I see a large IPO on the horizon.
You're surrounded by journalists. Hold your position.
Overnight success.
Later.
Right?
There's misinformation.
Clearing order now.
Let's just roll.
We're surrounded by journalists. Hold your position. Come on. Get up.
Trust the experts here.
Five.
We correct.
Founder.
V.
I see multiple journalists on the horizon. Stand by.
UAV online.
Blaze.
Double blaze.
Triple blaze. Double kill. Fight.
Is.
Win.
Team Deathmatch.
We are experts.
Triple blaze.
That's just wrong. Right.
Clearing order inbound.
We are surrounded by journalists. Hold your position.
Strike one.
Strike two.
Activate golden retriever mode.
Multi clearing order inbound.
Five.
I see multiple journalists on the horizon. Stand by.
You're watching TBPN. Today is Wednesday, January 21st, 2026.
2026. Throw smoke. It's a new year. We're live from the TBPN Ultradome, the temple of technology, the fortress of finance, the capital of capital.
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If you enjoy business, if you're a business enthusiast,
Lots of people like greenfield projects. You start fresh. Greenfield projects are where it's at. Yanczak, founder and CEO of California Forever, is in the Ultradome at 1. Then we have George from Tudo at 140 and Ara closing at 150 in person. It's going to be a fun show. Linear, of course, is the ultimate product, the system for modern software development. 70% of enterprise workspaces on Linear are using agents today, and you should be too.
So, Kling AI, the video generation video model, has been on a tear. There's an article in the Wall Street Journal showing some pretty staggering numbers. They hit 12 million monthly active users and they generated more than 20 million in revenue just last year. I wanted to dig in and understand where this came from, the history of Kuaishou, the Chinese company behind it. There's a new farmer filling up the trough for everyone. Really interesting that they're so neck and neck with Higgsfield.
Higgsfield last week comes out, announces they got to 200 million.
Yeah.
That Kling seems to be just slightly ahead of them, but really neck and neck and seemingly competing over the same opportunity.
Yeah. I mean, on the enterprise model API level, even the prosumer level, I think 30% of their revenue is coming from API and 70% is for prosumer. So basically, you have someone in a marketing role or they're just a fun individual creator and they want some AI video product, some generative video.
They refuse to ask any hard questions.
You got Demis on stage, you got Dario on stage, and you're not asking them about Kling and the absolute tear that Kuaishou has been on.
Actually, I mean, Dario did address the Chinese question. He said that they don't lose, they're not losing enterprise deals to Chinese companies right now. They're going up against OpenAI and DeepMind.
There is an interesting Chinese export control issue that I think we should get into at some point with regard to this story. But first, let's tell you about Restream. One live stream, 30 plus destinations. If you want to multistream, go to restream.com. So, Kling has hit 12 million MAUs, 20 million revenue in the last month. Now, they seem to be on the up and to the right curve. It's a pretty massive ramp. The product launched 18 months ago. But Kling is not its own startup. It is a new project from Kuaishou Technology. This is a Chinese company, and the founders, I couldn't find a single...
I'm gonna blow your mind right now.
Guess who worked at Kuaishou.
Jordan Schneider worked at Kuaishou.
Yes. He just responded to the Daily News Live and said, 'Lol, I worked at Kuaishou.' What a comeback. Jordan, tell all. Jordan, come get on the show.
You're welcome. Come hang out if you want to. I'll send him a note. It'd be great to hear more of the story from him directly. But he might be the only person that we can get to go on the record about Kuaishou because the founders, I don't think they've ever done a podcast appearance. They haven't been, you know, certainly on like the Acquired podcast American circuit like many founders that get a company to this scale. But there are some interesting links to other American companies. So, Kuaishou is pretty old, especially for the AI boom. It launched in 2011 as a mobile app for creating and sharing GIFs. This was before Vine and before Musical.ly. They were sort of like precursors to all those just by a year or two.
So, you could almost say that Jordan Schneider made his money in GIFs, I think. So, I think he created TikTok basically. We should put him in charge. We should get him in the CEO seat. Put him in charge. We're bringing TikTok back to America and Jordan should be running it for sure.
Um, so there's some similar threads. So Dom Hofmann, the founder of Vine, he worked at Yahoo before founding Vine. And Alex Zhu at Musical.ly worked at eBay and Microsoft and I think SAP as well. And so, both of those companies, they had like big tech experience, then they went and founded these companies. And the founders of Kuaishou, Su Hua and Shang Yi, also did the same. One of them worked at Google, one of them worked at Hewlett-Packard, and then they jumped into the social media boom that was going on in the late, I guess the late early 2010s. Is there a word for the period between 2010, the teens, the 2010s era, like post Facebook, there was Foursquare, Twitter, Pinterest, Snap, there were just like a new one every year was popping up. And so they jump in on this and the mobile internet was expanding really rapidly in China at that time. There was a big boom. There were a bunch of big winners that came out of that era. Kuaishou hit 100 million DAU by 2013. So basically 18 months after they launch, they're a pretty sizable social media app. And they actually pivoted in that 18-month timeline from GIFs to videos. And so once they had the new product dialed, they ramped pretty quickly. Now, there was a little bit of a slowdown between 2013 and 2019 because they didn't hit 200 million DAU until 2019. So, they were sort of saturating then. But they were on a fundraising tear the whole time. They raised $350 million from Tencent in 2017. They integrated with WeChat to accelerate distribution. And the company was worth around $18 billion by 2018, just seven years into the journey. So, not bad. Not bad. The Kuaishou IPO was a particularly crazy moment for the company. So, they raised $5.4 billion at the IPO. They were massively oversubscribed for that. So they say, 'Hey, we want to raise 5 billion and $165 billion of demand shows up from the market.' So retail investors just went insane. They're like, you know, what, $165 billion of demand, only $5 billion for sale. And so the stock trades up 192% at the open. And all of a sudden, the company's worth $180 billion. And both of the founders are decabillionaires. Pretty sick.
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So, that didn't last though. There was a massive sell-off. And there were a couple, there were a couple like speed bumps that Kuaishou seemingly hit shortly after going public. So, China had a big crackdown on regulation on local tech companies. ByteDance became much more dominant as a competitor and was, you know, had Kuaishou in their sights. And then the Kuaishou user growth just sort of slowed down. And so there were a couple misses on, you know, DAU, MAU growth. The metrics weren't looking as good. And so the investors said, 'Hey, we're rotating to other things. Hey, we're pulling out.' And so the stock traded down 80% within six months. So not great. But today the market cap's around $40 billion. Like it's still a very real business. And also, just financially, the business is very solid. Like it's not losing money. You can think about it this way. So it's a $40 billion market cap, 20, this is all USD. I converted everything. So $40 billion market cap, $20 billion revenue, $11 billion gross profit, net profit $2.6 billion, two and a half billion. So that's like a lot of cash flow, a lot of net income to work with. Certainly enough to do some training runs, start a new lab or a video lab or, you know, take some new bets. And so that's exactly what they did. So in 2024, they launched the first version of Kling and they did this just three months after OpenAI demoed Sora. So it was kind of like the Chinese answer to Sora. Since then they've updated Kling 30 times and carved out a nice little place on the grid of trade-offs around model performance and cost. For cinematic footage, people often recommend Veo 3 still, but for Kling, it has some really strong characteristics in motion control and physics simulations. Like there's a number of places where Kling's been outperforming there. And then there's a number of other sort of niche applications where Kling's really great. And at 10 cents per second, pricing has been very attractive relative to some of the other options in the market. Although there are a bunch of ways to get like free credits and then if you buy bulk, like none of the pricing is like exactly apples to apples, but they've certainly, they've certainly come out as a frontier quality model at a very affordable price and that's led to a bunch of adoption as we've seen with the 12 million monthly active users. Interestingly, Kuaishou claims that Kling is gross margin positive.
And so now it's unclear, that doesn't include training and we don't really, I mean it's gross profit so it doesn't include the hundred or so R&D people on the team.
But my question is like, what happens if they try and scale another order of magnitude? Will they be paying more for inference? Will they be able to get those chips? Because there's still this big debate over how many Nvidia GPUs should be able to be sent over to China. So, there's a little bit of debate there. And it's also just, it honestly gets me excited about Meta dropping a video model because a lot of the same, a lot of the same sort of like precursor elements in terms of like the training data in the ecosystem when you think about the, the just the raw data in Reels, that it could wind up being a model that's a little bit more opinionated, maybe it has some Midjourney sprinkled in there. Like I think that the Meta, the pressure on Meta has been intense. And the initial Movie Gen launch was not loved, but they certainly have the compute, they have the team now, they have the data, like they have all the key, the key ingredients to a really successful video generation model launch. The only question is when will it happen? And will it be one of those like temporary leapfrogs where it's better than Sora and Veo 3 for a month until the other labs update? Will it have its own characteristics? Because Veo 3 when it came out it was like, oh, we can do audio in there, then Sora was really good at vertical video. And a lot of these like labs, it feels like if you're in video, there's more room to be opinionated and come out with something where it's like we're really good at making content that's all one, all one scene, or our model by default will do cuts and cut from different shots to another, or it's really good at front-facing videos, or, you know, it gets the faces really accurate, or it does face replacement, you can upload your own. There's all these like features that you can win on, I think nowadays, since all the, all the different base video models are starting to look pretty photorealistic, so a lot...
Yeah, I mean, I'm so, I can't wait to see Meta's next real launch here, right? They have so many advantages, they have the talent now, the pressure's immense, but they should be able to come out with something that's super competitive.
Yeah. Turbo Puffer, search every byte, serverless vector and full-text search built from first principles and object storage, fast, 10x cheaper and extremely scalable. So, last month they did 20 million and of course Kuaishou put out a statement about it. Their shares went 3.6% higher to rank among the top gainers on the Hong Kong exchange. Year to date is up 23%. So, they've been on a run and there's a lot of investor optimism about Kuaishou's potential to monetize AI. The company's AI-powered video and graphics generation capabilities will likely drive earnings over the next few years. S&P Global Ratings analysts wrote in a recent note that could lower content creation and advertising costs and boost content creation on Kuaishou's short-form video platform. The company has the second largest independent short-form video platform after ByteDance's Douyin, which is basically the Chinese version of TikTok. And so, you know, is this going to be, you know, super important to the AI race in America? Probably not. Like we're still living in a world where you have OpenAI, Anthropic, Google really battling it out, and then xAI is doing interesting stuff, Meta has interesting stuff, and then there's a couple new labs that are maybe doing interesting stuff. But the Chinese labs haven't been putting a ton of pressure. But I think this is interesting because we're actually getting firm data on how these products are monetizing. Of course, Google, they're not even breaking out Gemini revenue or metrics. They'll throw out sort of random numbers, but it's not like YouTube where they have to report out specific things or like Amazon with AWS where they have to break out those financials. Kuaishou is kind of doing a service to the public markets. At least they're creating a comp for what revenue looks like relative to MAU.
And I mean, right now if they're doing $20 million in revenue on 12 million monthly active users, they're getting what, $180 per monthly active user, $180 a month basically, like a $20 a year subscription. That still feels a little low, but not bad for total ARPU for such a new service that really we don't know the mix of like enterprise versus prosumer where they would...
Yeah, and they're not breaking out where their users are, right? So...
