Coinbase Cuts AI Spend by 50% | Kalshi's $40B Valuation & Impending IPO | The Year for SaaS Roll-Ups

1. 0:00 – 0:57

   Intro

   1. JLJason Lemkin0:00

      I am getting burnt out on struggling CEOs on Twitter sharing performative AI data when they're not AI companies. Like, show me the money.

   2. RORory O’Driscoll0:08

      If you can be the largest tech company on the planet and still not make money, you might have oversized your ambitions a little and it might pay to come back a bit.

   3. HSHarry Stebbings0:16

      This is 20VC with me, Harry Stebbings, and today it's my favorite show of the week. Rory O'Driscoll, Jason Lemkin coming together to discuss the biggest news that's happened in the last seven days.

   4. RORory O’Driscoll0:25

      Software companies in the age of AI are either accelerating or irrelevant.

   5. JLJason Lemkin0:29

      AI is gonna be like the oil situation in the Persian Gulf today.

   6. HSHarry Stebbings0:32

      This is the only podcast that you need to listen to every week to stay up to date on what matters in tech.

   7. RORory O’Driscoll0:38

      Poor old Warren Buffett is like, "It's time for me to die 'cause you people have lost the plot."

   8. JLJason Lemkin0:42

      As we record this, greed will still trump fear, right? Ready to go?

   9. HSHarry Stebbings0:46

      [rock music]

2. 0:57 – 7:09

   Coinbase Cuts AI Spend 50%

   1. HSHarry Stebbings0:58

      Boys, it is the holiday edition, baby, coming to you from the British Riviera. Um, I'm looking forward [laughs] ... I always say this is, like, you know, the UK's Saint-Tropez, and then people look up for Intananci and they're like, "Huh." Um, Americans don't get the British sarcasm is my lesson from-

   2. RORory O’Driscoll1:14

      Yeah, I get the joke, Harry. I've-

   3. HSHarry Stebbings1:16

      Uh, we have, we have a lot of news today. I wanted to start on what I think is probably one of the biggest topics of the day, which is more a ma- macro topic or meta topic, but it was brought to light by Brian Armstrong on Coinbase, which is Coinbase spend down 50% this quarter, but usage up with regards to how they're utilizing open source, and that's taking away from their Frontier Model usage. How did we read this? Is this the new normal? Is this a frontier company with a frontier founder doing frontier things in terms of switching so efficiently? How do you read this?

   4. JLJason Lemkin1:51

      I have a lot of thoughts, but, um, I've ... And this got so much traction, right? And I think it's an important topic, but I- I'm just getting burnt out on performative social media from struggling CEOs that aren't in AI companies trying to act as if they're at the bleeding edge. I'm, I, I really don't care what a lot of these CEOs think about the performance of the latest LLM on their boring, old, pre-AI-

   5. RORory O’Driscoll2:15

      I get the graph 110%, so it's worth it

   6. JLJason Lemkin2:18

      ... SaaS or, or a crypto company. But man, I'm just ... Enough of the crap from Brian Chesky and Arm- I mean, these are generati- generational founders to use Harry's words, but I'm just, it's just performative. Like, put the numbers up, boys. Sorry we're in a crypto winter. Sorry Airbnb is still below its IPO price. Go do something about it. Go fucking do something about it. I've had enough.

   7. RORory O’Driscoll2:40

      I, I'm in a totally different place, right? So, um, because I actually thought it was a really great piece and, and in one sense-

   8. JLJason Lemkin2:47

      It was, but-

   9. RORory O’Driscoll2:47

      Hang on, let me finish. In one sense, let me agree with you in one sense. It's precisely because in the continuum from frontier amazing AI company to boring, stodgy corporate America, Coinbase is now plus or minus in the middle. This is your point. It's not a, you know, it, it's four or five year old since been public. It's, it's not a bright, shining frontier AI company, which is what makes the piece so good. To me, it was like a, just a common or garden tech CEO saying, "I was spending X a year ago. It exploded in the last five, six months, primarily because of the ability to do cogeneration, and I got to grips with this thing and I reduced my spend by 50% in the last two months and here's how I did it." Right? It's precisely because it wasn't some frontier leading company that it makes it more relevant, 'cause I think every single company spending $50 million, $10 million on Claude is gonna look at this and say, "If we haven't done all these three things in the next month, someone's head's gonna roll." It's cost management 101. But what it's said is, in the space of two months by getting to grips with your spend, you can continue to innovate, continue to generate more tokens, but cut your spend by half, right? Uh, so I thought it was a really great piece.

   10. JLJason Lemkin4:02

       It is. It's just Coinbase fell, uh, minus 30% was its last quarter.

   11. RORory O’Driscoll4:07

       Yeah, but if those ticks are on target-

   12. JLJason Lemkin4:08

       No, I'm not disagreeing with you. I'm just-

   13. RORory O’Driscoll4:10

       Oh, no. Those things are on target-

   14. JLJason Lemkin4:11

       And I think the graph and the chart were great

   15. RORory O’Driscoll4:12

       But watch

   16. JLJason Lemkin4:12

       I'm just burnt out.

