Anthropic Raises $45B but Falls Short on Compute & Thoma Bravo Hand Back Medallia Keys to Creditors

It's a whole new world where I think OpenAI is even more competitive. Again, the dirty little secret of venture is how much of your money you make in that one year in 10 when everybody buys the dream.

More and more, the agent is going to choose what models and just what vendors we use. It's possible you look back and see that as the first disconnect from compute equals revenue.

They didn't over-lever. They just way overpaid for it. You can't service 2 billion plus of debt on a 1 billion low-growth company with a pre-AI story that has to transform to AI.

Whoa, he's turning on me.

It feels a little overdone and a little overblown. You know, overdone in the sense of it accurately reflects what happened last year, which is, you know, if you think of Zoom, if you think of the two big picture jobs here, you know, you got two jobs when you run them. One, you got to build great models, and you got to buy enough compute to be able to run them, right? And there's no doubt in the back half of last year, OpenAI failed at the first part of that job. They didn't build great models, and as a result, their traction relative to Anthropic declined markedly. Their market share declined markedly, right? And that's probably the shoe that's dropping now. If you look at the model that they shipped recently, I think it's 5.5. Reviews of the coding say it's pretty damn good and arguably better than the current Anthropic model. So I think to some extent this is a late-dropping shoe on facts that were probably knowable three, four months ago if you were paying attention to the traction. And the funny thing is, in the super-connected Twitter AI universe, in fact, Anthropic is the guy that's getting slammed right now. There's a whole bunch of, oh, Claude can't keep up, can't support the users, and the current Codex model is better. So this feels a little like old news that maybe is news to the Wall Street Journal, but probably isn't news to anyone paying more attention.

This is looking backwards, right? This is looking backwards a lens into last year, and it confirms what we knew, right? Anthropic obviously, the rate of growth was incredible, and some of that was market share, right? It wasn't all AI. Some of it was market share, and it stole market share. And Elon was clear about this, that Anthropic had, quote, something special in coding, which underestimates how much of the overall growth in the market coding was, right? And I think OpenAI acknowledged it by doubling down on coding and getting Codex better. I would, I have just two thoughts. One, as crazy as it sounds, I think this is also yesterday's war. But I think going forward, we're going to, more and more, the agent is going to choose what models and just what vendors we use. Do we use, do we use Canva or do we use native AI-based generation tools like Figma? And the agents are going to choose which LLM we use. Okay. And just like everyone from Dario down has said, there's going to be more and more agents doing coding. The agents are going to make the decision on everything. And I would say, as a consumer of LLMs, forget about coding, which is the number one by dollars, right? As workflows expand to do everything, as agents do more, they will pick the LLM. And I see no competitive advantage to Claude for most workflows. It is so good. OpenAI, whether it's Codex 5.5, was just state-of-the-art of the models. It's so good for my workflows that I think the advantage that humans get out of Claude and Claude Code, which is huge, right? This was a story last year: humans shipping code, shipping products, built like we got an advantage. We were, we got more superpowers from Claude and Claude Code. I'm not sure our agents are going to get the same advantages. They may get just as many advantages from OpenAI. And I already see that with our agents, our AI VP of marketing, AI VP customers as applications, they love, they love OpenAI. They love it. So I think this is another benefit that is ephemeral as agents take over more and more of the workflows of our lives, and we're going to look back at last year as this transition era where most workflows were managed by humans, and late 2026 into 2027 is most workflows are going to be managed by AI agents. Not AI agents working autonomously, not crazy open claws blowing up our Mac minis, but running everything. And I think this is, this is where OpenAI is very well positioned. The agents will pick what they want, and it's not about what makes humans better. And our agents like OpenAI, and that's why I'm on, one of the many reasons I've come back to Team Sam and Team OpenAI is not because I care, because my agents like OpenAI. They like the API. They love it. So I, I got to follow my agents. Just like you got to back your team of humans in the old days, like 2024, today I have to back my team of agents. If they pick OpenAI, I'm, I got to be on the team. I'm not exaggerating. It's a radical change that most folks are just, are just in the, still in the human-led AI where they're not seeing yet.

They have very different perspectives on what vendors to pick.

