I see a large IPO on the horizon.
You're surrounded by journalism. Hold your position.
Overnight success.
The place of 30,000.
Double.
Right.
There, misinformation.
Quarantine clearing order inbound.
Let's just roll.
We are surrounded by journalists. Hold your position.
Come on. Get up.
Trust the experts here.
Five cookies.
We correct.
Founder Mel.
Five.
I see multiple journalists on the horizon. Stand by.
UAV online.
Blaze win.
Double blaze.
Triple blaze.
Double kill.
Victory.
Go.
Is.
Please.
Team deathmatch.
We are experts.
Triple blades.
That's just wrong.
Right.
Hardy clearing order inbound.
Come get up.
We are surrounded by journalists. Hold your position.
Strike two.
Activate golden retriever mode.
Marky clearing order inbound.
Five.
I see one more journalist on the horizon.
Founder, we are surrounded by journalists holding position.
Strike one.
Strike two.
Activate golden retriever mode.
Market clearing order inbound.
Five.
I see more and more journalists on the horizon. Stand by.
Founder.
You're watching TBPN.
Today is Thursday, February 26th, 2026. We are live from the TBPN Ultra Dome, the temple of technology, the fortress of finance, the capital of capital. Let me tell you about Ramp.com. Sometimes money, save both. He's used corporate cards, bill pay, accounting, and a whole lot more all in one place. We have quite the linear lineup for you today, folks. We got a scoop. We got an interview with the robot vacuum guy. Linear, of course, is the system for modern software development. 70% of enterprise workspaces are on Linear, are using agents.
Sam, the guy who exposed that he could remotely access 7,000 DJI robo vacuums.
Very interesting story, enabling live video, floor plans, and joystick control.
We're very excited to have him on in just over an hour. Then we have Ken Richie, chairman of Flexjet.
Very excited for that one. Quickly followed by Howard Marks,
Oaktree Capital, Oaktree, and then a lightning round to be remembered forever. Lots of lots of deals getting done. Lots of gong-worthy news.
And we have a surprise guest as well joining us. We do the time a little bit. First, we will tell you about Nvidia earnings. They crushed. Highly anticipated as always. Nvidia is permanently holding up the US economy, continues to hold up the US economy, the global markets, but it's sold off even though they blew out earnings and it was a very good quarter. So earnings dropped yesterday after we got off the phone with Doug O'Laughlin from SemiAnalysis. SemiAnalysis did have some good breakdowns here, but the top line revenue came in at $68.1 billion, up 73% year-over-year and 20% quarter-on-quarter. And this beat consensus estimates by nearly 3%. The stock price popped around 3% immediately but then sold off 5% after at the market open this morning, making it the stock's worst day since last April. They're now just a tiny $4.5 trillion company.
April was DeepSeek.
Last April, last April was DeepSeek. Yeah. Yeah, that makes sense. People were saying you won't need a whole bunch of Nvidia chips because you'll be able to inference cheap commodity hardware and the models.
DeepSeek was climbing the app store charts in America totally organically.
Yeah, there was a lot of weird stuff going on.
They weren't using a massive bot farm at all. Yeah, I mean, I guess I sort of steelman the DeepSeek story. There was this interesting takeaway which was that even though the numbers were sort of misreported.
We had it wrong. I think it was January.
DeepSeek was January.
Liberation Day was.
Oh, Liberation Day tariffs. Yeah. Chip sanctions. But yeah, the DeepSeek lesson was like you can distill models. You can get, you know, a certain level of intelligence at a much lower cost. And that is real, but the demand on the frontier is just incredible because people are like, 'Oh, I have a strong opinion about 5.3 versus 4.6.' Like, people really care about being on that perfect leading edge for exactly what their use case is. You see this with people having favorite models, favorite flavors all over the place. And so the demand in the Jevons paradox really just powered right through. What do you have to say about that?
I was going to say, like, I think when the DeepSeek moment happened, the narrative was not that they were distilling though. It was that they had built, like, they had trained a brand new model with very few resources. There was no, like, sense that they were just, like, distilling.
There were rumors about it pretty.
There were rumors, but the main narrative was not that, like, they're being distilled.
I think what I mean about distilling is that, like, the truth that came out over the news cycle was that distillation does get you somewhere near a particular frontier capability and allows you to reduce cost, but there is still another order of magnitude of demand for the next generation and the next level of the frontier, and we have yet to see a plateau emerge for demand for whatever the next frontier is.
Yeah, and overall the story of the last year is that there's very, very, very little demand for number three. Yeah. There's some demand for number two, and there is an exceptional amount of demand for the most performant model for a specific task.
Yeah. So going back to our newsletter today, our earnings recap, which you can subscribe to at tbn.com. After the earnings call, SemiAnalysis called the results staggering. I love it. Clean bill of health on gross margin, revenue, and the guide is firmly above buy-side bogeys. Incredibly clean, really. They also pointed out what Nvidia said about supply commitments with $21.4 billion of inventory on hand, up from $19.8 billion. They have $95.2 billion of supply locked in with chip manufacturers. Also stating, 'We have strategically secured inventory and capacity to meet demand beyond the next several quarters.' In other words, we're not running out of chips anytime soon. That's good news for Nvidia. The second-order effect that I think was interesting that Doug O'Laughlin flagged for us was that even if TSMC does scale up magically, or, you know, they figure out how to build another fab, they Arizona increases capacity, even if Nvidia has sharp elbows and is able to push out other demand and get all the line time they need to build all the accelerators that they need, soak up all the CPU demand, etc., etc. Well, then you could still wind up in a weird scenario where Nvidia has the chips, they're ready to sell them, the hyperscalers want to buy them, the AI labs want to inference them, but there's just not enough energy. And so there's this question of, like, when does the chip bottleneck shift to the energy bottleneck? That could be part of what is sort of worrying people because you can see in the timeline we have this chart, 'Are you not entertained?' from Nathan Benake over at Airstre, and he's taking a screenshot from the Financial Times, and it is just one of the most incredible graphs I've ever seen. And so as you see this chart, you have to wonder if there are any bottlenecks that they will run into. TSMC capacity.
Yeah. And I asked Doug about this. I asked Doug about this. What does Nvidia do if their customers do have an energy bottleneck?
I feel like they'll find a way to still ship the chips.
I agree. And truthfully, as big of a story data centers are, they're still consuming well under 1% of US electricity. And so there are chips to be moved around. There are new power plants to be brought online. We're actually talking to Doug Bernau from Radiant about nuclear power today. And there are so many different ways to solve the energy bottleneck. But it is very real world. It is very slow, and if there's a timing mismatch, you could see a little bit of a flatline that I think people might be worried about. So, Jensen himself strongly pushed back against the SaaS apocalypse narrative yesterday, which is interesting because he doesn't necessarily have to. He could be out there saying, like, yes, all those SaaS CPU workloads, they're all going to be GPU workloads now. And yeah, you should actually sell all your SaaS because the future is inference. Like, every app that you use, it's not going to be code that's running on a CPU. It's going to be inferred on a GPU on demand. And so, you know, demand for Nvidia should be even higher. Like, he doesn't really have that many bags with the SaaS companies necessarily. Of course, they'd be, you know, upset if he was talking trash, but he's not. He's defending them and.
But he buys a lot of software.
Sure. Yeah, of course. He said, 'I think the markets got it wrong on the SaaS apocalypse.' This is Jensen Huang talking to CNBC's Becky Quick, pushing back on the fears that AI agents will cannibalize the enterprise software industry. Instead, he expects a broad swath of software firms to use agentic AI to develop their software and boost efficiency in what he described as counterintuitive. Huang said that AI agents won't replace these software tools, but will use them instead. Why even waste the tokens building a calculator when you can just download the calculator SaaS or whatever? I don't know, whatever SaaS you want to grab off. And this is certainly what we've seen with databases. Like, certain databases have just skyrocketed in demand because they're the ones that the agents are pulling off the shelf. And so yes, the agent could design a new database and install it, but that's a lot of work. It's a lot of wasted tokens when databases already exist. So let's tell you about Finn.ai, the number one AI agent for customer service. If you want AI to handle your customer support, go to finn.ai. And let me also tell you about Vibe.co, where DC brands, startups, and AI companies advertise on streaming TV, pick channels, target audiences, and measure sales just like on Meta. And we can move over to the timeline reaction. Nvidia is such a big deal. It's not just on the cover of the business section. It's on the cover of the Wall Street Journal. Didn't get the picture, though. Didn't get the picture. The picture is Iran. Iran talking about nuclear enrichment is on hold, according to experts. But Nvidia results help soothe AI fears. The surge in profit comes as the AI industry's appetite for chips continues to grow. Data center hardware, the chips and networking equipment that Nvidia sells to AI and cloud computing companies, accounted for 91.4% of the quarter's sales. Terrible news for gamers. Like, absolutely the worst numbers you could ever see if you're gamers. Maybe that's why they're maybe they're launching a short attack short.
John would be punching a hole. I would be. Maybe the gamers have risen up and they are shorting Nvidia to try and get them to go back into gaming. Computing demand is growing exponentially. Chief executive Jensen Huang said the agentic AI inflection point has arrived. With each passing quarter, the pressure grows on Nvidia, which at a market value of nearly $5 trillion is the world's largest publicly traded company. Is it not just the world's largest company? Is there a larger privately traded company? I don't think so. It must just be the world's largest company. I don't know. I guess you get into crazy definitions of, like, does Russia count as a company since it sort of is all one controlled economy? It is no longer enough for Nvidia to produce good quarterly results. They have to produce perfect quarterly results, said Daniel Newman.
How could they have done better?
Instead of net income of $43 billion in the quarter, they could have put up $50 billion or $60 billion or $100 billion or $10 trillion quadrillion. We want to see a quadrillion-dollar quarter. Please, Jensen, I'm not happy. I'm not satisfied. Keep growing. Keep selling these chips.
Gavin Baker gave some thoughts ahead of Nvidia.
What did he say?
Great. Shau pulled some out. The same point hit on by Gavin and Citadel Securities. It's a good one. Gavin said, 'The world is fundamentally short both watts and wafers, and it may take years to resolve these shortages. The shortage of watts and wafers may prevent an overbuild. Hyperscalers would overbuild if they could, but they simply cannot. My best guess is that we would need roughly a thousand times more compute for the unlikely hypothetical scenario described by Catrini to be remotely possible. And the time it takes us to get there will give humans time to adjust and maximize the many potential benefits of AI.'
Citadel said displacing white-collar work would require orders of magnitude more compute intensity than the current level utilization. If automation expands rapidly, demand for compute definitionally rises, pushing up its marginal cost. If the marginal cost of compute rises above the marginal cost of human labor for certain tasks, substitution will not occur, creating a natural economic boundary. This dynamic contrasts sharply with the narratives assuming frictionless replication of intelligence even if algorithms improve recursively. Economic deployment remains bounded by physical capital, energy availability, regulatory approvals, and organizational change. Recursive capability does not imply recursive adoption. And do you know what the title of Citadel's response was?
No.
The 2026 Global Intelligence Crisis. Calling everyone idiots.
We got to write an intelligence crisis report now.
The.
Is actually the perfect response. Like, very, very detailed. This is the same report that I pulled out that the current labor displacement narrative isn't holding up because job postings for software engineers are rising rapidly.
Yeah, it's pretty remarkable that Citadel was able to get that report out so fast. Like, it dropped, I think, on Monday right after Catrini went viral on Sunday, or maybe it dropped Tuesday or something like that. Like, it got really fast.
Yeah, it dropped Tuesday.
I mean, that's like a quick turnaround for, like, a pretty detailed analysis. I thought that they were just recon.
Let's check the em dashes.
I mean, the interesting question about, like, you know, replacing white-collar work versus, like, augmenting in new things is that the AI labs are obviously selling into enterprises. That's growing a lot, and the revenues are very real, tens of billions of dollars. But when you look to the other startups that have put up really big ARRs, it just, I'm trying to square, like, Suno just announced that they're selling $300 million in ARR for AI music, and that's a huge number. It's so big, but it doesn't feel like replacement work yet. It feels like it's just an additive new thing. Like, there were just a lot of people that wanted to pay $10 a month for a cool app. Same thing. Same thing. How many non-technical people had an idea for an app? How many people that weren't musicians had an idea for a song?
It never could.
That and then just unlocking all this.
And then you see it with, like, Higgsfield 2 and all the viral loops. And then, what's that other one? Not Webflow, there's.
PVPN simulator. No. But Lovable is one where huge, huge growth. And it feels like, yes, Lovable is, like, going into enterprises and whatnot, but it feels like there's a lot of just, like, net new software developers, website builders that are joining that platform and building stuff. And it feels very incremental. It does not feel very substitutional to me. And I'm wondering how much of the Suno story translates to the AI lab coding model story as well. And that's certainly what Citadel is hinting at with the.
Increase. Citadel is also showing that new business formation is rapidly expanding. This is from the US Census Bureau. You can see that year-over-year it is jumping.
Which we love to see.
Did Cluso delete this post? The Great Recession session of 9:52 a.m. to 11:16 a.m. February. Too bad. Let me tell you about Sentry. Sentry shows developers what's broken and helps them fix it fast. That's why 150,000 organizations use it to keep their apps working. And let me tell you about Shopify. Shopify is the commerce platform that grows with your business and lets you sell in seconds online, in store, on mobile, on social, on marketplaces, and now with AI agents. Nvidia stock is falling because it needed to clear an options wall of $200 a share. So given a lot of folks were long calls into the print and it didn't clear 200, brokers are selling stock to reverse some sold calls. It's that simple. This isn't fundamentals. It's market mechanics, says Gordon Johnson. Very interesting. I don't fully understand all the dynamics that can happen with some of the stuff Jane Street does to move around the market. But, you know, we'll see. I would say hold your judgment of Nvidia for the next quarter to see.
Samsung becomes the first Korean company to reach a $1 trillion market cap.
Pretty remarkable.
Over on companiescap.com,
you can see they are sitting at number 12.
That's your homepage, right?
Yeah, homepage.
Yeah,
homepage for sure. Definitely homepage. Just under Berkshire Hathaway.
Pretty good. And Broadcom is above that. But Samsung passed Walmart and Eli Lilly.
I mean, increasingly important in the AI era, right? They've done a lot of fabrication and whatnot. I don't think it's all the TVs. There was some interesting stat about, of the $1 trillion companies, isn't Samsung like the highest margin, lowest margin or something? There was some post from yesterday we didn't get to, but there was a lot more context on that.
Yeah.
Anyway,
Ramp Capital is sharing, says Patriot, and somebody says, 'I have open calls sending lowball offers on Zillow all day just to make boomers start panicking.'