   17. RORory O’Driscoll4:14

       No, but watch

   18. JLJason Lemkin4:14

       I want a leader doing this. I want a leader doing this.

   19. RORory O’Driscoll4:16

       Watch about this. What about an even shittier company, and you know we got lots of shitty. Like, you pick on, if one of the manu- if one of the automo- motive manufacturing companies, which are fundamental business challenges, also did the same thing and said, "We were spending 100 million on AI, now we're spending 50," it would be just as relevant. I don't think, and in fact I would argue it's precisely those companies that are under cash pressure and earnings pressure that are gonna get their shit together on not spending too much money on AI, which is why it's more im- And that, frankly, that's most companies. Very few companies have the luxury of a venture-backed AI forward startup that can say, you know, "Just get this done no matter what." Most companies have cost discipline and-

   20. JLJason Lemkin4:53

       Is optimizing your LL spend really gonna help if your, if your revenue is shrinking minus 20 to 30%? I just don't see it's gonna, like, reignite growth in, in your, in your crypto time base.

   21. RORory O’Driscoll5:03

       Well, he didn't say it's gonna ... Again, you're just, you're just being a grump guy. He didn't say it was gonna reignite growth.

   22. JLJason Lemkin5:07

       No, no, no, I think it's a s- Harry asked what we thought. I think it's a sign. I think the data is valuable. Like, l- let's move on, right? I think it's great, but I am getting burnt out on struggling CEOs on Twitter sharing performative AI data when they're not AI companies. Like, show me the money.

   23. RORory O’Driscoll5:23

       I don't think-

   24. JLJason Lemkin5:23

       Show me the revenue growth

   25. RORory O’Driscoll5:24

       ... the revenue growth. I'm gonna argue again, I think it was a fact b- I actually really liked it 'cause it was a fact-based piece. And by the way, you know, it just showed, "Here's our spend by month, here's our tokens generated by month, here's our peak, and here's how we were able to clip 50% off it," right? Let me put it this way. Rather than arguing with you, Jason, which is usually not productive for either of us, I'm willing to bet that every single CFO in the Fortune 500 sent some version of that article to their CIO and said, "Dude, look what this smart guy in the Valley is doing. Figure your shit out Right? So I think actually, let's leave Coinbase out of it. Let's pretend we don't even know the name of the person who wrote that article, right? Let's ignore it. I think the really interesting question is, what does this mean for, you know, revenue traction for, you know, the hot, sexy foundation models, right? 'Cause I was looking at the numbers, and one says, "Oh my God, you reduced your spend by 50%." That's terrifying if you're the company getting that revenue. On the other hand, the positive spin, it only went back to the spend they were doing in, I think, November. In other words, if you look at it, the, basically, all that happened here was all these companies were spending and growing pretty aggressively in terms of their spend with probably Anthropic and OpenAI, and then in November, December with coding, it exploded. It took about five months for everyone to get their shit together and say, "We can't be doing this. Let's cut the burn," and then they figured out and, and kind of reduced it by 50% back to roughly the spend in November. Now, the interesting question is, does that imply, and I'm not saying it does, to be clear, does that imply that, you know, Anthropic, which last year exploded from one billion run rate at the start to nine billion at the end to 44 billion mid this year, you know, the... I'm not saying this, but you could say, "Oh, are you saying that their revenue's gonna go down by 50%, so they're gonna be at a 22 billion run rate?" I'm not. But it's gonna have some impact on the growth rate.

3. 7:09 – 11:16

   Is Open Source Killing Frontier Model Revenue Growth?

   1. RORory O’Driscoll7:09

      And that's the inter-

   2. JLJason Lemkin7:09

      I think so.

   3. RORory O’Driscoll7:10

      Yeah.

   4. JLJason Lemkin7:11

      I think there's two, two issues here. One is it, it sharpens the question of does the rise of open source and others actually gonna impact the growth of the frontier models more than we ever predicted? That's a big question, and I'm gonna say I don't know on June 30th. It's easy to say that. We could point to a lot of data. I, I think maybe that's the topic here. I think there's a second point in the, that, where Coinbase was really helpful. It's the, like, the less, uh, dramatic version of what I was saying. I do think there's a second point that the post made that people maybe missed, which is that as we round into the second half of '26, folks are realizing they radically ramped up their AI spend on product. It, it, it seems to have worked subjectively, qualitatively, but the productivity isn't there to justify it. I think that's what Brian was really saying. He wasn't, that, the data didn't say it, but he's like, "Listen, if, if we had shipped so many new products to Coinbase, if our product velocity had quintupled because our token spend quintupled, I'm all in." Like, if that flipped him around from -30% growth to +30% growth, I don't think we'd be, uh, we, he might have still done what he's doing, token routing a model, but he wouldn't be p- making this point. I think if you look across even any of our port- many of our portfolio companies that are doing well, that are not purely reselling tokens, they're coming to the conclusion that, "I'm not quite sure what the hell I s- I know I want us to do this. I can't put the genie back in the bottle. AI is great, uh, but it's not lines of code. What the hell..." And, and so many folks are not seeing the, the lift from net revenue, net productivity they thought from agentic coding. It, it's almost a conflict, but it's something we're, that we're all gonna have to deal with in the second half. And it's not the same as cutting costs. It's saying, "Jesus, I spent an extra 10 million in the first half of the year, and we grew the same as we did the prior two quarters. Like, where's the lift, boys? Show me, show me the lift," right? And, and, and there's, and CFOs are struggling with that, too, even if the bus- my point is, even if the business is doing well, they're struggling with it now.

