America's got to rebuild its entire infrastructure like right now. We don't have enough rare earth minerals. We don't have enough electricity. We don't have enough manufacturing capacity. Nvidia will make enough chips, but then we won't have enough memory. Almost everything is the bottleneck.
The China graph is like this and the US graph is like that. How do we make this seem less scary?
The history of technology is things have always gotten better. Humans are kind of unbelievable in their ability to come up with new things that they need. Now 8 billion people that might have an idea in their head can get it out of their head. I do think what's going to happen is...
So you've been doing this for a long time. I thought maybe I'd start off, and it's funny we actually didn't rehearse this at all because I thought that way it would be more real, right? More unique. Let's talk about, you know, you have this book where you talked about how hard it is to be a CEO and everything that you went through at LoudCloud and Opsware. That was a giant shift where the market kind of collapsed. The financial market collapsed.
And you had to really pivot and just change the company. And what do you think there are new age companies that are popping up right now, AI first, it's like they hopefully have their together. They're off to the races building something new. But like a legacy company or five or 10 years ago where there's this great opportunity but also great challenge, like what does a five or 10 year old CEO do where it's like they're pre-AI?
Yeah. So they got to figure out what they do. Financial markets hate them.
Yes. So there's the financial market who you are. So I don't know, maybe riff on that. I'd love to hear your thoughts.
Yeah. Well, I think the first thing you have to recognize in a kind of huge dislocation like this is that some very basic axiomatic laws of physics are different. And the two that are really different with AI compared to how companies have been built in technology forever is one, it used to be very well known that you cannot throw money at the problem. So, for example, if I had a product and I was two years behind, I could not hire a thousand engineers and catch my competitor. Like, it's a mythical man month. Nine women can't have a baby in a month. Everybody knows that. It never works. That's no longer true. You can throw money at the problem. If you have enough money and some good data, you can buy enough GPUs and solve basically anything in software. So that's gone.
The second thing that we knew for sure is like in software, possession is nine-tenths of the law. So if you have the customer, you have multiple lock-ins. You have the migration pain lock-in, you've got the data lock-in, you've got the user interface lock-in. Those are pretty much gone, right? So, it's very easy to replicate the code. It's very easy to move the data. And then it's not even going to be a human talking to your software. It's going to be an AI. And AIs are really flexible on how they use user interfaces. So, that mode is gone. So I think that's just the first thing you have to recognize as a CEO that okay, that's going away. So then where is your value, what are you delivering? And there it turns out there are many things that are of value. But if you're trying to get good pricing through any of those things you're going to be under tremendous pressure. Your price has to be a function of some other value that's much more distinct that you provide.
Got it. And the other thing that we've talked about this a lot internally as a firm is that once upon a time you would just have maybe if you have a good product, you might have 10 years to run with that product, maybe five years, and now it might be like five weeks. Well, we also talk about this in terms of going public. So, companies are staying private a lot longer.
Which probably is good if you're going through an existential crisis. You'd much rather do that as a private company than a public company. But also, the reason why the SaaS apocalypse is happening is because there are doubts on terminal value.
Yeah. Right. So, everybody who starts a company, they're doing it because they want to create economic value. They're capitalists. They're trying to actually benefit from this equation financially. But if you wait too long, maybe your company is worth zero. That's kind of scary. And that was always a risk, but it would play out over decades.
Yeah, it's not as fast a risk. So I guess what do you, if you were, I mean LoudCloud's around today. You're the CEO and again bad example. Sorry. Sorry to give you...
Very scary. I know. I know. Although actually LoudCloud would be like... actually data. Yeah, exactly. You would be very well positioned.
But I guess what is it that a CEO should do potentially differently? I mean, obviously move faster, cut faster, be more efficient, throw money at like all these things that we've talked about, but it's like if I don't go public, if I go public and I get disrupted, then I have this terrible life of I'm going to be a penny stock. If I just wait, there's this chance that I get eviscerated and this kind of like roadkill success equation is kind of scary, right? I mean, it's always scary, but you would have time and now it feels like you don't.
Yeah, I think you do have to be honest with yourself on what it is you have really. And there are companies that get thrown under the bus correctly and ones that don't. And then look, if you take a lot of these ideas to their logical conclusion, then nothing is worth anything because there are no people at companies and if there are no people who's going to buy your software. So like, it is more subtle and it just tends to take much longer than we think for some of these things to play out. So then the question is are you getting stronger in that meanwhile or are you degenerating? So is what's happening? Nobody's buying, the money just shifted. The customers are buying other stuff. They're not buying yours. In that case, you have a huge problem. You probably have to cut deeply and pivot.
On the other hand, look, there's companies that have been slaughtered in the valuation game. But are pretty strong. So I'm on the board of this company, Navan, right? And they're travel. So obviously the SaaS apocalypse, they're dead. No way you're doing travel. But then you look under the covers and you go well it actually is a little more complicated than that because on travel you actually need explicit relationships to, if I'm providing your travel and you're any kind of company that's important at all you need to travel globally. So now I need a relationship with every single airline in the world, every single hotel in the world, every train, every everything. You got to deal with that. You've got to connect back to their budgeting systems and all these things.