Well, listen. I think it will change. It's fun. Over, over the weekend, um, my 996 project was I built an agentic API grader where we went, I just had Claude, OpenAI, and Gemini together take the top 120 APIs and grade which ones they thought were the best. Which tools I thought, 11 Labs, um, everything on down. Interestingly, Stripe got the highest grade, got the only A+, uh, which is, which is a reason to go long on Stripe. I did not think Stripe would come out in the top. My captain obvious learning, and you'll see, see the same thing if you just ask Claude what to use, very biased toward the leaders now. They now, very biased toward momentum. They're not going to recommend Marketo for your agent to do marketing automation, okay? In fact, it mocked Marketo, Outreach, and Salesloft as tools useless to agents, okay? This API, they said there's no place in the, an agent will never send an email through Outreach, Salesloft, or Marketo because it will just craft and send a better email itself, and said these are worthless products in the age of agents. Um, but they are very, if you had to do a 2x2, they want market leaders that are, that are innovative. That's who the agents pick. So I think for now, at 3x3, it's Gemini, OpenAI, and Anthropic, right? In fact, the order is Anthropic, and so the grader, it graded Anthropic just above OpenAI, and then Gemini was just down here. So it, it, it was interesting. That's what all of them wanted to pick. And I think that's, uh, that's the world we're going into. And, and the old guard are going to be bypassed or, or, or useless. So that's why, to your point, I think this is an interesting story, but it's a whole new story as the agents pick. It's a whole new world where I think OpenAI is even more competitive again.

Under-discussed. The public markets have the right idea but the wrong direction. The public markets think vibe coding and Claude are their threat. No, the threat is what the agents pick. And actually, if you look at overall, the markets are, are, they almost get it right. They're worried about Atlassian and Monday because agents don't need project management tools. They have no use for them, okay? And the ones that are actually have outperformed, right, the Twilios, the Cloudflares, and others, the agents still have use for it. So our whole narrative that public markets somehow saw the future that most podcasts couldn't see, which is what matters is what the agents will pick. And to your point, this is why the agent wars, I mean, Marc Benioff gets it even more. This is why Sam Altman, they're all like, you got to win the agent wars because if, if OpenAI wins the agent wars, then you have lock-in. Then the OpenAI will probably pick OpenAI as the API. And now maybe they will evolve where they're actually agnostic at some level, right? Where, where these agents are so successful they have to pick the best of breed, one could imagine it. But there's, you got to own the agentic layer, not just the fabric, but you got to own the agents too because they're going to make these decisions.

Mass decay. Churn, churn that is, churn that is deferred still exists, and it is, it is where the rent-seeking CEO and the mediocre hide, okay? Workday does three-year contracts upfront and five-year renewals. So the average Workday customer effectively signs up for an eight-year contract. Three and five is their standard term, okay? Does that mean they, they're going to stay on Workday forever? No. That, it means they have eight years to find better agentic solutions. Now, now maybe the executives are all gone by the time that, that comes up, but I, I don't believe there's, if you, if you believe that public values, Rory's better at this than me. If you believe that public stock prices are the sum of terminal values of cash flows and profits, then deferring churn and masking churn doesn't matter. It doesn't help if you defer it four years because if it, if it dies, if the customer dies anyway at the end, you never have it because it falls off your ARR rolls.

I'm not sure it's extreme in the sense I can envision a world where even eight years from now you don't turn off your, um, SaaS system of record, but you're not growing. So interestingly, and again, I didn't hang on, Jason, I'm going to agree on something. It was interesting because you, we're going to discuss ServiceNow at some point in time, right? Which, you know, grew 20% plus or minus, very negative market reaction. And if you listen to the analyst call, this will make you very happy, Jason. A lot of the really drilly, kind of grindy questions were, is your AI agent revenue really real? Are you just bundling it? Is it growing fast enough, right? In other words, basically saying, I buy into, let's call Jason, the narrative you articulated, which is, if all you are is a system of record for humans, you are a bounded cash. Even if you're not a negative NPV, and I think some companies will be, we'll talk about that later, but even if you're not a negative NPV, you're a slow growth at best NPV terminal value. And the only way to get the high price that you need to make these stocks compelling is to have, yeah, agent-based activity on your platform. And it was just super interesting. You know, we had that talk a few weeks ago where I, you kind of gave me clarity on that, that you need to see agent acceleration. And then it was funny to look at the call and that, you know, this is a company I, I shouldn't know the numbers doing 16, 20 billion, and they're grinding the CEO about a half a billion to a billion dollars worth of agent revenue because what they've recognized is that's the tell for the future, right? And I'm willing to bet in a quarter or two someone's going to be asking Benioff for how many calls to your agent, your headless API did you get? How do you measure that? How do you measure value? And that kind of stuff. This is the way it's going. So you are right.