And he says, 'Can you give me an update on the Zillow campaign today?' And the Zillow update: listings contacted today 372. Average offer 70% below asking. Positive responses zero. Negative responses 270. One response was violent, but I've reported it to the Tampa Bay Police Department. No response, 102. Would you like me to keep making offers?
70% below asking. Just, you're selling a million-dollar property. And it's like, how's that? Can you do 300K?
Yeah. Let's.
Let's bring in John Palmer.
Let's bring in John Palmer. Our surprise.
He's live in the TBPN Ultra Dome.
Coming in.
You know him.
Nice hat. John,
you probably know John Palmer is the.
As being one inch shorter than you.
Well, he's the face of leg-lengthening surgery right now, right?
No, they were saying I'm the Goldilocks technology brother. So, some people were saying you're a little too tall.
Okay.
And Jordi tall on his own right, but maybe not quite at this table.
So, they wanted someone right in between. So, I was contacted by your team and.
I love it. I love it. Well, actually, introduce yourself since, for those who've been living under your data center.
Yeah, sure. My name is John Palmer. I was a co-founder and CEO of a company called Partardi Dow. Recently announced that we're going to be joining Stripe soon. So that was an awesome five-year journey. And also work on a company called Area Technology which does logo and graphic design for brands like yourself. Shout out to the new logo and graphics package. And yeah, that's.
Honored. Well, we wanted to hang and do some timeline with you as that is a sign of great respect in our culture.
Yeah. What you got, Jordi?
What do we have here?
Uh.
How do you guys enable pseudo for.
Okay, baby. Baby Keem.
Yes.
Says yesterday he hits the timeline. How do you fix OpenClaw internal reasoning leaking? Peter, what does he actually mean? Does anyone know what that means? So, I mean, we read your post about something small is happening. Hilarious.
Yep.
Did you? How much of that was real? Did you ever actually buy a Mac Mini?
So, the entire post was tongue-in-cheek, but I did, unbeknownst to you all, I did actually buy a Mac Mini that week. I did set it up. Setting it up was the best 48 hours of my life. Since then, I've used it not very much. So, it's, I don't know. I think the reason I bought it originally was basically to tinker and see, like, how real is the hype.
Yep. I set it up. I installed various plugins and skills. I made sure my setup was super optimized. And basically, I realized the only thing I really needed it for was coding remotely in, you know, repos I'm working on or side projects. You know, when I'm out and about on my phone. And you can already do that with, like, a million other tools. Actually, like, even Claw, even the cloud app, like, you can just connect it to whatever repo. Like, you can literally just use Cloud Code in the app.
Yeah. And so there was really very little delta that it provided in terms of value beyond what I was already doing.
Yeah.
And I did try some other things. I've been trying to get it to, like, you know, work on Google Sheets and invite people. But the big problem is that the browser use specifically is pretty fragile. And I think it's going to get better. So I don't have buyer remorse yet. I think that Mac Mini purchase will come in handy. But.
So far it's like, 'Hey, I want to add someone to a Google Sheet. Can you invite them?' And it's like it opens the modal to share. It types in their email and it's like it crashed. Like, it can't get past the share modal of a Google Sheet. I'm sure I could optimize my setup further, which I'm looking forward to.
Skill issue, skill issue, skill.mds is.
It probably is a skill issue.
Yeah, you need to get the skill called skill issue and make sure that's running. It is, I don't know if this is, like, a brilliant PR move from Baby Keem's team or if this is real, but either way, it's really, really funny. But yeah, it was, how mainstream this went. Our lawyer got a Mac Mini.
He's obviously pretty tapped in, but it's cool to see.
Uh.
Well, I was talking with you at the gym this morning that we should, I'm excited about a market for bootleg skills. So you don't just, like, you don't want to be the guy just listening to hits on the radio, right? You don't want to just be going on skills.sh and getting the 'What Would Elon Do' skill. That's what everyone did. And it turns out that one was, like, actually it was actually malware. So what you want is within your trusted social circle of people that you spend time with IRL, USBs full of markdown files with bootleg skills that you kind of keep internal. And there may even be a market for that, you know, on Craigslist, whatever.
And you can say if somebody says, 'Hey, can I try the USB? Can I borrow it?' You say, 'Well, this skill is kind of like a personal thing. Like, it's not really.'
You need to be gatekeeping your skills. That's, like, probably the last moat in tech is gatekeep skills. Just proprietary markdown files powering the entire globe.
I do honestly wonder what the conversion rate from, you know, buying the Mac Mini to, like, actually using OpenClaw regularly was because I think that your post was funny because a lot of people definitely went through that. Like, I went and bought a Mac Mini and it did take me, like, a week even to unbox it because I just had, like, a busy life and I didn't have time. And then when I did, it was like, okay, well, I didn't have a monitor at home so I had to plug it in my TV. And then, like, the actual setup does take time. Like, the 48 hours is not that much of a joke.
And I think on this point, like, I do think you need, like, a solid month at home fixing it. So I've been out of town for a week. I'm here in LA. I live in Brooklyn. And a lot of the time when you hit a wall, it's like, okay, now you probably need to get on the Mac Mini yourself and, like, add whatever environment variables or keys that you need, set up a new account for it. Yeah. And since I haven't been home, like, I can't really.
Like, you know, on a more serious note, amazing. Like, isn't, like, five years ago, everyone was posting, like, 'I miss, like, hacker culture.'
Totally. I miss the old Silicon Valley and it feels like this feels like we're back.
Yeah. Yeah. A lot of people definitely, like, opened up the terminal for the first time in years. I mean, this is true for vibe code generally. Like, a lot of people would step back from just writing code or committing code to any GitHub repo. Like, the vibe coding boom definitely.
It's funny because I do really prefer the Claude Code, like, user experience to any of the, like, slicker desktop tools because.
Because of a lot of reasons, but it is funny. You're, like, in the terminal. I think everyone, there's definitely a major factor where, like, you feel really cool using the terminal if you're not an engineer, but you're just, it's all plain text. Like, you're speaking in plain English and, like, it's speaking to you in plain English. But, you know, if you're at the airport or in a co-working space, you're like, I feel I look pretty fantastic.
Performative. Sheree says, 'Baby Keem just humbled a model.' That is actually an exact lyric from a Baby Keem song, Stat.
That's exact.
Deep cut. Deep cut. And yeah, someone else said 'two phone Baby Keem.' That's another lyric, but 'two Mac Mini Baby Keem.'
And Baby Keem liked it.
He's very online. We're working on getting Baby Keem on the show to break down his full skills.
Yeah. I mean, one of the biggest questions that I feel like is still sort of unanswered is, like, what are people doing with it? What, you know, obviously if you're working on a startup and you're building a piece of big software and you're committing to it and you're firing off just managing agents remotely, that feels relevant. Although, yes, you mentioned you can just do that already.
Yeah. I mean, I actually, whatever, like, I'm definitely not the top person who's, like, diving into this, right? I feel a lot more confident even for coding. I actually don't love doing it with OpenClaw because I've got my reps in with Claude Code. I trust the harness. I trust its ability to, like, utilize the model in the best way. So even for coding, I'm just using Claude Code remotely anyway. So still waiting to find the use case. I think one interesting thing, though, is just that, like, I think prior to this whole OpenClaw wave, the whole idea was, like, all the AI labs had their, like, computer use demo and it was running in, like, the totally, you know, anonymous VM somewhere. And I do think these things are way less useful without your personal data and your personal contacts and the stuff on your machine. No one solved, like, trusting it enough security-wise. Like, you know, my Mac Mini back home, it has its own Gmail, iCloud, whatever, because I'm not going to let it touch my data.
If we do that, all the files on your file system and all your accounts, and it's not going to make a dumb mistake,
I do think the ability to, like, do all of your knowledge work on the go, even if it's just, like, I do the same stuff I do today with AI, I can just do it on the go, would be a major leap in terms of, like.
Idea guys have been waiting for.
Yes. Yes. It's the moment idea guys have been waiting for, though. I think, yeah. And we can riff on that if you want.
Just more phone-based work, more, like, okay, this is something I need to do regularly, turn it into a cron job. Like, the agent should be able to do that.
Yeah. Yeah. I totally think so.
Also, I was just really excited about this, like, Napster sort of moment. Like, every idea, I was joking with Jordi, like, every idea that I have for, like, something to vibe code is, like, something that doesn't exist not because of code. Like, if you want a fitness tracker, like, yes, you can vibe code one, but you can also just go to the app store and get a free one or you can pay. Like, there's plenty of products in every category, right? Right. The things that you want but can't get are, like, something that jumps every paywall, something that, you know, so, like, gives you videos for free that are behind walls and stuff. And, like, these walls exist for a reason. And maybe those come down in a world where everyone's, like, working on open-source agents and just sort of showing up as themselves and synthesizing everything. But it feels like it's much harder to actually productize that fully because so many of the things that people want are, like, yes, they're possible in open source in the sense that, like, file sharing was popular.
Totally. Yeah. And even though I will say, like, even though I guess so far I don't want to say I'm disappointed because it was really a learning thing, but I still, it's never a good bet to be, like, really bearish on a new form factor with, like, novel tech. So I'm still pretty bullish and excited about, like, three, six months from now what that same Mac Mini could be doing. And it doesn't need the Mac Mini. It could be on whatever service, but I think it's going to get pretty exciting pretty quick.
Yeah. Yeah.
Yeah.
What did Playboy Cardi mean by this? Was he responding to Baby Keem? Is that what he was supposed to read into this?
Is he also doing it back in the Jeremy Irons in Margin Call? Is that the meme?
This is when he says that the music is going to stop.
Oh, okay. So Playboy Cardi is calling the top. Have you seen? I have.
You have?
Whoa. Are you a film guy?
I'm not.
Have you seen Borat?
I would never call myself a film guy, but I've seen all movies.
Have you seen Borat? I have seen Borat. Okay. Okay. The whole bit is that Jordi hasn't seen enough movies.
Yeah, he hasn't seen any movies, in fact.
Wow. Interesting.
RIP the market. We had a good run. The three kinds of stock market days so far: Donald Trump spins the wheel of tariffs and replaces a 5% tariff on Belarusian wheat with a 22.4% tariff on Pakistani jet engines. All stocks lose 2d6. Substack newsletter publishes a story about DoorDash going badly. DoorDash down 862%. Global financial system teeters on the brink. And three, Nvidia announces earnings of $100 trillion, beating expectations by 1,000x. Jensen Huang named new king of earth while his stockholders form the new permanent ruling class. Nvidia down 3% on the news. This is the president of the market. Are you a day trader guy?
No. No.
Are you an investor?
I am an investor. Investor.
How do you think about the market? What's your strategy?
I'm an investor. I'm a businessman. I don't know. I think my approach is, like, pretty smooth-brain value investing, like, good fundamentals. I'll buy the stock and hold it for a long time. Definitely not doing a lot of even intramonth trading. It's really, like, long-term.
You're not, like, a one-man Jane Street.
I'm not a one-man Jane Street.
What about crypto? I feel like if you're working in crypto, even adjacent to crypto, there's just so much alpha from seeing essentially, like, angel investment-style opportunities from someone who's building something that you just know it's going to be hyped and the token's going to moon.
The issue is that it's, like, wildly distracting because as soon as you have enough money, invest. I think I.
I don't like doing a lot of, like, individual stock trading because as soon as then my attention is gravitating towards this thing that's not actually productive.
Yeah.
And so what do you think?
I think that's true. And I think, I mean, obviously if you're trading, like, per in crypto, like, you better stay on top of it because, like, there's a moment to exit or if you just hold it long-term you'll probably get liquidated at some point. So I just don't touch any of that. You're right, though, that there are, whatever, there are, like, yeah, weird things in crypto where, like, someone you know or someone's doing a project and they airdrop a token or something like this and you wake up a week later and it's worth, like, whatever, a month's worth of your salary. So I think that's.
Let's talk about Jane Street because I've seen maybe.
10,000 posts kind of blaming them entirely for the crypto price action over the last couple months.
You haven't been able to, have you been able to find anything that is, like, definitive? Obviously the lawsuit came out and they were, like, we were going back and forth on it because it sounded they pulled funds out of this liquidity pool right after.
Actually, I don't even think they pulled funds. I actually think they sold into the pool.
Okay.
Which is, I guess, the same thing. I don't know. I don't know.
But they did it five minutes after we were saying maybe yesterday or the day before that, okay, it's a public blockchain. Theory that it's not actually a smoking gun necessarily.
But either way,
I'm only as informed as you are in terms of the tweets. I haven't verified anything, but yeah, my understanding is that, I guess, Tara Luna had a lot of money in this pool and they had planned to pull, whatever, 180-something million out of it. Yeah. And that I guess the allegation is that Jane Street heard that this was coming before everyone else. That's, like, the material non-public information. And so then also pulled their money or sold it, yeah, like, just minutes after Tara did it. And you're right that it's public. So I guess, like, again, not a source of truth here. I'm, like, relaying secondhand with confidence information that I read on the timeline.
Guys built for podcast. Yeah, I'm relaying this to you secondhand without confidence, but yeah, I guess you could say, hey, it was anyone could see that and they just reacted quickest. But I think I guess what that would come down to is what are the internal ops on moving those funds like that. I would imagine that a fund like Jane Street with $85 million in this pool isn't just sitting in someone's, like, hot wallet, MetaMask, right? Yeah, they probably could have some type of protocol or actually software, like, as some type of protective mechanism given that they clearly are.
I don't know, a lot of stuff feels like conspiracy theories that it feels very similar to, like, the Robin Hood GameStop fiasco where there was, like, a lot of conspiracy theories about, like, Citadel purposely tanking markets and bailing out hedge funds at various points. And I always thought that was just, like, people looking for scapegoats and a whole bunch of market actors just playing hardball because that's the default structure. I don't know.
Yeah. I mean, I'm not that comfortable, like, yeah, speculating on this either because I'm just, like, all right, I saw, you know, posting the timeline.
They are interesting, though.
DJ CPA says Jane Street got my dad drunk and made him cheat on my mom when I was three. People are hunting for, you know.
Says Jane Street killed my dog.
That would not be good.
You're just getting a lot of the cathartic, like, crypto people who have just been wrecked by these fiascos, like, now have a viable scapegoat.
He's not a bad trader. The market was manipulated by Jane Street.
Yeah.
Tampa International Airport has come out and said, 'We've seen enough. We've had enough. It's time to ban pajamas at Tampa International Airport.'
Wait, they actually, this is great. Read the next line.
I mean, it's really.