   5. RORory O’Driscoll9:13

      Yeah, depending on the company, [coughs] this AI spend on engineering, if you're a software company, it should credibly give you lift, revenue lift, 'cause you're making more... The s- the thing you make is software, you're making more software, you should get more revenue lift, or if you're a digital goods company. So you're right, Jason. If you're Coinbase, you're like, "I'd like to have seen revenue lift here," right? I think it's even applicable for companies, the further you are from a digital good, you know, silly example, if you have a tech team and you're, um, a car manufacturer, going back to it again, you're not gonna get a whole ton of lift from your extra software unless you're Tesla with FSD. But at a minimum, you should be seeing savings. You know, if you were spending 100 million on software and now you're spending 10 million on tokens, at a minimum you should be seeing savings. And if you're not seeing either, you're gonna be looking at this with a pretty jaundiced eye.

   6. JLJason Lemkin9:59

      Yeah.

   7. RORory O’Driscoll9:59

      And I think that's what's happening.

   8. JLJason Lemkin10:02

      Yeah, I have a portfolio company that, uh, that is e- every number, software company, every number is green, right? Uh, way overloaded with investors, way overloaded with everything, hit the first half of the plan. Everything's great, right? You would love all, all the numbers. Uh, but at the last board meeting, they came in and wanted to double their token spend, which was massive in the first half of the year. And it was enough to, to move the burn from no big deal to-

   9. RORory O’Driscoll10:26

      Big deal

   10. JLJason Lemkin10:26

       ... even, even for a company in the top p- half percent, even folks were like, "That's a lot of extra budget." A- and the feed- for the first time, the board was like, "Ok- okay, but if you want our approval, like, tie it to ROI," and this amazing team couldn't. They c- they couldn't. Like, the v- velocity is everyone wants to invest, but it didn't directly tilt the curve. So there is a point for even the highest flyers where you're gonna say, "Jesus, you gotta, I gotta see the ROI." And I think that's the big... That's just time, it, you know, we went into token maxing, where, like, everyone just tries stuff. That made sense, right? Um, and that led to the early folks that got whiplash, like Cursor having to go open source really early, and that's an interesting niche issue on X, but the real issue is just, um, we just can't show enough lift from this spend that it's gonna stress even the best of us, not just Coinbase.

4. 11:16 – 17:22

   Token ROI Crisis: Nobody Can Show the Lift From AI Spend

   1. JLJason Lemkin11:16

      It's gonna stress everybody, and so be it. It's ti- it's time for the next mature phase of token spending and software development. It's just time, boys, [laughs] to, to grow up, right?

   2. HSHarry Stebbings11:25

      If you, if you're an Anthropic shareholder, though, and you see Dario say, "Hey, we need a trillion dollars in revenue, or close to, for this business to be viable, or we will be bankrupt," maybe he says it kind of superciliously or glibly, but, like, he says it, and then you see the dominance of open source now pervading into a lot of usage, you have to be concerned that it will cannibalize that pathway to a trillion in revenue.

   3. RORory O’Driscoll11:47

      Uh, you, at least some concerns which will se- yes, I mean, which will segue to, one, it's gonna be in part our discussion next on distillation and And Anthropic's perspective on these open source companies stealing their IP, as they would say, we will leave the irony for a later discussion. But yeah, I mean, it is plausible that you have a world where the front... Remember, even if the bulk of the tokens are generated using open source models, it is plausible that the bulk of the revenue will still obviously come from state-of-the-art frontier models, right? So but the quest- and therefore, there's clearly a very big business here, right? And it's, and that's all great. It's to your point, Harry, if you've constructed your world in such a way that only a trillion dollars is good enough, and you end up with the consolation prize of half a trillion dollars, right, which is still, you know, the largest company, I mean, I'm just trying to think here, either the second or third largest company by revenue on the planet, and it would be the largest digital company on the planet. If that's, if you can be the largest tech company on the planet and still not make money, you might have oversized your ambitions a little, and it might pay to come back a bit. And that's exactly right, is that there's no, nothing in this Coinbase memo or a hundred Coinbase memos says, says, implies anything like, "Oh my God, these are not going to be amazing companies with great products that have differentiation." It's just, as you say correctly, if you've built a cost structure and a CapEx spend that you need it all, then the last thing you need are cheap open source alternatives at one-fifth the price.

   4. HSHarry Stebbings13:16

      Before we move on to Anthropic's perspective on distillation, Jason, I, I love you, my friend, but what do you want from these CEOs then? Like, candidly, he's being very factual and innovative in how he's presenting-

   5. RORory O’Driscoll13:31

      Yeah

   6. HSHarry Stebbings13:31

      ... what the company's doing. Like, what do you want from him? To just shut up and do the work, it seems like.