So Kling is available on AWS, like you can go and provision it in America. And so yeah, we're not exactly sure, and I think some of that inference might run in America in that case, so not exactly sure where their biggest customers are. But it's just interesting to see, like, you're not going to get this level of detail from Google because DeepMind's its own thing and then Gemini is in there, and then you can't even just subscribe to just Veo 3. You have to subscribe to Gemini Ultra and then you get Veo 3 credits. And so even Google, like, I mean, I'm sure Google knows how much I pay for Gemini Ultra and then they know how many Deep Research reports I file, how many normal prompts I use, how many times I just talk to it, and they know my usage pattern relative to how many Veo 3 generations I'm doing per month for my, you know, $250 or whatever I pay.
Anyway, moving on. Vanta, automate compliance and security. Vanta is the leading AI trust management platform. There is another interesting, just sort of like nuanced narrative that I hadn't really noticed while I was digging into Kuaishou. One is this China's aging tech workers issue, the curse of 35.
They're firing over there. That's what's happening. You can't even be an unk.
You truly can't. You truly can't. Discrimination against older employees, particularly apparent in a sector where executives openly state a preference for youth. And so, a different approach.
We've had back and forth on, you know, on VC Twitter about, oh, should your team be really young and cracked or should you get the experts in there? What's, you know, obviously in America, like you cannot discriminate based on age. But that hasn't stopped plenty of people from opining about what the correct mix is, whether or not you should follow those rules. But there's an article in the Financial Times that sort of has some charts here about how big tech groups in China have been downsizing in the past few years. We can go through that, but let's read through a little bit of this China's aging tech workforce. First hint Lai, 34, received that his position at short video app Kuaishou might be at risk was when a 35-year-old colleague was sacked. 'I was both shocked and anxious. I realized that our situations were very similar and the same thing could soon happen to me,' said Lai, using his nickname to avoid repercussions from his former employer. Just months from his 35th birthday, the developer was dismissed. Another victim of the group's reorganization known internally as Limestone.
Wow. They're giving code names to age discrimination. That's insane. Kuaishou is pushing out junior workers in their mid-30s.
According to five people with direct knowledge of Limestone, including current and former employees, Lai was told his termination was part of the company's overall redundancy program. The so-called curse of 35 has long plagued workers across white-collar professions, with older staff widely perceived as being less willing to put up with long working hours because of responsibilities at home. As China's tech sector reels from Beijing's crackdown, this article is from 2024, by the way. And economic slowdown. Tens of thousands of jobs have been cut over the past several months and older workers are seen as particularly vulnerable.
Technology companies have made no secret of favoring young and unmarried workers. Ageism in the tech sector is a big problem. There's a perception that older workers don't keep up with the latest technological developments. They don't have the energy to keep up the hard work and that they're too expensive. Thankfully, our very own John Coogan, you're very much keeping up with the latest technological developments. Otherwise, we wouldn't be talking about this because you didn't just read about Kling. You studied it and you wrote about it. While China's labor law prohibits employers from discriminating on the grounds of attributes such as ethnicity, gender, and religion, it does not explicitly refer to age. Whoa.
Hence, Project Limestone.
But Yang said some had interpreted the law more broadly as prohibiting discrimination against older people, meaning employers would not explicitly cite age as a reason for dismissal.
Chinese tech executives have long publicly voiced their preference for younger workers. In 2019, Tencent President Martin Lau announced a plan to reshuffle 10% of the company's managers, saying their jobs will be taken up by younger people, new colleagues who may be more passionate.
Baidu chief Robin Li, in an internal letter, also made public in 2019, announced the company's plan to become more youthful by promoting more workers born after 1980 and 1990. This thinking is deeply embedded across most tech companies. Well, let me tell you about Labelbox. Reinforcement learning environments, voice robotics, eval, and expert human data. Labelbox is the data factory behind the world's leading AI teams. So,
That's right. Between 20 and 30, most people are full of energy. You're more willing to march forward and sacrifice yourself for the company, but once you become a parent, your body starts aging. How are you going to keep up with the 996 schedule?' is a former sales manager at Meituan, referring to the Chinese tech sector's infamous work routine of 9:00 a.m. to 9:00 p.m., 6 days a week. ByteDance, which owns the video app TikTok, and e-commerce giant Pinduoduo, have some of the youngest recruits among Chinese tech companies. Data suggests the average age of their workers is just 27 according to the latest figures. The average age of staff at Kuaishou is 28 against the 33 years old at ride-hailing Didi. The average age of the worker in China is 38 according to the All-China Federation of Trade Unions. This trend has become only more entrenched with progressive waves of layoffs. And this is the chart that I wanted to show you. So, big tech groups in China have been downsizing in the past few years. So this is 2021, 2022, and 2023 for Alibaba, Baidu, Kuaishou, and Tencent. And they're all downsizing across those three years. Now, I was wondering if this was just an anomaly post-COVID, just one particular period during some economic gyrations. So, I went and pulled more recent data on what's going on, and it feels like they're all continuing to shrink. The one that's growing again is Tencent, but Baidu has significantly downsized. Alibaba has continued to downsize and shrink, and I think Kuaishou has as well. And so, there's an interesting dynamic there that I didn't, I mean, we hear about layoffs in big tech in America, but it feels like it's like a very temporary layoff and shrinkage and then it starts growing again pretty quickly as they do more acquisitions. Now, to be clear, some of these companies have shrunk because they've divested whole business units or sold off a piece of a company. And so, you can't really count that because it's like the jobs still exist. They're just at a separate company. Anyway, Lambda, Lambda is the superintelligence cloud building AI supercomputers for training and inference that scale from one GPU to hundreds of thousands. We have our first...
Before we jump in, it's worth noting I pulled up Mag 7 employee counts and every single company in the Mag 7 has increased headcount over that same period that we just showed. So...
Yeah. Yeah, there have been like periods of layoffs. But even when Mark Zuckerberg comes out and says, 'Hey, we're laying off a thousand people in the metaverse team and the Reality Labs team,' it's like, 'Well, he's adding tons of people to the AI teams and tons of people to the Instagram teams and Threads teams and Facebook core and marketing and sales people and events people.' Like the whole organization is just growing so fast that one niche layoff is not really going to cause a multi-year trend. At least in America, we're still growing. So just sort of interesting that I didn't realize that was going on, that there was such a concerted effort across four major Chinese tech companies to really reduce headcount, but it is happening.
Yeah, it is worth noting though that in the chat is sharing this as well that 2022 headcount and current headcount look very, very similar. So there hasn't been a ton of growth.
Anyways, anyways.
Graphite, code review for the age of AI. Graphite helps teams on GitHub ship higher quality software faster. And without further ado, we'll bring in our first guest of the show, Rich. Welcome to the TBPN Ultra. How you doing, Rich?
Busy week in media world. Earnings kicking off.
What's top of mind? What's keeping you the busiest?
Look, I think everyone's trying to figure out what is the future of Netflix. What happens to Warner Brothers? Does Paramount come back? I mean, we talked about this on your show a few weeks ago, right? We were talking about sort of this battle. Does Paramount come back? You know, they haven't raised their bid since we talked, you know, before the holidays. They have not raised their bid as of yet.
But they did say it wasn't their, they said it wasn't their best and final, right?
That is true. Mhm.
But you know, when you look at sort of how much Netflix clearly wants this, you know, Netflix yesterday went to all cash on their offer.
The Warner Brothers board came out and talked about the piece that Netflix isn't buying, which Paramount said was worthless. The Warner Brothers board said was worth, you know, $3, maybe even more, as much as four or five, maybe even more if it gets sold into pieces, which we think is possible. And so the bar, you know, in terms of like what does Paramount have to do to win, that bar is going up and up and up. And I think that's the challenge right now is how badly do they want this? Do they want to overlever the company to get this or is there a better use of capital? I mean, it's not like there aren't other assets out there. I mean, you could go into the video game world, right? Like there's assets like Take-Two, two of the biggest entertainment franchises in the world. Okay. But what's actually important for Paramount? Is it to build a compelling consumer subscription, right? Like because when you look at...
them overpaying for UFC or maybe they're not overpaying, but if they...
It launches this Saturday.
Yeah, which I'm excited for. But they paid 700 million or sorry, no, it was more than that. What was it?
The billion one on UFC. Yeah.
About 2x what ESPN was paying.
Yeah. And I guess like my question is, how effed are they if they don't get the Warner Brothers assets? Just, and I mean that from like a how compelling is their subscription platform without Warner Brothers those assets.
Look, you can license a lot of content. I mean, Netflix, despite trying to buy Warner Brothers, Netflix actually just went out and did a global licensing deal with Sony. So, after Sony movies are in movie theaters, the next place they go is to Netflix all around the world.
That's a deal that Paramount could have done. They could have outbid Netflix for that deal. Those licensing deals are out there. I mean, Universal movies are actually going to now be, after they do a short stint on Peacock, they're going to show up on Netflix. Like if you want to license catalog content, there is lots of ways to do it. I mean, heck, Amazon, like the craziest thing that's happened this week, honestly, Amazon, you probably remember a few years ago, they went out and they spent $8 billion on MGM. Everyone thought that was absolutely insane. Then they had to go back because you actually even for that $8 billion, you didn't control the James Bond franchise. They ended up paying the Broccoli family another billion dollars to get access to control the James Bond franchise. And then what happened today, guys? Today, the entire James Bond franchise is licensed to...
Netflix.
Like literally, you can go watch Dr. No on Netflix right now instead of watching this show. Like, it's crazy, right? So, there is lots of content to license, but you have to be aggressive. And so I think, you know, again, if Paramount has, you know, Larry Ellison's willing to put $12 billion into the Warner Brothers deal, the Middle East is willing to give them $24 billion to invest in this transaction, that's a heck of a lot of capital. If you want to start really both creating a lot more content internally and licensing a lot more, Paramount has the ability to do that. There's more NFL rights coming up for bid soon. Like, there are many ways to attack this beyond buying Warner Brothers. And I just think there comes a point where overpaying for something gets silly and you're better off finding an alternative. And I think that's sort of the question mark because remember for Paramount, they need to buy all of these linear cable networks because unlike Netflix, remember Netflix generates $11 billion of free cash flow a year. Paramount has negative free cash flow.
So like the ability to bid here is very different. These are very different companies.
So what's Netflix's rationale for buying versus licensing? Is that just thinking long term that they'll make more money over the long term or is there some other rationale or value that they would get from owning the whole thing as opposed to just licensing it?
John, it's a great question because I think if you step back and they even said this, I asked this question like, you know, what changed because Netflix had not been interested in making acquisitions. They were a builder, not a buyer, you know, throughout their entire history.
And I don't, if Paramount hadn't put this in play and like this asset hadn't become sort of in play, I don't think we'd be sitting here talking about Netflix buying Warner Brothers. I think once it became clear this asset was going to trade and that there was a way to buy it without getting all of those sort of dying cable networks, that there was a way to just buy the streaming business and most importantly the studio because what this is really about, this is like when Bob Iger at Disney, remember years ago he bought Pixar, he bought Marvel, he bought Lucasfilm, those three iconic acquisitions of IP have totally transformed the Walt Disney Company. I think that's what Netflix sees here is, hey, these IP libraries are going to trade. This is a once-in-a-lifetime opportunity. Someone's going to own them. Let it be us. Like, let's not let this get away from us because we can do so much with it. Just like Amazon for Bond needs Netflix. The ability to take all of that Warner Brothers catalog and shine a light on it the way Netflix can, I think was just too big of a, you know, talk about a 5, 10-year opportunity, was too big to pass up.