After successfully banning Crocs and giving everyone the amazing opportunity to experience the world's first Crocs-free airport, it's time to take on an even larger crisis: pajamas at the airport. Is this real? Is this actually Tampa?
It's hard to say.
What's your airport travel?
I was going to ask you guys because you're traveling together a lot.
I don't know. It's always a dilemma, right? Do you wear.
Like, I get the pajamas thing because if you wear, you know, your nicest clothes, then to me when I get to my destination, those were on the plane. Yeah. Like, I'm not unless I have laundry, you know. So for me, I'm rocking, like, one of my more, like, mid fits. Like, I'm something I don't care about, something lightweight that packs light as well because after that travel, like, that's not coming out of the bag for the duration. Well, there's a contagion theory here because if I'm in a suit, but I'm sitting down in a seat that someone in pajamas just sat down in, then I'm getting their pajamas all over my suit.
Yeah.
And so it's just a vicious cycle.
Are you guys business class on the plane with.
I've actually traveled in suits many times and it's underrated.
Interesting.
I think, I mean, besides the fact that I've heard that you can get upgraded to first class more easily if you're dressed up. I don't know how apocryphal that is. It happened. I feel like that's just people trying to justify.
I think people just, they see the suit and they're, like, 'Respect here. Please take my seat. I'm in pajamas. I have the first class seat, but you deserve this.'
I think I'd feel more comfortable with that. If I weren't as tall as I was, and you are, because the suit, you know, more powerful aura, definitely less comfortable, especially if you're in a seat where you're kind of constrained. It's kind of bunching up. It's really not feeling you're aiming for.
What about the TSA ban? Have you seen this TSA shutting down TSA PreCheck?
PreCheck.
This is just, like, a ploy to increase private jet ownership, right?
Yeah. Clearly the, we can ask Ken Richie about this. The lobby is trying to push people into.
It's kicking the commercial aviation enjoyers while they're down. It's really brutal.
What does Joe Wendel say about this? He says, 'I'm very pro-conformity, very anti-antisocial behavior in public, and yet I can't understand why people care so much about other people's airport attire. Just say that you wear pajamas to the airport. Just say that you wear pajamas to the airport.'
Flying is unpleasant enough.
Burger King is launching an AI chatbot that will assess workers' friendliness and will be trained to recognize certain words and phrases like, 'Welcome to Burger King. Please, thank you.'
It's huge.
The AI will be programmed into workers' headsets, according to The Verge.
I think Chick-fil-A got access to that technology, like, a decade early.
Yeah,
because there's a 'my pleasure.' There's a 'thank you.' There's 'my pleasure' every time.
Yeah. Apparently, when McDonald's opened in Russia, there was a quote: 'After several days of training about customer service at McDonald's, a young Soviet teenager asked a McDonald's trainer a very serious question: Why do we have to be so nice to the customers? After all, we have the hamburgers and they don't.'
They need to be nice to us if they want these hamburgers.
What was it? Did McDonald's launch something as well?
I thought they launched an AI thing, too. It wasn't.
It's AI Big Arch.
Well, the Big Arch is the big burger.
But then I thought there was, I mean, at this point every single company has an AI strategy of some kind and so everyone's putting various stuff. Are you an F1 guy?
A tennis guy.
I'm a tennis guy, but I watch, like, the F1 highlights and recaps. I'm rarely, like, getting up to watch the race live, but.
Play tennis or watch tennis or both.
Play and watch both a lot.
Yeah.
What does it say? Best friends should be able to apply to jobs together and get hired as a set. New-age hiring looks like four to six talented people clustering together and building a feature and getting acquired. That's, yeah, this does exist.
I mean, a horse did post.
Horse is kind of going off. Horse has been on a generational run. Literally a horse. Yeah, underrated to just.
Riley Walls, we talked about this yesterday, joined the labs team at OpenAI.
Very exciting. We were talking about this kind of offline before the show that it seems like there's a lot of opportunity and, like, hiring for not just ability, which Riley Walls clearly is incredibly talented and has, you know, an insane, probably, like, the most elite idea guy, like, actually on the pitch playing right now.
Yeah.
And that's hard to say as an idea guy, as idea guys ourselves. But I think, like, hiring for, you called it, like, hiring for mind share. I was a.
Yeah, I was pointing out obviously both Riley and Pete Steinberger, like, both incredible devs. So not trying to take away from that, but it's interesting that, like, both of those either, like, hires or acquisitions also come with, like, a lot of developer mind share.
And I think in a world where, like.
If you just run out to the extreme, like, software production costs go to zero. So being an engineer, being able to build stuff, that skill becomes more of a commodity than what are you trying to acquire or hire for.
Maybe in this interim period, it's, like, a blend. Okay, like, I still want you to be a good engineer, but I also want you to bring me a developer mind share. And I think to that point, it's, like, you know, with OpenClaw, for example, it was definitely the best product in the market, but it was open source. No one could have, you know, forked it, copied it, whatever. But I think it really would have been hard for someone to catch up given how much mind share it had. It's, like, the fastest-growing open-source repo of all time. So what you're buying, it's, like, even though it remains open source and forkable and in, like, a foundation and other people could build it. The reason you buy PE, in addition to him being a great developer, you know, idea guy, whatever, is just that, like, he's bringing the mind share of all the people who definitely follow him, have notifications on for all his posts. They're following all the updates because he's bringing.
In, they probably spent a few hundred, you know, 600 bucks or something like that on a Mac Mini.
Some hardware device to run the model.
Noah Smith is sharing the job postings for software engineers have picked up since vibe coding became a thing. They had been declining until the early part of last year, actually.
And again, this is why, I mean, we've talked about this over and over and over. I feel like there's this, like.
Two different narratives being spread on Instagram. It's just like this labor displacement narrative going super, super, super hard, and then over here, like it's just an entirely different world.
Yeah. I mean, Tyler, how do you interpret the software engineering number? Have we talked about this yet?
Yeah. I mean, so I think I broadly agree. Like, so when Daria won and Doresh, she had this take where it's like, you go from AI doing 90% of coding to 100%, and then it goes from 90% of like all suite tasks to 100%. And so when you're kind of in the interim period, like engineers get super, super productive, but then there's a point where it's like actually, like it's like instead of being super high leverage because the AI is doing 99%, now the AI is doing 100%, and it's actually like it just kind of instantly goes to zero.
So like I think you should imagine that like, yeah, you actually see, you should see a lot of like hiring because everyone wants like a vibe coder at the company, but then at some point vibe coding becomes so easy that like you don't need any special talent to be able to do it, and then you just have the random person.
I mean, even... Yeah. So basically, if one day you're not sitting at your desk, you're like, you're kind of the vibe coder in the coal mine.
Canary. Okay. Okay. Yeah. Yeah. Sure. Um, I do wonder about like, because there is a world where software engineering postings and jobs are substitutive for other roles. Like you can have someone whose job is like a business analyst and every day they open Excel and crunch some numbers, and then you could hire a software engineer to automate that task 10 years ago, 20 years ago, and a lot of companies did. And if vibe coding sort of eats into other things, you could see the rest of white... It's like the white collar work could go away because the software engineers are doing it. And then the bigger question is like, you're sort of jumping ahead to like a full unemployment scenario where no one has a job. In the world where there are like a few jobs there. Uh, I keep thinking about this thing that Pavlo Asperuhov said where he was like, uh, yeah, like everyone, if the software engineering jobs go away, like get ready to compete with software engineers in every category because they're going to learn financial analysis, they're going to learn to trade, they're going to learn to sell, they're going to learn all these things. And if they're just like smart and hardworking people and they have AI tools both helping them upskill, reskill, and shift and do whatever they need to in the new role, like you'll just... those people will still be employed. They'll just be in a different part of the economy. So I don't...
Rachel Carton, who's coming on the show soon, says by more than a 3-to-1 margin, young Americans believe AI will take away opportunities. There's a lot of uncertainty surrounding AI, especially among the youth. Using it as a joke like Liquid Death, Gucci, or Equinox have tried is not a wise marketing strategy. Uh, yeah, the blowback around Gucci was predictable, but it was also strange that they chose to use an image that looked like it was out of GTA 2. Like it was just like not even trying to look like one of the images that we looked at.
I thought it would look great. Normal photograph and looked cool. And the other one was like a GTA-style character which really didn't hit.
Interesting. Um, uh, Jirro Ticket says, 'But sir, that's rage bait. If you do this, you'll sloppy the timeline and you're posting something that you know has no value. We are selling engagement to willing scrollers at the current fair algorithm parameters.' Uh, AI Schiffman had... was certainly...
Have you ever talked to an AI just like as a being or like a friend or like just as like any non-productivity like... earnestly? Earnestly. Yeah. Just like chatting back and forth with it. Not for any specific business purpose.
Have you ever fallen in love?
No. No. No. I really haven't. Earnestly. I haven't really given that. I have like to test it out. Yeah. I wasn't like wholeheartedly engaging. Yeah. It's weird. I don't know if it's like a personality thing or maybe I'm just too busy or something, but I've never been like... I will... if I'm in a video game, I'll go talk to an NPC on a side quest. I'm down like, I'm down to explore the story that's there, but for some reason it just hasn't clicked with me.
I don't know. I haven't even done that. Like even when I was playing like MMOs back in the day, like I feel like I would always just be like skipping dialogue. I'm just like... I actually do skip a lot. I don't know. It's hard. It's hard to really buy into it. I think maybe a good synthesis of that would be I would be down to play like a new Elder Scrolls game where there are like really good AI models behind the characters. Then I'd be exploring it because like I've decided to suspend disbelief to play this game. So while I'm in this game, let me do it. But in my real life, I'm not like having a heart-to-heart with the AI. Next time you call me and I don't pick up, go into ChatGPT and say, 'Pretend you're Jordy. Let's talk about work.'
I do think that's like more interesting, like again, maybe not as a heart-to-heart, but like... I mean, there's companies that do that, like an AI version of an influencer and whatnot, like those things exist. I mean, you guys have like hundreds if not thousands of hours of live show now. You could probably get a pretty good Jordy model. And if you were like trying to riff on show planning, like it would actually functionally be pretty good. But...
No, I just have no desire for it. I don't know.
I do think this is an interesting take on the OpenClaw style stuff where like I think there's a world where again security is like a big asterisk here, but like if I had OpenClaw... Okay, so I've been riffing on this idea for a while that I'm just a GPT-5 client. So like ChatGPT has GPT-5 and I'm John Palmer. So I'm John Palmer Transformer. I'm JPT-5 and I'm just a client for JPT-5 which is my brain. And so like you guys... kind of like a harness. Yeah. Well, this is the clothes are the harness and the brain is the model and my mouth is the client. I don't know. So, so in that... anyway, I won't go into the whole riff, but I guess like, uh, so my Mac Mini I named JPT-5 and hypothetically if I could train it on like all the writing and speaking I've ever done plus my whole file system and it knew like what I do on my computer. One version of that is it's single player. It's my OpenClaw. I use it to do my tasks. But I'm really interested in like the multiplayer. Again, this is the security... security is not ready for this yet, but if I had my Mac Mini and either humans like yourselves could really go like, 'Hey, I need John for something. I know he did that one project and all the files are probably on his computer. Could I go micropay his agent be like, 'Yo, I need help researching this crypto thing that you did,' whatever.' And if my agent could actually give you... it's like you're not accessing the same one-size-fits-all model that everyone has. You're accessing, you know, that model with some custom, you know, context and prompting or whatever, and that would be cool. So, like, you know, you have access to Jordy anyway, but for someone who doesn't, you know, if that random third party out there wanted to riff with Jordy on a marketing idea, it'd be cool if they actually could and you had set up that model. It wasn't, you know, Opus 4.6 trying to replicate you, but it was like all your insider info. It's kind of cool. And then, you know, the agents could do it to each other. Now JPT-5 could be talking to JHT-5. Yeah. And they could be like, we could be hanging IRL and our models could be hanging back at home like kind of like a kids' play date, like my model's like hanging out with your model. They like, 'Hey, let's get John involved.' They go get John Kugan's. So it's kind of a fun... I mean, there's a take on that where it's like that's dystopian or something. But that's not how I feel. I just feel like I'm just like bored. I'm bored idea. We go brainstorm for an hour on some concept and then we come home and we find out our models cooked up something way better.
Yeah, I don't know. I was looking at the clawed... I think it's actually possible, especially if you were like, you bring the original idea and then you say like, I want John Palmer GPT to talk with John Kugan GPT about this idea and like come back with a bunch of ideas. It will work a lot better for someone like John who has spoken on the internet for hundreds of hours.
There's so much that I don't say on... that's why you actually want to talk. It'd be cool if the model could like decide to price its own services and negotiate with whoever whatever model is hiring it. I mean... whatever. It's...
Uh, Avi Schiffman dropped user interview number three. We're not going to play the video because it's kind of sad, but Gary Tan said, 'This is not the happy demo path. Apple or Google would never make this one of their launch videos. It's not what you will hear about in a TED talk, but it's real. AI doesn't get tired, doesn't ghost. A lot to think about with this one.' Yeah, I, you know, Avi continues to find new ways to break through the noise, but in some ways like even though this video has been... it feels somewhat dystopian, you know, this is someone who's struggling with mental health, like actually gets in an accident in the video. It does feel like the most kind of real, raw experience of AI companionship in this form factor.
Um, yeah, reflection on like, uh, do you remember his interaction with, uh, Paul Graham very early on? He was like, I'm building like a hardware device for AI. He put out like some very vague posts about his plans and everyone was like, this is impossible, like Apple will crush you. They have the supply chain, they have the distribution, they have brand, like you will never win in this category. And Paul Graham told him like, in order to win you have to do things that Apple would never do and be counterpositioned. And so at one point he was thinking about doing something that looked like very organic, you know, no smooth lines, no rounded edges, crazy colors that Apple wouldn't pick, like just really moving outside of their design language. So you wouldn't feel like that. And then yeah, this type of messaging is certainly in line with like the anti-Apple. Um, and I don't know, it'll be interesting to see where the company goes. People were so bearish on that ad campaign. We were very surprised by how broad the Billboard campaign was, but...
They got the Heineken response.
Oh, did Heineken like... So, Heineken also just came out with a new campaign that I want your guys' reaction to. Uh, it's... I don't know where exactly it is, but seems to be global. And it's just like a graphic of a voice note, and it says the campaign is 'Don't send a WhatsApp note. It could have been a beer in person.' So, they're like taking like the total like real world approach, which I think is...