   7. JLJason Lemkin13:34

      I want to see how AI... Listen, I value the data, okay? I'm not, I'm, I'm, I'm, I'm not being facetious. I do feel this way. I value the data, so I appreciate that. But I, I want to see how AI, I want to see how AI, if at all, can give Coinbase a, a revenue lift. That's what I'd like to see. Even if it's just them... I mean, listen, Coinbase is subject to the whims of the crypto market, okay? And, and investors should understand that. And when crypto roars back, Coinbase has grown at rates that, uh, are almost Anthropic levels for brief periods of time, right? So, so it's part of being on a non-recurring revenue journey in a very volatile market. But I'd love to see how growth is 5% higher from, from AI, AI something in crypto. I'd love to see how it's driving up insurance premiums and insur- I mean, insurance margins. I just want to see how, where this, where this, um, magical boost is from, from this utility. The LLMs are a utility, right? They're tokens. They're, they're, they're not fungible utility. Like, we're, we're kind of teasing at whether they're becoming fungible utilities, right? Is one token replaceable for another is the meta issue. I just want to see a boost. I, I'm tired of folks like Adobe saying, "We have 500 million of agentic revenue," and missing the quarter. That's performative, too. And listen, what would I be doing if I was the CEO of a company not accelerating the age of AI? Man, I might be doing the same, but I don't respect it. [chuckles] But I want to see the real boost. I... Everyone's faking, everyone's feeling like they have to be part of the AI age, but they're not delivering, Harry. They're, they're not delivering.

   8. RORory O’Driscoll15:03

      I want to applaud Jason for his consistency and disagree slightly. I think you-- Firstly, I give you credit. You have been remarkably consistent on this, and I'm going to paraphrase what you're saying. Software companies in the age of AI are either accelerating or irrelevant, and you're exactly right. I would say, in fairness, I'm going to ex- I don't think crypto gets an automatic lift from AI. So I think you're being a bit harsh on that company, but your Adobe example is exactly correct. Oh, and it'll come, actually, it'll segue to the Microsoft discussion later on. I do agree, and again, I give you credit for just strong principles strongly held. Um, if you're not accelerating in the age of AI and you're a software company, you've got a problem. That's your point, and I think you're correct. So if you, if, if, if that tweet, let's put it this way, if that tweet had come from the CEO of Adobe, you would be totally correct in saying, "That's great, but dude, you need more." Exactly. So I, I do agree with you. I, I would exempt Coinbase from that because I lump them more in the financial than the software space. But in the software space, you are correct. If you're not getting on board this train, you're getting left behind.

   9. JLJason Lemkin16:05

      Even sometimes, and I love him, we all, all three of us love him. Even sometimes for a while, I would get tired of Aaron Levie's constant AI stuff. But, but, but to answer your question, it has led to a boost at Box. It hasn't turned Box into 100% grower. It's gotten it back to double-digit growth. S-some of Aaron's stuff is a little bit too, to me, and I lo- uh, and I... We all learn from it, right? Some of it's a little bit too AI reflective, but he ties it to his revenue and his plan. He's like, "This is how it worked at Box. We're processing documents. We're processing content. Here's how it re- literally ties to our business model." So i-i-it's okay if some of it is, is a little bit, um, uh, performative. I, I give, if-- But I g- I give Aaron a b- a huge p- uh, thumbs up on it. But the Brian one, I just... Anyhow, it's all good. We're-- It's great to have the data. I just have a little... I, I, I've just become a skeptic when it's not tied to their business. That's all. I'm a skeptic of what, what the, um, what the goal is here. That's all.

   10. HSHarry Stebbings16:59

       You know, Rory, Jason is not only consistent, but he's also prescient in being ahead of the times because he's also cited his, mm, I don't know if I could say disliking, but his favoring now Sam and OpenAI over Anthropic and his kind of boredom of Dario saying that we're all gonna lose our jobs. It seems the world doesn't like Dario right now, and Dario has, uh, continued to whine. Uh, sorry,

5. 17:22 – 20:19

   Anthropic Accuses Chinese Models of Distillation

   1. HSHarry Stebbings17:22

      that's unfair, and Rory did not say that. Dario has criticized Chinese models for stealing, for brazen theft of their work through distillation of their models. How do we respond and think about Anthropic's commentary on whether or not Chinese models are stealing their work?

