I see a large IPO on the horizon.
You're surrounded by journalism. Your position.
Overnight success.
The place of 30,000.
Double.
Right.
There, misinformation.
Quarantine clearing order inbound.
Let's just roll.
We are surrounded by journalists. Hold your position.
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Trust the experts here.
Five cookies.
We correct.
Founder Mel.
Five.
I see multiple journalists on the horizon. Stand by.
UAV online.
Blaze win.
Double blaze.
Triple blaze.
Double kill.
Victory.
Go.
Is.
Please.
Team deathmatch.
We are experts.
Triple blades.
That's just wrong.
Right.
Hardy clearing order inbound.
Come get up.
We are surrounded by journalists. Hold your position.
Strike two.
Activate golden retriever mode.
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Five.
I see one more journalist on the horizon.
Founder, we are surrounded by journalists holding position.
Strike one.
Strike two.
Activate golden retriever mode.
Market clearing order inbound.
Five.
I see more and more journalists on the horizon. Stand by.
Founder.
You're watching TVN.
Today is Thursday, February 26th, 2026. We are live from the TVP Ultra Dome, the temple of technology, the fortress of finance, the capital of capital. Let me tell you about Ramp.com. Sometimes money, save both. He's used corporate cards, bill pay, accounting, and a whole lot more all in one place. We have quite the Linear lineup for you today, folks. We got a scoop. We got an interview with the robot vacuum guy. Linear, of course, is the system for modern software development. 70% of enterprise workspaces are on Linear, are using Agent.
Sam, the guy who exposed that he could remotely access 7,000 DJI robo vacuums.
Very interesting story. Enabling live video, floor plans, and joystick control.
We're very excited to have him on in just over an hour. Then we have Ken Richie, chairman of Flexjet.
Very excited for that one. Quickly followed by Howard Marks, Oaktree Capital, Oaktree, and then a lightning round to be remembered forever. Lots of lots of deals getting done. Lots of gong-worthy news.
And we have a surprise guest as well joining us. We do the time a little bit. First, we will tell you about Nvidia earnings. They crushed. Highly anticipated as always. Nvidia is permanently holding up the US economy. Uh continues to hold up the US economy, the global markets, but it's sold off even though they blew out earnings and it was a very good quarter. Uh so earnings dropped yesterday after we got off the phone with Doug Olaflin from SemiAnalysis. Uh some analysis did have some good breakdowns here, but the top line revenue came in at 68.1 billion dollars, up 73% year-over-year and 20% quarter-on-quarter. And this beat consensus estimates by nearly 3%. Uh the stock price popped around 3% immediately but then sold off 5% after at the market open this this morning. Uh making it the stock's worst day since last April. They're now just a tiny April $4.5 trillion company.
April was DeepSeek.
Last April, last April was DeepSeek. Yeah. Yeah, that makes sense. People were saying you you won't need a whole bunch of Nvidia chips because you'll be able to inference cheap commodity hardware and the models.
DeepSeek was climbing the app store charts in America totally organically.
Yeah, there was a lot of weird stuff going on.
They weren't using a massive bot farm at all. Yeah, I mean I I I guess I sort of steelman the the the the DeepSeek story. There was this interesting takeaway which was that uh even though the numbers were sort of misreported.
We had it we had it wrong. I think it was January.
Deep was January.
Liberation Day was.
Oh, Liberation Day tariffs. Yeah. Chip chip sanctions. But uh yeah the the DeepSeek lesson was like you can distill models. You can get, you know, a certain level of intelligence at a much lower cost. And that is real, but the demand on the frontier is just incredible because people are like, "Oh, I I I I have a strong opinion about 5.3 versus 4.6." Like, people really care about being on that perfect leading edge for exactly what their use case is. You see this with people having favorite models, favorite flavors all over the place. Uh, and so the the demand in the Jevons paradox really just powered right through. What do you have to say about that?
I was going to say uh like I I think when uh the DeepSeek like moment happened, the narrative was not that they were distilling though. It was that they had built like they had trained a brand new model.
With very few resources. There was no like sense that they were just like distilling.
There was rumors about it pretty.
There were rumors but the main narrative was not that like they're being distilled.
I think what I mean what I mean about distilling is that like the uh the the the truth that came out over the you know news cycle was that distillation does get you somewhere near a particular frontier capability and allows you to reduce cost but there is still another order of magnitude of demand for the next generation and the next level of the frontier and we have yet to see uh a plateau emerge for demand for the whatever the next frontier is. And.
Yeah, and overall the story the story the story of the last year is that there's there's very very very very little demand for number three. Yeah.
There's some demand for number two and there is an exceptional amount of demand for the most performant model for a specific specific uh task.
Yeah. So going back to our newsletter today, our earnings recap uh which you can subscribe to at tbpn.com. Uh after the earnings call, SemiAnalysis called the results staggering. I love it. Clean bill of health on gross margin revenue and the guide is firmly above buy-side bogeys. Incredibly clean really. Uh they also pointed out what Nvidia said about supply commitments with 21.4 billion of inventory on hand up from 19.8 billion. Uh they have 95.2 billion of supply locked in with chip manufacturers. Also stating, "We have strategically secured inventory and capacity to meet demand beyond the next several quarters." In other words, we're not running out of chips anytime soon. That's good news for Nvidia. The the second order effect that I think was interesting that Doug Olaflin flagged for us was that even if TSMC does scale up magically or you know they they figure out how to build another fab they Arizona increases capacity even if Nvidia has sharp elbows and is able to push out other other demand and get all the line time they need to build all the accelerators that they need soak up all the CPU demand etc etc. Well, then you could still wind up in a weird scenario where Nvidia has the chips, they're ready to sell them, the hyperscalers want to buy them, the AI labs want to inference them, but there's just not enough energy. And so there's this question of like when does the shift when does the chip bottleneck shift to the energy bottleneck? That could be part of what is sort of worrying people because you can see in the in the timeline we have this chart, are you not entertained from Nathan uh Benake over at Airstre uh and he's taking a screenshot from the Financial Times and it is just one of the most incredible graphs I've ever seen. And so as you see this chart, you you have to wonder if there are any any bottlenecks that they will run into. TSMC capacity.
Yeah. And I asked Doug about this. I asked Doug about this. What does Nvidia do if their customers do have an energy bottleneck?
I feel like they'll find a way to still ship the the chips.
I agree. And and truthfully, uh, as big of a as big of a story data centers are, they're still consuming well under 1% of of US electricity. And so there are chips to be moved around. There are new uh new power plants to be brought online. We're actually talking to Doug Bernau from Radiant about nuclear power today. And there are so many different ways to solve the energy bottleneck. But it is very real world. It is very slow and if there's a timing mismatch, you could see a little bit of a flatline that I think people might be worried about. So, uh, Jensen himself strongly pushed back against the SaaS apocalypse narrative yesterday, which is interesting because he doesn't necessarily have to. He could be out there saying like, yes, uh, all those SaaS CPU workloads, they're all going to be GPU workloads now. And yeah, you should actually sell all your SaaS because the future is is inferenced. Like all every app that you use, it's not going to be code that's running on a CPU. It's going to be inferenced on a GPU on demand. And so, you know, demand for Nvidia should be even higher. Like, he doesn't really have that many uh bags with the SaaS companies necessarily. Of course, they'd be, you know, upset if he was talking trash, but he's not. He's defending them and.
But he buys a lot of software.
Sure. Yeah, of course. Uh he said, "I think the markets got it wrong on the SaaS apocalypse." This is Jensen Wong talking to CNBC's Becky Quick pushing back on the fears that AI agents will cannibalize the enterprise software industry. Instead, he expects a broad swath of software firms to use Agentic AI to develop their software and boost efficiency in what he described as counterintuitive. Wong said that AI agents won't replace these software tools, but will use them instead. Why even waste the tokens building a calculator when you can just download the calculator SaaS or whatever. I don't know, whatever whatever SaaS you want to grab off. And this is certainly the true certainly what we've seen with databases like certain databases have just skyrocketed in demand because they're the ones that the agents are pulling off the shelf. And so yes, the agent could design a new database and install it, but that's a that's a lot of work. It's a lot of wasted tokens when databases already exist. So let's tell you about Finn.ai, the number one AI agent for customer service. If you want AI to handle your customer support, go to finn.ai. And let me also tell you about vibe.co, Co, where DC brands, be startups, and AI companies advertise on streaming TV, pick channels, target audiences, and measure sales just like on Meta. And we can move over to the timeline reaction. Uh, Nvidia is is such a big deal. It's not just on the cover of the business section. It's on the cover of the Wall Street Journal. Didn't get the picture, though. Didn't get the picture. The picture is Iran. Iran talking about nuclear enrichment is on hold, according to experts. Um, but Nvidia results help soothe AI fears. The surge in profit comes as the AI's AI industry's appetite for chips continues to grow. Data center hardware, the chips and networking equipment that Nvidia sells to a AI and cloud computing companies accounted for 91.4% of the quarter sales. Terrible news for gamers. Like absolutely the worst numbers you could ever see if you're gamers. Maybe that's why they're they're maybe they're launching a short short attack short.
John would be punching a hole. I would be um may maybe the gamers have risen up and they are shorting Nvidia to try and get them to go back into gaming. Uh computing demand is growing exponentially. Chief executive Jensen Wong said the agentic AI inflection point has arrived. With each passing quarter, the pressure grows on Nvidia, which at a market value of nearly 5 trillion is the world's largest publicly traded company. Is it not just the world's largest company? Is there a larger privately traded company? I don't think so. It must just be the world's largest company. I don't know. Uh I guess you get into crazy definitions of like does does Russia count as a company since it sort of is all one controlled economy. Uh it is no longer enough for Nvidia to produce good quarterly results. They have to produce perfect quarterly results, said Daniel Newman.
How could they have done how could they have done better?
Instead of net income of $43 billion in the quarter, they could have put up 50 billion or 60 million or 100 billion or 10 trillion quadrillion. We I want to see a quadrillion quadrillion dollar quarter. Please, Jensen, I'm not happy. I'm not satisfied. Uh keep keep growing. Keep keep uh keep selling these chips.