I think it's conf-, like, let's take, for, I think Canva is going to have a wildly successful IPO, and they just launched their, their agentic suite, okay? And it's got a lot of great agentic products in it. You can, you can vibe images, you can vibe, you can vibe everything. Like, it's actually very, very good. This Canva, I think it's called Canva 2.0. It, it's great. And, and if it had come out last year, like, it might even be the default that, that we use instead of startups, okay? And it's so, so no question, it's Canva 2.0. No, it's great. Is it, is it the best? It's definitely better than Make. No, I mean, it's great. It's, it's great. Okay, but ask yourself a question. Would an AI agent use it? No. An AI agent is not going to go in and move assets around, vibe them, and it's just going to create the assets. So an agent doesn't need Canva. This is the meta threat that the, the stock prices reflect, but the narrative misses, right? This Canva got the, Canva maybe in 2026 built the right 2025 product, but will agents buy? I don't think any chance an agent is going to use Canva, and I don't think any, there's any chance an agent is going to use Jira or Confluence unless it's forced to. Like, it has no, it has no need for these products.

Yeah.

I actually think this is one area where the enterprise crosses over ahead of consumer because we want to automate these workflows as soon as we can, right? I don't know the answer. I don't know if the average low-end B2C user who gets so much value from Canva is going to make themselves obsolete with an agent. They're going to still be designing. They're going to pay 18 bucks a month getting incredible value out of Canva. So they may be, it may take time because we, none of us really want to replace ourselves with agents, right? It's our team. So the more people you have on your team, the more you're going to deploy more, more agents to replace them. The more you're just yourself, a solopreneur, the more you're going to use AI tools, but not agents to replace, agents to enhance you. So I listen, I don't know the answer to your question, but I think this is, this is going to harm enterprise workflows before it hits the sort of prosumer market.

I think there's a lot in that, and I want to just kind of put a bookmark on it because I think it was actually very helpful. What it means, Harry, is if you think of three categories for software companies, you know, eroding terminal value, melting iceberg, you're in trouble. You have a low stock price, we'll talk about it later. And if you've leveraged, you're dead, right? Then the middle category is system of record. They're going to keep you forever, but no activity, but not a ton of agentic activity on top, right? You're going to be worth something. You, you know, there is a positive terminal value. It's calculatable, and there's a price at which you should buy the stock. And then the, the happy outcome is the agents are using you, and you're getting increasing returns as you, you know, from AI leveraging your technology. So that if you put those three buckets, I think, but Jason, you're right in saying, Jason, in those three buckets, successful enterprise software companies can easily get to that top bucket because you're right, companies want to automate because it's called taking costs out, and it's called, you know, making yourself more efficient, right? So successful, successful SaaS companies in the enterprise that adapt to this reality can probably reignite growth. Obviously, unsuccessful ones will fail, right? That's what you're saying with what you're saying about Canva. I don't, I don't have a, I don't, I'm not a design person. I don't have a feel for, I like the team, but I don't, I'm not a designer. I have zero creativity, I think. But I think you could be right, which is, is that individual user, small user, they want to have AI tools, but they don't need to create a whole AI automated workflow because they're just not doing enough to matter, right? So intuitively, what that says is they end up in that middle bucket where I think now bringing it back to the IPO, I think you, the point is they have the scale and the profitability to be an IPO. This company is going to do great. The problem is, as we've discussed before, so much of venture is about the pixie dust upside. And any IPO without pixie dust upside just gets priced like a real company. And it's always a bummer for venture people when their company gets priced like a real company because it's just so much easier to make money when you get pixie dust credit, right? And the truth is, SaaS pixie dust credit expired in 2025.