   2. RORory O’Driscoll17:43

      Sure. I mean, you have to power through the irony before you can have the discussion, and we all understand the irony, which is all the foundation models, including Anthropic, were trained on other people's IP to the point where Anthropic recently settled litigation with a whole bunch of copyright holders on books because they had, quote-unquote, "unfairly," to use Dario's word applied to Chinese, leveraged their intellectual property. So the, I, I do admire the element of hypocrisy, of being appalled when someone else does it to you or having done it to other people yourselves. Be that as it may, let's move on from that. Just wallow in it a second, but then move on. Is it, you know... What's happening, again, stepping back for folks, is the allegation which actually- Dario's-- which Anthropic, let's not personalize it. Anthropic, the company said, actually in a letter to the Senate Banking Committee recently, that basically the Chinese open source companies are bootstrapping their, um, development of, of their state-of-the-art models by effectively breaching the terms of service of Anthropic and sending literally millions of reque- prompts to Anthropic, recording the answers, and using that as training data to start training their models. It's basically taking-- and to some extent, they would say it's taking, yeah, Anthropic's IP and using it to build open source models, which then compete against them. So that's the kind of comment here, right? And it's-- a-and so, yeah, so other than so what and ha, that's funny, right, what happens after that? Well, the first thing is, the main thing is, is it illegal, right? And the interesting thing here is it's clearly in breach of Anthropic's terms of service, and that's very clearly expressed, right? But that's not a legal co- that's a contractual problem between Anthropic and the Chinese model companies, and they're more than welcome to sue each other in, you know, you knock yourself out in Beijing. Good luck with the lawsuit, dude. Right? I think the interesting thing, and that's why the Senate Banking Committee thing is interesting, is you could imagine a world where-- 'cause as well as just being in breach of terms of service, it is also arguable that you have copyright issues and/or trade secrets acts, and they go above the level of contractual and then start to get into actual leg- you know, kind of legal issues that the government might take an interest in. Or maybe at its most extreme, I could see Anthropic saying to the government, "Hey, these are strategic US assets. Um, you know, we're getting regulated separately on how we produce our products. You've got to stick up for us and say you're not gonna let this happen and put the full weight of the US government behind it." And that takes what was a contractual dispute between two parties and makes it the US government putting the

6. 20:19 – 28:30

   Anthropic's Real Play: Get the US Government to Ban Chinese Open Source Models

   1. RORory O’Driscoll20:19

      thumb on the scales. And clearly, that's what they're angling for. Like, going back to the Coinbase comment, what happens if, in return for Mythos kind of complying with US government restrictions on overseas access, the quid pro quo in the next piece of legislation is no Chinese model that has been proven in a US court of law to distill using US foundation model technology can be used by a US company. It's not crazy. This is the kind-- So I-- you can see where they want to go. I mean, they're not just kind of crying because it's unfair. In my view, they're laying the pipe for a set of trades to push back on this open source stuff if they're, in fact, doing distillation. So that's, I think, the-- what's going on here.

   2. JLJason Lemkin21:02

      That's what I, I, I'm not claiming to be-- That, that's what I, I... Whether, to, to, to Harry's point, whether he's no longer become a successful communicator, [chuckles] right, at this point, whether the, uh, whether the, uh, spite startup vibe of We're the Safe Guys has expired and led to conflict with Trump, putting that aside, I think he wants the models banned for use by US companies. I think he wants Chinese models banned for use by US companies, and I think in an area-- in an era where SBF may get pardoned, the founder of Binance already got pardoned, this is pretty imaginable. I think it might be perfectly logical for them to get around the table, especially when we're, when we're, when we're jostling in, uh, on geopolitical level and say, "Listen, we're just gonna, we're gonna ban it," or we're gonna say any-- or we're gonna do some weird tariff on any US startup that uses a Chinese model. They have to pay 100% tariff tax. That's beyond my skill set, but clearly they just want US company... You can't stop China from doing what China's-- I just got back. You ain't gonna stop China from doing it for, for a million reasons, but just put an end to what Cursor and Harvey are doing. No more. You guys can't do it anymore. You guys have to, on grounds of national security, this is, this is theft of our IP. This is theft of our data. We can't trust them. Um, and hey, Cursor and Harvey, your models are just destroyed, your business models. Thank God you sold for sixty billion because, uh, Chinese open source is banned. I don't think it's implausible. I, I, I-- Let's-- Is it on Kalshi? I-- It seems to be more than a 10% chance it's gonna happen.

   3. HSHarry Stebbings22:24

      Would you not say it's actually almost inevitable, not plausible? When you know, when you look at both Sam and Dario advocating for it and the people around the administration advocating for it too, you don't exactly have an opposing side.

   4. RORory O’Driscoll22:36

      Well, well, you should have because, you know, this is-- and Bill Gurley's great on this. This is regulatory capture in the extreme, right? The truth is, there's two separate-- 'cause there's two separate issues that they're brilliantly conflating. One is, should they be ba-- quote-unquote, banned because they, they distilled our prompts and as such got a leg up on that? Naughty them if they did, just like naughty Anthropic and naughty OpenAI for stealing your 1.5 million books, right, to leverage your property three years ago. So pay the naughty fine and move on, right? No one's banning OpenAI and Anthropic 'cause they were naughty, so logically, the distillation thing sh-shouldn't result in banning. Separate thing is, and conflating the two, is are you really saying-- are you really trying to find a motivation from the government that says ban not because of the naughtiness, but because Chinese open source running US AI sounds scary, right? And I can imagine that. There are, you know, products that are the interest of national security, like Huawei, are banned in the US, so it's not crazy that if we believe frontier models are equivalent, that you could see that kind of thing. Now, the argument that every tech CEO will and should be making is these are open source models that are sourced and running in the US on US inference. There's literally nothing going... Yeah, the, the code is open to expection-- inspection. There's no backdoor here. There's zero risk involved, right? But to make that argument implies that you have on the other side of the table a government entity willing to listen and do nuance, and that's hard. So I think that you could imagine, um, in the absence of a sensible regulatory function, you know, that you conflate the, the naughty tax for stealing the intellectual property, the security risk because it's China, and then the deep dark secret is the foundat- the frontier models are actually just trying to defend their, their vast CapEx spend by eliminating a low-cost competitor. And it all comes together in a big kind of policy mismatch in, um, you know- I- in c- in return for some of these restrictions on, you know, security and/or usage, right? I mean-