Gavin Baker gave some thoughts ahead of Nvidia.
What did he say?
Great. Uh Shau pulled some out. The same point hit on by Gavin and Citadel Securities. It's a good one. Gavin said, "The world is fundamentally short, both watts and wafers, and it may take years to resolve these shortages. The shortage of watts and wafers may prevent an overbuild. Hyperscalers would overbuild if they could, but they simply cannot. My best guess is that we would need roughly a thousandx more compute for the unlikely hypothetical scenario described by Catrini to be remotely possible. And the time it takes us to get there will give humans time to adjust and maximize the many potential benefits of AI."
Citadel said displacing white collar work would require orders of magnitude more compute intensity than the current level utilization. If automation expands rapidly, demand for compute definitionally rises, pushing up its marginal cost. If the marginal cost of compute rises above the marginal cost of human labor for certain tasks, substitution will not occur, creating a natural economic boundary. This dynamic contrast sharply with the narratives assuming frictionless replication of intelligence even if algorithms improve recursively. Economic deployment remains bounded by physical capital, energy availability, regulatory approvals, and organizational change. Recursive capability does not imply recursive adoption. And do you know what the title of Citadel's response was?
No.
The 2026 global intelligence crisis. Calling everyone idiots.
We got to write a intelligence crisis report now.
The the is actually the perfect this is the perfect response. Like very very detailed. This this is the the same report that I pulled out that uh the the the current labor displacement narrative isn't holding up because job postings for software engineers are rising rapidly.
Yeah, it's pretty remarkable that Citadel was able to get that report out so fast. Like it would hit it it dropped I think on Monday right after Catrini went viral on Sunday or maybe it dropped Tuesday or something like that. Like it got really fast.
Yeah, it dropped uh Tuesday.
I mean that's like a quick turnaround for like a pretty detailed analysis. Um I thought that they were just recon.
Let's check the M dashes.
I mean uh the the the interesting uh question about like you know replacing white color work versus like augmenting in new things is that uh there's the the AI labs are obviously selling into enterprises that's growing a lot and the revenues are very real tens of billions of dollars. But um when you look to the other startups that have put up really big ARRs, it it just it I'm trying to square like Sunno just announced that they're selling 300 million in ARR for AI music and that's a huge number. It's so big, but it doesn't feel like replacement work yet. It feels like it's just an additive new thing. Like there were just a lot of people that wanted to pay $10 a month for a cool app. Same thing. Same thing. How many how many non-technical people had an idea for an app? How many people that weren't musicians had an idea for a song?
It never could.
That and then just unlocking all this.
And then you see it with like Higgsfield 2 and and all the viral loops and then uh what's that other one? Um uh not Webflow, there's.
PVPN simulator. No. Uh but the the lovable is one where where huge huge growth and and it feels like yes lovable is like going into enterprises and whatnot but it feels like there's a lot of just like net new software developers website builders that are joining that platform and building stuff and it's it's it feels very incremental. Does not feel very substitutional to me and I'm wondering how much of the pseudo story translates to the AI lab coding model story as well and that and that's certainly what Citadel is hinting at with uh the.
Increase Citadel is also showing that new business formation is rapidly expanding. This is from the US Census Bureau. Uh you can see that year over year it is jumping.
Which we love to see.
Did Cluso delete this post? The great recession session of 9:52 a.m. to 11:16 a.m. February. Uh, too bad. Uh, let me tell you about Sentry. Sentry shows developers what's broken and helps them fix it fast. That's why 150,000 organizations use it to keep their apps working. And let me tell you about Shopify. Shopify is the commerce platform that grows with your business and lets you sell in seconds online, in store, on mobile, on social, on marketplaces, and now with AI agents. Nvidia stock is falling because it needed to clear an options wall of $200 a share. So given a lot of folks were long calls into the print and it didn't clear 200 brokers are selling stock to reverse some sold calls. It's that simple. This isn't fundamentals. It's market mechanics says Gordon Johnson. Uh very interesting. I don't I I I don't fully understand all the dynamics that can happen uh with some of the stuff Jane Street does to to move around the market. Uh but you know, we'll we'll we'll see. Uh I I would say hold your hold your judgment of Nvidia for the next quarter to see.
Samsung becomes the first Korean company to reach a $1 trillion market cap.
Pretty remarkable.
Over on companies cap.com.
You can see they are sitting at number 12.
That's your homepage, right?
Yeah, homepage.
Yeah.
Homepage for sure. Definitely homepage. Just under Berkshire Hathaway.
Pretty good. And Broadcom is above that. But Samsung passed Walmart and Eli Lilly.
I mean, increasingly important in the AI era, right? They've done a lot of uh um fabrication and whatnot. Um I don't think it's all the TVs. There there was some interesting stat about uh of the one trillion dollar companies, isn't Samsung like the the most highest margin, lowest margin or something? There there there was some post from yesterday we didn't get to but there there was a lot more context on that.
Yeah.
Anyway.
Uh Ramp Capital.
Is sharing uh says Patriot and somebody says I have open call sending lowball offers on Zillow all day just to make boomers start panicking.
And he says can you give me an update on the Zillow campaign today and the Zillow update. Uh listings contacted today 372. Average offer 70% below asking. Positive responses zero. Negative responses 270. One response was violent, but I've reported it to the Tampa Bay Police Department. No response, 102. Would you like me to keep making offers?
70% below asking. Just you're selling a million dollar property. And it's like, how's that? Can you do 300K?
Yeah. Uh let's uh.
Let's bring in John Palmer.
Let's bring in John Palmer. Our surprise.
He's live in the TV and Ultra Dome.
Coming in.
You You know him.
Nice hat. John.
You probably know John Palmer is the.
As being one inch shorter than you.
Well, he's the face of leg lengthening surgery right now, right?
No, they were saying I'm the Goldilocks technology brother. So, they were some people were saying you're a little too tall.
Okay.
And Jordy tall on his own right, but maybe not quite at this table.
So, they wanted someone right in between. So, I was contacted by by your team and.
I love it. I love it. Well, actually, introduce yourself since uh for those who've been living under your data center.
Yeah, sure. My name is John Palmer. Um I was a co-founder and CEO of a company called Partardi Dow. Um recently um announced that we're going to be joining Stripe soon. So that was a awesome 5-year journey. And um also work on a company called Area Technology which does um logo and graphic design for brands like yourself. Uh shout out to the new logo and graphics package. And um yeah, that that's.
Honored. Well, we wanted to do we wanted to hang and do some timeline with you as that is a sign of great respect in our culture.
Yeah. What you got, Jordy?
Uh what do we have here? Uh.
How do you guys enable pseudo for.
Okay, baby. Baby Keem.
Yes.
Says yesterday he hits the timeline. How do you fix openclaw internal reasoning leaking? Peter, what does he actually mean? Does anyone know what that mean? So, I mean, we read your post about uh something small is happening. Hilarious.
Did you How much of that was real? Did you ever actually buy a Mac Mini?
So, the the entire post was tongue and cheek, but um I did uh unbeknownst to you all, I did actually buy a Mac Mini that week. I did set it up. Um setting it up was the best 48 hours of my life. Uh since then, I've used it. Uh not very much. So, it's um I I don't know. I think the reason I bought it originally was basically to tinker and see like how real is the hype.
Yep. I set it up. I installed various plugins and skills. I made sure my setup was super optimized. And basically, I realized the only thing I really needed it for was coding remotely in, you know, repos I'm working on or side projects. Um, you know, when I'm out and about on my phone. And you can already do that with like a million other tools. Actually, like even claw, even the cloud app, like you can just connect it to whatever repo, like you can literally just use cloud code in the app.
And so there was really very little delta that it provided in terms of value beyond what I was already doing.
And I did try some other things. I've been trying to get it to like, you know, work on Google Sheets and invite people. But the big problem is that the browser use specifically is pretty fragile. And I I think it's going to get better. So I don't have buyer remorse yet. I think that Mac Mini purchase will will come in handy. But.
So far it's like, "Hey, add I want to add someone to a Google sheet. Can you invite them?" And it's like it opens the modal to share. It types in their email and it's like I crashed like it can't get past the share modal of a Google sheet. I'm sure I could I'm sure I could optimize my setup further which I'm looking forward to.
Skill issue skill issue skill.mds is.
It probably is a skill issue.
Yeah, you need to get the skill called skill issue and and make sure that's running. It it is it is uh I don't know if this is like a brilliant PR move from Baby Keem's team or if this is real, but either way, it's really really uh funny. But yeah, it was I how mainstream this went. Uh our lawyer uh got a Mac Mini.
Uh he's obviously pretty pretty tapped in, but it's cool to see.
Uh.
Well, I was talking with you at the gym this morning that we should I I'm excited about a market for bootleg skills. So you don't you don't just like you don't want to be the guy just listening to hits on the radio, right? You don't want to just be going on skills.sh and getting the what would Elon do skill. That's that's pretty that's what everyone did. And it turns out that one was like actually it was actually malware. So what you want is within your trusted social circle of people that you spend time with IRL USBs full of markdown files with bootleg skills that you kind of keep internal. And there may even be a market for that, you know, on Craigslist, whatever.
And you can say if somebody says, "Hey, can I can I try the USB? Can I can I can I borrow it? You say, "Well, this this skill is kind of like a personal thing." Like, it's not really.
You need to be gatekeeping your skills. That's like probably the last moat in tech is gatekeep skills. Just proprietary markdown files powering the entire glo.
I do I I I do honestly wonder what the conversion rate from, you know, buying the Mac Mini to like actually using Open Claw regularly was because I think that your post was funny because a lot of people definitely went through that. Like I I went and bought a Mac Mini and it did take me like a week even to unbox it because I just had like a busy life and I didn't have time. And then when I did it was like okay well I didn't have a monitor at home so I had to plug it in my TV and then like the actual setup does take time. Like the 48 hours is not that much of a joke.
And and I think on this point like I do think you need like a solid month at home fixing it. So I've been out of town for a week. I'm here in LA. I live in Brooklyn. And a lot of the time when you hit a wall, it's like, okay, now you probably need to get on the Mac Mini yourself and like add whatever environment variables or keys that you need, set up a new account for it. Yeah. And since I haven't been home, like I can't really.