Yeah. Yeah. You got to be, it'll be the, you know, we talked about Rippling growing 70 some odd percent at a billion, right? This should be, if this were an AI play, it would be a jaw-dropper, right? AI, will it trade at a SaaS discount? I sure hope not.

It'll trade, you see, I don't like the second half because I actually think it's, I think Rippling is a great story, is that, and I know you do too, but it's like, it's going to trade on a sensible adjusted PE multiple based on growth, based on cash flows, entirely rationally in a way that any value investor could buy it, which by definition means it won't trade like SpaceX, which is going to trade hopes, dreams, and prayers, right? And the dirty little secret of venture again is how much of your money you make in that one year in 10 when everybody buys the dream. So you're right. I think it's going to, like, it's a great outcome. It's, and so it's not going to trade, I don't think, SaaS discount as much as I think it's going to trade at fair value. I mean, maybe that's a way to say it even starker. A lot of venture capital makes money when their assets don't trade at fair value. They trade at a narrative premium to fair value. And in those one year in 10 when you make 30 to 40% of your total cash back, you get an unexpected gift, right? Yeah. Good SaaS companies that aren't AI-first are going to trade at fair value, which means if you've created value, you'll get value. And I think Canva and Rippling have both created enormous value. So they'll get value. But what they won't get is that stupid 30 times revenue premium that looking back you might have got in 2021.

I mean, there's just such a lot to disentangle. Let's, let's put a pin in Nvidia for a sec and go back to the big picture on what do the deals mean. And I've been thinking a lot about this, is that remember I said earlier, right, you have two jobs when you're running an enterprise foundation model, leaving aside the consumer business. You have to build amazing models, and you have to buy enough compute to make sure they can run them at the demand you can, at, at the demand you see. And both jobs are incredibly hard. And the funny thing is right now OpenAI got one job right. They have enough compute, and they got the model wrong. So that's why they're in trouble. And Anthropic did it the exact opposite way, right? They got the model perfect. In fact, they may have oversucceeded, and as a result of that, they're light on compute, right? So that's what's big picture going on. Amazon, sorry, Anthropic are massively constrained on compute, which is why they're doing these big deals. And Dario has articulated in the past, you know, I'm a little careful about this, and this is a, and, you know, let's get real, no one had a business plan last year when they went from 1 to 9 that said they're going to go to 30 by the end of Q1, right? So they were, they were hit by their own success, right? So that's kind of what happened. And, and, and the bigger picture going back to the two big jobs is, and I just internalize how incredibly hard and risky the second job, the buying compute job is, and how capital intensive this is. I don't think we internalize it, right? I was thinking about it. If you're at a $10 billion run rate right now, you know, which is roughly Anthropic end of last year, right? And you're looking forward two years, and you think you're going to go 5x this year and maybe 4x next year. Not crazy. Which means you're going to be, which is 20 times. So that's 200 billion two years from now, right? So let's run, let's say 100 billion two years from now, right? So whatever cap you have today, capacity to serve 10 billion, you run that model and you say, now I need capacity to reserve to serve two years from now 10 times that amount, which is 100 billion. I need 90 billion of new capacity, right? And the capital intensity for every dollar of run rate revenue, it probably takes four or five dollars of capex to support that, right? So if you're going to add 90 billion in revenue capacity, someone between you and your partners has to find plus or minus $300 billion to buy chips, dig holes in the ground, build data centers, and make it all happen, right? And it's easy to lose sight of that. How, think about how capital intensive that is. You're doing 10 billion in run rate, and you're effectively saying between you and your partners to be able to meet demand two years from now, you've got to invest 300 billion. Not all yourself, some to your partners. Think how. And by the way, if you get it wrong and you end up doing 200 billion in run rate revenue, you're going to only have half the compute you need. You're going to look like an idiot. And if you get it wrong and you only get to 50 billion in revenue two years from now, you're going to be left with 150 billion of stranded capacity. That, I mean, we lose because in software land it was so easy. If you sold more, you made more money. You didn't have to spend a lot to make that happen. At worst, you had to hire some reps. Microsoft had to hire no one when they exploded in revenue. They just shipped more PCs. More PCs shipped, and they got their like 20 bucks per PC. In this case, two years before you get the revenue, you have to bet four times that amount on capex, right? So my big aha from this is it's obvious when you say it, but how incredibly risky this bet is. And, you know, it's, it's no accident that if you look at the two CEOs, who is going to take the risk to the upside and just spend the money and just, you know, devil take the consequences? It's going to be Sam. So he has lots of compute. And who's the more careful guy and might underspend? It's Dario, right? And I don't blame either of them in the sense of the, the sums involved. It's not just the AB. It's not just that the business is capital intensive, that there's $4 of capex for every 1x of revenue, but it's also 10x-ing in growth. Yeah, the combination means you have to bet four, five, eight times your current run rate revenue in capex just to meet demand. And you got to do that every year. Have a, you know, so I'm sitting here going, all these stories, I want Anthropic screwed up because they don't have enough compute. Dude, if you can predict two years out what the demand is, let me tell you, there's a, you can join Leopold in a special situation. Yeah, in the situational awareness trading game, right? It's really hard and betting this kind of... So, so that's my big aha, which is the com-, it's the compute intensity means the capital intensity, and the growth means the, the, the spread and the risk of that capital intensive bet is just huge.