I think it's good. Uh, you know, I think you had Matt Zaitlin on the show recently and he and I play in a pretty regular like friends poker game. Not big money. It's really like a social hang. But it's funny because like everyone's like, multiple people have wives here, like why are you going to play poker? That's degenerate. Are you losing money? Whatever. But I had a post a while back that's like in the current like casino economy between like prediction markets, meme coins, like crypto trading, whatever, like an in-person poker game with your friends is like the most wholesome. Like if you're going to gamble and lose like 100 bucks, uh, go do it with your friends over four hours. Like having a drink and hanging out and uh, and you're solving the male loneliness crisis.
I've heard the same argument made for cigar nights.
Yeah. Like cigar is obviously bad for you, but getting together with friends and actually maintaining social, you know, ties is probably really good for long-term health. It's pretty great, honestly. And if you play a regular poker game, even with strangers that you only knew through this game originally, like six months out, you've logged like so many hours just like hanging out that it's like a pretty great wholesome vibe, you know?
We should get into it. Not big. If you're ever in New York, we can have you guys.
Okay, let me do some ads. Let me tell you about Gemini 3.1 Pro. Gemini 3.1 Pro is here with a more capable baseline. It's great for super complex tasks like visualizing difficult concepts, synthesizing data into a single view, or bringing creative projects to life. And let me also tell you about public.com. No, Plaid. Plaid powers the apps you use to spend, borrow, and invest. Securely connecting bank accounts to move money, fight fraud, and improve lending now with AI. Dan Romero says, 'I spent five years cloning an existing app with a network effect. Building the software is not the hard part.' And he was building this app for a very specific sub-community and was able to get a massive amount of attention. So I think this is like a good, clear rebuttal of at least that one part of the Catrini piece.
Yeah. I think I had a post a while back about how like, again, same thing, like software costs go to zero. Everyone's like, oh yes, like I'm an idea guy. I'm going to be crushing it now because now I can just use Claude Code and like build whatever I want. But it's like if you just make one more logical leap, it's like, okay, everyone has that now. So if you're just like building your ideas, like if you're building vibe-coded apps for consumers, you're actually in a way more competitive space than it's ever been. So I actually think it's almost more like, uh, not to riff on the idea guy thing too long, but like actually being paid like a salary to be an idea guy or like making good income to be an idea guy will actually be like a very privileged position where only companies that have like real moats and monopolies on distribution will actually be able to hire like people whose job it is just to think on the idea because if you have a good idea and you ship it, you know people will use it because you've already got the distribution versus if you're even if you've got a great idea and you can vibe code it up, if you're in this like sea of vibe coders like producing way more apps.
Well, the other thing is, uh, there are certain idea guys throughout history that thrived because they had a unique insight. They brought it to market, executed pretty well, but it just was a great idea at the right time and so it got traction, attracted great people and things like that. And in a world where like an idea can be made, and we've seen this with I think a bunch of marketing on X over the last year, where if somebody has like a good style of launch video, it will be immediately replicated within a month and then it will become just kind of like flooded and the meta will kind of die quickly. And so in a world where like ideas are cheaper than ever, is it really just about like idea guys getting lapped by people that are great at executing and it's like, 'Yeah, you had this great idea. You shipped it. Someone else saw that and it's like, that's a great idea. I'm going to ship it today and then I'm just going to outexecute you.' Uh, someone should launch their startup with a congressional testimony. That would be a great aura if you just... the first time you're ever seeing about this company, they're just answering questions and getting grilled by Congress people about what their plans are. It's always like typically the top of the mountain, like Mark Zuckerberg built Facebook for a decade, then he starts getting called to testify, then he starts getting sued. But if you just come out the gate day one...
Augustus was kind of... he was like half the time in Alagundo, half the time on the road. He wasn't being called to testify, he was like, you know, standing up...
I know, but he's kind of doing a bit.
Yeah, it kind of did work like that. It's very funny.
Uh, anyway, let me tell you about Figma. Ship the best version, not the first one, with Figma. Introducing Quad Code to Figma. Explore more options. Push ideas further. Uh, we got new Apple products.
What's coming out this coming week?
Oh, yeah. Uh, we don't know exactly. It's a... It has the Apple logo on it, though. We know that.
We do know that. Touchscreen Mac.
Oh, that's why, that's why, that's why they're touching it.
Are you guys... How are you guys thinking about the touchscreen Mac? Because one of my least favorite things in the workplace is when people put their fingers on my screen. It makes my blood boil.
Yeah. Uh, and so, uh... maybe they have some new like... are they... I could see Apple at this point. They've got the iPhone sock. They could have like a little attachment that has like a clean, like a little... a cleaner, you know, a little spray bottle, like an Apple spray bottle. They could have a magnetized Roomba and you put it on, you stick it to your screen while you walk away and it drives around, identifies the...
Yeah, like a Zamboni. Like a Zamboni.
The Apple Zamboni screen.
You want to create the problem and then have the product that solves the problem in the same launch. So touchscreen Mac with the Roomba.
Yeah. That's such an odd choice because I feel like the whole... I feel like humanity has gone down the path of like the touchscreen laptop and it's been available for years, maybe over a decade, and I just feel like it's never really broken through. And if we were at least seeing like, oh yeah, well like obviously like 80% of PC users have a touchscreen and it's clearly a dominant form factor for a lot of...
It's like the reason... the reason for the touchscreen is like I'm away from my computer. I can't carry around a dedicated keyboard and mouse. So I guess I just have to figure out a way to use the screen for everything. But it's not superior if I have room on my desk for a keyboard.
I'm always going to be faster doing the... like it's going to look very... maybe it's better for people that aren't as technative. Like I can imagine like an maybe older family member like, you know, wanting to zoom in on a photo and maybe it's more native to them to kind of like use the pinch functionality.
Yeah. It feels hard though, like if it's in a... again, I don't even know if this is what they're releasing, but if it's on a laptop, like I actually kind of have to like reach past the keyboard. It seems like a far reach to like... if you're like even keeping your arm held like raised like this for more than like 30 seconds would get, I think, tiring for most people anyway. I don't know. The first time I saw that I just thought Mac Mini honestly, because it just looks like... well, they're making the Mac Mini in the USA. They came out with that announcement.
And I will be, you know, getting rid of my current Mac Mini and buy the USA. Made in the USA.
Of course. Running Kimmy 2.5 on my made in the USA Mac Mini. Well, uh, we have some videos to watch, but we don't have IM for you. So, uh, we should probably let you go get back to the rest of your day. Thank you so much for coming and hanging out.
We will see you soon. Let me tell you about Okta. Okta helps you assign every AI agent a trusted identity. So you get the power of AI without the risk. Secure any agent, secure every agent with Okta. And let me also tell you about Console. Console builds AI agents that automate 70% of IT, HR, and finance support, giving employees instant resolution for access requests and password resets. Um, let's flip through some of the videos that we missed because there are some good ones in... TSMC's plant in Arizona, which is spread over a thousand acres, is expected to cost 165 billion. I thought they already had a TSMC Arizona up and running. I guess they're expanding it to the tune of 165 billion.
It's still coming online.
I wonder when... what day is this actually going to go live?
Got to send Tyler over there.
Oh yeah. Won't you be in the area soon? Don't want to dox your weekend.
Maybe I should check it out.
Go check it out. Get arrested for trespassing.
Uh, we forgot to play this AI video of uh the AI leaders Elon Musk and um and uh Sam Altman as old men. Did you want to watch this?
This was a very, very bizarre video.
Extremely viral over on Instagram.
Yes. Oh yeah. Uh, it's uh, it's in section E here. Let me tell you about Cisco. Critical infrastructure for the AI era. Unlock seamless real-time experiences and new value with Cisco. Um, the uh, it features Inner Gym Move the World.
No purpose, but they had a lot of time on their hands. The less people actually did physical work, the more they... you can't restart videos on Instagram... um, had lost their jobs. They had no money, no purpose, but they had...
The visual fidelity is just another level up. I don't know if this is uh the latest Chinese model, but it's really good.
Use the energy of humans to power the machines that took away their jobs.
The voices, the voices...
The voices are a little odd. Yeah, a little... they are still in the uncanny valley, but the actual video is really strong. Solved our need.
Deeply wrong to put our technology leaders like this. Should have made them look like bodybuilders if you're going to do this.
Yes. But it is a funny bit.
Uh, Anthropic is going into consumer now. Is that right? Adam Feldman joined as... I recently joined Anthropic to lead consumer product and we're growing. Our goal is to build AI that millions of people will use every day to think better, create more, and accomplish what matters to them. A bit biased here, but this is the most interesting option.
Yeah. So, back in Q4, yeah, I was expecting that they would care a lot more about consumer than they were letting on. I think like when uh if you look at their actions this week, you see that when they were lagging, yeah, they were like really leading with safety. And now that coding is a competitive market, they're obviously dialing some of that back. And when they had actually zero consumer adoption or functionally zero consumer adoption, uh they didn't care about consumer. But if you look at the Keep Thinking campaign, you look at the Super Bowl campaign, you don't do these things unless you care somewhat about consumer. It all bleeds together anyway. And so, uh, it seems like it's the end of the road for all the AI companies that they have some sort of consumer footprint. It's hard to be that deep. And when you think of like the pure plays, I mean, even Amazon, I mean, they sell a ton of tokens through AWS, but then they also have Rufus because they need to vend the AI into their distribution, into their platforms. Um, and we've seen Llama be vended into Instagram and WhatsApp and all the different consumer interfaces that people use every day. And people will use those for business contexts in consumer apps. Gmail became dominant in consumer and businesses all over the world because uh there's a huge blend that happens as people work both professionally in their personal lives and vice versa. They do work when they're at home and all sorts of different stuff.
Reg has some breaking news. Apple has acquired the rights from Netflix to air Drive to Survive season 8 on Apple TV Plus. You were expecting something like this over a year ago at this point.
Uh, that if you're going to be spending all this money on the F1 movie and the F1 streaming rights, you want to actually be the home of uh Formula 1.
Yeah. It's sort of like content vertical integration. Like you want to be able to take the viewer on this journey from novice. So, you watch the F1 movie which has Brad Pitt in it and it's just super accessible and anyone can throw it on and have a good time. Even if you're not an F1 fan, you can watch the F1 movie and know... and like in the movie there's a voiceover that explains all the mechanics of how the sport works and so you learn and you come out of that saying, 'Okay, I'm kind of interested.' Then you could watch Drive to Survive and then you could actually watch the...
Trey says Apple should sponsor Cadillac F1. I get the conflict, but also Penske owns IndyCar and has a team.
Well, it's funny because...
What would the conflict be?
Oh, because they're airing it.
Yeah. So, like I don't feel separated enough, but remember I had a pretty viral post last year. I forget. I was quoting Jen Mochi and saying like Apple's like clearly run out of like ideas. And obviously that's not fully true. But uh I was saying that they should just have a Formula 1 team and be like, you wanted the Apple car. This is the Apple car.
Cuz like a one car on the pitch that just has no... or sorry, on the track that has...
Grid. Grid. Yeah. Three fingers. Um, uh, one car out there that's just all white.
It would go extremely hard there. Yeah. No one's really doing white in F1.
Yeah. Oh, no logos at all. Yeah.
Silver, like silver... just like perfect pearlescent white or something. That would be very, very cool.
Uh, let me tell you about ElevenLabs. Build intelligent real-time conversational agents. Reimagine human-technology interaction with ElevenLabs. Let me also tell you about TurboPuffer. Serverless vector and full-text search. Build from first principles and object storage. Fast, 10x cheaper. SemiAnalysis says Micron's hundred-billion-dollar mega fab in New York is at risk of delay due to just six concerned citizens and their frivolous lawsuit.
The project has already taken an absurd 1,200 days between announcement and groundbreaking. Competitors overseas who began at the same time now have built and working fabs.
Micron spent 612 days on the environmental impact study including a 45-day public input period. Yet hours before groundbreaking, they were hit with a lawsuit calling the process unnecessarily rushed. 612 days on an environmental study. Um, comments from local borders on NIMBY parody: 'We are not trying to stop any progress, but we don't want this just bulldozed into our area.' This is a real quote. The lawsuit itself didn't come from a grounds uprising. A California-based workers' rights group went door-to-door in New York seeking plaintiffs. They eventually found just six people willing to sign on, but that's enough to potentially halt the project. That is so insane. A Syracuse local news outlet's excellent reporting on the group behind the lawsuit, Neighbors for a Better Micron, found that before the suit was filed, the group had never held a meeting or a vote. Some members didn't even know who the others were.
One member of the suit, who as a former lawyer you might expect to be smart, says that Syracuse has the highest child poverty rate in the country. What is Micron doing about that? Uh, anyone can agree it's a worthy cause, but do we really think an advanced memory semiconductor manufacturer is the right vehicle to solve it? To be fair, it is legitimate to consider the environmental impacts of a fab. They're large industrial projects that can be harmful if not built and operated safely. But these last-minute injunctions are renting, not legitimate environmental concern. We estimate the lawsuits will cost 100 to 500 million to settle despite the fact they should be thrown out as frivolous. Ultimately, Micron has probably budgeted for it as a small fraction of a hundred-billion-dollar project. Still, there is a non-zero chance these six concerned citizens delay the entire thing. If the US wants to compete in strategic technologies like Micron's project, which produces a key ingredient in the AI supply chain, it must reduce frivolous rent-seeking litigation. AI tools will only empower these people as it trivializes nitpicking on complex rules and 10,000-page documents.
That is, uh, yeah, really wild. Like this feels... uh, yeah, this feels like any state should be generally excited about having a hundred-billion-dollar project which will undoubtedly generate hundreds of millions of...
And someday billions of tax revenue.
But uh, Patrick says NIMBYs are being replaced with bananas. Build absolutely nothing anywhere near anyone.
Uh, the Catrini scenario is now on Kalshi. There's a 12% chance that the Catrini scenario happens, which of course is the S&P falling. Uh, it's interesting. 12% feels high, but the rules summary is fascinating here on this market. Uh, if at least three of these happen, it resolves to yes. So unemployment rate exceeds 10%. S&P declines more than 30%. Zillow home index value declines more than 10% year-over-year in any of New York City, Los Angeles, San Francisco, Chicago, Houston, or Phoenix. Labor share of gross domestic income falls below 50%. Uh, inflation falls below 0% in any monthly release. And if any of those happen before July of 2028, the market resolves to yes. So sort of interesting because there's a whole bunch of different scenarios where something could happen that's not AI-related that could trigger one of those. I was reading an article in the Wall Street Journal today about uh expats. The number of uh Americans that are retiring abroad is just increasing. And it doesn't really have anything to do with AI. It doesn't really have anything to do with immigration policy. It's just sort of like Americans are wealthy, the dollar's strong, and so they find they, you know, they want to go travel and the internet makes it easier to go live in a different country and hang out and, you know, stay on the beach. And so that number has been climbing. And so if that climbs a lot and people leave America but they stay employed and they leave before they're retired, like that could lead to lower unemployment because the labor pool is lower. There's a whole bunch of different things that could happen um that could adjust these things. Um, but it's still interesting because I mean on the face of it, unless there's some weird alternative scenario, none of these would be particularly good. And uh, fortunately, it's still sitting pretty low at just 11.6% chance but probably worth following. Let me tell you about Lambda. Lambda is the superintelligence cloud building AI supercomputers for training and inference that scale from one GPU to hundreds of thousands. Um, uh, some breaking news.