Like, you know, on a more serious note amazing. Like isn't like 5 years ago, everyone was posting like I miss like hacker culture.
Totally. I miss I miss I miss the old Silicon Valley and it feels like this this feels like uh it feels like we're back.
Yeah. Yeah. A lot of people definitely like open up the terminal for the first time in years. I mean this is true for vibe code generally like a lot of people would step back from just writing code or committing code to any GitHub repo like the vibe coding boom.
Definitely.
It's funny because I do really prefer the quad code like user experience to any of the like slicker desktop tools because.
Because of a lot of reasons but it is funny you're like in the terminal I think everyone there's definitely a major factor where like you feel really cool using the terminal if you're not an engineer but you're just it's all plain text like you're speaking in plain English and like it's speaking to you in plain English but you know if you're at the airport or in co-working space. You're like, I feel I look pretty fantastic.
Performative. Sheree says, "Baby Keem just humbled a model." That is actually an exact uh lyric from Baby Keem song uh Stat.
That's exact uh deep cut. Deep cut. And uh yeah, he someone else said two phone baby keem. That's another lyric, but two Macini Baby Keem.
And Baby Keem liked it.
He's he's very online. We're working on getting Baby Keem on the show to break down his full skills.
Yeah. I mean, one of the biggest questions that I feel like is still sort of unanswered is like is like what are people doing with it? What, you know, obviously if you're working on a startup and you're building a piece of big software and you're committing to it and you're firing off just managing agents remotely, that feels relevant. Although, yes, you mentioned you can just do that already.
Yeah. I mean, I actually whatever like I'm definitely not the top person who's like diving into this, right? I I feel a lot more confident even even for coding. I actually don't love doing it with open claw because I've I've got my reps in with cloud code. I trust the harness. I trust its ability to like utilize the model in the best way. So.
Even for coding I'm I'm just using cloud code remotely anyway. So still waiting to find the use case. I think one interesting thing though is just that like I think prior to this whole open claw wave, the whole idea was like all the AI labs had their like computer use demo and it was running in like the totally you know anonymous um VM somewhere and I do think these things are way less useful without your personal data and your personal contacts and the stuff on your machine. No, no one solved like trusting it enough security-wise like you know my Mac Mini uh back home it it has its own Gmail, iCloud, whatever cuz I'm not going to let it touch my data.
If we do that all the files on your file system and all your accounts and it's not going to make a dumb mistake.
I do think the ability to like do all of your knowledge work on the go. Even if it's just like I do the same stuff I do today with AI, I can just do it on the go would be a major leap in terms of like.
Idea guys have been waiting for.
Yes. Yes. It's the moment idea guys have been waiting for though. I think Yeah. And we we can riff on that if you want.
Just more phone based work, more like, okay, this is something I need to do regularly, turn it into a crown job. Like the agent should be able to do that.
Yeah. Yeah. I totally think so.
Also, I was just really excited about this like Napster sort of moment. Like every idea I was joking with Jordy like every idea that I have for like something to vibe code is like something that doesn't exist not because of code. Like if you want a fitness tracker, like yes, you can vibe code one, but you can also just go to the app and get a free app store and get a free one or you can pay. Like there's plenty of products in every category, right? Right. The things that you want but can't get are like something that jumps every paywall, something that Yeah. You know, so like g gives you videos for free that are behind walls and stuff and like these walls exist for a reason. Um and uh and maybe those come down in a world where everyone's like working on open source agents and just sort of showing up as themselves um and synthesizing everything. But uh it's uh like it it feels like it's much harder to actually productize that fully because so many of the things that people want are like yes they're possible in open source in the sense that like file sharing was was popular.
Totally. Yeah. And even though I will say like even though I guess so far I don't want to say I'm disappointed because it was really learning thing but I I still it's never a good bet to be like really bearish on new form factor with like novel tech. So I'm still pretty bullish and excited about like 3 6 months from now what that same Mac Mini could be doing and it doesn't need the Mac Mini. It could be it could be on whatever service but I think it's going to get pretty exciting pretty quick.
What did uh what did Playboy Cardi mean by this? Did he was he responding to Baby Keem? Is that what was he supposed to read into this?
Is he also doing it back in the Jeremy Irons in margin call? Is that the meme?
This is when he says that the music is going to stop.
Oh, okay. So, so, so Playboy Cardi is calling the top. Have you seen I have.
You have?
Whoa. Are you a film guy?
I would never call myself a film guy, but I've seen all movies.
Have you seen Borat? I have seen Borat. Okay. Okay. You're You're The whole bit is that Jordy hasn't seen enough movies.
Yeah, he hasn't seen any movies, in fact.
Wow. Interesting.
RIP the market. We had a good run. The three kinds of stock market days so far. Donald Trump Donald Trump spins the wheel of tariffs and replaces a 5% tariff on Belarusian wheat with a 22.4% tariff on Pakistani jet engines. All stocks lose 2d6. Uh, Substack newsletter publishes a story about Door Dash going badly. Door Dash down 862%. Global financial system teeters on the brink. And three, Nvidia announces earnings of $100 trillion, beating expectations by a,000x. Jensen Wong named new king of earth while his stockholders to form the new permanent ruling class Nvidia down 3% on the news. This is the president of the market. Are you are you a day trader guy?
I am an investor. Investor.
How do you think about the market? What's your strategy?
I'm an investor. I'm a businessman. Um I I don't know. I think my approach is like pretty smoothrain value investing like uh good fundamentals. I'll buy the stock and hold it for a long time. Definitely not doing a lot of.
Even even intramonth tra it's it's really like long term.
You're not like a oneman Jane Street.
I'm not a not a oneman Jane Street.
What about what about crypto? I feel like if you're working in crypto, even adjacent to crypto, there's just so much alpha from seeing essentially like angel investment style opportunities from someone who's building something that's you just know it's going to be hyped and the token's going to moon.
The issue is that it's like wildly distracting because as soon as you have enough money, invest. I I I think I I think uh.
I I don't like doing a lot of like individual stock trading because as soon then then my attention is gravitating towards this thing that's not actually productive.
Yeah.
And so what do you think?
I think that's true. And I think I mean obviously if you're trading like per in crypto like you better stay on top of it because like there's a moment to exit or if you just hold it longterm you'll probably get liquidated at some point. So I I just don't touch any of that. You're right though that there are uh whatever there are like yeah weird things in crypto where like someone you know or someone's doing a project and they airdrop a token or something like this and you wake up a week later and it's worth like whatever a month's worth of your salary. Um, so I think that's.
Let's talk about Jane Street because I've seen maybe.
10,000 posts kind of blaming them entirely for uh the just crypto price action over the last couple months.
You haven't been able to have you been able to find anything that is like definitive? Um uh obviously the lawsuit came out and they were like we were going back and forth on it because it sound they pulled they pulled funds out of this liquidity pool right after.
Actually I don't even think they p I don't think they pulled funds. I actually think they sold into the pool.
Which is I guess the same thing. I don't know. I don't know.
Uh but they did it five minutes after we were saying maybe yesterday or the day before that okay it's a public blockchain. Theory that it's not actually a smoking gun necessarily.
But either way.
I'm I'm only as informed as you are in terms of the tweets. I haven't verified anything, but yeah, my understanding is that um I guess uh Tara Luna had had a lot of money in this pool and they had planned to pull whatever 180 something million out of it. Yeah. And that I guess the allegation is that Jane Street heard that this was coming before everyone else. That's like the material non-public information and so then also pulled their money or sold it um yeah like just minutes after Tara did it. And um you're you're right that it's public. So I guess like again not a source of truth here. I'm like relaying secondhand with confidence uh information that I read on on on the timeline.
Guys built for for podcast.
Yeah, I'm I'm relaying this to you secondhand without confidence, but yeah, I guess you could say, hey, it was it was a anyone could see that and they just reacted quickest, but I think I I guess what that would come down to is what are the internal ops on moving those funds like that. I would imagine that a fund like Jane Street with $85 million in this pool isn't just sitting in someone's like hot wallet, MetaMask, right? Yeah, they probably they could have they could have like some type of protocol or actually software like as some type of protective mechanism given that they.
I don't know a lot of stuff feels like conspiracy theories that uh it feels very similar to uh like uh the Robin Hood um GameStop fiasco where there was like a lot of conspiracy theories about like Citadel purposely tanking markets and the bailing ing out hedge funds at various points. And I I always thought that was just like people looking for scapegoats and a whole bunch of market actors just playing hard ball because that's the that's the default structure. I don't know.
Yeah. I mean, I'm not that comfortable like yeah speculating on this either cuz I'm just like all right, I saw you know posting the timeline.
They are interesting though.
DJ CPA says Jane Street got my dad drunk and made him cheat on my mom when I was three. People are are hunting for uh for you know.
Says Jane Street killed my dog.
That would not be good.
You're just getting a lot of the cathartic like crypto people who have just been wrecked by these fiascos like now have a viable scapegoat.
He's not a bad trader. The market was manipulated by Jane Street.
Yeah.
Uh Tampa International Airport has come out and said, "We've seen enough. We've had enough. It's time to ban pajamas at Tampa International Airport.
Wait, they actually This is great. Read the next line.
I mean, it's really.
After successfully banning Crocs and giving everyone the amazing opportunity to experience the world's first Crocs-free airport, it's time to take on even an even larger crisis. Pajamas at the airport. Is this real? Is this actually Tampa?
What's your What's your airport travel?
I was going to ask you guys because you're traveling together a lot. Um.
I don't know. It's always a dilemma, right? Do you wear.
Like like I get the pajamas thing because if you wear, you know, your nicest clothes, then to me when I get to my destination, I'm those were on the plane. Yeah. Like I'm not unless I have laundry, you know. So for me, I'm rocking like uh one of my more like mid fits like I'm something I don't care about, something something lightweight that packs light as well because after that travel like that's not coming out of the bag for the duration. Well, there's a there's like a contagion theory here because if I'm in a suit, but I'm sitting down in a seat that someone in pajamas just sat down in, then I'm getting their pajamas all over my suit.
