great host great coost aesome
01:22:52
you may have heard of two words Allin okay you may have heard of it David Sachs brilliant crypto I mean we didn't
01:22:58
even dive into crypto I mean people are going a little nutty on this crypto what do you think about all
01:23:05
this crazy crypto going on here Keith everything's spiking back up xrp Bitcoin what do you think of uh salor I know the
01:23:14
salor fans are like obsessing about him coming on the Pod what do you think of seller taking these loans to buy Bitcoin
01:23:21
and that other people are following suit to put it in their treasury well sure version on crypto generally is I still
01:23:26
think the primary use case is speculation and not that there's anything wrong with that people
01:23:29
speculate on stocks retail trading people speculate on football games gambling like the natural tendency for
01:23:36
humans to want to speculate is very real the the art to me is because everybody's
01:23:42
now a node connected into these crypto let's call Bitcoin you know can you build an application on top that would
01:23:49
have too much inertia too much friction to start from scratch but it has real value and I think think it's possible
01:23:55
because so many people are now connected based upon speculation initially so that's what's exciting to me but you
01:24:02
know we've watched speculation before in crypto markets and you know it's very volatile so hopefully someone builds
01:24:09
real layers of productivity or utility on top but takes advantage of the network it's a little bit like back in
01:24:16
your days at Facebook toath you know you had the social graph and you'd say you know you can build applications on top
01:24:21
of the social graph but if you had to create a social graph from scratch that was heroic effort and nobody else is
01:24:25
going to do it that was like literally the Facebook Monopoly story and so I think that's true of crypto there's lots
01:24:31
of nodes someone's got a soci social graphic and there's no Zuckerberg to rug pull and say you can't build someone's
01:24:36
got to build the application on top and then it'd be extremely exciting what do you think freeberg you you you were
01:24:42
monitoring this sailor situation the the mister micro strategy people seems well
01:24:48
I think the way the Sailor Financial structure is set up is it looks a lot like a synthetic call
01:24:56
option on bitcoin you get a convertible note so you earn a coupon on the note and then you have a conversion price
01:25:03
which is a premium to the stock price which you can translate if you look at the book value or the net asset value of
01:25:08
the stock that's how much Bitcoin there is and the premium was two to one I think or two and a half to one yeah the
01:25:16
premium that the conversion price is at tells you what Bitcoin needs to be for you to have Equity upside so it's
01:25:23
effectively convertible note you earn a coupon and then you have a conversion premium that you can kind of convert to
01:25:28
equity which basically gives you a call option you're saying the premium you're paying is the price for the call option
01:25:35
effectively and you're earning this kind of coupon in the meantime so it's a way
01:25:39
for some people to kind of trade the price of Bitcoin seems like this guy said a lot of hedge funds and I don't
01:25:44
know if you guys saw the CNBC article that it's kind of like Bloomberg it's like the hottest trade in hedge fund
01:25:49
land right now is to buy up these convertible notes that he's issuing so if you actually were to sit down and do
01:25:55
the black shells modeling of the uh the value of the synthetic call option that he's selling you with the convertiable
01:26:02
note there's a reason people are paying for it they think that there's value there so there's certainly something to
01:26:07
the structure that makes sense all right so for your Sultan of science the dictator and fit saacks fit saacks here
01:26:16
low BMI low heart rate what's the heart rate at right now ke uh 40 to 42 uh like by measured by eight sleep
01:26:23
typical oh eight S wonderful what do you think of our Knicks by the way we'll see I don't know if I would
01:26:30
have made that trade honestly but car Anthony towns really fascinating he's playing so good I know but like I think
01:26:37
you had the chemistry all dialed in and hopefully they can build back better you know like bu back better absolutely
01:26:43
all right listen uh we'll see you all next time don't worry saaks isn't going anywhere it's just a little bit busy
01:26:49
right now there's a transition going on saaks is transitioning and we'll see the
01:26:54
the Pod will transition as well we see what it looks like in the New Year we have a good lineup of co-hosts
01:27:00
we're going to do eight weeks uh it's going to be all in idle all in idle is occurring we're rotating people in and
01:27:07
you get to vote audience ke that was great thank you you did great thank you for joining
01:27:13
us EXC love you boys love let your winners ride rain David and instead we open source it to
01:27:29
the fans and they've just gone crazy with [Music] it besties are that's my dog taking your
01:27:47
driveway oh man myit will meet me we should all just get a room and just have one big huge orgy they all this useless
01:27:55
it's like this like sexual tension that they just need to release [Music] somehow we need to get merch
01:28:09
[Music] our I'm going [Music]