Yeah, I don't think it's a huge deal, but if, if OpenAI really missed last year, and I think some of it's definitional what the miss is, right? We're reading an Information report, and I again, I don't think this is a huge deal, but, but it's possible you look back and see that as the first disconnect from compute equals revenue, right? Because the, the risk mitigation to Rory's point is as stressful as this is, all the spend, if Sam's right that, that really compute equals revenue, one, if there's a perfect correlation, then it all kind of works out in the end, assuming that capital is available. If, if, if that breaks for any reason, right, then it just adds a level of risk to the model. Uh, that's even higher. And I'm not saying that happened for sure, but superficially it seemed to have happened, right? Superficially.

Jason, you're exactly right. I mean, I think it's a [__] stupid statement by Sam, right? It's, it's correlation. It implies correlation, um, causation. It's just correlation. Let's rephrase that statement because the ultimate statement is compute equals revenue. Not true. I mean, I can tell you what is true. No compute equals no revenue. But compute and a shitty model also equals no revenue. See Grok for details, right? The truth is to succeed, you need to have enough compute to meet demand and a good enough model to generate demand, right? And you got to do both of them in sync. It's a, you know, it's hard. So I agree the correlation argu-, everyone was making that correlation argument, uh, sorry, causation argument that, you know, compute equals revenue only because what they weren't, because while they were making that argument, the, the demand seemed almost infinite. But the minute your model underperforms a little bit, it's not quite infinite anymore. Now I think the good news is if aggregate demand is growing up 5, 10x per year, I think these air pockets are just going to be air pockets for both sides, right? I mean, I think because zooming out, Jason, the big picture comment is agents. I mean, what do you think? How many more tokens does your agent use per day than you did, Jason?

What about token? I'm actually interested.

That's my point. I think they're using literally, I, I saw a number like it's 50 to 100 times more expensive in terms of tokens to serve an agent than a Jason, actually, than a, probably 10 times than a Jason, 100 times a Rory because I'm not, you know, you're...

I'm an idiot. What's easier to rectify? Is it easier to resell excess compute that you have, or is it easier to emergency buy compute that you don't?

It sounds like it. Again, hadn't thought of it, but the problem is if you're one of the two big guys, you are so much, what are you going to do? Can imagine it. You, OpenAI, you have ex-, you half a gig of excess compute. Anthropic is desperate for compute. The hell you sell it to them? You want to buy it?

Totally, that's fair.

I mean, you, you get zen about it at some point. We're going to have two divisions. We're going to have our compute division and our applications divisions, and they've got their own P&Ls and, um...

What's more like, but remember you don't have the, the truth is you actually have the compute on a long-term contract, but Amazon, Google, Microsoft, CoreWeave, Oracle will actually quote have the compute. So maybe the way to phrase it is if comp-, if foundational model company A can't take their, take our, pay the hyperscalers will probably take that compute to foundational model company two and say, hey guys, I got some cheap short-term compute. It's like a sublet. Yeah, just a $10 billion sublet. So yeah, there will be some kind of market. I mean, as one is ahead and B, I mean, what we're seeing de facto is that's happening right now. The kind of macro, remember that whole CoreWeave, the, the one, the reallocating a data center from company A to company B. That's this going on in real time, right? People are trying to figure out, you know, again, remember that, that, that forecasting problem I articulated. On top of that, there's a two-year lead time. So it's not like you're forecasting next month's demand. You have to forecast two years out, bet 10 times your revenue on capex, and hope you're right. It makes running an airplane company, an airline, look easy. And...