Yeah.
And so, uh it's it's just a vicious cycle.
Are you guys business cash on the plane with.
I I I've actually traveled in suits many times and and it's underrated.
I I think uh I mean besides the fact that I've heard that you can get upgraded to first class more more easily if you're dressed up. I don't know how apocryphal that is. It happened. I feel like that's just people trying to justify.
I think people just they they see the suit and they're like, "Respect here. Please take my seat. I'm in pajamas. I have the first class seat, but you deserve this."
I think I'd feel more comfortable with that. Um if I if I weren't as tall as I was, and you are because the suit, you know, more powerful aura, definitely less comfortable, especially if you're in a seat where you're kind of constrained. It's kind of bunching up. It's really not feeling you're aiming for.
What about the TSA ban? Have you Have you seen this TSA shutting down? TSA pre-check.
Pre-check.
This is just like a ploy to up to to increase private jet ownership, right?
Yeah. Clearly the the we're we can ask Ken Richie about this. The the lobby is trying to push people into.
It's kicking the commercial aviation enjoyers while they're down. It's really brutal.
What does Joe Wendel say about this? He says, "I'm very proconformity, very anti antisocial behavior in public, and yet I can't understand why people care so much about other people's airport attire. Just say that you wear pajamas to the airport. Just say that you wear pajamas to the airport."
Flying is unpleasant enough.
Uh, Burger King is launching an AI chatbot that will assess workers friendliness and will be trained to recognize certain words and phrases like, "Welcome to Burger King. Please, thank you."
It's huge.
The AI will be programmed into workers headsets according to the Verge.
I think Chick-fil-A got access to that technology like a decade early.
Yeah.
Cuz there's a my pleasure. There's a thank you. There's my pleasure every time.
Yeah. Apparently, when McDonald's opened in Russia, there was a quote, "After sever several days of training about customer service at McDonald's, a young Soviet teenager asked a McDonald's trainer a very serious question. Why do we have to be so nice to the customers? After all, we have the hamburgers and they don't."
They need to be nice to us if they want these hamburgers."
What was it? Did Did MC McDonald's launch something as well?
I thought they launched an AI thing, too. It wasn't uh.
It's AI big arch.
Well, the big arch is the big burger.
Um but then um I thought there was I mean at this point every single company has an AI strategy of some of some kind and and so everyone's putting putting uh various stuff. Are you an F1 guy?
I'm a tennis guy, but I I watch like the F1, you know, highlights and recaps. I I'm rarely like getting up to watch the race live, but um.
Play tennis or watch tennis or both.
Um play and watch both a lot. Um.
Um what does it say? Best friends should be able to apply to jobs together and get hired as a set. New age hired hiring looks like four to six talented people clustering together and building a feature and getting acquired. Um that's yeah, this does exist.
I mean a horse did post.
Horse is kind of going off. Horse has been on a on a generational run. Literally a horse. Um yeah, underrated to just.
Uh Riley Walls, we talked about this yesterday, joined the labs team at OpenAI.
Very exciting. Uh we were talking about this uh kind of offline uh before the show that it seems like there's a lot of opportunity and like hiring for not just ability which which Riley Walls clearly is incredibly talented and has you know an insane probably like the most elite idea guy like actually on the pitch playing right now.
Yeah.
Uh and that's hard to say as an idea guy as idea guys ourselves. Um, but I think like hiring for you you called it like hiring for Mind Share I was a.
Yeah, I was pointing out obviously both Riley and Pete Steinberger like both incredible devs. So not not trying to take away from that but it's interesting that like both of those um either like hires or acquisitions.
Also come with like a lot of developer mind share.
And I think in a world where like.
If you just run out to the extreme like software production costs go to zero. Um, so, so being an engineer, being able to build stuff, that skill becomes more of a commodity than what are you trying to acquire or hire for.
Maybe in this interim period, it's like a blend. Okay, like I still want you to be a good engineer, but I also want you to bring me a developer mind share and I think to that point, it's like, you know, with OpenClaw, for example, um, it was definitely the best product in the market, but it was open source. No one could have, you know, forked it, copied it, whatever. But I think it really would have been hard for someone to catch up given how much mind share it had. It's like the fastest growing open source repo of all time. So what you're buying it's like even though it remains open source and forkable and in like a foundation and other people could build it. The reason you buy PE in addition to him being a great developer, you know, idea guy, whatever. Is just that like he he's bringing the mind share of all the people who definitely follow him, have notifications on for all his posts. They're following all the updates because he's bringing.
In they they probably spent few hund you know 600 bucks or something like that on a Mac mini.
Some hardware device to to run the model.
Um uh Noah Smith is sharing the job postings for software engineers have picked up since Vive coding became a thing. They had been declining until uh the early part of last year actually.
And again, this is why I mean, we've we've talked about this over and over and over. I feel like there's this like.
Two different narratives being spread on Instagram. It's just like this labor displacement narrative going super, super, super hard, and then over here, like it's just an entirely different world.
Yeah. I mean, Tyler, how do you interpret the software engineering number? Have we talked about this yet?
Yeah. I mean, so I think I broadly agree. Like, so when Daria won and Doresh, she had this take where it's like, you go from AI doing 90% of coding to 100%, and then it goes from 90% of like all suite tasks to 100%. And so when you're kind of in the interim period, like engineers get super, super productive, but then there's a point where it's like actually, like instead of being super high leverage because the AI is doing 99%, now the AI is doing 100% and it's actually like it just kind of instantly goes to zero.
So like I think you should imagine that like yeah, you actually see, you should see a lot of like hiring because everyone wants like a vibe coder at the company, but then at some point vibe coding becomes so easy that like you don't need any special talent to be able to do it, and then you just have the random person.
I mean even... Yeah. So basically if one day you're not sitting at your desk, you're like you're kind of the vibe coder in the coal mine.
Canary. Okay. Okay. Yeah. Yeah. Sure. Um, I do wonder about like because there is a world where software engineering postings and jobs are substitutive for other roles. Like you can have someone whose job is like a business analyst and every day they open Excel and crunch some numbers, and then you could hire a software engineer to automate that task 10 years ago, 20 years ago, and a lot of companies did. And if vibe coding sort of eats into other things, you could see the rest of white... it's like the white collar work could go away because the software engineers are doing it. And then the bigger question is like you're sort of jumping ahead to like a full unemployment scenario where no one has a job. In the world where there are like a few jobs there, I keep thinking about this thing that Pavvel Asperuhov said where he was like, yeah, like everyone, if the software engineering jobs go away, like get ready to compete with software engineers in every category because they're going to learn financial analysis, they're going to learn to trade, they're going to learn to sell, they're going to learn all these things. And if they're just like smart and hardworking people and they have AI tools both helping them upskill, reskill, and shift and do whatever they need to in the new role, like those people will still be employed. They'll just be in a different part of the economy. So I don't...
Rachel Carton, who's coming on the show soon, says by more than a 3-to-1 margin, young Americans believe AI will take away opportunities. There's a lot of uncertainty surrounding AI, especially among the youth. Using it as a joke like Liquid Death, Gucci, or Equinox have tried is not a wise marketing strategy.
Yeah, the blowback around Gucci was predictable, but it was also strange that they chose to use an image that looked like it was out of GTA 2. Like it was just like not even trying to look like one of the images that we looked at looked like a normal photograph and looked cool. And the other one like was like a GTA style characters which really didn't hit.
Interesting. Um, uh, Jirro Ticket says, 'But sir, that's rage bait. If you do this, you'll sloppy the timeline and you're posting something that you know has no value. We are selling engagement to willing scrollers at the current fair algorithm parameters.' Uh, Avi Schiffman had uh was was uh certainly...
Have you ever talked to an AI just like as a being or like a friend or like just as like any non-productivity like earnestly?
Earnestly. Yeah. Just like chatting back and forth with it. Not for any specific business purpose.
Have you ever fallen in love?
No. No. No. I really haven't. Earnestly. I haven't really given that. I have like to test it out. Yeah, I wasn't like wholeheartedly engaging.
Yeah. It's weird. I don't know if it's like a personality thing or maybe I'm just too busy or something, but I've never been like... I will, if I'm in a video game, I'll go talk to an NPC on a side quest. I'm down like I'm down to explore the story that's there, but for some reason it just hasn't clicked with me.
I don't know. I haven't even done that. Like even when I was playing like MMOs back in the day, like I feel like I would always just be like skipping dialogue. I'm just like... I actually do skip a lot. I don't know. It's hard. It's hard to really buy into it. I think maybe a good synthesis of that would be I would be down to play like a new Elder Scrolls game where there are like really good AI models behind the characters. Then I'd be exploring it because like I've decided to suspend disbelief to play this game. So while I'm in this game, let me do it. But in my real life, I'm not like having a heart-to-heart with the AI. Next time you call me and I don't pick up, go into ChatGPT and say, 'Pretend you're Jordy. Let's talk about work.'
I do think that's like more interesting, like again, maybe not as a heart-to-heart, but like I mean there's companies that do that, like an AI version of an influencer and whatnot, like those things exist. I mean you guys have like hundreds if not thousands of hours of live show now. You could probably get a pretty good Jordy model. And if you were like trying to riff on show planning, like it would actually functionally be pretty good. But no, I just have no desire for it. I don't know.