   5. JLJason Lemkin24:44

      There's also a middle ground too, or, or a, or a, a partial win for, for, for Anthropic and OpenAI is just, listen, we can't stop Cursor, which they could. We can't stop Cursor and Harvey, but you know what we can do? We can make every single Fortune 500 company uncomfortable u- uh, banning open source. Like, they're not comfortable from a security, secur- There's enough ambiguity out there that it's just not worth it, right? Whether a startup can take a-- Startups can cut corners that enterprises are not comfortable cutting, right? All you have to do is make it look dangerous to enterprises, and they can just ban any open source use in their company, right? That's the fallback position. That's a good win.

   6. RORory O’Driscoll25:19

      I, I gotta be, dis- dis- distinguish something there. They wouldn't say ban open source. They would say ban non-US, Chinese-based o- um, companies distilled on US models, 'cause you know-

   7. JLJason Lemkin25:29

      Yeah, however you- Yeah

   8. RORory O’Driscoll25:30

      ... they're not gonna ban Reflection or Pool So- Poolside. 'Cause look, at some-- One of the interesting things here is clearly, I mean, all these US companies don't want Chinese open source. They want open source. And at some point, there's gonna be an interesting opportunity for a US open source company like Reflection, like Poolside, to take some of this revenue. But you're right, Jason, you know, some version of banning these companies that have been found, quote-unquote, guilty of distillation that are based ex-US and China is plausible. I mean, stepping back, one thing I noticed here, um, that Anthropic wrote to the Senate Banking Committee. Obviously, the minority, um, head of the Senate Banking Committee is Liz Warren. You really have to wanna get something done when as a tech company you say, "What I'm gonna do is pull in Liz Warren on my side."

   9. JLJason Lemkin26:12

      [laughs]

   10. RORory O’Driscoll26:12

       Very few tech companies say, "That's what I really need here today," right? And it just shows that you're trying to, you know, get something interesting done here.

   11. HSHarry Stebbings26:20

       Guys, personally, and you don't have to answer, but I'm just intrigued. Do you think we should ban them?

   12. RORory O’Driscoll26:25

       No. Um, because I think you have to be very pragmatic in terms of what you... And again, I'm willing to be corrected. There's two separate issues. If they've done the naughty, then they should pay the naughty tax. They should pay exactly as much as Anthropic had to pay to the book guys, and th- they should have paid to Anthropic. It's easily priced. And we could use the argu- I mean, th- th- and that would make things, quote-unquote, fair. So from a, so from a distillation perspective, no. Separate comment from a national security perspective. Again, as I understand it, if you are downloading the model, the code is open for inspection, the weights are available, and there's nothing running and no, um, telemetry back to China, then I don't think there's any danger. So I think you probably shouldn't ban them, right? Um, that would be my take.

   13. JLJason Lemkin27:10

       I think that AI is gonna be like the oil situation in the Persian Gulf today. And what I mean is it's too-- The-- We are so, as econom- as an economy in the US, we are so addicted to this. Our 401 (k) s, our stock market, everything we do, every bet, every re-election for every politician, um, we are so tied to the AI boom. I'm not gonna-- Whether we can d- debate whether it's a bubble, right? I mean, at some level, it has to be a bubble. We are all so-- We're all on this journey together. Forty percent of the S&P 500 is tied to this bubble. I, I, I think we have to protect it.

   14. RORory O’Driscoll27:47

       Oh.

   15. JLJason Lemkin27:47

       And, you know, Sarah Friar or whatever a year ago saying that the US government should, should, should back all of our data centers, that was... You know, I think it was her that was flamed for saying that, right? She's, she's probably-- It was true. [laughs] And I, and she probably shouldn't have said it the way she said it offhand. I think it was offhand in a, in a, in a comment. I mean, everything-- I think what I mean is everything's gonna be circular because we, it's like we can say we don't need that oil because we make plenty of it from, from, um, from fracking, but, but look at the impacts, right? Even if gas prices go up a dollar a gallon, people are freaking out. And if their 401 (k) s go down 20%, if NVIDIA stops selling chips, if, if all of this moves to Ope-- I, I don't know. I think we're gonna end up doing everything we can

7. 28:30 – 33:14

   Microsoft Deep Dive: Growth Decelerating & No Standalone AI Product

   1. JLJason Lemkin28:30

      as a society to prop up, uh, prop this up. I, I think we're all gonna be, um... And I think it may even be more important than the other issues. We just don't, we just don't want unemployment. We don't want these things to happen, and we're all, we're all, we're all, we're all all in on this, whether we realize it or not. I think we're all, we're all tied to the AI economy. It's all about me. I care about unemployment. I care about every- But, but my 401 (k) , don't touch it, man. You think I'm kidding? I think we're all in, in. Just like the price of gas. Like we... Yeah, you know, I feel a little bad about, but don't raise the price of my gas. Don't touch my 401 (k) . These are... Don't, don't touch it. Don't touch those high-paying jobs.