What else is breaking news?
Uh, this was sent to me by Jay Yarow, uh, formerly was at uh CNBC for quite a long time. Fortune is launching a daily business show according to Adweek. The latest in a series of publishers including the Guardian to do so. Mark Stenberg over at Adweek says this initiative is likely an attempt to imitate the success seen by other daily business programs such as TBPN.
Uh, so if you want to make the Fortune version of TBPN, there's a role. Uh, they're hiring a showrunner for a daily show.
Do you think they've acquired the tap water required to make that show work?
Yeah, we got to bring... we got to remind people that...
You want to remind people right now.
Yeah. So, I mean, if you're going to clone TBPN or do something that's inspired by TBPN, uh, we do have a terms of service. So, if you've ever watched the show, uh, you've actually technically agreed to this. And buried in the terms of service is an agreement that if you clone the show or copy a piece of the show or rip off the show or even are just inspired by the show, it's fine as long as on your first episode you drink a glass of tap water. Just one glass of tap water. Uh, otherwise, like I think the gods might curse you and uh...
Yeah, it's really just a nod. It's a sign of... And also if you don't do it, you are legally required to pay us 100% of your revenue forever. Yeah.
Uh, but that's like a minor thing. The bigger thing is the tap water. Just focus on that. Anyway, we have our first guest of the show in the waiting room. Let me tell you about MongoDB. What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI, own the data platform that powers it. And without further ado, we have Sam. Welcome to the show.
How are you doing? Hi everyone. How are you doing tonight?
Thank you so much for joining. Vacuum guy, how's your week been? Were you expecting to go this viral?
Well, not really because it's been like three days. I make the... I discovered the bridge.
So, it's interesting is pop up now.
Yeah. Wait, how many you said? Did you say two years?
20 days. 20 days. Okay. Break down. Why did you start hacking on your DJI vacuum? Give us the full kind of chain of events.
Okay. Well, I don't even try to hack it. Um, it was just, um, let's say a side project. Uh, when I saw my little guy cleaning uh my living room and me playing uh on my PS5, um, my brain just made some association stuff and I was like, 'Okay, what if I could uh drive my boy with uh my PS5 controller?' Yeah. So, what I did, um, I take the DJI app because DJI have an official app called DJI Home. Um, and I try to understand what's happening when uh my robovac moves, when it goes straight, when it turns left and turns right. Change the data between my uh vacuum and DJI cloud and try to replicate it with my PS5 controller. And after maybe one hour, uh, I have something working, uh, like I could drive it with uh my PS5 controller. But I want to go like further, like um, if my little guy has less than 30% of battery, I want to hear him cry. Right. So...
So I need to drive the battery status, like the percentage of my battery. So I uh continue my reverse engineering of the DJI Home app and find out um like uh how to do it, how to ask about the battery status. I do it. But what I received uh is not like, oh, your robot is like 80% of battery. I got tons of data, like a lot of battery status. I didn't understand. Um, so I take this big chunk of data. It was a lot. Um, I open my uh Claude Code, send the file and just asking him like what's going on, explain him what I'm trying to do. And if there's something I did wrong, like why I have this data, and he answered to me like, okay, um, it's not just for the device, there have thousands of others. So I take a little bit of time to process this. Well, because it's AI, of course, I double check. I try to manually read like my big log file. Um, the data from the vacuum was sent back to me when I asked it about the battery status. And yeah, it wasn't just my device. So for me it was like, okay, I have a key, my own user key, let me control my robot. It look like my key, I can open other doors than mine. So my software, the software I built to control my robot and also drive the full stream video and microphone from the vacuum. I have like some uh environment variables, like the thing you can change just to make a software working with another device. So I have two stuff like here and the serial number of the device. So I was just like, okay, I just need to change the device serial number and put another one and maybe it's going to work. Um, it happened that I have a friend who is uh as stupid as me to buy this uh vacuum and I just asked him his uh number. Yeah. So he gave it to me, performed some test and yes, everything worked. I saw everything. I hear him and I can control him, control his uh his robot with a really low latency which is great. And um, so we was like a little bit shocked about what we saw. Um, so I start to check um DJI program. They have one. Yeah. But everything is in Chinese when you go to the website. I was a little bit confused, like it's just for Chinese citizens and even the reward, it was in the local currency of China. So I just tweeted about it like, hey, I'm not a Chinese citizen. Can I apply for? I didn't have like any answer. So, uh, I applied but in English to the program and um, no one answered to me. Uh, I was...
Like you weren't supposed to. That's not a bug.
So, I was a little bit frustrated about it. So I start live tweeting about what I discovered. I didn't uh show how I did it. I just show some data I can have that I can retrieve from DJI cloud. Um, they finally answered to me but just because I harassed them on Twitter by DM. Um, and they say, okay, thank you, uh, we're going to check that and be back to you as soon as possible. They come back to me probably one day after um, uh, telling me, 'Okay, um, we saw the issue and we fixed it. Thank you for everything.' But they didn't fix the problem. Um, I...
Wait, so by this point you have full access and control over 7,000 individual devices?
Uh, to be more precise, it was 7,000 uh vacuums and 3,000 DJI Power. Um, it's like their battery pack or something like that and connected to the internet apparently because I have access to it. Um, but yeah, it was around 10,000 devices.
And how did you get the serial numbers for those again? Like uh I imagine that they've sold more than 7,000. So what made the ones that actually were showing up for you different than the ones that you couldn't access?
Can you repeat or raise it? Sorry.
So uh I understand how you had your serial number and your key which turned out to be the master key and your friend sent you his serial number and then you were able to control his robot vacuum cleaner. But if I have one of these and you don't know my serial number, how do you get access to it?
Unfortunately, DJI gave it to me uh without any keys. Like if I take my own user key... Yeah. ...and plug it to the um um to the MQTT protocol of DJI. Um, I see everything. So I didn't have to guess the serial number of everyone. I just saw the data like clear. Um, wow. Uh, device X6X6X6X6X6X6X6X6X6X6X start cleaning for example. And like yeah, so I didn't have to encrypt or crack anything. Everything was clear.
And so... oh, sorry, excuse me.
No, no, no, this is fascinating that uh that all of that data was just... because that's actually two different vulnerabilities. Like one is the network topology and the other is the access key and you would expect that both would be locked down or at least one, but the fact that both of them were available to you is uh very disconcerting.
Yes. And so just after that...
After... I'm not going to say they lied about fixing it and not fixing it, but they probably just fixed some stuff, but not everything. Uh, I was uh talking with The Verge uh who started to contact me when I live tweeted what I discovered. So we planned to do a demo and uh during the time we planned to do it and the real demo, it's like two days happened and uh during this time DJI released another fix which worked but like not really. It worked to... I can't retrieve anymore the camera, uh, the stream video. I can't retrieve the microphone uh from other users. It's like protected now. And during the demo, I still have access to all of others' data. I still have access to the 3D map plan, Magma Pro plan, sorry, because um this uh this vacuum has tons of sensors and they need like a 3D map of where you live to make sure you know where to go when you need to clean. So I got this, I still got this data and uh yeah, and the full telemetry system of DJI. Um, we performed the demo with The Verge and one day after, uh, no more access to others' data. Everything was...
What a remarkable story. Thank you for sharing it with us.
Yeah, how uh as like do you think that um how much confidence does this give you that like the DJI drones that they've sold millions of uh could have uh do you think they're more locked down or do you think this could be kind of a company-wide issue?
I don't know. But the last thing about this story, um, they still have two major issues. We decided with The Verge not to disclose it publicly because it's kind of bad and I can't talk a lot about it. We try to play a fair game with the company. Yeah. Like, okay, we give you a little bit of time. We know this bridge is not as easy to fix as the first one, but they still have two major issues. And indirectly, like really indirectly, you can still have um access to stream video from other users.
That's so insane. Do you know how many... any idea how many of these vacuums they've actually sold? Have they published any of that data?
Oh. Oh, so they've only sold 7,000.
I was assuming that you had only gotten access to a uh kind of like a subsection.
Seems like you got them all.
They didn't separate a region. It was like a whole bucket, like a bucket with the whole devices.
Product and there aren't that many out there. So, uh, absolutely wild stuff.
It's just insane. I hope that they're contacting customers who have them in their homes and letting them know that, hey, by the way...
Might have been spied on by some...
Anybody on the entire planet.
It's a data breach. It's like they... because unless they can prove that you were the first and only person to ever access this and you didn't go further, uh then they have an unknown uh, you know, liability here that they should disclose. So, uh, it'll be very interesting to see how they respond. But thank you for, uh, the citizen journalism, the activism.
Yeah, it sounds like you're handling it in the right way and uh looking forward to whatever you discover next. We'll be following along. It's great to meet you.
Have a great rest of your day.
Cheers. We'll talk to you soon. Let me tell you about Phantom Cash. Fund your wallet without exchanges or middlemen and spend with the Phantom Card. And let me also tell you about Cognition. They're the makers of Devin, the AI software engineer. Crush your backlog with your AI engineering team. And without further ado, we have Ken Luji, the chairman of Fleckjet here at the TBPN.
Hey, Don. Hi, Jordy. How are you?
Fantastic. We've been looking forward to this.
Thanks so much for uh taking the time to come chat with us. Uh I would love to start with your early career because uh do I have it right that you actually...
Served in the Air Force?
Yes, I went into the Air Force through the ROC program in the late '70s. Wow. It wasn't that hard to get into the Air Force then. The Vietnam War was still active in people's rearview mirror, and I actually probably wouldn't have been able to go to college if it wasn't for the ROC program. So it wasn't that I had this strong desire to be in the Air Force, but I did love to fly, and it actually helped me get through college.
That's amazing. So, uh...
No, no, I was going to say, it was interesting. I always wanted to go to the University of Notre Dame, and I was going up for a visit and I heard my parents β we lived in a very small house, thin walls β and I heard my parents talking about they couldn't afford it, and they said, 'Who's going to tell them we can't afford to send them to school?' So I went to my visit and I said, 'Is there any financial aid available?' And they said, 'Well, you kind of missed the window for that, but if you were interested in the military, you could go down and enroll in ROTC.' So I went down there on a Saturday that was closed, but I decided for whatever reason I wanted to be a Navy pilot. I'm standing at the Navy ROTC trying to copy down the number, you know, on the old rotary phones, and somebody taps me on the shoulder and they said, 'Can I help you?' And I said, 'Well, I'm an incoming freshman and I'd like to fly and I'm thinking of joining the Navy ROTC.' And he looks at me and he says, 'You sure you've been admitted to Notre Dame, son? Because the Navy has boats and the Air Force has jets.' So, I'm Colonel Mhler. I'm head of the Air Force detachment. Why don't you become an Air Force pilot? And that's how I ended up in the Air Force.
That's amazing. Wait, so you were flying before college. What was the context of that? Or you were interested?
No, no, no, no, no. I learned to fly through what was called the FIP program, which was an instructional program through the Air Force.
Okay. And then, so I don't know how long you were in the Air Force, but it sounded like when you got out, you had the opportunity to buy a company for a very low amount of money. And I want to know the anatomy of that deal and go a little bit further than you've talked about before because it sounds like one of the most fascinating deals that maybe doesn't happen anymore, or maybe financial engineering still exists like this. But I'd love to know sort of when did your business career start? What happened after you left the Air Force?
Well, you know, I always say that I never really identified myself as a businessman. I love to fly. I loved aviation. And, you know, people can go into business because they love business. And those guys could run a candy store. They could run an insurance company. I'm not that guy. I'm an inch wide and a mile deep. And I only know a lot about one very narrow section, right? And so don't ask me to give you advice on running a candy store, okay? But in my early years, I was flying for a charter company called Corporate Wings. Yeah. And I got there because after the Air Force, I went under reserves. After the reserve assignment, I flew for Northwest Orient where I was furloughed. Okay. And so I started to realize, you know, being a pilot has a lot of insecurities. You know, at that time, remember that in the early '80s there's only 5,000 corporate jets in existence. You know, today we have 35,000. Wow. And so the industry was small. It wasn't stable. And so the charter company I was flying for came up for sale. And I called my dad at the time and I said, 'Dad, I think I want to buy this charter company. It costs $27,500.' And he said, 'How are you going to pay for it?' And I said, 'Well, they have 27,000 in the bank. So I'm thinking if I buy the stock, I'll just use the 27,000 and pay for the company.' He goes, 'Well, but I thought you said 275. Where are you getting the other 500 bucks?' And I said, 'Well, why do you think I called you?' So yes, you know, leverage finance exists today. It just has a lot more zeros to it.
Yeah. But so when I heard that, it's a fantastic story. I'm just confused why a stock would be for sale so close to cash value. Were there a lot of liabilities that were coming down the pipe that you then had to generate the revenue to deliver on? Like it just sort of defies basic economic logic.
All right. So we're going to tell a story that's known to only a few. And the true story here is that in the early '80s there was investment tax credit of 10%. And it came in cash. So you could buy a plane. At those times, a Citation was a million dollars. You got a $100,000 tax credit. Mhm. And Corporate Wings at the time was actually called J&J Aviation. And they had King Airs and two Citations that were on investment tax credit, but they didn't exist. The owner of this company, a guy named Jeff To, created a fraud around the existence of these planes. I was flying the King Airs that was in another β I mean, I didn't know anything about it β but the dispatcher at that company, when the fraud became unveiled and everybody headed for the hills, the dispatcher of the company I was friends with, he said to me, 'I can't run a company because I'm a dispatcher. We need somebody that could fly, make the customers feel comfortable.' So the deal was there because the company was done, and so that's why that situation was unique, but few people know about the Citation fraud. So that's really how it evolved. We changed the name from J&J to Corporate Wings, and that's how it began.
So a lot of hair on the deal, but some decent customer relationships and probably some decent employees that could actually fly. What assets remained after you sort of cleaned up the corporation, right?