I do think this is an interesting take on the OpenClaw style stuff where like I think there's a world where again security is like a big asterisk here, but like if I had OpenClaw... Okay, so I've been riffing on this idea for a while that I'm just a GPT-5 client. So like ChatGPT has GPT-5 and I'm John Palmer. So I'm John Palmer Transformer. I'm JPT-5 and I'm just a client for JPT-5 which is my brain. And so like you guys... kind of like a harness. Yeah. Well, this is the clothes are the harness and the brain is the model and my mouth is the client. I don't know. So, so in that... anyway, I won't go into the whole riff, but I guess like so my Mac Mini I named JPT-5 and hypothetically if I could train it on like all the writing and speaking I've ever done plus my whole file system and it knew like what I do on my computer. One version of that is it's single player. It's my OpenClaw. I use it to do my tasks. But I'm really interested in like the multiplayer. Again, this is the security... security is not ready for this yet, but if I had my Mac Mini and either humans like yourselves could really go like, 'Hey, I need John for something. I know he did that one project and all the files are probably on his computer. Could I go micropay his agent be like, 'Yo, I need help researching this crypto thing that you did,' whatever.' And if my agent could actually give you... it's like you're not accessing the same one-size-fits-all model that everyone has. You're accessing, you know, that model with some custom, you know, context and prompting or whatever and that would be cool. So, like, you know, you have access to Jordy anyway, but for someone who doesn't, you know, if that random third party out there wanted to riff with Jordy on a marketing idea, it'd be cool if they actually could and you had set up that model. It wasn't, you know, Opus 4.6 trying to replicate you, but it was like all your insider info. It's kind of cool. And then, you know, the agents could do it to each other. Now JPT-5 could be talking to JHT-5. Yeah. And they could be like we could be hanging IRL and our models could be hanging back at home like kind of like a kids play date, like my model's like hanging out with your model. They like, 'Hey, let's get John involved.' They go get John Coogan's. So it's kind of a fun... I mean there's a take on that where it's like that's dystopian or something. But that's not how I feel. I just feel like I'm just like bored. I'm bored idea. We go brainstorm for an hour on some concept and then we come home and we find out our models cooked up something way better.
Yeah, I don't know. I was looking at the clawed... I think it's actually possible, especially if you were like you bring the original idea and then you say like I want John Palmer GPT to talk with John Coogan GPT about this idea and like come back with a bunch of ideas. It will work a lot better for someone like John who has spoken on the internet for hundreds of hours. There's so much that I don't say on... that's why you actually want to talk. It'd be cool if the model could like decide to price its own services and negotiate with whoever whatever model is hiring it. I mean whatever. It's...
Uh, Avi Schiffman dropped user interview number three. We're not going to play the video because it's kind of sad, but Gary Tan said, 'This is not the happy demo path. Apple or Google would never make this one of their launch videos. It's not what you will hear about in a TED talk, but it's real. AI doesn't get tired, doesn't ghost. A lot to think about with this one.' Yeah, I, you know, Avi continues to find new ways to break through the noise, but in some ways like even though this video has been... it feels somewhat dystopian, you know, this is someone who's struggling with mental health, like actually gets in an accident in the video. It does feel like the most kind of real raw like experience of AI companionship in this form factor.
Um, yeah, reflection on like... do you remember his interaction with Paul Graham very early on? He was like, 'I'm building like a hardware device for AI.' He put out like some very vague posts about his plans and everyone was like, 'This is impossible, like Apple will crush you. They have the supply chain, they have the distribution, they have brand, like you will never win in this category.' And Paul Graham told him like in order to win you have to do things that Apple would never do and be counterpositioned. And so at one point he was thinking about doing something that looked like very organic, you know, no smooth lines, no rounded edges, crazy colors that Apple wouldn't pick, like just really moving outside of their design language. So you wouldn't feel like that. And then yeah, this type of messaging is certainly in line with like the anti-Apple. Um, and I don't know, it'll be interesting to see where the company goes. People were so bearish on that ad campaign. We were very surprised by how broad the Billboard campaign was, but...
They got the Heineken response.
So, Heineken also just came out with a new campaign that I want your guys' reaction to. Uh, it's... I don't know where exactly it is, but seems to be global. And it's just like a graphic of a voice note, and it says the campaign is 'Don't send a WhatsApp note. It could have been a beer in person.' So, they're like taking like the total like real world approach, which I think is...
I think it's good. Uh, you know, I think you had Matt Zaitlin on the show recently and he and I play in a pretty regular like friends poker game. Not big money. It's really like a social hang. But it's funny because like everyone's like multiple people have wives here like, 'Why are you going to play poker? That's Degen. Are you losing money?' Whatever. But I had a post a while back that's like in the current like casino economy between like prediction markets, meme coins, like crypto trading, whatever, like an in-person poker game with your friends is like the most wholesome. Like if you're going to gamble and lose like 100 bucks, go do it with your friends over four hours. Like having a drink and hanging out and you're solving the male loneliness crisis.
I've heard the same argument made for cigar nights.
Yeah. Like cigar is obviously bad for you, but getting together with friends and actually maintaining social, you know, ties is probably really good for long-term health. It's pretty great, honestly. And if you play a regular poker game, even with strangers that you only knew through this game originally, like 6 months out, you've logged like so many hours just like hanging out that it's like a pretty great wholesome vibe, you know?
We should get into it. Not big.
If you're ever in New York, we can have you guys.
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Yeah. I think I had a post a while back about how like again same thing like software costs go to zero. Everyone's like, 'Oh yes, like I'm an idea guy. I'm going to be crushing it now because now I can just use Claude Code and like build whatever I want.' But it's like if you just make one more logical leap it's like okay everyone has that now. So if you're just like building your ideas like if you're building vibe-coded apps for consumers you're actually in a way more competitive space than it's ever been. So, I actually think it's almost more like not to riff on the idea guy thing too long, but like actually being paid like a salary to be an idea guy or like making good income to be an idea guy will actually be like a very privileged position where only companies that have like real moats and monopolies on distribution will actually be able to hire like people whose job it is just think on the idea because if you have a good idea and you ship it, you know people will use it because you've already got the distribution versus if you're even if you've got a great idea and you can vibe code it up if you're in this like sea of vibe coders like producing way more apps.
Well, the other thing is is there are certain idea guys throughout history that thrived because they had a unique insight. They brought it to market, executed pretty well but it just was a great idea at the right time and so it got traction, attracted great people and things like that. And in a world where like an idea can be made and we've seen this with I think a bunch of marketing on X over the last year where if somebody has like a good style of launch video it will be immediately replicated within a month and then it will become just kind of like flooded and the meta will kind of die quickly. And so in a world where like ideas are cheaper than ever. Is it really just about like idea guys getting lapped by people that are great at executing and it's like, 'Yeah, you had this great idea. You shipped it. Someone else saw that and it's like, that's a great idea. I'm going to ship it today and then I'm just going to outexecute you.' Uh, someone should launch their startup with a congressional testimony. That would be a great aura if you just the first time you're ever seeing about this company. They're just answering questions and getting grilled by Congress people about what their plans are. It's always like typically the top of the mountain like Mark Zuckerberg built Facebook for a decade then he starts getting called to testify then he starts getting sued but if you just come out the gate day one...
Augustus was kind of... he was like half the time in Alagundo, half the time on the road. He wasn't being called to testify, he was like you know standing up...
I know but he's kind of doing bit.
Yeah it kind of did work like that, it's very funny. Uh anyway, let me tell you about Figma Ship the best version, not the first one with Figma. Introducing Quad Code to Figma. Explore more options. Push ideas further.
Uh, we got new Apple products.
What's coming out this coming week?
Oh, yeah. Uh, we don't know exactly. It's a... It has the Apple logo on it, though. We know that.
Oh, that's why that's why that's why they're touching it.
Are you guys... How are you guys thinking about the touchscreen Mac? Because one of my least favorite things in the workplace is when people put their fingers on my screen. It makes my blood boil.
Yeah. Uh and so, uh maybe they have some new like are they... I could see Apple at this point. They've got the iPhone sock. They could have like a little attachment that has like a clean like a little a cleaner, you know, a little spray bottle like an Apple spray bottle. They could have a magnetized Roomba and you put it on you stick it to your screen while you walk away and it drives around identifies the...
Yeah, like a Zamboni. Like a Zamboni.
You want to create the problem and then have the product that solves the problem in the same launch. So touchscreen Mac with the Roomba.
Yeah. That's such an odd choice because I feel like the whole... I feel like humanity has gone down the path of like the touchscreen laptop and it's been available for years maybe over a decade and I just feel like it's never really broken through and if it was if we were at least seeing like oh yeah well like obviously like 80% of PC users have a touchscreen and it's clearly a dominant form factor for a lot of... it's like the reason for the touchscreen is like I'm away from my computer. I can't carry around a dedicated keyboard and mouse. So, I guess I just have to figure out a way to use the screen for everything. But, it's not superior if I have room on my desk for a keyboard. I'm always going to be faster doing the like it's going to you're going to it's going to look very maybe maybe it's better for people that aren't as technative. Like I can imagine like an maybe older family member like you know wanting to zoom in on a photo and maybe it's more native to them to to kind of like use the pinch functionality. Yeah. It feels hard though like if it's in a again I don't even know if this is what they're releasing but if it's on a laptop like I actually kind of have to like reach past the keyboard. It seems like a far reach to like if you're like even keeping your arm held like raised like this for more than like 30 seconds would get I think tiring for most people anyway. I don't know. The first time I saw that I just thought Mac Mini honestly because it just looks like...
Well they're making the Mac Mini in the USA. They came out with that announcement.
And I will be, you know, getting rid of my current Mac Mini and buy the USA. Made in the USA.
Running Kimmy 2.5 on my made in the USA Mac Mini. Well, uh, we have some videos to watch, but we don't have IM for you. So, uh, we should probably let you go get back to the rest of your day. Thank you so much for coming and hanging out.
We will see you soon. Let me tell you about Octa. Octa helps you assign every AI agent a trusted identity. So, you get the power of AI without the risk. Secure any agent, secure every agent with Octa. And let me also tell you about Console. Console builds AI agents that automate 70% of IT, HR, and finance support, giving employees instant resolution for access requests and password resets. Um, let's flip through some of the videos that we missed because there are some good ones in...
TSMC's plant in Arizona, which is spread over a thousand acres, is expected to cost 165 billion. I thought they already had a TSMC Arizona up and running. I guess they're expanding it to the tune of 165 billion.
It's still coming online.
I wonder when what day is this actually going to go live?
Got to send Tyler over there.
Oh yeah. Won't you be in the area soon? Don't want to dox your weekend.
Maybe I should check it out.
Go check it out. Get arrested for trespassing. Uh, we forgot to play this AI video of uh the AI leaders Elon Musk and um and uh Sam Altman as old men. Did you want to watch this?
This was a very very bizarre video.
Extremely viral over on Instagram.