   2. RORory O’Driscoll29:08

      What you're saying might be true, Jason. I'm not sure it is, but it might be true. But if it is true, what is implicitly, what's implicit in that statement is really very negative. In other words, because what you're saying is keep up the price of AI as an input to the rest of the economy by protecti- protecting these foundation models' pricing structure so that they can get a trillion dollars in revenue, and the loser, as always is the case with trade restrictions, is the rest of the economy who won't get cheap intelligence. They'll get dear intelligence. So what it means is the, the stocks in your 401 (k) that are making AI will continue to make money, and the stocks in your 401 (k) that should be getting the lift from AI are gonna lose money. It's, it would be like as if in 1981 or '82 the governments, um... I, I give a cla- IBM. IBM licensed MS-DOS, and they should've protected it, and instead everyone was able to clone it like Compaq. It would be like the US government coming in and says, "No Compaq, no Dell. You can't make clones of the IBM. We've got to keep IBM's stock price up, and therefore we're gonna ban the clones, and we're gonna keep the PC industry a small, tiny, profitable industry for IBM."

   3. JLJason Lemkin30:22

      Possible.

   4. RORory O’Driscoll30:22

      Could ha- It could happen in this case because the dynamic of overseas national security makes it happen, but it would be, for the record, so freaking dumb. So I hear you. It could happen-

   5. JLJason Lemkin30:32

      Well, look, here's the counterargument. You... I'm not saying... You might be right. It might be dumb, right? I think if you step back for a minute-

   6. RORory O’Driscoll30:37

      To, to be clear-

   7. JLJason Lemkin30:38

      Yeah

   8. RORory O’Driscoll30:38

      ... dumb things happen all the time, especially when governments are involved.

   9. JLJason Lemkin30:41

      Agreed.

   10. RORory O’Driscoll30:41

       I have high confidence in dumb. See Harry for details. I'm in the UK Sorry, Harry

   11. JLJason Lemkin30:45

       I think, just to tie all the, the meta issue-

   12. HSHarry Stebbings30:47

       I thought you were going to stop there and see Harry for details, and I was really hurt there, Rory. [laughs]

   13. RORory O’Driscoll30:50

       No, no, no. No.

   14. JLJason Lemkin30:51

       If you look at the history of LLMs on this show since it started, right? What has really changed, and Coinbase is just one example of this, we, we are probably leaving the oligopical age, right? And we had an oligopical ... When we started this show, a- actually, you could argue there were two monopolies, okay? Anthropic owned coding. Elon Musk, when we started this, said, "Those Anthropic guys have something special. I can't compete in coding." OpenAI owned consumer, right? They both had sort of weird pricing they made up, and were losing lots of money, but it was ... And, and they had these sort of m- dominant ... Now, then we, and then as, as we began to begin this year, we entered an oligopical era where we had two leaders, okay? And for a while, what happens in oligopolies, traditionally, is you compete aggressively on features and not on price. You essentially q- soft collude on price, and the models were somewhat similarly priced. OpenAI would be like, "Oh, we're half the price for Codex," but not really were as competitive, right? And then typically, I mean, Harry's the, the, the, the master here. When you leave oligopical stages, there's massive, uh, price erosion because you're no longer competing on features, you're competing on price, and that's exactly what we're seeing. And governments do support oligopolies all the time when it's, when ... And they, they s- and the cla- the number one example in EC is medical device companies and Medicare, right? Uh, you fix pricing so you can get innovation, and I just wouldn't-

   15. RORory O’Driscoll32:08

       No, you fix pricing because you've, uh, you fix pricing because of regulatory capture. I, I, I agree with what you're saying is, yeah, yeah, oligopolies are great for the people involved because, yeah, you can have a price beyond innovation.

   16. JLJason Lemkin32:18

       And sometimes for innovation. If you look at the study, when you have folks that are brutally ... Like, we're still competing, but if we agree that, that, that basically, listen, we're 200 bucks each for our max program, and we're gonna charge this much per token, how do you win? You win because Anthropic comes in and builds this, this dis- disruptive coding model and takes all that revenue, right?

   17. RORory O’Driscoll32:41

       Oh.

   18. JLJason Lemkin32:41

       That's how you win in an oligopical market when you, when pricing doesn't matter and features do. And it, and it actually can be great for innovation in the short term, but maybe not in the, maybe not in the long term, right?

   19. RORory O’Driscoll32:52

       I'm go- yeah. I mean, inclu- include me out on that. Competition works. I mean, again, going back, yeah, I, I, I think any number of examples say you just gotta let competition rip. You gotta let the open source providers rip. Yeah, we're gonna wa- I mean, again, it's the Coinbase example. You know, the, the counter, the counter, what's it? The counterfactual is if those c- if those open source product didn't exist, the Brian Armstrong

8. 33:14 – 38:51

   Microsoft Has 30% of OpenAI But No State-of-the-Art Model of Its Own

   1. RORory O’Driscoll33:14

      tw- quote would've, tweet would've been, "We were paying $10 million six months ago for our AI intelligence. Now we're paying 60. What the frick do I do?" It wouldn't have been as good a tweet, right? We need competition to make this shit happen. So I hear you, Jason. It might, by the way, it might happen. You might see some pressure, but I think it would be a bummer. Move on.