So we had four airplanes. We had two King Airs, a Navajo, and a Cessna 421. Okay. Shortly thereafter the King got worried and they left. Yeah. So my business was a grand total of a Navajo and a Cessna 421 for you old-time pilots out there. But by the way, I thought I died and went to heaven, right? I mean, I had a business. I'd go to the hangar on Saturdays and polish the nacelles of that Navajo. I was so proud of that airplane.
That's amazing. So then talk about the scale up because obviously you have a massive footprint in business now. But what were the key steps along the way? What were the key turning points for you?
Well, I'd say the key turning points were in the mid-'90s when we, you know, when Fractional was evolving and I had this nice charter company. Yeah. Maybe 20, 25 airplanes at the time, but saw Fractional starting to steal market share in a big way from Charter because of a consistent level of service, the fact that they could run one way. In those days, charters were always out and back. You paid round trip for the aircraft. So I kind of saw the threat of Fractional, and that's when I came up with the idea to form Flight Options. And Flight Options' idea at that time, nobody had done fractional with used aircraft. They'd only done it with new aircraft. You had Citation shares with brand new Citations. NetJets was working with Hawker and Citation at the time.
And how would it work? How would it work mechanically? There'd be basically somebody would say, 'Hey, I'm going to buy this jet. I'm going to cut it up into eight pieces or whatever.' And then what, did they effectively crowdfund it? Like everybody had to come together at the same time. How did that actually work?
Capital, you know. You know, I'm sorry, Jordi, but there was no internet at the time, so crowdfunding.
No, no, I meant like... Yeah. Throw a jet up on Kickstarter.
No, but you hit on the key issue. Yeah. You couldn't start with one jet. Yeah. You had to have enough jets that people would buy a share because it could catch on very quickly. If four of us own a jet, you have to have at least four of them in case we all want to fly at the same time. So you had to get to the point where you had a minimum number of aircraft. And in 1997, I was out trying to raise capital for just that. My idea was to start with 12 aircraft. They were going to be used Citation IIs and used Hawkers. And at the time I needed 12 million of debt. And I went out to all the debt sources I could get. I had my great presentation on. I had my shirt and tie and blue suit and I went to all these places and nobody would give β I mean, in the end of the day I think we raised like 10, $2 million based upon having that much money in the bank. It was ridiculous. But this was in late '97. Then in 1998, Warren Buffett buys NetJets. Yeah. In June of '98, he buys NetJets. And my proposal was literally on everybody's desk. And from June of '98 till August of '98, we came away with over $200 million of financing. General Electric, Boeing Credit, Commercial Credit Corporation, Bombardier. And so all of that was β it was actually in some ways Warren Buffett that got me into the business because he bought NetJets. He christened the industry and allowed my proposal to have meat to it. So that was really β we went live with Flight Options in November.
Needed somebody to legitimize the industry, and then people looked at your pitch and they were like, 'Hey, this guy's a pilot. He's got all this operational experience. He knows how to work with customers. He's actually a solid bet in the category. He's in the right market.' Yeah. How much β there was a massive amount of wealth creation in the late '90s. Did that β how much of that, just in the kind of internet boom, did that play into just like a lot of new demand coming in, or was that not a factor?
Oh, unbelievably a factor because we tended to be with the used aircraft. We had the same model. It's just the buy-in was lower because a brand new Citation was 8 million but a used one was 2.4. So we had the same model, just the buy-in was lower, and so it became very entrepreneurial. It became β new money was interested in it because they were conserving capital. I can remember there was a company called Internet Capital Group and they were in the late '90s and they had an annual meeting in Philadelphia and we sold 30 shares at that meeting because everybody was instantly wealthy there. And then of course you know what followed that, right? The dot-com bomb came and then in 2001 it just went away. Yeah. And so was that crash hard for your business? How did you get through it? I mean, with leverage it feels like there's always a risk of just actually total capital collapse, total loss. How do you weather the various storms that you've faced throughout your career? I've been through four and every one has been different. Okay. But that one, because the industry was still in its infancy, there were a lot of other β there were, you know, at one time there were 55 startups in this area. If you remember, United Airlines had a startup in the space at one time. So I weathered through it by finding a merger, right? As people were moving away and the business was shrinking, find somebody else in deep doodoo and then merge with them, right? And then create a new story. Yeah. So that was really β and in that case it was Travel Air, which was a division of Raytheon, and that was the merger we did to come out of the dot-com bomb. But yeah, you're right. I can remember like we came into it combined with 200 aircraft and came out of it with like 120. Wow. I mean...
Explain the dynamic of the buyout with Raytheon. It was a very interesting dynamic. I was not familiar with this particular process, but explain the economic mechanics, how the bidding worked, the results, because I've never heard of that before and it's fascinating.
Yeah. So it's a term called shareholders' roulette. Yeah. Yeah. And it's used often in a company where you have 50/50 ownership. And what it simply says β because normally if a company has a buy-sell agreement, and those buy-sell agreements will say something like fair market value determined by three independent auditors, and if you're the seller in a pinch, you take a 15% discount. So it normally defines the process of valuing the company. But when you have two 50/50 owners, one person simply goes to the other person and makes them an offer to buy and to sell at the exact same number. And then the other party chooses whether they want to buy or sell at that number. So it forces you to a fair number. And if you remember, Raytheon didn't want to be in that business. They're making missiles. So it never occurred to me that they would ever want to own the business. But what I did was I got the business underwritten by a private equity firm, Warburg Pincus. We underwrote the business at that time at 360 million and I went to Lexington, Massachusetts with my $180 million buy and sell offer to them thinking, look, they had a business that was going broke, right? I gave out 180 million. I thought Raytheon's going to erect a Ken Ricci statue in Massachusetts. I brought him this 180 million, right? They thought I was cheating them. They thought it was too little and they bought me out. And so...
Wait, and the business at that time you said was losing money, or you're saying the business when we merged?
Yeah. When we merged, their business was losing money. We were maybe making 6 or 8 million. And the combined β you know, the economies of putting them together, right-sizing the fleet, back office β we thought we had a projection for about $30 million. And just to show you how times have changed, it was based on that $30 million projection that the multiple came out and that's how we got to the valuation.
That's still 12x EBITDA forward number. There's a lot of risk there. That's crazy that they took the deal.
Are you kidding me? Of course it was crazy. I didn't get it. And you know what? It was the worst day of my life because I didn't want to be out of the business.
Yeah. So you have to make this buy-sell at 180. You're ready to buy them out and you can't β then you wind up getting bought out. But there's no walking it back. It's like it's over at that point. They just called your bluff.
You deliver them two letters. One that says I will sell to you at 180 million. One says that I will buy from you at 180 million. And they pick one and sign it. That's great. And I was...
You wish you were like β I wish we did a duel, like a proper duel. It's remarkable. So I mean...
You know what? In some ways it absolutely turned out to be a blessing, but you never see that in real time, right? I can remember those days. I felt like I'd lost my child. I mean, it really was. But in reality, because I had raised money along the way, I only owned 16% of the combined entities. So my buyout β I got 16% of the 180 β and then we bought that company back from them in 2008. No way. No way. Okay. And we bought it back. So that was like five years you were waiting. It was, yeah, almost six. But by the way, I bought it in the middle of the 2008 financial crisis. Yeah, we bought it back for 130 million. So we bought it back at 30 cents on the dollar.
What did you do? What did you do in that window? You just twiddling your thumbs?
Well, I don't have that twiddle-your-thumb gene. I actually began a disastrous process which leads me to much pain these days. I began to roll up the FBO industry and I started by buying β I partnered with a company called Allied Capital and we bought the Mercury Air Centers which were primarily in California. And we started that in '04 and we sold that company to Macquarie which was Atlantic Aviation. We sold that to them in 2007. And it's painful because you wish you held on. You wish in hindsight you didn't sell. Well, what I was going to say was that we were buying them at six times and we were one of the first transactions that traded at 15 times. Now today the FBO industry is trading to private equity well north of 15 multiples. And what are they doing? They're raising the fuel prices to people like us to fund the acquisitions of what I started. So it comes back to roost.
You mentioned four key crisis moments, four financial crises that you've soldiered through. Obviously one of them, the housing great recession, another. What were the other two?
So in the great interest rates of '84, when I remember doing proposals to buy an airplane at 21% interest rate. We had that huge interest rate issue in the early '80s.
Did you have any adjustable rate loans at that time? Or everything prior to that was fixed and you were just having to work off of the 20-some?
Well, it wasn't that I had any debt really at that time. We were, you know, Corporate Wings was more of a management company. I needed people to buy a new plane so that I could run it in charter and become the manager of it. So I had to make a proposal and they said, 'What's my cost of capital?' And I would say, well, the going interest rates are 21%. So that was tough on the industry. And then Gulf War I in the early '90s, when we hit Gulf War I, the sale of new aircraft came to a standstill during that crisis. So I would tell you high interest rates, Gulf War, dot-com bomb, financial crisis.
How is the aviation industry doing today? There were some folks asking about eVTOLs, automation. There's tariffs and depreciation schedules are changing. It feels like a time of transformation, but I don't know if that's just what it looks like from the outside.
Well, I think our industry β the cool thing about aviation is we're always in transformation. We live in an industry that always has something cool coming up. So that's fun. I'll tell you that I don't want to be a Debbie Downer on your program, but we are in a time of abundance. And I think you can β if you've only been in our industry for five years or eight years, you can come to think that this is normal. And we're living through a time where it's easy to see, right? There are two economies. We can talk about the cost of bread. We can talk about the cost of gas, but fractional owners and private jet owners aren't living β they don't live in that world. The wealth transfer that's going on doesn't live in that world. So we have this one world that's living in really good times because it's very in right now to be, you know, business and wealthy. And that is creating what I think is an overabundance in our industry. I think this is extraordinary. In my 40 years in this industry, this is one of one. Yeah. And I think we have to be careful not to be complacent about this being normal. Because I say, you know, this too shall pass. But right now, this is the world we live in. We live in this abundant world. Yeah. In our industry.
What about specific technologies that might change aviation? There's been a lot of talk about flying cars, a lot of talk about eVTOLs, not a lot of production process, not a lot of movement there. But do you have more insight into some of the new technologies that might be coming out in the next decade?
I think the new technologies β I mean, I think the number one thing we're going to see is how windows go away from the airplanes. So today, if you look at the supply chain β if you go back three or four years ago, it was titanium, that's been solved. The problem in the supply chain today is windows. If you ask Embraer, ask Michael Malfitano, ask them why are your deliveries slipping, they say it's the windows. I didn't know this, but 50% of aircraft windows fail when installed. Whoa. So β and if you get a failure in the air, like we have a buddy who had a lung collapse because of a broken window. And yeah, it's a disaster. So I think the technology that's coming very fast β I don't know if you saw that Embraer announced the smart window in their Praetor 600. So they've taken out one of the windows in the aft part of the cabin and instead of that they put a digital screen. And you can make that screen just look outside because there's cameras outside. So if you want to see if anybody's stealing your luggage, you could look out the window and see it. But the reality is in flight you could make it day, you could make it night, you could watch a video, you could make it larger, you could make it smaller. So that is, I think, the start of what's coming next. We'll get to the point where we'll eliminate passenger windows in rapid form. If you're familiar with the AutoFlight aircraft, that is in their development process without windows. And then it won't be long after that that we'll be rid of the cockpit windows because, like you just said, high failure, expensive to maintain. So I think that's a technology that we could pretty much assure is coming quick.
How do you evaluate new technologies? I'm sure anytime there's any type of new private aircraft manufacturer or eVTOL company, they're coming to you, they're pitching you, they want some type of LOI even though they're not going to deliver for, you know, even five, ten years. We've seen so many of these companies kind of come and go or have a good render or kind of like demo and then they never end up getting off the ground at all. So I feel like the tech industry β maybe it doesn't feel like this from your vantage point β but it doesn't even get excited about a lot of these eVTOL projects anymore, or at least the insiders don't. But how...
Well, let me β I'm sorry, let me separate eVTOL because I think that's a different class from innovations in aircraft and so on. First of all, I think it's my obligation for someone that loves aviation to invest β a vested interest β encourage people to come up with new technologies. So I will say I've invested in four clean-sheet aircraft. I'm 0 for three with one that I still have in development. So I invested in the supersonic β Boom Supersonic. No way. I did that. I was at the Aerion. I was an early supporter of the Aerion product, right? We're an early supporter of the AutoFlight aircraft. So I think part of it is just our obligation is to encourage technology. Okay. Some of it is self-serving because, you know, you do have a duopoly. You know, we do have a polyopoly, I guess, in the aircraft business and right now the main manufacturers control so much from the pricing of aircraft, the servicing of aircraft. So encouraging people to be entrepreneurial in the space is something I feel obligated to do. Now, I said I haven't done very well at it, but we'll continue to try to encourage those technologies. Different. I think eVTOL is something different. eVTOL is a totally different market. We've been a supporter of Beta. I did the SPAC at Eve. These are the Wright brothers. This is early aviation and we're generations away from those aircraft being suitable for our businesses. We're not going to have FlexJet fractionals. They're not luxurious. They don't have the weight capabilities. You know, a lot of them don't even have no pressurization, no heating, no cooling. People go, 'Well, what do you need heating for that? It's only going to be 60 minutes.' Well, okay. That's not luxury. It's not something we can do, right? Yeah, that's funny. But I think... Sure. But I think it's a great technology and it's going to happen.
Yeah. Why do you think the Concorde failed?
It's a great question because I love β I think it was a wonderful aircraft, but there were only 15 of them. So lack of adoption would be the number one reason. It's hard to β with 15 aircraft, you know, you can't keep parts in, you know, it's just β I think it obviously was a financial reason. Now there were other, you know, environmental concerns at the time. Most of the environmental concerns aren't a challenge anymore. Most of the technology now can deal with that. So it's really β I think we're just β I think had Aerion maybe started a year and a half later, they'd have played into this era of abundance that we're in, but they got caught in the before-COVID. And so that kind of hurt them a little bit. I think had they been a little bit later. I think the market's right. I think we're ready for this. We're ready for supersonic. Mhm.
What's the most number of hours that you've ever heard of an executive flying annually? You don't have to name the person, but just the number of hours.
600 hours in the air. Whoa. Okay. That's quite a bit lower than what the Financial Times was reporting on.
Well, the Financial Times was reporting on β I think Alex Karp β didn't they have him expecting to be up in like the thousand-something range? And we were saying like it seems like this guy is doing deals in Europe and Asia and America constantly. You can imagine he's constantly in the...