Yes. Oh yeah. Uh it's uh it's in section E here. Let me tell you about Cisco critical infrastructure for the AI era. Unlock seamless real-time experiences and new value with Cisco. Um the uh it features inner gym move the world.
No purpose, but they had a lot of time on their hands. The less people actually did physical work, the more they... you can't restart videos on Instagram... um had lost their jobs. They had no money, no purpose, but they had...
The visual fidelity is just another level up. I don't know if this is uh the latest Chinese model, but it's really good.
Use the energy of humans to power the machines that took away their jobs.
The voices, the voices...
The voices are a little odd. Yeah, a little they are still in the uncanny valley, but the actual video is really strong. Solved our need.
Deeply wrong to put our technology leaders like this. Should have made them look like bodybuilders if you're going to do this.
Uh Anthropic is going into consumer now. Is that right? Adam Feldman joined as... I recently joined Anthropic to lead consumer product and we're growing. Our goal is to build AI that millions of people will use every day to think better, create more and accomplish what matters to them. A bit biased here, but this is the most interesting option.
Yeah. So I back in Q4, yeah, I was expecting that they would care a lot more about consumer than they were letting on. I think like when uh if you look at their actions this week, you see that when they were lagging, yeah, they were like really leading with safety. And now that coding is a competitive market, they're obviously dialing some of that back. And when they had actually zero consumer adoption or functionally zero consumer adoption, uh they didn't care about consumer. But if you look at the Keep Thinking campaign, you look at the Super Bowl campaign, you don't do these things unless you care somewhat about consumer. It all bleeds together anyway. And so uh it seems like it's the end of the road for all the AI companies that they have some sort of consumer footprint. It's hard to be that deep and when you think of like the pure plays, I mean even Amazon, I mean they sell a ton of tokens through AWS, but then they also have Rufus because they need to vend the AI into their distribution, into their platforms. Um and we've seen Llama be vended into Instagram and WhatsApp and all the different consumer interfaces that people use every day and people will use those for business contexts in consumer apps. Gmail became dominant in consumer and businesses all over the world because uh there's a huge blend that happens as people work both professionally in their personal lives and vice versa. They do work when they're at home and all sorts of different stuff.
Reg has some breaking news. Apple has acquired the rights from Netflix to air Drive to Survive season 8 on Apple TV Plus. You were expecting something like this over a year ago at this point.
Uh that if you're going to be spending all this money on the F1 movie and the F1 streaming rights, you want to actually be the home of uh Formula 1.
Yeah. It's sort of like content vertical integration. Like you want to be able to take the viewer on this journey from novice. So, you watch the F1 movie which has Brad Pitt in it and it's just super accessible and anyone can throw it on and have a good time. Even if you're not an F1 fan, you can watch the F1 movie and know and like in the movie there's a voiceover that explains all the mechanics of how the sport works and so you learn and you come out of that saying, 'Okay, I'm kind of interested.' Then you could watch Drive to Survive and then you could actually watch the...
Trey says Apple should sponsor Cadillac F1. I get the conflict, but also Penske owns IndyCar and has a team. Well, it's funny because...
What would the conflict be?
Oh, because they're airing it.
Yeah. So, like I don't feel separated enough, but remember I had a pretty viral post last year. I forget. I was I think quoting Jen Mochi and saying like Apple's like clearly run out of like ideas. And obviously that's not fully not true. But uh I was saying that they should just have a Formula 1 team and be like you wanted the Apple car. This is the Apple car.
Cuz like a one car on the pitch that just has no or sorry on the track that has...
Grid. Grid. Yeah. Three fingers. Um uh one car out there that's just all white.
It would go extremely hard there. Yeah. No one's really doing white in F1.
Yeah. Oh, no logos at all. Yeah.
Just like perfect pearlescent white or something. That would be very very cool. Uh let me tell you about 11 Labs. Build intelligent real-time conversational agents. Reimagine human technology interaction with 11 Labs. Let me also tell you about Turbo Puffer Serverless Vector and full text search. Build from first principles and object storage. Fast 10x cheaper. Semi Analysis says Micron's hundred billion dollar mega fab in New York is at risk of delay due to just six concerned citizens and their frivolous lawsuit.
The project has already taken an absurd 1200 days between announcement and groundbreaking. Competitors overseas who began at the same time now have built and working fabs. Micron spent 612 days on the environmental impact study including a 45-day public input period. Yet hours before groundbreaking, they were hit with a lawsuit calling the process unnecessarily rushed. 612 days on an environmental study. Um, comments from local borders on nimi parody. We are not trying to stop any progress, but we don't want this just bulldozed into our area. This is a real quote. The lawsuit itself didn't come from a grounds uprising. A California-based workers rights group went door-to-door in New York seeking plaintiffs. They eventually found just six people willing to sign on, but that's enough to potentially halt the project. That is so insane. A Syracuse local news outlet's excellent reporting on the group behind the lawsuit, Neighbors for a Better Micron, found that before the suit was filed, the group had never held a meeting or a vote. Some members didn't even know who the others were. One member of the suit, who as a former lawyer you might expect to be smart, says that Syracuse has the highest child poverty rate in the country. What is Micron doing about that? Uh, anyone can agree it's a worthy cause, but do we really think an advanced memory semiconductor manufacturer is the right vehicle to solve it? To be fair, it is legitimate to consider the environmental impacts of a fab. They're large industrial projects that can be harmful if not built and operated safely. But these last minute injunctions are renting, not legitimate environmental concern. We estimate the lawsuits will cost 100 to 500 million to settle despite the fact they should be thrown out as frivolous. Ultimately, Micron has probably budgeted for it as a small fraction of a hundred billion dollar project. Still, there is a non-zero chance these six concerned citizens delay the entire thing. If the US wants to compete in strategic technologies like Micron's project, which produces a key ingredient in the AI supply chain, it must reduce frivolous rent-seeking litigation. AI tools will only empower these people as it trivializes nitpicking on complex rules and 10,000-page documents. That is uh yeah really wild like this feels uh yeah this feels like any state should be generally excited about having a hundred billion dollar project which will undoubtedly generate hundreds of millions of and someday billions of tax revenue. But uh Patrick says nimbies are being replaced with bananas. Build absolutely nothing anywhere near anyone.
Uh the uh the Catrini scenario is now on Kalshi. There's a 12% chance that the Catrini scenario happens, which of course is the S&P falling. Uh it's uh it's interesting. 12% feels high, but the rules summary is fascinating here on this market. Uh if at least three of these happen, it resolves to yes. So unemployment rate exceeds 10%. S&P declines more than 30%. Zillow home index value declines more than 10% year-over-year in any of New York City, Los Angeles, San Francisco, Chicago, Houston, or Phoenix. Labor share of gross domestic income uh falls below 50%. Uh inflation falls below 0% in any monthly release. And if any of those happen before July of 2028, the market resolves to yes. So sort of interesting because there's a whole bunch of different scenarios where something could happen that's not AI related that could trigger one of those. I was reading an article in the Wall Street Journal today about uh expats, the number of uh Americans that are retiring abroad is just increasing. And it doesn't really have anything to do with AI. It doesn't really have anything to do with immigration policy. It's just sort of like Americans are wealthy, the dollar strong, and so they find they want to go travel and the internet makes it easier to go live in a different country and hang out and you know stay on the beach. And so that number has been climbing. And so if that climbs a lot and people leave America but they stay employed and they leave before they're retired, like that could lead to lower unemployment because the labor pool is lower. There's a whole bunch of different things that could happen um that could adjust these things. Um but it's still interesting because I mean on the face of it, unless there's some weird alternative scenario, none of these would be particularly good. And uh fortunately, it's still uh sitting pretty low at just 11.6% chance but probably worth following. Let me tell you about Lambda. Lambda is the super intelligence cloud building AI supercomputers for training and inference that scale from one GPU to hundreds of thousands. Um uh some breaking news.
What else is breaking news?
Uh we this was sent to me by Jay Yarao uh formerly was at uh CNBC for quite a long time. Fortune is launching a daily business show according to Adweek. The latest in a series of publishers including the Guardian to do so. Mark Stenberg over at Adweek says this initiative is likely an attempt to imitate the success seen by other daily business programs such as TVPN.
Uh so if you want to make the Fortune version of TVPN, there's a role. Uh they're hiring a showrunner for a daily show.
Do you think they've acquired the tap water required to make that show work? Yeah, we got to bring we got to remind people that...
You want to remind people right now.
Yeah. So I mean, if you're going to clone TVPN or do something that's inspired by TVPN, uh we do have a terms of service. So, if you've ever watched the show, uh you've actually technically agreed to this and buried in the terms of service is an agreement that if you clone the show or copy a piece of the show or rip off the show or even are just inspired by the show, it's fine as long as on your first episode you drink a glass of tap water. Just one glass of tap water. Uh otherwise, like I think the gods might curse you and uh...
Yeah, it's really just a nod. It's a sign of... And also if you don't do it, you are legally required to pay us 100% of your revenue forever. Yeah.
Uh but that's like a minor thing. The bigger thing is the tap water. Just focus on that. Anyway, we have our first guest of the show in the green room waiting. Let me tell you about MongoDB. What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI, own the data platform that powers it. And without further ado, we have Sam. Welcome to the show.
Hi everyone. How are you doing tonight?
Thank you so much for joining.
Vacuum guy, how's your week been? Were you expecting to go this viral?
Well, not really because it's been like three days I make the I discovered the breach.
So, it's interesting is pop up now.
Wait, how many you said? Did you say two years?
20 days. 20 days. Okay. Break down. Why did you start hacking on your DJI vacuum? Give us the full kind of chain of events.
Okay. Well, I don't even try to hack it. Um it was just um let's say side project. Uh when I saw my little guy cleaning uh my living room and me playing uh on my PS5, um my brain just make some association stuff and I was like, 'Okay, what if I could uh drive my boy with uh my PS5 controller?' Yeah. So, what I did um I take the DJI app because DJI have a like official app called DJI Home. Um and I try to understand what's happen when uh my robovac uh move when it go straight when left and turn right. Change the data between my uh vacuum and DJI cloud and try to replicate it with my PS5 controller and after maybe 1 hour uh I have something uh working uh like I could drive it with uh my PS5 controller but I want to go like uh further like um if my little guy have less than 30% of battery I want to hear him cry. Right. So...