And then the second thing that's like nobody wants to do, including OpenAI or Anthropic, is sell to the damn travel manager. Like nobody has a channel to the travel manager. It's just not some like and you can't even imagine that being a good idea. You want to keep advancing. You want to do the things that Navan is doing where okay, turn ourselves into more of an AI company. And then hold the customer. And by the way the AI, the agentic travel experience turns out to be much more complicated than one would think. And I don't know if it stays that way but that's the way it is today. So I think it's very company dependent. I don't think it's all one thing, but I do think Brave New World and if you keep looking at it like the old world and it's got completely different laws of physics, you are definitely going to die.
Yeah. Well, maybe let's talk about venture capital.
There's a lot of cope going on now too. So you got to be careful with that.
Well, that's the thing. It's like there are some things that really are features and before it would take a long time to build a feature. So you might as well, it's comparative advantage. David Ricardo, I could weld my own steel. I could grow my own food, but I'm just going to not do that because I can do things that actually produce more economic value for me. But now it's just becoming not that hard to go create features, but features are not products or not companies. And we've always had this distinction. There's feature, product, company. But it's a little bit confusing figuring out which one is which right now just because the ability to create a feature and create a product and even get all of the data. You know my favorite saying the best companies have hostages not customers, like even get some of the data out of the hostage company.
Yeah. So it's a very confusing world in terms of figuring out which one is which which is kind of maybe a good segue to venture capital land of how do you think, I mean when you started this firm in 2009, big financial crisis actually very big financial crisis global financial crisis going on the biggest...
The world has changed a lot since then. I mean how much of what's happening today kind of fits within the mental model of back then and how much is kind of brave new world? Maybe riff on that a little bit.
Yeah. So it's really different. So our first fund was $300 million. And we raised it from all the traditional kind of LPs, endowments, charitable foundations, etc. Fund of funds. You know, we just raised 15 billion dollars for four of the seven funds. Four of the seven funds. So like not even the whole complex. And we raised it from very, very different kinds of investors. So, basically none of our LP base was international when we started and we're at like 35% international money and it's from all kinds of places. So, and just tech has gotten so much more important. I think that we have to think in terms of the world in a way that we just didn't before.
So, for example, why'd you raise so much money? Which by the way, I'm kind of mad at myself because I don't even think I articulated internally well enough because we could have raised even more money next time. Don't worry. Yeah, we had more money on the table. But the way I was thinking about it is look, America's got to rebuild its entire infrastructure like right now. Because we don't have enough rare earth minerals. We don't have enough electricity. We don't have enough manufacturing capacity. We have the wrong chips. Like they take way too much damn power. They were built for games. We don't have enough anything to be in this future world. And somebody's got to fund it. And clearly that's going to take a lot of money. So, all that is brand new and I would say it's fairly overwhelming in a sense, but it is really, really important. Like we're pretty much out of electricity now in the United States. Like not 12 months from now, like right now.
The China graph is like this and the US graph is like that. The demand for these tokens is straight vertical. But the ability to build that capacity is absolutely not vertical. So we need new, I mean we invested in a transformer company not like an AI transformer like an actual power transformer company because you need better, easier to manufacture, more efficient transformers. And the transformer hasn't changed since really we invented electricity. So like these kinds of things.
Well, I guess how so there's an old saying, the cure for high prices is high prices.
But the problem is there's a lot of latency involved. So right now, there are computers that show up with no RAM.
Like if you buy a server from Dell, they're like, 'Sorry, we don't have any RAM to sell you.' Because all of that has been gobbled up. Because yeah, they could build a new factory or you and I could decide to go build a DRAM factory. That would take us 5 years.
Yep. So how do you, I mean, and we don't believe...
Yeah, you got to start now. But this is actually if you remember which you obviously do 1999 it's like well we have to build more fiber right we have to build more capacity but it's obviously very different because all the GPUs are hot they're all lit right now.
And back then most of the fiber was dark.
But how do you get like...
Yeah well there were bottlenecks when we were building fiber the bottlenecks were kind of in different places so...
You know we like the servers weren't capable of putting bits out even fast enough to do video, right? And the software was really, we didn't have load balancers, we didn't have application servers, we didn't have anything. And so you had all this fiber and all this bandwidth, but you couldn't actually build the applications and then most of the end users weren't, it's a network too. So people weren't connected on the other end. So it just didn't work and then we had the dot-com crash and all these things.
So now we're in a little different place because almost everything is a bottleneck. I do think what's going to happen is like we'll probably have enough chips long before we have enough electricity. So Nvidia will make enough chips. But then we won't have enough memory and we won't have enough electricity. So we're in that kind of situation now. So I think you really have to study where we are at each point in the supply chain and figure out how to alleviate those bottlenecks. And by the way, God bless Elon, the Terrafab. That's the idea. He's going to just go deal with all the bottlenecks himself. Which is how he does things, which is why we need him.
Indeed. So I feel like you're an expert in three things. Hip-hop, AI, and crypto. And I don't know anything about hip-hop, but I've heard a lot from you, but let's talk about the other two. In particular, crypto and AI. So I actually just wrote about this. I mean, you remember the origins of crypto was hash.
And the scariest thing right now from my perspective is that everybody with Claude or with ChatGPT can actually go super deep and personalize a phone call, an email. Like seems like all communication is going to be completely unusable.