How do you think the studios and the platforms are kind of trying to process how Gen AI will impact the value of IP? Because if I look at this and I'm like, if you have IP and the cost to produce new content drops dramatically, which I think is my assumption generally is that you're going to be able to produce, like when you look at animated content and even like kind of blockbuster films, I expect the cost to produce these things is going to drop dramatically. Which means if you actually have a monopoly on the IP, you can create a lot more different content around it. And I think that Gen AI will also mean that there's just a bunch of like more and more and more and more content, like net new content, net new IP being created, but it's unclear if you have, it will maybe even become harder to like generate real breakout hits if the whole zone is just being flooded with a ton of content.
Well, look, in a world where, first of all, let me just step back. I agree with you. Gen AI is going to lead to an explosion of content there, you know, and I don't think this is just video content, I think it's an explosion of content. So whether it's gaming content, you think about a UGC platform like Roblox, you think about a short form or shorter form, you know, UGC world of video like YouTube, you think about Spotify, like all of the platforms in a world where content creation gets cheaper, the platforms win. That is exactly part of the long-term investment thesis on why own Netflix now.
Yes, it will get easier to make content from the Warner Brothers library. It'll get cheaper for Netflix. I mean, certainly animated content, which takes three to four years to make. I mean, look, you know, one of our questions for Netflix on their earnings call was like, how big of a miss is it that K-pop Demon Hunters 2 isn't coming out until 2029? Like, that's embarrassing, guys. Like, right, like it shouldn't take four years to get that sequel out, but that's because of the timeline for animation. That's going to compress dramatically.
Is that everything? Because I thought that there was also sort of just an unpredictable, it was an unpredictable success. They hadn't negotiated the contract with Sony and so they kind of got caught flat-footed when it became such a success. And again, it was like it was a success that only would have happened on Netflix where a movie can go viral where if that had had some limited run in theaters, it probably would have just been forgotten.
It's true. But they struck the deal at the end of '25 and you're not getting a movie till '29. That is just the timeline. Like Sony Pictures Animation, which is up in Canada, sure, there's a backlog of films that are before this, and there's just no way to accelerate that at the moment.
But I think I want to go back to Jord's point.
Making it cheaper to make content does mean the value of existing content probably comes under pressure. Like there is no doubt that since you're going to have so much more content created, existing content will have less value.
I think that's a negative for Netflix. It's a negative for Disney. But the platform side of the equation, which is what Netflix is known for, just like YouTube and Spotify and Roblox, I think all of those platforms become huge beneficiaries because people are going to have so much more content on those platforms than they do today. So, I think it ultimately becomes an advantage. Hurts one side of the business, but I think as you look at it holistically, becomes a big long-term advantage because the big platforms have the eyeballs. Like that's where people turn to, right? Like you come home from work and you turn on Netflix, you turn on YouTube. Like those are the fundamental winning platforms and they're battling it out and I think AI makes that battle even, both of those companies even more powerful.
And so it sounds like if I could summarize the place that you're getting to is maybe not believing that Paramount and the Ellisons should just lever up to this insane degree when they could potentially take some more, you know, take maybe still tens of billions of dollars but just allocate it across a wider variety of deals. Is that one path that you're seeing?
I think this is, they're stretching, right? Like when they tried to buy this thing at 19 and there were no other bidders, it was a brilliant idea. Maybe even at 23 it was a brilliant idea.
As you start getting, you start to realize that like you're not winning at 30. That's pretty, I would assume to both of you and me, like they're not winning at 30.
Right. Like so they're going to have to bump and they're going to have to bump meaningfully.
And so to pay 34, 35, like you start to get to valuation levels, I don't think you can put any more debt on this. You got to come up with 10, 12, 14 billion dollars more equity, like, and even that is too levered. Like I would not want to be in this transformative AI media world sitting there with seven times leverage. That is not a great place to be. And so I truly believe David Ellison has a huge opportunity over the next decade. But I don't think overlevering to buy Warner Brothers is the best path forward.
Also, it's worth noting the stock of Oracle at the beginning of Q4 was trading at $313 a share. It's now trading at $174 a share.
And so that has to be a factor too in terms of everyone's confidence around like, hey, how much cash do you have available?
Look, Larry's got plenty of capital. If he wanted to buy this for all cash, he could. But remember, he's not. This is a hundred billion dollar transaction. The Ellison family is putting in 12.
You know, so like there is a limit on how much I think the Ellison family, they put in, you know, $8 billion or sorry, they put in six of the 8 billion of cash into the Paramount transaction. Redbird put in the other two. So 6 plus 12, that's an $18 billion commitment between the two deals. It's a big number. But on the flip side, you know, given the size of this transaction, you know, I think there is a limit to how much they probably want to invest in this sector. And again, I just think leverage is not your friend. Like I look at sort of how you win over the long term in this media space, especially given how much change, and I think you two do a great job highlighting sort of how technology is changing what's happening. Being levered is the last thing you want. And I think what was really interesting is that when Skydance bought Paramount, they injected cash onto Paramount's balance sheet to delever it because they didn't want to be levered. And so I think even they understood that they don't want to be levered. They're being forced to lever to try to compete against Netflix. And I think that's actually the mistake. And I just think that there's other ways for them to win long term. Overstretching the balance sheet does not to me seem like the right path.
Explain the cable assets that are sitting within Warner Brothers Discovery. You have CNN, I believe there's a few other...
Yeah. When some of the numbers were floating out, CNN doing something like projecting 600 million of like...
Seemed like a good business. My question is, you have this Netflix fight over the Warner Brothers, like the studio, the IP library, and to Netflix it feels like the TV assets are less valuable. Certainly they were carved out of the initial offer. Are those more important to Paramount, Skydance, the Ellison family? Is there a world where Netflix takes Warner Brothers, the studio, and the cable assets go to Paramount?
They're critically important to Paramount because Paramount, as I said, doesn't generate free cash flow or, you know, doesn't have the earnings capacity of Netflix. And so, in order to finance this, to lever this up seven times, you need all of that cash flow. If they were only buying what Netflix was buying, John, this would be levered over nine times. And so, you have to have those assets. If you're going to finance it the way they're doing it and not do this as a cash deal, in order to do debt, they need those assets. These become really important assets. And so for Paramount, they have to stop the split of this company, which is supposed to happen this summer. If Warner Brothers splits, Paramount can't do this deal because they can't finance it the way they currently are financing it.
The reality is these assets like CNN. Do I think public market investors will like these assets? No, I don't think so at all. I don't think these are growth businesses. I don't think investors are going to be excited at all. But I do think that there are strategic buyers of these assets where there is the influence and power of owning a news network that will far outweigh its public market trading value. And I think that's really the opportunity.
If you put this up for sale, someone's going to come in and buy CNN because it actually has important, you know, strategic value. You think about like a Nexstar, which is trying to build their own, you know, news network, trying to build out, you know, they're in the process of making a major acquisition of Tegna. Like there is certainly an opportunity where I think you'll see multiple buyers come out of the woodwork, maybe even billionaires who want, or you know...
hundreds of billionaires who see this as a way to influence you could because remember you could change the direction of CNN from the perception of liberal you could move it more center right if you wanted. I think there's a lot of people that would look to buy CNN if it was available.
What about uh is there any political saving grace for the Ellisons? Is there any chance that uh the Netflix deal gets blocked?
Is that the angle? Like if they're not increasing their offer, I'm sure they're back channeling trying to get it killed. That would be my assumption.
I'm sure they are. But but you guys are It's funny. Doing what we're doing right now, is the single greatest reason the deal should be approved. And and I mean that sincerely. Yeah. Like look at what we're doing. We are sitting on the internet. On on X, broadcasting live. No cable subscription required. But you are absolutely competing against CNBC. And like there is no doubt in my mind that what you're doing is a real comparable, you know, a true competitor to linear television. So trying to tell me that you have to define, you know, streaming TV, subscription TV, let alone free streaming TV like YouTube and X, that we're going to put up artificial barriers and say this is somehow different than watching CNBC or CNN or Fox News. Like look, you can make the argument. Will it hold up in court? I would love to see how a judge is going to isolate those categories.
Yeah. Yeah. Uh you mentioned Take 2 Interactive. Uh it's a $44 billion company. Uh GTA 6 is coming at some point. Uh how does that make any sense for either Netflix or Paramount to own? It feels like for both of them it would be a massive just different business line to enter. Obviously like in the attention economy they do compete. If you're playing GTA 6, you're not watching CNN, but they just feel like fundamentally very different businesses to me. Is there some synergy that I'm missing?
Well, I'd say for Paramount specifically, I mean, Sky Dance, Sky Dance Games is a a real focus. I mean, Ellison, you know, I think if there's anyone in the traditional or legacy media world that bridges Northern California and Southern California, it would be David Ellison. you know, he grew up friends not just obviously his dad is Larry Ellison at Oracle, but he grew up friends with Steve Jobs, right? And like so if you sort of look at sort of his understanding of technology, you have to believe that he understands the importance and power of gaming. It's why Sky Dance Games has such big ambitions. And so, you know, I look at sort of the power of that GTA franchise and Red Dead and like you look at sort of like the future and you go, sure, it'd be great to make more movies and it'd be great to have a bigger studio with Warner Brothers, but there's many ways to win in entertainment. And I think video gaming is a huge category. And while I I don't think Take 2 and Strauss is looking to sell anytime soon, look, it would be a much smaller transaction relative to Warner Brothers and you would get some incredible IP and you would shift away rather than owning more TV and more sort of legacy studio. You would shift the focus of the company in an entirely different direction, which I think could be really exciting.
Why did uh Jared Kushner pull out of the deal?
You would have to ask Jared Kushner. I have absolutely no idea. But I mean, I'm I'm I'm suspecting that just politically it didn't look great. I mean, it might have been one thing when this was a friendly, you know, straightforward acquisition, but when you were getting into a competitive bidding situation and it was sort of being looked at as sort of, hey, this is the, you know, this is someone tied to the president that's influencing it, it might have just been this did not look like he thought it was going to look. But again, I I honestly don't know. I've never I've never met him.
Uh how how are how are different video generation AI models uh are any of these factors showing up in uh earnings and financial reports and conference calls? Like how are management teams messaging around generative AI? Is it just a growth opportunity or is it actually becoming something that moves the needle either on the cost side or the revenue side for anyone?
I would really keep your eyes on Amazon. I think they're the first mover here and really trying to make a dent here. And it's not to make less content, you know, or sorry, to make content cheaper and spend less. Amazon's literally looking at this as can we actually use AI to bring the cost down 20 30% and then make more content for the same budget. And so that this sort of speaks to what you guys were sort of hinting at before. This is a way to increase the total amount of content and obviously more content means more engagement. And so I really think Amazon's taking a lead here. Netflix has their own AI playbook. I think you're going to start to see it up from Netflix. And of course, the other company that's talked about it, we haven't seen anything, but the other company that's most vocal about it would obviously be Paramount where Ellison certainly believes in the power of technology to change the cost structure of this business.
What about Disney? Disney did the big deal with OpenAI. Yeah, I wanted to ask if you're hearing about other IP holders rushing to try to do uh like when we saw that deal happen, I was like, "Wow, this having like a one-year maybe more exclusive on all the Disney IP, I feel like could be pretty significant once it's live. It's going to be incredibly viral. Parents are going to What's the last time you used Sora?"
Uh I was never bullish on Sora specifically, but that's the problem, right? Like, so it all of this is what I was going to say. What I was going to say, I was bullish on the on the Disney IP deal specifically because parents are going to be willing to pay to bring joy to their children by turning their life into Disney scenes.