So I need to drive the battery status like the percentage of my battery. So I uh continue my reverse engineering of the DJI Home app and find out um like uh how to do it, how to ask about the battery status. I do it. But what I received uh is not like oh your robot is like 80% of battery. I got tons of data like a lot of battery status. I didn't understand. Um so I take this big chunk of data. It was a lot. Um I open my uh Claude Code send the file and just asking him like what's going on explain him what I trying to do. And if there's something I did wrong like why I have this data and he answer to me like okay um it's not just for the device there have thousand of others. So I take a little bit of time to process this well because it's AI of course I double check I try to manual read like my big log file um the data from the vacuum was sent back to me when I asked it about the battery status and yeah it wasn't just my device. So for me it was like okay I have a key my own user key let me control my robot. It look like my key I can open other doors than mine so my software the software I built to control my robot and also drive the full stream video and microphone from the vacuum. I have like some uh environment variable like the thing you can change just to make a software working with another device. So I have two stuff like here and the serial number of the device. So I was just like okay I just need to change the device serial number and put another one and maybe it's going to work. Um it happened that I have a friend who is uh as stupid as me to buy this uh vacuum and I just asked him his uh number. Yeah. So he gave it to me perform some test and yes everything work. I saw everything. I hear him and I can control him control his uh his robot with a really low latency which is great. And um so we was like a little bit shocked about what we saw. Um so I start to check um DJI program. They have one. Yeah. But everything is in Chinese when you go to the website. I was a little bit confused like it's just for Chinese citizen and even the reward it was in the local currency of China. So I just tweet about it like hey I'm not a Chinese citizen. Can I apply for? I didn't have like any answer. So uh I applied but in English to the program and um no one answer to me. Uh I was...
Like you weren't supposed to. That's not a bug.
So I was a little bit frustrated about it. So I start live tweeting about what I discover. I didn't uh show how I did. I just show some data I can have that I can retrieve from DJI cloud. Um they finally answer to me but just because I arrest them on Twitter by DM um and they say okay thank you uh we're going to check that and be back to you as soon as possible. They come back to me probably one day after um uh telling me, 'Okay, um we saw the issue and we fix it. Thank you for everything.' But they didn't fix the problem. Um I...
Wait, so by this point you have full access and control over 7,000 individual devices?
Uh to be more precise, it was 7,000 uh vacuum and 3,000 DJI power. Um it's like their battery pack or something like that and connected to internet apparently because I have access to it. Um but yeah, it was around 10,000 devices.
And how did you get the serial numbers for those again? Like uh I imagine that they've sold more than 7,000. So what made the ones that actually were showing up for you different than the ones that you couldn't access?
Can you repeat or raise it? Sorry.
So uh I understand how you had your serial number and your key which turned out to be the master key and your friend sent you his serial number and then you were able to control his robot vacuum cleaner. But if I have one of these and you don't know my serial number, how do you get access to it?
Unfortunately, DJI gave it to me uh without any keys. Like if I take my own user key and plug it to the MQTT protocol of DJI. Um I see everything. So I didn't have to guess the serial number of everyone. I just saw the data like clear. Um wow. Uh device X6X6X6X6X6X6X6X6X6X6X start cleaning for example and like yeah so I didn't have to encrypt or crack anything everything was clear.
And so oh sorry excuse me. No no no this is fascinating that uh that all of that data was just because that's actually two different vulnerabilities like one is the network topology and the other is the access key and you would expect that both would be locked down or at least one, but the fact that both of them were available to you is uh very disconcerting.
Yes. And so just after that, yeah, after I don't I'm not going to say they lie about fixing it and not fixing it, but they probably just fix some stuff, but not everything. Uh I was uh talking with The Verge uh who start to contact me when I live tweet him what I discovered. So we plan to do a demo and uh during the time we planned to do it and the real demo it's like two days happened and uh during this time DJI released another fix which work but like not really it's worked to I can retrieve anymore the camera uh the stream video I can retrieve the microphone uh from other users. It's like protected now. And during the demo, I still have access to all of others data. I still have access to the 3D map plan, Magma Pro plan, sorry because um this uh this vacuum have tons of sensors and they need like a 3D map of where you live to make sure you know where to go when you need to clean. So I got this I still got this data and uh yeah and the full telemetric system of DJI. Um we perform the demo with The Verge and one day after uh no more access to others data everything was...
What a remarkable story thank you for sharing it with us. Yeah how uh as like do you think that um how much confidence does this give you that like the DJI drones that they've sold millions of uh could have uh do you think they're more locked down or do you think this could be kind of a companywide issue?
I don't know. But that the last thing about this story um they still have two major issue. We decide with The Verge not disclose it publicly because it's kind of bad and I can't talk a lot about it. We try to play a fair game with the company. Yeah. Like okay we give you a little bit of time. We know this breach is not as easy to fix as the first one, but they still have two major issue. And indirectly, like really indirectly, you can still have um access to stream video from other users.
That's so insane. Do you know how many any idea how many of these vacuums they've actually sold? Have they published any of that data?
Oh. Oh, so they've only sold 7,000. I got access to all.
I was assuming that you had only gotten access to a uh kind of like a subsection.
Seems like you got them all.
They didn't separate a region. It was like a whole bucket like a bucket with the whole devices.
Product and there aren't that many out there. So uh absolutely wild stuff.
It's just insane. I hope that they're contacting customers who have them in their homes and letting them know that, hey, by the way, might have been spied on by anybody on the entire planet. It's a data breach. It's like they because unless they can prove that you were the first and only person to ever access to this and you didn't go further, uh then they have an unknown uh you know liability here that they should disclose. So uh we'll be very interesting to see how they respond, but thank you for uh the citizen journalism, the activism.
Yeah, it sounds like you're handling it in the right way and uh looking forward to whatever you discover next. We'll be following along. It's great to meet you.
Have a great rest of your day.
Cheers. We'll talk to you soon. Let me tell you about Phantom Cash. Fund your wallet without exchanges or middlemen and spend with the Phantom Card. And let me also tell you about Cognition. They're the makers of Devin, the AI software engineer. Crush your backlog with your AI engineering team. And without further ado, we have Kenn Ricci, the chairman of Flexjet here at the TV panel.
Hey, John. Hi, Jordy. How are you?
We've been looking forward to this. Thanks so much for uh taking the time to come chat with us. Uh I would love to start with your early career because uh do I have it right that you actually...
Served in the Air Force?
Yes, I went into the Air Force through the ROC program in the late '70s. Wow.
It wasn't that hard to get into the Air Force then. The Vietnam War was still active in people's rearview mirror, and I actually probably wouldn't have been able to go to college if it wasn't for the ROC program. So it wasn't that I had this strong desire to be in the Air Force, but I did love to fly, and it actually helped me get through college.
That's amazing. So, uh...
No, no, I was going to say, it was interesting. I always wanted to go to the University of Notre Dame, and I was going up for a visit, and I heard my parents β we lived in a very small house, thin walls β and I heard my parents talking about they couldn't afford it, and they said, 'Who's going to tell him we can't afford to send him to school?' So I went to my visit and I said, 'Is there any financial aid available?' And they said, 'Well, you kind of missed the window for that, but if you were interested in the military, you could go down and enroll in ROTC.' So I went down there on a Saturday that was closed, but I decided for whatever reason I wanted to be a Navy pilot. I'm standing at the Navy ROTC trying to copy down the number, you know, on the old rotary phones, and somebody taps me on the shoulder and they said, 'Can I help you?' And I said, 'Well, I'm an incoming freshman and I'd like to fly, and I'm thinking of joining the Navy ROTC.' And he looks at me and he says, 'You sure you've been admitted to Notre Dame, son? Because the Navy has boats and the Air Force has jets.' So, I'm Colonel Mhler. I'm head of the Air Force detachment. Why don't you become an Air Force pilot? And that's how I ended up in the Air Force.
That's amazing. Wait, so you were flying before college. What was the context of that? Or you were interested?
No, no, no, no, no. I learned to fly through what was called the FIP program, which was an instructional program through the Air Force.
Okay. And then, so I don't know how long you were in the Air Force, but it sounded like when you got out, you had the opportunity to buy a company for a very low amount of money. And I want to know the anatomy of that deal and go a little bit further than you've talked about before, because it sounds like one of the most fascinating deals that maybe doesn't happen anymore, or maybe financial engineering still exists like this. But I'd love to know sort of when did your business career start? What happened after you left the Air Force?
Well, you know, I always say that I never really identified myself as a businessman. I love to fly. I loved aviation. And, you know, people can go into business because they love business. And those guys could run a candy store. They could run an insurance company. I'm not that guy. I'm an inch wide and a mile deep. And I only know a lot about one very narrow section, right? And so don't ask me to give you advice on running a candy store, okay? But in my early years, I was flying for a charter company called Corporate Wings. Yeah.
And I got there because after the Air Force, I went under reserves. After the reserve assignment, I flew for Northwest Orient, where I was furloughed.
And so I started to realize, you know, being a pilot has a lot of insecurities. You know, at that time, remember that in the early '80s there's only 5,000 corporate jets in existence. You know, today we have 35,000.
And so the industry was small. It wasn't stable. And so the charter company I was flying for came up for sale.
And I called my dad at the time and I said, 'Dad, I think I want to buy this charter company. It costs $27,500.' And he said, 'How are you going to pay for it?' And I said, 'Well, they have $27,000 in the bank. So I'm thinking if I buy the stock, I'll just use the $27,000 and pay for the company.' He goes, 'Well, but I thought you said $275. Where are you getting the other $500?' And I said, 'Well, why do you think I called you?' So yes, you know, leveraged finance exists today. It just has a lot more zeros to it.
Yeah. But so when I heard that, it's a fantastic story. I'm just confused why a stock would be for sale so close to cash value. Were there a lot of liabilities that were coming down the pipe that you then had to generate the revenue to deliver on? Like it just sort of defies basic economic logic.