Headline. One second. There's only 2,000 hours in a year. So, like, how are we going to... Well, so the headline was that he spent $17.2 million on flying, and they worked backwards to estimate that that was 2,457 flight hours. But a lot of that is based on the plane. Obviously, if you're in a very expensive plane, $17 million goes a lot less far. Could have been the BBJ. Could have been the BBJ. Yeah. Anyway, now I personally fly around 350 hours a year. 350 to 400. And, you know, but I'm doing long trips. I go back and forth to operations in Europe. So, and I feel like that's a lot of hours. But...
How is Starlink impacting aviation overall? There's a lot of excitement from it rolling out on the commercial space. Most of the jets β I'm sure all the jets that are in the FlexJet fleet have had great internet connectivity in general for quite a while. But what is the ongoing impact?
Well, not to correct you, but that was not a true statement. Connectivity in corporate aviation has been a challenge for many years. In fact, I would tell you it was the Achilles heel because here you go buy the $70 million jet and you get on it and you have one of the old technologies, you know, and it's a disaster. You're like, how could I pay this kind of money and I don't have the internet? Starlink has changed everything. I mean, Starlink, like even for me now, I used to never β for my flights, if I had an eight-hour flight, I'm leaving this weekend, I can schedule anything in that flight. If you want to do this podcast from the air, we can do it because β so you can just keep your schedule. And remember it works on the ground. The old technologies only worked in the air. Yeah. So now you had taxi, takeoff, you couldn't do a phone call, you couldn't watch a movie. So disruptive. So disruptive. Yeah. No, it's changed a lot. In fact, we did the initial installations on Musk's airplane and because of that, we got the initial STCs for all of Starlink. So our fleet's been in Starlink very early on. Their competitors are just starting to convert to it.
Yeah. How do some of these β how do the contracts work historically? Did some of the old connectivity providers lock some fleets into really long-term agreements? So now they have to make a decision: hey, do we continue paying for this plus Starlink? Because I wonder β we've just been wondering how slowly some commercial airlines have reacted seems surprising just considering it's such an easy way to create a meaningful differentiation for passengers.
Well, I think you're dead on, right? Money makes the blind see. So if you try to find the solution to what you're missing, it is the fact that they have those long-term contracts. Now I don't know. I don't know enough about all the contracts. I know our contract, you know, our initial contract with Gogo allowed us to β because we have so many planes, we could just add and take off planes at will. And we have not yet done the Phenom fleet because there's a different antenna needed for the smaller fuselage. So we still do have, you know, about 80 airplanes that are on the Gogo system, but we'll be converting those. That's great. Great.
Well, thank you so much for the time. This was a lot of fun. I learned a lot and hope to talk to you soon.
Love what you guys are doing. Thanks so much. Enjoy what you're doing. Thank you so much.
Let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. It's that easy. And we have Howard Marks in the waiting room from Oaktree Capital. Let's bring him into the TBPN. How are you doing? Welcome. Thank you so much for joining. I would love to kick it off with the high level on your theory of the market cycle. And then maybe we can walk into how you're thinking about markets today and over the last few years, but the high-level thesis on the market cycle. How do you explain your overall thesis?
Sure. Well, thanks, first of all, thanks for having me on today. You know, I've watched what you do and it's terrific and I'm glad to be part of it. Thank you. You know, basically a company or a market or an economy makes progress along what we call a trend line. And so the value that it creates should progress along that trend line. But the point is that while the progress there is pretty steady and gradual, sometimes people get too excited and they overvalue that progress and the market goes to an unsustainable high. And then something comes along that makes that correct back toward the trend line, but given the way human nature works, through it to an unsustainable low. And then eventually that's corrected back toward the trend line to a high. So the point is that whereas the underlying thing progresses gradually, the price fluctuates wildly around that trend line and the main reason is the fluctuation of psychology.
Yeah. How far back do you go when you think about market cycles? Does the same theory apply pre-industrial revolution?
Well, I'm, you know, I'm old, but I'm not that old. And...
I didn't mean it like that.
You know, I wasn't there, but yes, I think β well, I think, you know, one of the most valuable operative quotations is from Mark Twain. Yeah. Who supposedly said that history does not repeat, but it does rhyme. Yeah. So the things that rhyme are the elements of human nature that cause these excessive fluctuations around what I'll call intrinsic value or reality. Sure. So, you know, the desire to get rich quick. Yeah. Envy of seeing others get rich quick. The belief that it's possible to get rich quick. The fear of missing out. The fact that people get more excited the higher the price goes, which should be worrisome. So these things I think have always been in place and you read about bubbles that took place β let's see, the tulip bubble I think was 1620, the South Sea bubble was 1720, and so these excesses, these human failings have always been part of what goes on.
But this time is different. Kidding. How do you think β a lot of the guests on our show have maybe been through the COVID kind of brief correction and chaos of ZERP, but don't have much else to go off of. That can kind of be an advantage because you can just be so optimistic that even if something bad, you know, you do get a big correction, maybe you get a fast rebound. Has being through a number of these cycles ever hurt your performance because you just weren't optimistic enough? Or, you know, this idea that optimists make money and pessimists sound smart?
Well, you know, my firm, Oaktree Capital Management, first of all doesn't invest for the most part in the stock market. We're mostly investors in what's called credit or debt. Yeah. But I think that we are what's called contrarians. I think my partner Bruce Karsh and I are essentially innately contrarian, which is to say that we're most comfortable doing the opposite of what the herd is doing at the extreme because we see its error. And so I think we've always done that naturally. And so we are β I think we're conservative by nature. And I always say, by the way, in 1978, Citibank asked me to go to the bond department and start a high-yield bond fund and a convertible bond fund. And it worked great because being a lender requires conservatism. If they would have said, I want you to start a venture capital fund and predict when Amazon is going to be created, I would have been a disaster. I'm not a futurist. I'm not an optimist, etc. But when I have seen excessive pessimism and excessive gloom causing crashes, and I've seen a few, it has come kind of naturally to go against that excess. And so I think one of the β ironically one of the things we've done best for conservative people is seize the opportunity at the lows again by being contrarian. And, you know, I wrote a memo in October of '08 after the global financial β after the bankruptcy of Lehman, with the title 'The Limits to Negativism.' And there is such a thing as being too negative.
Mhm. Do you think contrarianism, like you just described, is purely innate or can it be learned? Is it a muscle that you can build over a career? Is it something that folks in everyday life who maybe aren't professional investors but might benefit from not getting overheated and falling in with the herd can learn? And if so, how?
I think you can learn these things. You know, I wrote a book called 'Mastering the Market Cycle.' I'm not really trying to plug the book, but it wouldn't hurt. But, you know, and it all talks about how to deal with the cycle. And what I think is β I get all these questions: Can you learn this? Can you learn that? Can you learn to be unemotional? Can you learn to be what I call a second-level thinker? Can you learn to be a contrarian? The answer is I can tell you why it's important. I can explain to you why it's essential. Is it something you can ingest? I don't know. You know, I for some reason or another come by it naturally. It's easy for me relatively. By the way, I don't want to give the impression that when I make these calls at the highs or the lows that I do it without some trepidation. I'm never sure. Anybody who's sure is an idiot. You know, they say there are two kinds of people who lose a lot of money: the people who know nothing and the people who know everything. So I'm not trying to imply that it's easy. Yeah. But it does come fairly naturally to me through the combination of my emotional makeup and the application of logic. Yeah. If somebody else doesn't have my emotional makeup, they could learn the logic. Maybe they could learn to do it. It might not come so easy. That's all I can say.
How do you think about the concept of black swan events or the integration of black swan events into a market cycle? Because going into COVID, I was looking at the fundamental health of the American consumer, the fundamental health of the economy, everything looked very strong and I think that's why the economy rebounded as quickly as it did and then sort of overheated. But how do you need to put black swans out of your mind? Are black swans even a real thing? Like, how do you think about that concept?
They're a real thing. I don't think you can do anything about them. Yeah. My term β the term I've always used for what Taleb calls a black swan is an improbable disaster. Mhm. And by the way, they're not all disasters. There are improbable bonanzas, too. But I mean, if you just think about the improbable disaster, it is something where if it happened it would be disastrous, but it's very improbable. What do you do about it? And in my opinion you can't do anything about it. If you say, well, I'm concerned that there could be, you know, an eight-hurricane earthquake. I'm concerned that there could be four hurricanes in a row. I'm concerned that there could be nuclear war and I'm concerned that there could be inflation at 20%. Well, you can protect yourself against that. You can call that guy who lives in Omaha. He'll write you an insurance policy to protect you against all of those things. You just won't like the premium. And if you take out that insurance policy and you pay that high premium and you're protected β in the vast, vast majority of years, it's not going to happen. And after a little while, you'll get tired of paying those premiums and it'll stop probably in time for it to happen. Yeah. So you really can't. And the things that are in the way, way distant tails of the probability distribution are just things you have to live with. That's real life.
Mhm. How do you think about the education that goes into becoming an investor and how that's changing? It feels like it's easier to learn without mentors because everything's been compacted into AI and open-sourced on the internet and you can watch great lectures and podcast interviews. What's changed and what's the same?
Well, my perception is that AI β number one, AI has a mentor. Mhm. It reads everything that ever happened. Yeah. And ingests it and remembers it and can find it. Mhm. And then AI becomes a mentor. Mhm. And it tells you how to think. It gives you examples of thought processes. So I think it just makes it so much easier to learn, you know. And I wrote a memo in December. I write memos to my clients. October was the 35th anniversary. And I talked about AI in a memo December 9th. And then I have a son named Andrew. He's in the tech world. He's a terrific venture capitalist. He's co-founder of a group called TQ Ventures. Mhm. And given the recent events, he pushed me to revisit that memo and update it. Mhm. And he had this great idea. He said, 'Why don't you ask Claude to tell you about what's been happening?' And so he and I developed a request which we inputted to Claude. His help was invaluable. But of course, he does this all day with all of his brilliant founders. And so Claude wrote me a tutorial which enabled me to update the memo. And I learned an incredible amount, you know, in a field that is not native to me. Yeah. Through doing that. And so it was a mentor to me and it can be a mentor to others, but as we know, you have to ask it the right questions. Yeah. And Andrew and his buddies helped me do that.
Yeah. How has technology changed the credit markets or just investing in credit over your career? I can imagine computerization, the internet, there's sort of a continuum of advances that just help information flow more freely. AI feels like just an extension of that, but how has the actual work changed over your career?
Right now, AI is helping us marshal data with a thoroughness and a speed and an error-free that we never had before. I don't think it has changed the process because what you see, it all comes down in the end to looking at a company and assessing the probability that it'll pay its debts. Mhm. And I don't, you know, I think we're still better at doing that than AI is. Oh, by the way, I should tell you that an hour or two ago, I put out a new memo updating the December memo. You probably haven't seen it. I may make reference to it, please. But...
Pardon me. No, I was saying we do have it pulled up, but for the audience.
Okay, great. So, you know, it says in there β and I asked Claude, and Claude said, 'Look, the truth of the matter is that the thing that AI is the weakest at is doing analyses on brand new things where there aren't established patterns.' And I think that that's a lot of what we do, you know. And so, you know, at the present time I think AI can marshal the data, organize the logic out, frame the question. I don't think it's the top of the heap in answering the question yet. Of course I can always be wrong. But, you know, and I say in the memo that I think that what AI does is it predicts based on past patterns. It predicts what kind of companies will pay their debts and whether a given company will pay its debts and it puts forth a hypothesis with regard to an individual situation. And it tells you you should or shouldn't invest. I think as I understand the status of things today, you need people to check the hypothesis. Yeah. You know, I don't think I would make an investment commitment based on the hypothesis alone. I would want to check it, but I think it gives you a great starting point. And by the way, so I wrote the memo. I said to Andrew, 'Do you want to look at it?' He says, 'Why send it to me? Why don't you send it to Claude?' Ask Claude to take a look at the memo. So I did. And I was absolutely β and if you read the memo, I was absolutely dumbstruck. Yeah. By what I got back because it responded to me β it felt like a note from a colleague or friend. It was personal. It was warm. It drew analogies to my 35 years of memos. It talked about some of the people I respect. It injected humor. It was complimentary. It talked about a section it thought was really good. So I wrote to Andrew. I said, 'Is AI, is Claude an assisser?' Because I thought it was maybe unduly complimentary. Yeah. He said, 'Well, Dad, ask it to be hypercritical.'
So I wrote back, I make a few corrections. I said, 'Now would you please be hyperritical?' So it writes me back and it says, 'Do you want me to be hyperritical or hypocritical?' It's making a joke, you know, and so I think that it's going to change our world.
Yeah, I think that we have an activity in our investment world called indexation, where rather than pick stocks, a lot of people who invest in the stock market now instead just invest in a vehicle that emulates the S&P 500 or some other index. And indexation has put a lot of people out of business because a lot of people used to, A, do an inferior job β underperform the S&P β and then, B, charge highly for their services. There's something wrong with that. And a lot of those people are out of the business now, and the majority of equity mutual fund money is managed through indexation or passive.
I think AI will advance that. It just raises the bar and weeds out the people who don't add value. I don't think it'll replace the best. But it'll replace a lot.
How are you personally comparing the AI buildout and the advancements in the various models and stuff happening at the application layer all the way down to the hardware layer to the internet buildout? There's so many different comps from investor psychology to overall consumer psychology. We were talking earlier this week on the show about the battle of Seattle and the protests around the internet buildout and the fear that people had around jobs getting outsourced going overseas as well as just disintermediation. And it feels like so many of the radical predictions that people made about the internet are still being made about AI. Some of them came true with the internet, but they came true over a decade or two. And in some ways now it feels like AI really is just a continuation of many of the same trends that the internet brought along, but some of the predictions are even wilder this time around.
Well, I think that, first of all, I am in that debate. I'm on the side of the warriors vis-Γ -vis society. By the way, remember I said 10 minutes ago, I'm not that much of an optimist. So I can imagine the jobs eliminated and I am not imaginative enough to think of all the jobs that will be newly created. So I see a net decline in jobs, and I do worry about that. AI is similar to the technological bubbles that I've seen, and the technological bubbles probably go back all the way to the railroads, you know, 140 years ago.
But the power of AI relative to the predecessor technologies, I think, is vastly higher. The speed of innovation is vastly faster. I think if you look at Claude and all the coding models and the way they've progressed and the way Anthropic's revenues have progressed, I think you have to say that this is faster than anything we've ever seen before.
Well, and it's because you have the distribution that was laid starting over 20 years ago.
But I think the speed at which AI can innovate is faster than the speed at which society can adjust. So you might say it'll catch up, but I think at minimum you're talking about a significant period of dislocation. The other thing that we haven't touched on, but is the biggest difference between AI and everything else we've ever seen, is the autonomy. All the other technologies, starting with the railroad up through the internet, were, I would call, labor-saving devices. We had a job to do, and the new technology did it better, faster, cheaper. AI is different. It's not just going to do the job we used to do. It's going to design new jobs.