Yeah. Or I mean, do kids just love watching Bluey because they love Bluey? Like I don't do you want to watch yourself in a you know I guess for the creative parent that can actually tell an interesting story. I mean I get the gimmick like I remember when Sora first came out we all did it right like we were all trading these around sending around I remember I was in a Knicks jersey before they put the copyright controls in. I was in a Knicks jersey on the court dunking like it was I was catching the game-winning pass in the you know for the Giants like and I think I think I think you're a little I think you're a little bit jaded. I mean, Disney has a whole business of just like have lunch with a character, right? Parents are spending I mean, it goes back to you're at Disneyland. You're the kid puts their face through the car through the cardboard cutout and they appear to be Superman. Anecdotally when when I first took an image of my son and I turned it I turned the two of us into dinosaurs. He has never forgotten that moment and he'll bring it up all the time. Turn us into turn us into dinosaurs. and I'm going to be like, we're not using AI right now. We're going to go we're going to go to the beach.
Look, I think it all depends on how sort of how preconceived it is. Like, do do is it just turning it in and you have to go figure out how to make something interesting and compelling or is it sort of already pre-engineered and preset where you stick in your faces and the scene comes to life? Like I think it's got to not be a lot of work cuz I think you know people don't and I think I will say I am not a terribly creative from like a writing stories like you know people need to be taught how to do it. I think that initial how to prompt how to make it good is not easy and so it'll be interesting to see how easy they make it for parents to make this really a great experience. So I like the idea and look I give Disney credit. you would not have expected Disney to be the one to jump out in front on on AI given how much they're focused on sort of protecting their IP. So, I give them a lot of credit for trying. I I think the key is Sora needs to become something that really becomes less of a gimmick and more where you actually want to sit down and actually like watch the content because I still feel like it right now it feels very gimmicky.
Yeah. I I do I wonder I wonder what OpenAI is getting out of it. Right. Disney has 150 million people visit the parks annually. If there if in the line there's like a QR code that's like turn yourself into such and such character. I think like right now OpenAI has a challenge which is that free LLMs are pretty great, right? And and they have this gap free is great. Yeah. they have this real gap between turning on commerce and turning on ads and really unlocking that from a revenue standpoint. And I think if they can and making these sort of like magical products that are unique to OpenAI that you're not going to be able to get at at, you know, through Gemini or any of these other LLMs, I think it I think it could uh buy them a little bit of time to to turn on some of the other monetization. But uh again, I think you're I think you're right on Sora. Uh I wonder uh how they're doing. See if they're still in the app store top 25.
They've been in the top hundred. I think they're around 60ish or something. And I agree with you. I haven't used the Sora app very often, but I am seeing clearly content that has been generated with Sora distributed on Instagram. And so there is a world where you know you create a prompt tool that's subscription that people are paying for and then there and the really creative people are distributing that content elsewhere. Uh they've already said that some of it will go on Disney Plus. And so you could have someone who's a creative storyteller tell a story that takes place in Disney IP as the world that they're interacting with. And then that does do well and it goes out and and maybe maybe it's not every single person using the Sora app to generate their own videos, but that you're seeing content that was generated through that partnership and it's monetizing in a variety of ways. I don't know. This all gets back to what we said before. Yeah.
There's going to be a heck of a lot more content. There's gonna be more content for sure. Over the next five years, there's going to be an exponential explosion. Yes. Of content. Yes. And it's funny you mentioned Instagram. Another example. Platforms. Yeah. Platforms win. Totally. That is the key. If you own and control a platform and the cost of creation comes down, yeah, you're going to be a long-term winner. And so that's why Spotify, why Netflix, why YouTube, why Roblox. That's how we're positioned is picking platforms are going to be the big winners over the next 5 years.
So maybe that means that Paramount plus Warner Brothers and HBO is more of a platform than separate and there is actually a creative value to putting those together and overpaying. And so maybe there is some rhyme to the reason behind David Ellison's aggression here. Building a platform, a daily use platform is really really hard. Yeah, I'm not saying it's impossible. You got the Sopranos and Looney Tunes and and Superman and Batman and you're on there as a kid. You grow up and it's one of the key apps that you open next to Netflix, next to next to Disney Plus. The funny thing is in what you're saying is it's it's all the reasons why Disney should be bidding on Warner Brothers Studio as well, right? that that I feel like that one just aesthetically actually does trigger FTC just because Superman and Spider-Man can never cross paths. Batman and Iron Man, it's too similar. They're billionaires. They're they're they're tech guys. It it doesn't work. They got to be separate universes. I'm just saying they should want a lot more content. They should. Oh, 100%. You just described if they could get it done. And and and they could make the same argument that Disney Plus plus uh Warner Brothers is no more powerful than than YouTube and Spotify and Instagram and and all the other platforms that are soaking up people's time, including What are you uh what are you paying attention to this earning cycle? Mhm.
I mean, look, I think the the the you know, this is obviously the 26 outlook for a lot of these companies and I think, you know, you're going to hear sort of like in a world where so much is changing so fast. I mean, we came out with our, you know, we do a quarterly earning scorecard where we sort of highlight phrases that are used and it'll be interesting to see while AI dipped in terms of mentions last quarter. Do we see even more companies talking about AI as we move through the year? I think that's going to be really interesting to watch and is it in a positive or negative light and like who's being disrupted by or helped by I think is going to be really interesting to watch. And then of course just going back to where we started, you know, whether it's Netflix or Paramount, someone's going to win Warner Brothers. Well, then the question is what does everyone else do because everybody else looks really small. And so sort of seeing, you know, the reverberations of what happens because of all of this is going to be really important to listen as you move through earnings.
What do you think about uh some of the private movie studios? Do you think any of those will get picked up? A A24 uh did around at 3.5 billion. Uh Thrive Capital mid 2024. Uh certainly building a lot of IP. They found an interesting mix of content. I really like a lot of their films. Uh, do you think anyone will try and acquire some smaller studios?
Look, the biggest problem is smaller studios don't move the needle, which is why I think, you know, something like Lionsgate hasn't been bought, but why Warner Brothers, you're seeing this massive interest. Um, I don't know about the smaller studios. I certainly think like as you look at something, you know, you look at Sony Pictures or Sony, you know, Sony, you know, pictures and TV. Yeah. Um, there are assets out there that, you know, look like they are ripe for, you know, M&A, whether it's sale or some form of combinations. It does feel like you're going to see more combinations in the year ahead. Yeah. But again, you can you can also just license their content, which is what Netflix and many of the other streamers have done. Well, thank you so much for taking the time to come chat with us. Always a good time to hang out. Great to hang. Have a great rest of your week. We'll talk to you soon, Rich. Goodbye.
Plaid. Plaid powers the apps you use to spend, save, borrow, and invest. Securely connecting bank accounts to move money, fight fraud, and improve lending. Now with AI, back to the timeline, the messy drama that dealt a blow to one of AI's hottest startups. This is an exclusive in the Wall Street Journal. After a relationship with a colleague, a Thinking Machines co-founder, had his role changed. months later he was fired after after a contentious uh meeting. Megan Broki has the story in the Wall Street Journal alongside uh Kich Hegi. Um Mirram Marotti's meeting with her co-founders going off the rails. Marotti, the chief executive a of AI startup thinking machines lab had shown up for work on Monday last week expecting to have a one-on-one with Barrett Zof, her chief technology officer. According to people familiar with the matter, last summer she had learned that Zof was in a relationship with a colleague. In the months since, she had expressed repeated concerns about his lack of productivity. According to the people, uh she was invited instead to an impromptu meeting with Zof, another co-founder, and a third employee. The three told her they agree they disagreed with the direction of the company and that they were considering leaving. They asked Zof to be given charge of all technical decisionmaking. according to the people. Moratti responded that Zof was already CTO and asked why he hadn't been doing his job for months. So they're like clearly beefing. That's a very funny uh it's a funny request like what was he doing as CTO if he didn't have full control? But I mean I obviously CEO can override all sorts of stuff and there's other people around the table and uh you know titles only mean so much. There's soft power all over the place. So two two days later Zof was fired. Within hours, all three had signed offers to rejoin OpenAI, the AI lab that they had ditched a year ago to join Marott's fledgling startup. Uh, the departures are a sign of how the heated AI race that is consuming hundreds of billions of dollars and transforming the economy is as much a battle for talent as technology. For all the high-tech advancements AI startups are spreading to develop, they are ultimately at the mercy of the humans powering. Do you think this was a three-hour talent acquisition process? Do you think OpenAI just just looked at uh checked the timeline and said, "Hey, we got three people that are on the market. Maybe we should hire them."
It seemed like they were talking before they entered the portal and then they immediately entered the portal, the trade portal for sure. That's exactly what happened. Uh no, I think I think very obvious that uh the conversations had been ongoing. It's very likely I would assume they had already agreed to to terms. Yeah, it seemed like it prior to the news going out.
Well, let's continue, but first, Vibe.co — where DTC brands, B2B startups, and AI companies advertise on streaming TV, pick channels, target audiences, and measure sales just like on Meta. So, Zoe's firing and decision to rejoin OpenAI with colleagues also marks a pendulum swing for a company that Murati — the startup that... for a startup that Murati, that startup's former chief techn... former technology chief had founded with 20 former OpenAI employees. So 20 people from OpenAI left during the Thinking Machines foundation. Addressing Zof's departure to Thinking Machines employees, Murati said there had been multiple issues with his performance, trust, and conduct. According to an internal message viewed by the Wall Street Journal, Zof said she fired him after he exposed an intent to take a job elsewhere. "Thinking Machines terminated my employment only after it learned I would be leaving the company. Full stop. At no time did Thinking Machines Labs cite me on any performance reasons or un..."
John, I'm breaking up with you.
You know, you're like, "No, you're fired. I'm breaking up with you." It does feel like a little bit of that going on, but yeah, there's a war for narrative here between Barrett and Mira. Clearly, they didn't... So, he says Thinking Machines didn't cite any performance reasons or unethical conduct as part of the reason for the termination, and any suggestion otherwise is false and defamatory, Zof said in a statement to the Journal. The exits, coupled with fellow co-founder Andrew Tulloch's decampment to Meta last fall, leave Thinking Machines with just three of its original six founders. Murati spent six years at OpenAI where she earned a reputation for emotional intelligence and lack of ego, and was named interim CEO during the brief period when CEO Sam Altman was deposed. She helped launch its first product and ran almost every aspect of the company before starting Thinking Machines last February. Many of the early researchers, including Zof, that she hired came from OpenAI's post-training team, the division that built ChatGPT and was tasked with teaching AI models how to communicate with humans. Murati's issues with Zof started over the summer when she began to suspect he was having a relationship with a colleague with whom he had lobbied to bring over from OpenAI. According to people familiar with the situation, in responses to questions from the Journal, Zof said that many people at Thinking Machines wanted to hire the woman, including Murati. At the time, Murati was in the process of raising one of the largest seed rounds in Silicon Valley history. The company ultimately raised two billion at a twelve billion valuation when she confronted Zof about the possibility of an undisclosed relationship with a female employee who was junior to him at the company but did not report to him. He initially denied it, according to people familiar with the situation. By June, however, both Zof and the woman had told Murati about the relationship, which had begun when they were colleagues at OpenAI, people with knowledge of those discussions said. The woman then left the company and returned to OpenAI, which is sort of a wrinkle in this. Zof told his boss that he had been manipulated by the woman into a relationship, according to people familiar with the matter. Shortly after that conversation, he took a break from work. Okay, I got to... I generally think that the...