Why?

Well, first of all, now, now Anthropic is deeply tied to them, right? So Google wins whether you use Gemini or whether you use Anthropic now, right?

Um, two, Google has infinite capacity because they're, they're the largest provider of traditional web software. So they have all this capacity for themselves that they can allocate even better than Microsoft. Do I want to give it to my own compute? Do I want to give it to, to Anthropic? Do I want to give it to them? They have this surplus to Rory's point, to your point, Harry, that they can route between their customers.

and themselves and others. They win-win here. They have Gemini, they have Amazon, and they have the capacity and they have the ability to rotate it where and when they want. And they have the cash flow. They have the cash flow to manage it all. So, Google win-win-win. They definitely have more.

And to stick with the more ways to win comment, we forgot Harry's original question on Nvidia. Yeah. The last shoe to drop here is both Amazon and Google have chip products they can bundle into the equation. And for context, you know, chip, you know, is GPU spend is roughly 50-55% of total capex on any buildout. So if you're building out a one gig data center and you know estimates range 30, $40 billion, 20 billion that is compute and Nvidia's gross margins are 70%. Which means 14 billion of that per gig is raw profit to Nvidia. So if you're sitting there now, you know, you're, you, that's one of the what's Google and Amazon are trying to do, which is substitute that for their chips. Now, Jensen will make the argument as he did on the podcast. Dude, it's a mistake. Our pod chips are better. They have more support. And you got to be in the weeds on that to know the exact answer, especially for specialized use like Google and Amazon would say that the Nvidia advantages aren't as good on specialist use. But I wonder myself. But nonetheless, that is what's happening, which is some attempt to bundle. Neither of those two chips, the Google chip or the Amazon chip are widely available on a standalone basis. So what both of the hyperscalers are doing is effectively bundling their chip with their capital and their equity investment to convince Entropic to continue to run on their products and just take more of the gross margin arguably with asidi would say a substandard product. But you know tech is there's many examples in tech of substandard bundling products succeeding. See Microsoft for details.

Okay. Not the question I was expecting. I would probably, I mean for maximum dollar it's a, it's, I mean maximum dollar gain. It's, it's a bad question. How I'm not, I'm not doing my thing again. I think risk adjusted I would do Google reluctantly because it's, I think if you just wanted the upside, you know, you can paint an Nvidia is, is a more singlethreaded story around raw capex demand but I think risk adjusted you probably would do Google because even to, to Jason's point the biggest advantage Nvidia has is if this thing happens, if this one thing happens which is capic explosion, they get it all. The biggest advantage Google, but if slows down even a little, they're, they're really in a different place. The biggest advantage Google has, it has multiple ways to win. It can win if AI adopts fast. It can win if AI adopts slow. It's kicking off cash. It's got a bunch of steady businesses. Provided only one thing can go wrong. Provided CH GPT does not erode Google search, which is the mother load of cash, they're golden. So, risk adjusted, I'd probably reluctantly buy Google.

No, you got to do Nvidia.

Okay. because it is, it is despite the fact that, that it obviously it potentially has reached its, its, its market share ceiling with, with, with anthropic and deals and others. It's the, it's the best pure play into the AI vector.

Agree. I think we're saying, yeah, we are. So you don't want to, you don't want to minimize your risk. Just put it into VTI or bonds. If you want to bet on AI today because we can't buy anthropic or open AI, just buy Nvidia. That's how you buy AI today. Just, just buy Nvidia. Don't even think or spell it.

For, for what it's worth, that's totally fair. And I think if you're just going for max upside, if yes, if you wanted to create your AI upside exposure, it's Nvidia and then a bunch of other weird things we can talk about another time.

Yeah. Don't even buy Core Weaver or these crazy things. Just go, just go back the truck up to Nvidia and if, if Nvidia loses AI, AI, AI stumbles. It's okay.

Okay, fine.