It's going to assign new jobs. It's going to take on work we haven't asked it to take on. It's going to take on work we didn't think it could do. And it's going to operate at some point in time without instruction. In the memo, I talk about the fact that ChatGPT brought out a new model earlier this month. And in the write-up for the model, they said basically, in English, AI β the model helped us design the model. There's never been anything analogous to that before. So when I think about this extreme level of competence, speed, etc., I think of dislocation for people. And there are people who say β and I referenced in the memo β there are people who say, 'Oh, I have great news, people aren't going to have to work.' To me, that's terrible news. I think we get a great deal from our work other than a paycheck. And how are those elements of life going to be replaced? It's a wild time.
How are you feeling about the United States relative to other countries, the rest of the world? There's a lot of uncertainty generally, politically. At the same time, America seems to have a lead in the AI race. How are you feeling about just America broadly?
Well, I don't know enough about the technology to know where we stand in the race or what it's going to take to win the race or anything like that. But I think there was big news recently that Anthropic is going to β I don't even know the right terminology, but let's say be less reticent in certain areas to apply technology. Because in America and in a lot of developed countries, we have these things called scruples. 'Oh no, I'm not going to do that.' 'Oh yeah, well, yes, you could do that, but I'm not going to do that.' This is an arms race.
And America has never had a serious rival before. We thought Russia was a serious rival. We were wrong. It was never really a threat other than militarily or atomically. But we've never had an economic rival before. Now we have a rival in many dimensions, and of course it's China. And I think that AI will be at the core of that rivalry. And if we slow down because of our scruples and they carry on, I think that'll help them win. And if they get control of AI, if they have highly superior AI, I think that could be one of the things that makes life tough for us.
So, and by the way, I consider myself as having scruples, but I worry about what this implies. And by the way, if you want to think about scruples, think about this. One of the areas in which we have a problem, which is not highly talked about or acknowledged, is rare earths. And rare earths are ubiquitous in many areas of technology, and we're dependent on China for that. So here's a question for you two young guys. Before China developed its primacy in rare earths, who had primacy?
I think we did. And we decided it was dirty and it was worth shipping overseas.
Bingo. Let's go. Thank you.
A hundred. You get 100 points for that answer. It was us. And as I understand it, most of the rare earths came out of one mine in California. And my guess is some ecologists concluded β yeah β that, as you say, it was dirty. And so maybe we shouldn't do it. And then guess what? China said, 'We'll do it.' 'We'll do it and we'll do it cheaper.' And so they got all the business. And that's how you create a dependency.
And there's a big question about how does the dirt over there just come right over here? Like potentially, I think it's possible it's all one atmosphere.
But look at what happened with energy in Europe. Germany had a bunch of nuclear reactors. And then they said, 'Well, we don't really want nuclear reactors because it's non-ecological.' And Russia said, 'Oh, we'll do it for you. We'll supply your energy.' And you develop a dependence.
So the point is, what you had in both cases is you had decisions made on purely economic terms in areas that probably should have included some strategic decision-making.
But it was all ceded to the economists and the ecologists.
Hard decisions. They are. Can I completely switch gears and ask you sort of a personal finance question? I've heard this rule of thumb that the allocation between stocks and bonds should be tied to your age. If you're 50 years old, you should be 50/50. If you're 25 years old, you should be 25% in bonds. But recently, the bond markets and the stock markets have been more correlated than decorrelated. And I'm wondering how you think the average person should think about the equity markets versus the debt markets.
First of all, there are no numbers that hold true for everybody. So any rules of thumb that have numbers in them, you have to throw out. The only rule of thumb is no rules of thumb. Well, like who was it β somebody once said that every generalization is flawed, including this one. That's great. So the point is that stocks and bonds have different qualities.
Existential qualities, and people should understand what the difference is. And the difference is not merely that one is called stocks and one is called bonds. You have to understand the difference, and then you have to figure out for yourself what the right risk posture is. And each person and each company, each insurance company, each sovereign wealth fund, each investor should figure out their normal appropriate risk posture based on age, wealth, income, sufficiency of wealth and income, aspiration, number of dependents, and intestinal fortitude β the ability to live with fluctuations. And it's different for everybody.
So that rule of thumb generalization hints at a direction, which is to say maybe younger people whose lives lie ahead should take on more uncertain paths which have a higher trajectory but more uncertainty, and older people who are approaching retirement should have a less uncertain path and more dependability. Makes perfect sense. The number, using something like your age as the answer, is silly. But I think everybody has to think about those things, and it's not easy to come up with the answers, but you better do it because it's damn important.
Last question for me, and sorry to jump around a little bit, but I'm curious. Were you ever deeply pessimistic about the internet, about what the internet's impact would be on society in the way that you are around AI and potential labor displacement? Because certainly you could have pessimism about, 'Hey, we got a lot of fiber in the ground that's not actually being used, we're headed off a cliff here.' That's kind of like maybe more like economic pessimism, but societal pessimism. I'm curious.
You know, I think the honest answer is that I never was. I never knew enough about the internet to reach that point of pessimism. Because you didn't have the internet. Well, I also didn't have my son kicking me in the butt making me do the research. I mean, he has really pushed me. He said, 'Dad, you have to know this stuff.' And he does it all day. And so I think I know much more about AI than I ever did about the internet. And so the answer is I never did reach that level of pessimism with regard to the internet.
What's the fundraising cycle like for Oaktree Capital? How often do you raise funds? What's the latest fund?
Well, that's an interesting question. I mean, we have a lot of different kinds of funds. We have some which are very plain vanilla and produce a steady return fairly dependably higher. We don't do anything in what's called high-grade bonds or investment grade. Everything we do is noninvestment grade. So nothing we do is 100% dependable. But we have some that are mundane with modest return, moderate return, and then we have some that are highly aspirational and often tied to the cycle. I think it's fair to say we're the world's leading investor in distressed debt.
And so sometimes when there's a lot of distress, there's a lot for us to do. We have the ability to invest a lot of money and historically have high returns. When everything is placid, there's not much to do in distress land. So we have to kind of go into remission, and we don't raise much money in those funds. We raise small funds with which we can do very selective things and make do with a modest supply. So a lot of our fundraising is tied to that.
The other thing is we're worriers. When in good times most people plunge ahead, we tend to pull back because we get worried because they're too damn optimistic. Buffett says the less prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own affairs. And I believe that. So when everybody is unafraid, I get terrified because they do nutty things that put us all in jeopardy. The scariest thing in the world, the riskiest thing in the world, is the belief there's no risk. And when people believe there's no risk, the world gets crazy. There's an old saying in the banking business, which is where I started my career, that the worst loans are made in the best of times for this reason.
So that really defines our cycle. When everybody else is having a ball, making money hand over fist, doesn't see anything to worry about, we kind of go into a cocoon because to us that's scary and it hints at very few opportunities. When everybody else is terrified and wouldn't touch risk with a 10-foot pole, and as a consequence you get highly paid for taking risk β that's when we turn aggressive.
Which β I don't know how much you read or talked with Andrew about Catrini's Sunday memo, the 2028 global intelligence crisis, which Citadel responded to by basically saying, 'We have an intelligence crisis right now.' With everyone's reaction to this piece, did you ever have a memo that created really wild near-term price action, in the way that the Catrini piece did, or with the way that information moved historically?
No, I look β he used a device of, I mean, he even said this is not a prediction, this is an extreme case to illustrate. I've never felt that it was attractive to do that. You know, I try to live in the middle of the probability distribution and understand what's going on in the middle of the probability distribution rather than β again, I think maybe you would say that Catrini's case was a black swan. And I don't traffic with black swans.
Well, yeah, it's interesting. It kind of needed to come from a Substack that gives the kind of appearance of being β if you're just reading it for the first time, it gives these kind of appearance of sophistication. But it doesn't come with having run tens of billions of dollars of assets.
Well, thank you so much for taking the time to come chat with us. Really enjoyable conversation.
Well, as I said, I think you guys are doing a great job, and it's really a pleasure to be part of it. Tell Andrew he's welcome.
Yes, we've loved having you. Hopefully we can do it again soon. Congratulations. Let's plug the book. Go buy the book. It's available where all books are sold. I'm sure there's an audio version as well. Thank you so much.
Let me tell you about Vanta. Automate compliance and security. Vanta is the leading AI trust management platform. And let me tell you about Labelbox. RL environments, voice, robotics, evals, and expert human data. Labelbox is the data factory behind the world's leading AI teams. And without further ado, we will kick off our Lambda Lightning round. I'm getting it, Ben. We got new graphics. The Lambda Lightning round has been β We have Demi Gu from Pika. She's the co-founder and CEO. Welcome back to the show. How are you doing? Thank you so much for coming back on the show. Fired up. Tell us about AI Selves. Tell us about the latest launch. What did you launch today?
Yeah, for sure. So we all have the same problem. There's only one of us. Your mom needs help with your computer. Your partner sometimes wants more time, especially for a founder. Your friends want to hang out. You're a founder, you're so busy that maybe you're missing out for a group trip planning, but you're in the meetings or on flights or asleep. So then we raised this question: what if there's a second you? We build something new which is called AI Self, where you can give birth to it, you can raise it, and it will grow with you. You both and it becomes a living extension of you.
This is what you and John Bulmer were just talking about two hours earlier in the show. You're like John and Jordy are going to talk to each other and get stuff done. Is this purely for entertainment, or do you actually see a business use case where someone with a great marketing mind will create an AI Self and then I would be able to go to them and bounce a Super Bowl ad campaign off of them? How do you see the user actually interacting with this?
Yeah, for sure. I think there are many ways you can do it. First, it definitely β it's you, but it's always, like you mentioned, infinite availability, right? So 24/7 available, always on, can be everywhere. So your family β mom, people who love you β will be able to have more access to you. So your mom will be able to talk to AI Self to help her debug problems. But like you mentioned, it's the same for people who have great expertise, right? So if you're a really genius marketing person, maybe other people can talk to her to gain more marketing knowledge and she can monetize off it. And it's because it's AI, so it can do all those things β it breaks all the human limits, right? So it can be very capable. For example, like I mentioned, it can have your marketing taste, but it also can do everything like 10 times faster.
How do you get enough data for an individual to make it an accurate representation of the individual? We've talked about this because we put out three hours a day of content of ourselves talking, hanging out. But most people don't have that. We're going 24/7 with this. Let the AI Selves host the rest of the other 21 hours a day.
Yeah, for sure. So to answer the question about how do we get data to have an accurate representation of you, I would say there are three angles. First, it could import more data of you. So for example, you can import all the TBPN shows in the past, so you can learn from that. But also, when you're using AI Self, there's this constant process like you're correcting and guiding it, right? So when you're using it to generate marketing assets for you, it will also learn the marketing taste you have. When you're using it for short-term productive work, it will also learn the taste basically. And the last angle is that the identity also really matters here. Because for example, your mom might not care how 100% accurate everything is about you, but as long as it's you, she will be interested because otherwise she could not find you. So yeah.
Well, thank you so much for coming on. Unfortunately, you have some breaking news, so I need to cut this interview short. But we'd love to have you back on the show soon. So have a great rest of the day and congratulations on the launch. We'll talk to you soon. Goodbye.
And the breaking news is that Warner Brothers says Paramount's new offer is superior. Netflix now has four days to respond. The M&A market is continuing to diverge. When we started tracking this, Netflix was up at 50%, Paramount at 40%. Now Paramount is starting to run away with it. They're at 62% and Netflix is down at 33%. Will they sweeten their offer? We don't know, but Netflix has four days to respond.
More breaking news. What else? Square is cutting from 10,000 to 6,000 employees. A 40% reduction. Let's head over to Jack. He says, 'We're making blocks smaller today. Here's my note to the company.' And I wanted to ask Howard about this because it feels like so much of β I'm curious to see what Jack says around the reasoning. But I've been shocked that more CEOs, when their stocks are down and beat up, aren't looking at what happened with X and saying we can β there's a huge expense that we have here. Payroll.
And anyway, so he says, today we're making one of the hardest decisions in the history of our company. We're reducing our organization by nearly half, from over 10,000 people to just under 6,000. That means 4,000 of you are being asked to leave or entering into consultation. I'll be straight about what's happening. First off, if you're one of the people affected, you'll receive your salary for 20 weeks plus one week per year of tenure, equity vested through the end of May, six months of healthcare, corporate devices, and $5,000 to put toward whatever you need to help in this transition. That is generous. We're not making this decision because we're in trouble. Our business is strong, gross profit continues to grow. We continue to serve more customers and profitability is improving. But something has changed. We're already seeing that intelligence tools we're creating and using, paired with smaller and flatter teams, are enabling a new way of working, which fundamentally changes what it means to build and run a company, and that's accelerating rapidly. I had two options: cut gradually over months or years as this shift plays out, or be honest about where we are and act on it now. I choose the latter. Repeated rounds of cuts are destructive to morale, to focus, and to the trust that customers and shareholders place in our ability to lead. And I won't read the whole thing, but this feels a little bit more real.
Like what Satrine was sort of predicting a little bit. Yeah. And it feels more real than some of these other cuts where they do like an 8% RIF and then say, 'Oh, we're getting better.' But going down by nearly half. Also, Block has been mostly spared the SaaS apocalypse. Over the last one month, the stock's down 17%, over the last six months it's down 30%. It's not down 50, 60%. But still, it's trading at β it's way off peak. The peak stock price was $263, now it's at 54. So there's certainly a question about how they build back.
Well, let me tell you about Gusto, the unified platform for payroll, benefits, and HR built to evolve with modern small and medium-sized businesses. And without further ado, let's continue our lightning round and bring in Yash Patel from Applied Compute. How are you doing?
Good. How are you? Good to see you again. Since this is the first time on the show β long overdue β please introduce yourself and the company.
Yeah. So my name is Yash. I'm the CEO of Applied Compute, and what we do is we build what we call specific intelligence for enterprise. And what that means is, AI is going at breakneck speeds. These general models are getting better and better week over week. But if you're using the general thing, you're never having your competitive edge. So what we think is there's a ton of latent knowledge or subject matter expertise that's kind of in an enterprise, and what we want to do is help enterprises capture that, imbue that into their agentic workforce, and start to scale up their agentic co-workers.
What does the onboarding process look like for an enterprise? Is it just sort of turning loose? Before you answer, I just got to say I love specific intelligence. I've got enough general intelligence. I really like some specific. I think a lot of people are feeling that β everything's at 99%, but I want 99.999%.