Mira, she told me it was cuffing season. I didn't know what it meant, so I just said, "Okay, I got cuffed." Is that what happened?
Yeah. I mean, I think just saying like, "I was manipulated into becoming the significant other" — you know, you got to take a little responsibility. You know, everyone is assuming that this is a romantic relationship. They never reported that this is a romantic relationship. They just said that he had a relationship with someone else and it was undisclosed. And I think that more companies need to be clear about the rules around disclosures of relationships. Like if you and Tyler start an esports team, for example, like you would have a relationship, you would be teammates playing Call of Duty. And if you didn't disclose that to me, I would feel left out. I'd be like, why don't I... why am I not on the team? If I find out that Tyler and Scott are going off and drinking a bunch of Athletic Brews every night, you know, without me, that's a relationship. They're bros. And it wasn't disclosed. It wasn't disclosed. You might be very angry. I might be angry. And they didn't disclose. I think relationship disclosures need to go beyond romantic relationship disclosures. If you're just broing down with people, that actually is kind of a real thing. Sometimes I'm catching up Monday after the weekend. Somebody's like, "Oh, yeah, I was hanging with so-and-so on Saturday." Like, "Wait, where was my invite?" You guys hang out on Saturday. What? You didn't disclose that relationship. Korean barbecue. Yeah. Oh, so you have a relationship where you go to Korean barbecue together. Okay. And you just didn't think to tell the rest of the company. KBBQ. Yeah. What's your thoughts?
I was going to say, I think there's, you know, I like to imagine there's some kind of Shakespearean tragedy here, right? It's like the Montagues and the Capulets — that's OpenAI and Thinking Machines. Oh yes. And it's these forbidden lovers, right? They can't be together. But now they are — they're, you know, they're united because everyone is in OpenAI. Even though, I mean, if you go to the Journal and you say, "I've been manipulated by that woman who's now my colleague," because they both work at OpenAI now, right? So that's odd.
Wait, do we know that the woman left the company, Thinking Machines, and returned to OpenAI? So Barrett and the woman in this relationship, which might be romantic — they might just be playing board games together or playing COD professionally together, who knows? But they had a... but they were both at OpenAI. They both went to Thinking Machines and they both went back to OpenAI. And so they're all in the Montague camp now, or the Capulet camp. I don't know who's who. I haven't studied enough to assign roles. Do you... have you read Shakespeare recently? Well, at the end, like, they both die. Is that what... is that... they both die and they get steamrolled by a neolab? Is that what happens in Romeo and Juliet? I don't know. Okay. One thing is, like, rewinding to November 13th. Yes. Bloomberg reported Thinking Machines in funding talks at a $50 billion valuation. Yeah. So that's a big question. Yeah. The big question now is, did any of these financing talks actually convert into real investment? And if not, I think there's very little chance that a round gets done in that territory anymore. Yeah. Yeah. It is certainly not the best thing to have hitting the Journal if you're out on the fundraising track. At the same time, these mega rounds, it just feels like they take a long time. We've been hearing about the Anthropic round for a really long time. And we've also been hearing that the Anthropic round, even though it's been going on for, I don't know, six months or something, like, it's going really well and everyone's excited. And there was a whole bunch of FUD around the xAI round — is it going to happen? Have they hit benchmarks? Is there, you know, too much fear around all the different hallucinations and whatnot? Are they seeing real traction? The round got done. And so this is not like... it's not over because these rounds can just take a long time. So it's not like, oh, you need to have the round closed in three months if you're raising out there fundraising. Yeah. But this is obviously... we're figuring a lot of stuff out. You know, we have a lot of momentum. Really excited about what we're doing. And then you have articles in the Journal that are saying your own co-founders disagree with the direction of the company. Yeah. I think most investors are going to be like, "Hey, we should probably chat before we give you another $5 billion." But Mira is going to say they only disagree because I fired them for having relationships. Yeah. Like, he said, she said. We're solid. Yeah. It is a... it should... and it has Silicon Valley talking. Over the next several months, executives at Thinking Machines witnessed a drop-off in Zof's performance after he was cycled back to a new technical contributor role with reduced executive and managerial responsibilities, and they were tracking his performance. They said his usage of Slack, the main arena where the company did its work, declined precipitously in the following months. He was locked in. I don't know. I don't see a problem with... if you go from a manager to an individual contributor, you don't need to be slacking as much. You need to be locked in. You need to be grinding, right? And writing prompts. In his responses, Zof said he worked as an individual contributor for two months and also worked on projects that included recruiting and retention of talent, roadmap planning, and the release of the company's model training product, Tinker. He said he was also out of the office for parts of November and December due to illness and a death in the family. Very tragic. That's very sad. In addition to the holidays, so he's like, "I'm not on Slack. I was with my family on Christmas." In October, shortly after Tulloch left for Meta, where he had previously worked, Zof reached out to Altman to talk about coming back to OpenAI. By the time of their meeting with Murati last week, Zof, co-founder Luke Metz, and third employee Sam Schoenholz had been unhappy with the direction of the company for months and had been holding talks with both OpenAI and Meta in recent weeks about joining either company as a trio, according to people familiar with the matter. Interesting that Meta, amid the crazy buying spree that they've been on in the talent wars, did not jump in with something, you know, so much higher. They already have Andrew Tulloch. They've already got one Thinking Machines co-founder. They're basically acquiring the whole team piece by piece. They're going to wind up paying more than the twelve billion price.
Yeah. And I don't know. I mean, it wasn't that long ago that people were speculating, okay, what is Thinking Machines worth in an acqui-hire scenario? And based just on that type of analysis, it's worth a lot less today than it was a few months ago. Less talent.
I wonder what they mean when they say unhappy with the direction of the company. Like, what do they want? Are they excited about the ads product at ChatGPT? Are they excited about Sora? Are they excited about OpenAI for health or for science research? A particular technical direction? Just the GPU scaling, the buildout? Just how rich OpenAI will be with the backing of Oracle and all the... yeah, it's 1.4 trillion. A little bit nerve-wracking if you're an investor, but if you're an AI scientist, you're like, "I'm going to have unlimited resources." And so it could be that. I don't know. I think the big question is obviously what is Altman's move? Stand by Mira, ride with Mira, potentially lead this round at 50, right? Altman, the government of Albania invest...
into Thinking Machines. No way. They could decide to take a bigger swing, though. The GDP of Albania is somewhere around 30, 30 billion USD.
And anyways, they might, you know, take a Trump-Intel kind of dynamic, say, you know, we need a national AI champion and potentially nationalize Thinking Machines. They could have like a joint venture between a16z and Albania.
Nationalize a company that's based in America if you're not an American.
Yeah. Yeah. I saw a Vibe Reel of Jamie Dimon talking about like how important it is that his bank is big, and he says JPMorgan has to be big because we bank, you know, all of the Fortune 500. We bank governments. We bank the US government. That's such a good line. Banking governments. I really want to know what's involved in that. Anyway, um.
Yeah, I think like... I think my takeaway from this is like the pressure... the pressure for Thinking Machines to deliver went from like pretty extreme to like maybe slightly more extreme, but it's actually not that much of a difference. I feel like they were already under a lot of pressure. Similar to Meta, where like dense talent concentration, haven't shipped anything like, you know, truly remarkable yet. Yeah. Yeah.
Obviously, everyone's looking to see if they're going to be a real horse in the race.
Yeah. Yeah. Yeah. Um.
Yeah. The other thing is like this team was created during an insane period of drama.
Yeah. The most... So, it's not all that surprising that... born in the drama.
They were born in the drama.
Now they're living in the drama.
And but they can consolidate. They can refocus. They can realign the team. They still have a bunch of super talented people.
Yeah. And I'm sure they can still, you know, figure out kind of a niche and deliver.
Yeah. Anyway, Okta helps you assign every AI agent a trusted identity. So you get the power of AI without the risk. Secure every agent, secure any agent. Okta secures AI.
After the meeting. So, the three co-founders, the three Thinking Machines employees that have this meeting, Mira asks them, 'Have you already committed to jobs elsewhere?' Metz and Sheng Holt said they hadn't. Zoph didn't answer. According to some people that were in this meeting, the day after the meeting, Zoph had dinner at a pizzeria with Meta executives Alex Wang and Nat Friedman. He confirmed on Wednesday he was fired. Murati posted on X that Thinking Machines had, quote, 'parted ways with Zoph.' Less than an hour later, OpenAI's CEO for applications... is it CEO for applications? CMO? I thought it was CEO of applications, CMO. Anyway, she's running the applications. She posted that Zoph, Metz, and Sheng Holt were returning to the company and that negotiations had been underway, quote, 'for several weeks.' That's an interesting thing to put in your hiring post, because there's clearly going to be a narrative about how sudden was this? When was this decided? Blah blah blah. But she is saying proudly that we've been talking to these folks for weeks. She said Zoph would report to her while the other two would report to him. So yeah, the craziness with Thinking Machines.
End of the day, you got Mira, you got John Schulman.
And it feels like there's some sort of niche that they could carve out. I mean, when we first heard about the fine-tuning for LLMs, for business, for B2B companies, like that seemed like not... it was not the AGI superintelligence pitch. It was also not the, okay, we're going to niche down and give consumers one specific thing. We're going to go after audio. We're going to go after video. We're going to make an AI version of Excel or an AI version of PowerPoint. Like there's so many niche AI companies that have done very well. We're going to do AI for legal, AI for health, right? Like there's all these ways that you can niche down. They kept it sort of broad, but it felt like going into the enterprise with her connections and her background and the team seemed like something that could ramp revenue very, very quickly.
Yeah. And the raw talent of the team.
A lot of which still exists.
Yeah. So, but I mean really like the strongest way to counter like the vibe war that's happening right now is just show some good numbers because if the business is working, even if you have a little bit of tumult on the technical side and there's, you know, a CTO leaving, like if the business...
With OpenAI, it's like, you know, some of the craziest drama ever surrounding a company, and then you look at, you know, the revenue ramp and it's like, you know, and the DAUs are just through the roof, and you're like, okay, well, clearly the user was completely unaffected. I bet if you look at the ChatGPT daily active user growth chart, you cannot see Sam Altman getting fired and then rehired. It's not like people were like, 'Well, I'm not using this app today and I'm firing it back up once he's...' No, there was no blip in the graph, I'm sure, around that because this was like Silicon Valley drama and for the average user, it's like, did it deliver or not?
Yeah. And that's just something that happens all the time when there's these drama elements that burst onto the scene and take over the timeline for a few days.
Yeah. Another possible route, and things would have to get really bad over there. They'd really have to be directionless, which again, you know, the team clearly was debating on if the direction was correct, but sounds like they do have a direction. But I still think this is a company that would have a pretty meaningful valuation in an acqui-hire context, right? Like if Amazon were to come and buy them, how much would Amazon pay to get John Schulman and Murati?
Amazon should be able to clear the PROF stack for sure.
Yeah. By a long shot, you would imagine. So...
Anyway, MongoDB, choose a database built for flexibility and scale with best-in-class embedding models and re-rankers. MongoDB has what you need to build what's next. I wanted to look at this photo of Davos. It's AI-generated, but it captures a good vibe. A whole bunch of private planes parked there. That's not real, but I like that Kwok Kwok contextualized it anyway, saying this looks like Hoth Echo Base. And he shared one further down that's Davos transformed into a Star Wars scene. Anyway, over in Davos...