All right. So we're going to tell a story that's known to only a few. And the true story here is that in the early '80s there was an investment tax credit of 10%. And it came in cash. So you could buy a plane. At those times, a Citation was a million dollars. You got a $100,000 tax credit.
And Corporate Wings at the time was actually called J&J Aviation. And they had King Airs and two Citations that were on investment tax credit, but they didn't exist. The owner of this company, a guy named Jeff To, created a fraud around the existence of these planes. I was flying the King Airs that was in another β I mean, I didn't know anything about it β but the dispatcher at that company, when the fraud became unveiled and everybody headed for the hills, the dispatcher of the company I was friends with, he said to me, 'I can't run a company because I'm a dispatcher. We need somebody that could fly, make the customers feel comfortable.' So the deal was there because the company was done. And so that's why that situation was unique, but few people know about the Citation fraud. So that's really how it evolved. We changed the name from J&J to Corporate Wings, and that's how it began.
So a lot of hair on the deal, but some decent customer relationships and probably some decent employees that could actually fly what assets remained after you cleaned up the corporation. Right.
So we had four airplanes. We had two King Airs, a Navajo, and a Cessna 421.
Shortly thereafter, the King got worried and they left. Yeah. So my business was a grand total of a Navajo and a Cessna 421 for you old-time pilots out there. But by the way, I thought I died and went to heaven, right? I mean, I had a business. I'd go to the hangar on Saturdays and polish the nacelles of that Navajo. I was so proud of that airplane.
That's amazing. So then talk about the scale up, because obviously you have a massive footprint in business now. But what were the key steps along the way? What were the key turning points for you?
Well, I'd say the key turning points were in the mid-'90s when Fractional was evolving and I had this nice charter company. Yeah. Maybe 20, 25 airplanes at the time, but saw Fractional starting to steal market share in a big way from Charter because of a consistent level of service, the fact that they could run one way. In those days, charters were always out and back. You paid round trip for the aircraft. So I kind of saw the threat of Fractional, and that's when I came up with the idea to form Flight Options. And Flight Options' idea at that time, nobody had done Fractional with used aircraft. They'd only done it with new aircraft. You had Citation shares with brand new Citations. NetJets was working with Hawker and Citation at the time.
And how would it work? How would it work mechanically? There'd be basically somebody would say, 'Hey, I'm going to buy this jet. I'm going to cut it up into eight pieces or whatever.' And then what, did they effectively crowdfund it? Like everybody had to come together at the same time. How did that actually work?
Capital, you know. You know, I'm sorry, Jordy, but there was no internet at the time, so crowdfunding.
No, no, I meant like... Yeah.
Yeah. Throw a jet up on Kickstarter.
No, but you hit on the key issue. Yeah. You couldn't start with one jet. Yeah. You had to have enough jets that people would buy a share because they could catch on very quickly. If four of us own a jet, you have to have at least four of them in case we all want to fly at the same time. So you had to get to the point where you had a minimum number of aircraft. And in 1997, I was out trying to raise capital for just that. My idea was to start with 12 aircraft. They were going to be used Citation IIs and used Hawkers. And at the time I needed $12 million of debt. And I went out to all the debt sources I could get. I had my great presentation on. I had my shirt and tie and blue suit, and I went to all these places and nobody would give β I mean, in the end of the day, I think we raised like $10, $2 million based upon having that much money in the bank. It was ridiculous. But this was in late '97. Then in 1998, Warren Buffett buys NetJets.
In June of '98, he buys NetJets. And my proposal was literally on everybody's desk. And from June of '98 till August of '98, we came away with over $200 million of financing. General Electric, Boeing Credit, Commercial Credit Corporation, Bombardier. And so all of that was β it was actually in some ways Warren Buffett that got me into the business because he bought NetJets. He christened the industry and allowed my proposal to have meat to it. So that was really β we went live with Flight Options in November.
Needed somebody to legitimize the industry, and then people looked at your pitch and they were like, 'Hey, this guy's a pilot. He's got all this operational experience. He knows how to work with customers. He's actually a solid bet in the category. He's in the right market.' Yeah. Yeah. How much β there was a massive amount of wealth creation in the late '90s. Did that β how much of that, just in the kind of internet boom, did that play into just like a lot of new demand coming in, or was that not a factor?
Oh, unbelievably a factor because we tended to be with the used aircraft. We had the same model. It's just the buy-in was lower because a brand new Citation was $8 million, but a used one was $2.4. So we had the same model, just the buy-in was lower, and so it became very entrepreneurial. It became β new money was interested in it because they were conserving capital. I can remember there was a company called Internet Capital Group, and they were in the late '90s, and they had an annual meeting in Philadelphia, and we sold 30 shares at that meeting because everybody was instantly wealthy there. And then of course, you know what followed that, right? The dot-com bomb came, and then in 2001 it just went away.
Yeah.
And so was that crash hard for your business? How did you get through it? I mean, with leverage, it feels like there's always a risk of just actually total capital collapse, total loss. How do you weather the various storms that you've faced throughout your career?
I've been through four, and every one has been different. Okay. But that one, because the industry was still in its infancy, there were a lot of other β there were, you know, at one time there were 55 startups in this area. If you remember, United Airlines had a startup in the space at one time. So I weathered through it by finding a merger, right? As people were moving away and the business was shrinking, find somebody else in deep doodoo and then merge with them, right? And then create a new story. Yeah. So that was really β and in that case it was Travel Air, which was a division of Raytheon, and that was the merger we did to come out of the dot-com bomb. But yeah, you're right. I can remember like we came into it combined with 200 aircraft and came out of it with like 120.
Explain the dynamic of the buyout with Raytheon. It was a very interesting dynamic. I was not familiar with this particular process, but explain the economic mechanics, how the bidding worked, the results, because I've never heard of that before and it's fascinating.
Yeah. So it's a term called shareholders' roulette. Yeah. Yeah. And it's used often in a company where you have 50/50 ownership. And what it simply says β because normally if a company has a buy-sell agreement, and those buy-sell agreements will say something like fair market value determined by three independent auditors, and if you're the seller in a pinch, you take a 15% discount. So it normally defines the process of valuing the company. But when you have two 50/50 owners, one person just simply goes to the other person and makes them an offer to buy and to sell at the exact same number. And then the other party chooses whether they want to buy or sell at that number. So it forces you to a fair number. And if you remember, Raytheon didn't want to be in that business. They're making missiles. So it never occurred to me that they would ever want to own the business. But what I did was I got the business underwritten by a private equity firm, Warburg Pincus. We underwrote the business at that time at $360 million, and I went to Lexington, Massachusetts with my $180 million buy-and-sell offer to them, thinking, look, they had a business that was going broke, right? I gave out $180 million. I thought Raytheon's going to erect a Ken Ricci statue in Massachusetts. I brought him this $180 million, right? They thought I was cheating them. They thought it was too little, and they bought me out.
Wait, and the business at that time β you said it was losing money, or you're saying the business...
When we merged. Yeah. When we merged, their business was losing money. We were maybe making 6 or 8 million. And the combined β you know, the economies of putting them together, right-sizing the fleet, back office β we thought we had a projection for about $30 million. And just to show you how times have changed, it was based on that $30 million projection that the multiple came out, and that's how we got to the valuation.
That's still 12x EBITDA forward number. There's a lot of risk there. That's crazy that they took the deal.
Are you kidding me? Of course it was crazy. I didn't get it. And you know what? It was the worst day of my life because I didn't want to be out of the business.
Yeah. So you have to make this buy-sell at 180. You're ready to buy them out, and you can't β then you wind up getting bought out. But there's no walking it back. It's like it's over at that point. They just called your bluff.
You deliver them two letters. One that says I will sell to you at $180 million. One says that I will buy from you at $180 million. And they pick one and sign it.
You wish you were like β I wish we did a duel, like a proper duel. It's remarkable. So I mean...
You know what? In some ways, it absolutely turned out to be a blessing, but you never see that in real time, right? I can remember those days. I felt like I'd lost my child. I mean, it really was. But in reality, because I had raised money along the way, I only owned 16% of the combined entities. So my buyout β I got 16% of the 180, and then we bought that company back from them in 2008.
So that was like five years you were waiting.
It was, yeah, almost six. But by the way, I bought it in the middle of the 2008 financial crisis. Yeah, we bought it back for $130 million. So we bought it back at 30 cents on the dollar.
What did you do? What did you do in that window? You just twiddling your thumbs?
Well, I don't have that twiddle-your-thumb gene. I actually began a disastrous process, which leads me to much pain these days. I began to roll up the FBO industry, and I started by buying β I partnered with a company called Allied Capital, and we bought the Mercury Air Centers, which were primarily in California. And we started that in '04, and we sold that company to Macquarie, which was Atlantic Aviation. We sold that to them in 2007. And it's painful because you wish you held on. You wish in hindsight you didn't sell. Well, what I was going to say was that we were buying them at six times, and we were one of the first transactions that traded at 15 times. Now today, the FBO industry is trading to private equity well north of 15 multiples. And what are they doing? They're raising the fuel prices to people like us to fund the acquisitions of what I started. So it comes back to roost.
You mentioned four key crisis moments, four financial crises that you've soldiered through. Obviously one of them, the housing, great recession, another. What were the other two?
So in the great interest rates of '84, when I remember doing proposals to buy an airplane at 21% interest rate. We had that huge interest rate issue in the early '80s.
Did you have any adjustable rate loans at that time? Or everything prior to that was fixed and you were just having to work off of the 20-some?
Well, it wasn't that I had any debt really at that time. We were, you know, Corporate Wings was more of a management company. I needed people to buy a new plane so that I could run it in charter and become the manager of it. So I had to make a proposal, and they said, 'What's my cost of capital?' And I would say, well, the going interest rates are 21%. So that was tough on the industry. And then Gulf War I in the early '90s, when we hit Gulf War I, the sale of new aircraft came to a standstill during that crisis. So I would tell you high interest rates, Gulf War, dot-com bomb, financial crisis.
How is the aviation industry doing today? There were some folks asking about eVTOLs, automation. There's tariffs and depreciation schedules are changing. It feels like a time of transformation, but I don't know if that's just what it looks like from the outside.