That show was Yeah, we love Jansen. Go Jansen. I mean look, look the data says most managers, I mean we all know that underperform the index and then especially if you adjust for beta they underperform the index so no it turns out to be remarkably hard Harry but keep telling yourself that.

Agree, yes. And when you're not diversified you're either right or wrong. I mean yeah, survival bias here but yes.

Well look, ARC is down 3.88%, 88% this year. We're, we're definitely getting our.

Yeah, I don't want to be all entropic all the time.

Well, Benchmark has their money. All right. Who cares? If I, if I, if I own 20% of Manis and got my 400 million out, I, I, I would love the boys. I'd want to help get the boys out. Don't get me wrong, but I don't care if I got my money out. I ain't giving it back. I'm not accepting the service of process. I'm hiding from the, from, from the service of process provider. I'm keeping my 400 million. I'm taking my 80 million in carry for myself and I'm hiding.

Uh, it is a real risk, but I ain't giving my money back. If I'm benchmarking, France, I ain't give my money back. I.

I don't want to trivialize it only because there are humans at the heart of this who are at risk stuck in China. Right. But, but I do agree your assessment is the investors who've gotten their capital out, the chances of them having to or being willing to return that capital are zero. So when the, when China says they want to unwind the transaction, I actually don't think they're talking about the money as much as I think the leverage point is over Meta where they're really saying you have this technology, we'd like it back, right? And let me give you a clue. If that had happened to Tesla where they have a massive car plant in China, they'd be coming to the table right now with, um, the Chinese government and saying, "Maybe we should unwind this transaction because you've got a lot of leverage over me." Right? From memory, I think if, if you do a lot of business in China, this ruling is going to start a discussion. If you don't do a ton of business in China, it's not, no one's going to be pursuing the venture investors. I think they're, to some extent it's going to be pushing on Meta and then obviously the more human thing is some of those, the team are still based in China and they're not going to be able to get exit visas, right? I think it, this process will unwind. What it really is doing is it's less about getting them this thing back than it's preventing it from ever happening again. That's the first, last, and only one of these deals that anyone will do, right? Cuz I just think it's going to be really, unless literally as before you wire your money as a venture investor, you know, the night before you put everyone in a 737 in Beijing and say, "Dude, we'll wire the money when you hit Singapore and bring your family." It's just not going to be a thing, right? So, I think China is, is just sending a very clear and look.

Tax. Well, but they have the technology other than some of the found, they have the technology and any of, any of the team that's based in Singapore they have right. I actually think what happens is and there'll be some resolution as I said. I go back, I don't remember how much business Meta does in China right, but if they do a lot they'll have to settle. If they don't do a lot and I think that, I can't even remember, I know Google didn't for the longest time. I just don't care what meta does in China, neither subject interests me and the combination interests me less. Um, so but I think that if they do, they're going to have some, they're going to feel some pressure. As I say, just like if you were a big US manufacturing company or Tesla and the Chinese government took this position, you'd have to take it seriously because they'd say otherwise we're just going to register a four billion judgment against you and exercise it against your local plant. Have a great day.

I think it's just a blip. A human issues aside to Rory's point, I don't mean to minimize them, right? I, I would just take my, my carry and, and, and hide. I don't think you can. The service providers will come from China. Um, I think that the, and I don't want to spend too much time on, I think it will be a minor blip in some upcoming AI war between China and the US that is difficult to fully understand today how this war goes, right? Will the, will Nvidia is supporting AI to China, right? Let's, let's do more, that's in their best interest. Others are against it. Um, it's clearly a war at some level but I'm not smart enough to fully predict where it will go but this will just be a, the start of, not the start but one of the first expressions beyond this Nvidia a chip drama of where this war will go. It's a war.

Agree. And I don't love the war word because I think I, that implies actual violence. But I think you're right because it's funny. You often have to step in the other person's shoes. If you think back, if you, if you're looking at it from China's perspective, there is someone going to go to prison somewhere, I think in Singapore or the US, for selling Nvidia chips to China in breach of the sanctions, right? And they're probably sitting there going, "Well, if you won't give us your chips, I'll be damned if we're going to give you our researchers." And it feels a lot more balanced from their perspective. And you evil westerns are putting this dude in prison. And all he tried to do is sell us some, you know, black wall chips. Back off. The sanctions we're exerting on them probably feel problematic to them. Now I, I, I, I remain on team USA. I live in Team USA. I'm with Team USA. But just put yourself in the shoes of the other side and think what, what they're probably sitting there going, we'll show you with Manis like you showed us with Nvidia. All make sense?