Trey says we need to know what those machines are thinking.
You call it Thinking Machines Intelligence. Thinking Machine Intelligence, TMI Labs.
I mean, we don't know. It's possible that when they were debating the product direction, they were talking about should we make branded 45s, right? We know they have branded plates.
Oh, yes. Yes. Yes. Yes. But...
Maybe that was the technical direction, like do you lift heavy or do you do lower weight, higher reps, and there was a massive debate over that.
Anyways, I mean, buddy is another relationship that you need to disclose. If you're spotting each other, I want to know about it. I want to know who's spotting who because that's an important relationship that's happening outside of the workplace. I got to know about it if you're going to be lifting together.
Anyways, I'm rooting for Thinking Machines and excited to see what they do. Demis and Dario are apparently just broing out in Davos. I love it. Lina Khan says Demis Hassabis, CEO of Google DeepMind at Davos, quote, 'When told that Dario Amodei was here earlier today, his face lit up. Two minutes later, he was talking about a CERN-like collaboration for AI once the labs are close to AGI.' They're just stoked on each other. 'I'm on pretty good terms with pretty much all of the other leaders at the leading labs. I love Ilya and we're good friends.' You love it. Just some positivity hanging out at Davos. Demis said he thinks entry-level jobs and internships might fall away due to AI. Sees consistency as the biggest problem with current agents. Advice for college graduates: get incredibly proficient with these new tools, AI agents. And so yeah, we were debating this earlier, like the role of a junior engineer is going away, but is it possible that it just changes? Like what makes a senior engineer that much better with an AI tool that they don't need anyone else who can potentially use AI tools as well?
How much of this is something where, I mean, to go back to the Chinese young hiring boom, there's an element where I'm sure there's companies where you have older software engineers who are more resistant to adopt AI technology and you'd actually be better off with a young junior.
Here's a tough question for you, Tyler. What are you fantastic at that AI is bad at? Hm.
Um, walking around being physically embodied.
Embodied. Yeah, that's the last one.
So maybe that's like for China, it's like maybe Silicon Valley has kind of found like pederasty from first principles. Maybe, you know, it's just a similar thing over there, right? There's actually a lot of value. I think like so generally, I've always gone between like, are our jobs actually going to go away from this or are they just going to get like more fake?
Yeah. Like Jordi and I were talking about this earlier where it's like, are there just going to be no junior jobs in like five years or are they just going to be like, you're just kind of... it's like, you know, you're in the office because like people like having other people in the office and stuff like this.
So I don't really know where I sit, but I think I'm probably more in the camp of like...
You just don't need to hire new people.
What did Ken Griffin say? He has been on a tear.
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Citadel CEO says AI has re-empowered technology departments in every business but claims that 50% of entry-level white-collar jobs will disappear due to AI in 5 years is hype. He's throwing some cold water on Dario's talk track. But let's play the video.
Are we getting audio? Where's Ken Griffin on this one? Is this the right one? From Disclosed TV, Citadel CEO says AI has re-empowered technology. Is that the one, Jordi? Yeah, let's play it.
And we are, I guess, in the market for an AI agent that can play videos on our...
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So first of all, it's a pleasure to be on the gloom and doom panel.
The 1920s were an extraordinary period. As I said at the beginning, it's not pre-ordained the end of the 1920s, which was of course the Great Depression.
Andrew, so let's take a step back and talk about where we are right here, right now.
The area of recklessness is the spending of governments around the world who are all, with little exception, all spending well beyond their means. That's the recklessness of this moment in history. This is not a parallel to the 1920s in terms of the recklessness of the private capital markets. It's a story of the recklessness of government spending within the private sector. There's a huge question as to where AI will take us and I was carefully taking notes and listening to what Larry has to say or to what Madame Lagarde has to say because this is one of the big issues of our moment. Will AI create the productivity acceleration that is honestly hoped for in Washington and in the halls of government around the world as a way to overcome the profit spending that we're currently engaged in? Like the world needs a savior and the hope is that AI is the savior that we need for productivity. And the challenge with this is it may or may not be. We just don't know yet. Now there's a tremendous amount of hype around AI and in some sense the large AI companies need to create that hype to raise the tens or actually hundreds of billions of dollars of investment that are going into the field.
You wouldn't be able to raise hundreds of billions of dollars. We'll spend, and Larry can probably direct me on this, but roughly $600 billion this year in capex for data centers in the United States.
But does that mean that it's getting hyped up too much or it's just the hype is required as a sales mechanism?
Larry's backing you up, Tyler. All right, let's play the next video, which was the one I was originally talking about, which is talking about job loss.
What AI has done is it has re-empowered the head of technology in every business in the United States and it has pushed budgetary resources into the hands of the chief technology officer. So what you're seeing across American business is actually the impact of American businesses spending more on digitization at large, of which AI is just one component. It's one component but in some sense it's the cover story that creates the space for American companies to really embrace technology in a much more profound way. I was in China about a year and a half ago with a group of prominent global executives and they were all talking about how AI was changing their business. It was so fun. And I said, 'Let's go around the table and let's each share a story as to how we're using AI to make our business better.' I heard five or six great stories. Not one involved generative AI.
But does that mean that the productivity... Bro, you're telling me a big company's inefficient in implementing technology camp that you know, as Dario Amodei says, half of all entry-level white-collar jobs will be gone in the next five years. Is it that kind of change or is it more...
You know, put yourself in his shoes. How much money does the AI community need to raise over the next five years? He's wrong about this, right? Demis doesn't need...
Spend the United States this year over half a trillion.
Google's doing this with cash flow.
Like that's true for every other lab lead except for Demis. Like you would expect to make a promise you're going to profoundly question about Dario.
Oh, Dario. Okay.
So, is it hype?
Yes.
Of course. Like, how else are you going to get people to write $500 billion of checks just this year alone? Right? There needs to be a level of like AI is your savior almost.
And the question is where will AI land in productivity gains at the end of the day. In certain areas we know it's going to be profound, whether it's call centers, whether it's helping to improve the productivity of software engineers. But in a number of white-collar jobs, you know, there was a recent Harvard paper on this, they called it AI work slop, that it looks good but if you sort of peel back the onion, the substance isn't there. I was with one of my colleagues who runs our commodities business and he handed a report that we generated with an AI engine. Doesn't matter what the topic was, the first few sentences, like, wow, that's really insightful, and then you go down below that and it's all garbage.
So that's going to... and we are running out of time, but that suggests that AI is not going to come to the rescue to make up for the various negatives that we discussed about in the first part of this conversation. So in 10 seconds...
But remember, spending on technology at large is having a clear positive impact on the economy.
So which economy in the world benefits most from this confluence of geopolitics, economic policy and technology change?
I mean, who benefits the most? That's a really interesting way to put it.
In 10 seconds. In 10 seconds.
You know, when it's all said and done, it's somewhat ironic, but it's the United States and China are the two big beneficiaries of this moment.
Uh, yeah. Yeah. So, one thing, like the way that I like to process this is as somebody who's not indexed to AI scaling and AI progress, but a lot of the most talented people he's ever worked with have ended up working in AI, right? They've gone from the East Coast and gone over to the West Coast and started working at the labs. And so, while he's not, you know, working in a lab, I do feel like, you know, his... and you can argue like he's not AGI-pilled. He clearly is not processing models, developing like more advanced reasoning and agency and all these things that are going to happen. He could be here next year and he could be like, oh, I got a report from a commodities trader. It was AI generated. It was amazing. Like that's happened in so many other fields where people have said, 'Oh, I'll always be able to clock generative imagery,' and then they look at the latest Nano Banana Pro output and they're like, yeah, okay, actually I can't. I have updated. That certainly happens.
The interesting thing about his... I like the point about the incentives of lab leads to make grand proclamations about progress in order to underwrite larger financing rounds. That's clearly true. That's clearly something that does happen. But explain Demis sounding exactly like Dario in terms of timelines and impact. Like a lot of their rhetoric is very, very similar and Demis is in a position to just say, 'Oh yeah, like we're going a lot slower because we're doing this off of cash flow and we don't need to raise and it's going to be longer.' Like that actually might be to his benefit to sort of pour cold water on all the competition that's out there trying to raise all this money. If he comes out and says, 'Yeah, you don't need to lever up and build a trillion dollars worth of data centers because progress isn't going to be that fast.' That would be probably beneficial to Google maybe. I don't know. But it certainly doesn't seem like he has to message that. I mean, maybe to the Google shareholders somewhat, but not really. It's not really showing up in Google financials yet. It's not really changing.
Well, Demis might wait until Anthropic and OpenAI get their S-1s out and then decide, all right, it's time.
What do you think about that as a counterpoint to Ken Griffin's... you know, CEO of Citadel, he's saying that all of the AI hype is about fundraising for these labs. Demis doesn't count there, right?
Yeah. Yeah. I mean, doesn't he still have to like convince, you know, Sundar?
Yeah. And the internal markets. Yeah.
But I think that's broadly true, but I still... it's like, you know, he had the example of like, oh, he talked to business leaders and how are you improving your company with AI and none of the examples were AI. Like those are, you just know those are like it's from some consulting firm that gave them the model that was like three years ago.
Yeah. Like I... they need some younger people at these companies that would be using generative AI in transformative ways as opposed to... yeah, I mean it feels like those two things cannot be true. You cannot have a sclerotic large business that is failing to take advantage of AI and simultaneously not be hiring young people who are more AI-native. It feels like you have to embrace one or the other.
Yeah. And he's discounting like any concept of progress, right? Like he's like, 'Oh, when you read something, it's like total slop now.' That's exactly how code was like two years ago. Now there's software agents that can, you know, pretty autonomously build entire systems. Like that's certainly not unlikely to happen in just general writing.
Yeah. Yeah. Ken Griffin needs to vibe code a mobile game or something.
Yeah. I think calling out that saying like labor replacement theories and pitches are like catnip for venture capitalists. They're doing white-collar work and if they get the pitch that you know some technology is going to... like if you went to a VC and you gave a really compelling pitch of how your product is going to replace all VCs in the world and it actually made some sense and you could kind of imagine how it would play out. I'm sure you'd get a lot of investor interest in something like that, right? Because you're just trying to hedge, right? So it is like the most compelling narrative.
Finn.ai, the number one AI agent for customer service. If you want AI to handle your customer support, go to Finn.ai. Let's click over to Jamie Dimon at the World Economic Forum in Davos. He's talking about raising taxes and special interest groups.
That makes society work better for everybody. And would you raise taxes to pay for that? I don't think you'd have to. I think it would drive a lot of growth. I did the numbers at one point, be $60 billion of spending. I think it would probably create more than that of growth and taxes. You know, and if you have to raise taxes a little bit, that's fine. But again, I don't want to have the binary argument. I don't know anyone, okay? And you guys in the room might be Democrats, Republicans, who thinks that sending another trillion dollars to Washington DC will actually improve anything. So when you say raise taxes, if you said raise taxes and directly give it to the people who need it, I'd do it. Of course, you know, that doesn't happen. It goes to all these interest groups, you know, and they give it to their friends and all that. And which is why the people consider it a swamp. It's kind of a swamp. You know, the 17,000 lobbying groups. Bank companies are guilty too. They're just fighting for their own self-interest as opposed to what's good for my country. But, you know, that's what happens in Congress. You know, and you see how these bills get spent, like the CHIPS Act was a good idea until, you know, it had to be unions, place-based, child care, diapers, you know, what the hell are we doing? And then we spend more money. The problem is we just spend enough.
Yeah, Jamie Dimon's great. 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. Demis, we've been talking about him and his blockbuster performance at Davos. He had a number of interviews. This one with Emily Chang talking about a pause on AI and whether or not he supports it. A very revealing quote, says a lot about his timelines and his poom in some ways. Let's watch this clip from Emily Chang interviewing for a pause to give regulation time to catch up, to give society time to sort of adjust to some of these changes.
In a perfect world, if you knew that every other company would pause, if every country would pause, would you advocate for that? I think so. I mean, I've been on record saying what I'd like to see happen. This was always my dream, the roadmap at least I had when I started out DeepMind 15 years ago and started working on AI, you know, 25 years ago now, was that as we got close to this moment, this threshold moment of AGI arriving, we would maybe collaborate, you know, in a scientific way. I sometimes talk about setting up an international CERN equivalent for AI where all the best minds in the world would collaborate together and do the final steps in a very rigorous scientific way involving all of society, maybe philosophers and social scientists and economists as well as technologists, to kind of figure out what we want from this technology and how to utilize it in a way that benefits all of humanity. And I think that's what's at stake. Unfortunately it kind of needs international collaboration though because even if one company or even one nation or even the West decided to do that, it has no use unless the whole world agrees at least on some kind of minimum standards and, you know, international cooperation's a little bit tricky at the moment. So that's going to have to change if we want to have that kind of rigorous scientific approach to the final steps to AGI.
Pod friendly guy in the YouTube chat says, 'Demis is the Steve Jobs of AI.' You're wearing the TBPN turtleneck today. Maybe we need to make a turtleneck and award it to whoever we crown the Steve Jobs of AI. He's a fantastic communicator. Demis is inspiring, balanced, measured, knowledgeable, just not completely accelerationist at all costs, but also not completely doomerist. I don't know. It's a really great take. I don't know. What do you think, Tyler?
Yeah, I think there's maybe an interesting way to look at this, like the question of pausing. Where if... so if you take Dario says that he's not competing with DeepMind or OpenAI, right? Because he's an enterprise. They're in consumer.
Yeah. Wait, who? Sorry. Clarify who's there.
Anthropic is enterprise... is saying we're not competing with DeepMind because that's a consumer company. Is that what he's saying?
Yeah. And OpenAI, that's what he said yesterday like broadly. He was like, we don't have to monetize a billion users or whatever.
He's like, just ignore those companies and their enterprise businesses, they don't matter. Okay.
Yeah. But so if you take that and then... so that means, you know, there's some way in which, you know, DeepMind's real only competitor is OpenAI. If, you know, we were just talking about how DeepMind doesn't have to raise money, right? They're funded by cash flow. So basically there's a way to look at it where you can either pause for safety reasons so we can catch up with regulation or whatever, or it's just because if we basically pause all AI, it's actually fine for Anthropic, right? Because they don't have a super direct competitor, right? OpenAI is trying to get more into enterprise, maybe DeepMind is as well too, but like they have a fairly strong position perhaps. And then it's going to hurt OpenAI a lot, right? Because they need to raise a lot of money to compete with DeepMind. So if you can basically make this like almost cartel-looking thing group with Anthropic and DeepMind, you can basically try to take out OpenAI.
No, I mean that's a very cynical way to look at it.
Yeah. Yeah. Yeah. I hear you. The other interesting thing is that he says he would like maybe potentially support a pause. But then what he describes is not, oh, all the researchers just focus on productization of the current models, stop training, stop doing reinforcement learning, stop optimizing models, and instead like let's build more great SaaS. Like that's not what he's saying. He's saying like let's all still do AI progress to focus on ads and AI progress. That would fire me up. But that's not what he's saying. What he's saying is like get all the research together in CERN, and CERN is not pausing scientific research. Like if anything, CERN is a way to accelerate AI research, but in a collaborative way. So he's really just calling for more collaboration and a pause on competition. And I mean I feel like everyone in the scientific community, in the research community definitely laments the days of yore where there were more open research papers, more sharing of knowledge. It wasn't all constantly just backdooring through hiring and poaching. Some of it was just open. You could just download the transformer paper.
Yeah. But even in that case like DeepMind is still like, you know, on the defensive, right? Because OpenAI is trying to take... like Google is like, oh, search is dying, right? OpenAI is trying to take it away. If you can basically get everyone to be like, oh, we're going to, you know, collaborate, everyone's going to share the research, that's probably better for Google's users.
Yeah. So you would never expect the leader to say, hey, let's pause the race. You wouldn't expect OpenAI to pause the race because they're the ones who have so much more to gain from like attacking the others, just continue pushing further. Yeah. Interesting. Yeah.
Okay. I mean, it depends on what you mean by pause because I feel like if there was like a model freeze and you only have Opus 4.5, GPT 5.2, Gemini 3 Pro, you have those models, like OpenAI could still compound on the DAU front, right?
Yeah. I mean, yeah, there's a bunch of ways it could actually go down, but there's like different ways to look at it, I think, rather than just like pure safety.
Yeah. There's some extra context here from Andrew Curran. He says, 'Dario said the same thing during the day after AGI discussion this morning. They were both asked for their timelines. Demis said five years. Dario said two.' Later in the discussion, Dario said that if he had the option to slow things down, he would because it would give us more time to absorb all the changes. He said that if Anthropic and DeepMind were the only two groups in the race, he would meet with Demis right now and agree to slow down. But there is no cooperation or coordination between all the different groups involved. So no one can agree on anything. And it's very funny thinking about this CERN, like bring all the researchers together in the context of like the craziness of OpenAI, the craziness of Thinking Machines, all the interpersonal aspects, the human element of AI progress. That, you know, you get everyone in, it's like, okay, we need to pick a leader, like, okay, who's in charge? Who decides what? Like how do all these people get along? Because some of them have some pretty crazy bad blood because it's like, 'Hey, you kicked me out of this lab and then you quit when I thought you were going to be my co-founder and then you were having this relationship with this person.' Like creating harmony in the barnyard might not be the easiest thing.
Interesting point from Deepo in the chat. No OpenAI at Davos. Which is... there is. So I believe Sarah Frier did an interview there. The interviews are on like a delay. A lot of them happen at 10 p.m. Davos time. Also the first day of the conference was yesterday so we will be getting more Davos content today. I did feel that though. But a lot of it's just about when different segments happened. So I mean amazing move by Dario and Demis to come out with, you know, absolute heater on day one, very early establish some ground game, some ball control, because Satya Nadella is there. He's going on the All-In podcast and he's already given quotes and there's some clips from him, but we haven't seen him. He hasn't been aura farming. Microsoft hasn't been aura farming Davos as effectively as Google and Anthropic. So, you know, little bit of tail of the tape there.
Well, let's skip ahead to ElevenLabs. Build intelligent real-time conversational agents. Reimagine human-technology interaction with ElevenLabs. And I believe the CEO of ElevenLabs is there at Davos. But, what do you want to move on to? This is, I mean, this was probably the story that got reported on the least out of Davos over the last 24 hours, but is arguably the most important. The most expensive car in the world. Everyone wants to know. Of course, it is the car that Jensen bought his parents. So, let's pull up this clip.
I love it. Congratulations on that journey. And I know we have many more years of that journey ahead of us. Thank you. I appreciate that. My only regret was at the IPO, after the IPO, I wanted to buy my parents something nice. And so I sold Nvidia stock at a valuation of $300 million. The company was at a valuation of $300 million. And I bought them a Mercedes S-Class. It is the most expensive car in the world.
Yeah. They regret it. Do they still have it? Oh, sure. Yeah, they still have it. Yeah. Jensen, congratulations on that journey. Yeah. What is, uh, five? So, it's currently a $4.5 trillion... four and a half... and an S-Class when they went public in 1999. So, what was an S-Class cost? Like 60K something back then? I don't know. 80K. How much? What did... I mean, you're talking about a maybe a billion dollar car. I don't know if I have the math right there, but it seems like... Yeah, around 65K. It seems like the stock might be up 15,000x or something. I don't know. I mean, it's definitely up 1,000x, right? Because it's, yeah, 300 million, 300 billion, and then you get another zero. So 10,000x. Wow, that is brutal.
Brutal. Worse than the TV I bought with a Bitcoin. Worth it. I bought a TV with a Bitcoin. Terrible. Not even 4K. Thing's in the trash now. It was like $1,000 back then. It's ridiculous. Anyway, Cisco, the Davos of Cisco. Cisco AI Summit. It's February 3rd. It brings together leaders from Nvidia, OpenAI, AWS, and more to discuss the future of the AI economy. The whole thing will be livestreamed, and we'll be there for a giga stream. Mark your calendars. February 3rd, Cisco AI Summit. I see many of you there. We're very excited.
President Trump had some comments in Davos. Alex Heath broke the story, took it to the timeline. Alex Heath says, a quote from Trump, 'Mark Zuckerberg showed me a plant where he put it over a map the size of Manhattan, miles long, miles wide. It literally covered most of the island of Manhattan. It's called a big plant.' I think he's talking about a data center, but I like that he's calling it a plant. That is a big plant, a power plant, essentially a plant of things. And President Trump also said that the stock market dip is peanuts, that the stock market is going to be doubled. And Boring Business quotes it and says the president is literally telling you that the stock market will double from here and you are bearish. It's a crazy, crazy line. What else did Trump say here? He said, 'Our stock market dip is peanuts. The Dow is going to hit 50,000 and double to 100,000 in a relatively short period of time.' Anyway, let me tell you about AppLovin. Profitable advertising made easy with Axon.ai. Get access to over 1 billion daily active users and grow your business today.
Someone should try to follow up and figure out, ask the president, are you giving financial advice? And what's driving it? Are multiples going to double or is our earnings going to double or are we going to see a little bit of earnings growth and then a little bit of multiple expansion? What's driving the valuation increase? I'd love to know that. Let's get to the bottom of it.
Semafor made a print newspaper. Yeah. For Davos. But I mean, first we need to confirm that Philip Johnston, the founder of StarCloud, former guest on the show, he is there at Davos. He's dropping takeaways. He's asking questions. He was the only person that got to ask Demis a question, right? That's crazy.
I mean, makes you ask some questions.
It does. It does. Yeah. Yeah. I mean, what a run from Philip Johnston. But it's been fun seeing like the on-the-ground. Obviously, there's a lot of polished clips that are going out from the media organizations, but he's doing citizen journalism over there. And we thank him for his service bringing clips to the timeline. Saying that Jensen Huang announced that we need more energy. And also, he broke the story, at least to me, that Jensen's parents own the most expensive Mercedes in the world. I wonder if they still have it. Anyway, let's go to SE74. First, let me tell you about Gemini 3 Pro. Google's most intelligent model yet. State-of-the-art reasoning. Next-level vibe coding and deep multimodal understanding. I like that sound cue. It's a good one.
Anyway, Reed over at Semafor says, 'It's fun to work for a print newspaper again, although I missed the print deadline for some changes, which brought back some fond Wall Street Journal memories and traumas.' We really missed our window to do the TBPN print newspaper. Somebody sent us a fully built-out TBPN print newspaper. It looked absolutely fantastic. Last year, we wanted to roll out at least a weekly, maybe daily print newsletter, but couldn't get around to it.