Yeah. I mean, it's, it, it's, it's at least slightly tied to DeepSeek finally raising outside financing at 20 billion, right? It's, uh, uh, I maybe war is the wrong term. I think there's two great battles that will come before this pot ends, right? That are subtle that we won't hit every one is just China versus US in, in AI is a battle that's happening. A, and the other is just the social dislocation from AI. Um, it's, it's, it's already happening. I think there'll be more revolts and issues as layoffs happen. I think the California will pass its billionaire tax and the exodus will continue. I think New York is already p, is, is trying to pass its penthouse tax which is already leading to wars with the citadel founders and others. So there's going to be this theme of, of social unrest and this war with battle with China over AI that won't bubble up each week. But I think at a meta net, meta nonpolitical level, these are the two big themes I think that, that, uh, we can ignore in our quest to get rich fast. And we're gonna have three trillion dollar IPOs. Who cares? Who cares about the little guys when we have $3 trillion IPO care? Who cares?

Yeah. But I think what that, that bit at the end sounds mean, Jason, but I think what you're saying in the rest of it is it turns out that the non-trillionaires or non-billionaires can see that the billionaires don't care. And you're right. I think the political climate has shifted. And yes, this is going to be a continuing social drama. It's not the thing that preoccupies my day because I'm just trying to do my job. But you're right. If you were to zoom out and write a social history of the 2020s in 30, 30 years time, I think you're exactly right. I think the two historians will talk about, you know, the revolt against inequality and AI and they'll talk about the China. I think it's a very good framing. I think those are the two big social political framing things here provided we don't blow up the world, right? And, and I think it's interesting because my, I haven't seen the polling on the billionaires taxing. My rule of thumb used to be California the electorate is quite sensible. They, um, you know, they, they elect Dems but they're pretty profoundly right-wing at heart which is what no one ever talks about.

Interesting because normally they vote down any tax because they're like no, we've learned just vote no to anything right. Yeah, we're, we're Democrats in our heart but we're Republicans in our pocketbook. But if it's 40% already that's interesting. I haven't paid attention because unfortunately it's not a billionaire that I'm, I'm, I'm not in the price bracket but duly noted. Okay.

Yeah.

Might be second behind Pluralsight depending on how you define it. It might be the second big one. We just, we just, we just weren't as focused on Pluralsight, but Pluralsight died under debt, too. Under massive debt.

But.

Was big.

100%. They're losing money a lot. I mean, yeah. I mean, it sound from memory 2021 the deal I think went down in 21 like it was a $6 billion transaction or whatever and five billion of it was equity. So, it was not wildly overleveraged, right? Maybe 1.6 of debt, the rest of equity. So, you know, not wildly overleveraged, right? Fast forward today, they have more that debt than that now. So it could be there was a minor dividend recap and they took some money out. Maybe they got 20 cents on the dollar. But the big picture here is this, the, and it's terrifying is that this is a company I believe with a couple hundred million in EBDA. And despite, you know, if you look at it from a cap structure perspective it was four or five times equity. It was 80% equity only 20% debt. And that should be pretty safe. But when you way overpay for a company that now has way underperformed and for reasons we'll talk about visa vi has very significant terminal value questions then even though you've only got a small amount of debt the stunning thing is with less than a couple billion did you say it was three billion of that right I thought, I thought it was closer to two but that's okay right they basically said the debt smothers the company right even though it was fairly underleveled what that means is at 200 billion They basically were as a eight nine adjust times adjusted EBDA. It wasn't worth putting any more equity in. They've massively overpaid and the deals underperformed. So it's a business that looked like nothing could go wrong in which is enterprise software. And it turns out and, and, and funny and people would have said if something does go wrong it would be oh my god you way over levered it. They didn't way overlevered it. They just way overpaid for it. Right?

That's the important insight that I think is missed. Right. Um, Pluralsight was both, right? Vista apparently lost 2 billion, but it was very levered, right? Um, this is not heavily levered, but they, they can't afford the 300 million of debt service or it's not worth servicing the 300 million.