This is a very interesting lead, too. I can't find this actual article. I'll have to find a digital version of this, but he says, 'Techies ignore the geopolitics on their Davos home turf.' Quote, 'This reminds me of Burning Man, but not how you think.' I'm like just zooming in to try and read this. AI has finally been eclipsed by geopolitics at Davos. There are essentially two conferences happening. One involves Greenland, Venezuela, and the rewriting of the world order. And the other is really just a tech conference centered around selling and dealmaking. That's the one I want to go to. Yeah, we were texting with a journalist who is writing a story about tech's involvement in Davos and my point was like it does feel like Davos is coming back and the tech companies are there. Although from the outside, I think a lot of people think of Davos purely as a meeting of world leaders and geopolitical and they're following the Greenland story and they're very much looking at the front page of the Wall Street Journal, but if you go to the front page of X and the timeline, it's all Demis and Dario clips and Ken Griffin and a few others, but mostly like the stuff that I've been seeing has been focused very much so on tech, but there is a whole different story going on all around Greenland and whatnot. But we got to talk about AI timelines. It's more interesting to me. I'm just so excited.
Should we talk about why Elon is racing to take SpaceX public?
Absolutely. Absolutely. But first, speaking of public, public.com, investing for those who take it seriously. They got stocks, options, bonds, crypto, treasuries, and more with great customer service. So, why is Elon racing to take SpaceX public? Putting data centers in space pushed the billionaire toward an IPO, sources say, according to the Wall Street Journal.
SpaceX resisted going public for years. Then came the rise of artificial intelligence. Elon's rocket maker became one of the country's most valuable private companies due in part to its ability to develop risky space businesses outside the scrutiny of public investors. Its executives like to say the company wouldn't IPO until its rockets were regularly flying to Mars. That was before the rush to build data centers for AI computing prompted Musk, Jeff Bezos, and others to propose putting them in space. The idea has prompted skepticism for many engineers given the technical challenges posed by building solar-powered AI data centers that zip around the Earth. But it has continued to gain traction and Musk has become obsessed with the idea of SpaceX being the first to do it. Such a feat would be hard to attempt without billions of dollars in capital an IPO could deliver in one fell swoop.
The billionaire. It's so funny to just refer to Elon as like just a billionaire. Like the billionaire also sees a SpaceX IPO correction in like two months.
Yeah. In two months once he's a trillionaire.
Trillionaire is a new... I'm excited to be throwing that around.
The billionaire sees a SpaceX IPO as a way to help his AI company xAI catch up to rivals. Musk has a long-running rivalry with OpenAI CEO Sam Altman, who last year explored buying a rocket company to deploy satellites with AI computing capabilities into space. Two of xAI's competitors, OpenAI and Anthropic, are eyeing their own IPOs this year, and Musk seems eager for SpaceX to hit the public market first. SpaceX is expected to select banks to lead the stock offering soon. Musk has told people he wants to complete the IPO by July.
He wants to get it done so he can have a nice summer. Philip Johnston needs to SPAC StarCloud like today. If he SPACs it, it's going to 20 billion like overnight. Like it's going to be the biggest meme stock. Anytime that there's a public SPAC comp to an Elon company that's like private, it's just like everyone wants it because they want the... they're like, well if the Elon thing works, like this one will take 2% of the market. So it maths out. Could certainly be able to raise a lot of money.
Musk's apparent change of tune on SpaceX's IPO plans in the middle of last year surprised many. The billionaire, soon to be trillionaire, has loudly complained about running his existing public company Tesla and has repeatedly tangled with regulators in the courts over issues like his compensation.
Everyone thought like Elon ran the biggest A/B test on what it's like to run a large-cap company in the public markets and the private markets. He had a terrible experience in the public markets with Tesla getting sued and dealing with all that, dealing with complicated comp packages. And so it felt like he would definitely prefer to be private all the time. He wanted to take Tesla private, remember, at funding secured. He's never been a fan of the public markets but he has changed his tune. So...
Anyways, building and launching thousands of satellites would be technically demanding, costly, and SpaceX officials quickly decided the easiest way to raise the tens of billions of dollars it required was to dip into the newly thawed US market for IPOs. Meanwhile, xAI was trailing rivals including OpenAI and Google Gemini by key metrics such as revenue and user base. A SpaceX IPO was seen by some of its investors as a potential cash cow that could supercharge xAI's growth and in turn help SpaceX. If SpaceX succeeds with putting data centers in space, its investors expect xAI to become a customer.
Some investors believe SpaceX could purchase a percentage of xAI or Musk, who owns more than 40% of SpaceX, could tap that stake to invest in his other companies, including xAI, plus a publicly traded stock creates a capital safety net of sorts and would be reassuring to investors.
Um, so anyways, the two companies have existing ties. SpaceX has invested two billion in xAI as part of a five billion financing and then xAI raised a bunch more money. So, very exciting. Anyway, CrowdStrike, your business is AI, their business is securing it. CrowdStrike secures AI and stops breaches. And we have our first guest in the TBPN studio, the founder and CEO of California Forever. Good to have you on the show again. Welcome back. How are you doing? Sorry, let me get my diet coke away. How's the new year going? How was your break? How are the holidays?
We have three young kids under four and we dragged them nine hours to see my mom and dad in the Czech Republic. Nine hours, time with friends there and then nine hours back. Yeah. So, you can imagine how my Christmas was. Yes. More like a day of travel with young children is more stressful in many ways than 99% of work days.
I went to Europe over the break. I went to Austria but didn't bring the kids. So, it was very... a big difference. My new pet peeve is single people or couples on airplanes who complain about the long flight. I'm like, really? You had to sit there for 12 hours and drink wine and watch Netflix. That was terrible. Well, I used to think when a kid was crying, it meant the parent was doing something bad. So, as you know, I'd be on a flight and the kid's crying and I'm like, 'Wow, this parent is just being abusive or whatever. Why is the kid so upset?' Turns out kids will just cry for all sorts of reasons, for a million reasons.
Anyway, give us the update. How are things going? Just sort of reset for us on the project. How long have you been working on California Forever? Where are you in the process?
I've been working on this for almost a decade. Almost a decade. So in 2016, started in 2017. It was about seven years of land assembly and then we introduced it publicly about two years ago.
Were you full-time back in 2017?
Yeah, I was full-time. I was the only employee for seven and a half years. Okay. And obviously confidentiality was very important for us. And so when I say I was the only employee, I meant I did everything. We raised a billion dollars in that period and I did everything from bookkeeping to being everything else in the company. I literally did.
And the confidentiality was that in part because if people knew what you were doing, they would come in and start trying to bid against you on land stuff and realize, hey, this plot, so he's willing to pay more?
And that is the game theory. Yeah. And it always happens. I mean, even if you have public universities buying land in a city to build a building, they don't come in and like, 'We are MIT and we would like to buy this plot of land.'
So what was the structure of that fundraising? Because you probably had to draw a salary. Is it like a search fund where a venture capitalist might raise some money, pull some management fees to fund their salary and operational overhead and then like when there's a deal to be done, there's a capital commitment that happens, a transfer. Is that what it's like?
We structured it as a partnership that raised money over time at different valuations as we made progress. Okay. And then I just took salary like any other founder. It was pretty similar to a normal tech company. There's some nuance because it's real estate and because of the sheer amount of capital that we needed and how long it took to do it, but other than that pretty standard.
Yeah. And what was the first pitch? What was the first plot of land that you bought? What was that negotiation like?
Well, the first few were listed. So when we came to the market, there were four or five properties just been listed and sitting on the market. Okay. For two years or something.
Was there anyone else thinking about doing anything in this particular region?
I don't know of anyone else. I mean, not right now, but the great irony of the situation is lots of people thought this was a really good idea in 1958.
Yeah. Yeah. There is this... in 1958 the Federal Commerce Department and the Army Corps of Engineers got together. This is almost before computers. Yeah. And they wrote this thick binder. They called it the Future Development of the San Francisco Bay Area 1958 through 2020. And decade by decade they planned where growth should go in the Bay Area. Yeah. And you open these maps and they did it decade by decade and you look at the first one and Santa Clara is still orchards and so on. Then they correctly predicted this explosion in places like Pleasanton and Dublin in the East Bay in the 80s and in the 90s. But the part of Solano where we're building remained open. And then you flip open the 2010 map. And where I thought there should be a city, they had a city. Well, here you go. And I was sitting there in 2015 and I'm like, okay, maybe this isn't just Jan's insane idea. Maybe some smart people thought about it. And then you look at other regional planning documents in the Bay Area. Something called the Association of Bay Area Governments, which is the regional planning body, had a plan called 1970 to 1990. And in the plan, they literally said, by the end of the 90s, we are going to be running out of space in the bay, and we're going to need to build some new cities, otherwise the region is going to become unaffordable. Yeah. And there are some areas where you could build cities that are really good for it. Yeah. And the part of the bay that's the best place to do it that is five times bigger than anywhere else is the area of which we've acquired about 90% over the last 10 years. So this is a very old idea that we've dusted off and obviously we're building something different than what they would have built there in the 50s. Yeah. But lots of roots in regional planning.
So in terms of development, it feels like, you know, AI has been the mega trend over the last few years. Most of the building that's happening around AI is happening in Abilene, Texas, and just wherever the natural gas plant lines are and sort of all over America in pretty low population areas. No one's really thinking that, oh, you know, Meta needs a data center right next to their Menlo Park campus. But the AI mega trend also might drive up housing prices in San Francisco a ton. A lot of people are predicting this based on the IPO schedule. If OpenAI and Anthropic get out, there's a trillion plus in liquidity going loosely into the San Francisco housing market. You could see some really crazy dislocations in that market. Is that something you're tracking as an accelerant of your plans?
Yeah, 100%. Okay. And I think it's honestly more from the policy perspective because the last time... I mean this has happened in the Bay Area periodically for the last 20 years. The problem is we haven't done anything about it in 50 years and every time it gets worse and then there's a bit of a pullback and like, oh, it's going to be better, and then it just comes back stronger than before, right? Com boom, then social, crypto, now AI. And so from a policy perspective the argument that we've made is we need to...
get ahead of this because if we don't, this is going to be way worse than what we saw in 2017, 2018, and when it last happened in 2017, 2018.
The problem is tech is going to get blamed for this.
It's wrong and it makes no sense because you just create all of these real-world pay jobs, but you're going to get blamed for it, or we're going to get blamed for it. And so we as an industry need to get ahead of it. And you saw attempts at this in 2017 and 2018.
And Google and Apple and Facebook and I think Amazon up in Seattle all made these 500 million, 1 billion, 2 billion commitments to go and build affordable housing.
But what happened when you look at the numbers is they would maybe build a few hundred units or a few thousand units because building in existing cities is just so time-consuming, so expensive. It costs a million dollars to build a small two-bed affordable apartment in San Jose.
A million dollars and it takes 11 years of planning. Whereas our argument...
Affordable housing for millionaires.
Yeah. Exactly. Heavily subsidized by the taxpayer. Sure.
Whereas our argument is, if you create a place where you can build, you can get the private capital markets to build it. And we are proposing to build 174,000 homes.
For context, 174,000 homes is more homes than San Francisco has built since 1950. Since 1950. And sure, we should build a lot more housing in San Francisco. The idea that you can solve the Bay Area housing problem...
The trends are the trends.
in San Francisco or in Menlo Park is insane. No city in the world has ever solved a housing affordability issue without spreading out a little bit. And then the question is, do you spread out just by spreading out with sprawl, or do you spread out and actually thoughtfully plan it and be able to build something really magical?
What is the number of homes that the California government has projected are needed to sort of solve the housing crisis? Is it 3 million?