   2. JLJason Lemkin33:33

      Hard to predict, at least, right? Hard, hard to predict w- uh, as of the, as of this date, I think. Hard to predict.

   3. RORory O’Driscoll33:38

      Yeah.

   4. HSHarry Stebbings33:38

      We're gonna jump around a little bit here, but few companies have had the competitive tussle when it comes to regulation, uh, and government intervention or trying to than Microsoft. Microsoft is in a pretty poor state. It's the worst month since 2000, I found. Uh, and I mean, they're down 16%, 16.5% as of today. What is going on? I'm a holder of Microsoft, and just when I think it can't go lower, it does. Guys, can you help me out here? Is this, is this a permanent sell?

   5. RORory O’Driscoll34:14

      I don't have a theory of the case of why this month it suddenly kind of dawned on everyone that its strategic position was weak. Ironically, just when they had one of their big announcements and Satya made all this conversation about their direction on AI, maybe it suddenly opened people's eyes. Because we've been saying for the last year, look, they don't have the standalone model. Their AI story really is we spent a lot of money on CapEx, which we do to support OpenAI. We have a good investment in OpenAI, which is looking pretty good, though perhaps not as good as it was a year ago. But our core software business doesn't have a compelling AI product. And let's get real, CoWork and Claude Code are eating the two core parts of the Microsoft franchise back in the day, which was, you know, offers for the individual knowledge worker, which is what CoWork is becoming, and, um, developers, developers, as Steve Ballmer used to say, which is what Claude Code is becoming. So when you zoom out a million miles, Microsoft, which is in the software business unlike Apple and therefore can't afford to stay apart from the great AI wars, other than its equity ownership in OpenAI, doesn't have anything compelling to bring to the table, and I think the market's looking at that and going, "You're not going to zero, Harry. Don't panic. You've had your hit." I mean, you don't get the lift that you get from the growth stories. Jason's comment, do you really have an ... I mean, they'll say they have an AI growth story, but if you break it out in the numbers, which they don't do, a lot of that is just, "Hey, we're selling inference to OpenAI, so we have a growth story." But what they don't have is a compelling end customer growth story here that they own themselves. So I think the market's finally caught up with the bullshit.

   6. JLJason Lemkin35:54

      Look, I, I don't know the answer either, right? The, the ... Because it's a very complex business model, Microsoft, right? It just has, it's, it's, it's a conglomerate with, it's got Xbox, which I'm not a total expert on, and a whole bunch of pieces. I think for ... So I, I, I don't have any opinion. I think, stepping back for a minute, I think what is troubling is Microsoft guiding that Azure growth is decelerating, and I think any time you see deceleration at all, right? And, and, and Rory can say, "Jesus Christ, how can you keep growing 40% at this, at this size," right? Law of gargantuan numbers, right? Sort of massive ... But I think, I think just as a student, the only way you could, your stock price is gonna trade up is if you, if, is if you beat, raise, and grow. You have to accelerate in this market. And, and you can be an oldie like Okta and Twilio and just, your stock can blow up, or even Navan if you re-accelerate. But the market's expectations are so high that, um, you know, guiding to 37% from 40% growth is a fail. It's a fail for Azure, and it's just Th- this is why maybe that regulation is coming for those Chinese open source models, 'cause we just can't afford th- the deceleration. We just can't afford, you know. Uh, so... Uh, but it's not the only- Azure is not the only factor, right? But it's so important, and it's a, it's almost a canary in the coal mine that if there's any issue in Azure, we should at least reflect on why it is, right? If there's any slowdown in this era where we're claiming we're all gonna be running 20 agents 24/7, Azure should be ev- sh- shouldn't it be accelerating even at this scale?

   7. RORory O’Driscoll37:22

      Well, yes, bec- I mean, again, 'cause Azure... I n- I mean, I cited developers and, end user a- a- a- and knowledge workers, but you're talking about the separate aspect of the business, which is the cloud business. And you're right. And yeah, the Azure cloud business deaccelerates, but I think more fundamentally, a huge slug of the Azure cloud business is simply just inference for, you know, other providers like OpenAI. So yes, I, I agree.

   8. JLJason Lemkin37:46

      But it should accelerate, right? That, that should accelerate.

   9. RORory O’Driscoll37:48

      Yeah. If you recollect, and this is a harsh comment, three years ago, Satya did the, "We're gonna make, you know, Google dance" comment. And the truth is, since then, Google's massively outperformed. And for all their faults, and I still think they have significant issues and risks, they at least have their standalone model and a product to sell. The truth is, today, Microsoft has a 30% ownership interest in OpenAI and doesn't have a state-of-the-art frontier model themselves. That's a big difference.

   10. JLJason Lemkin38:16

       You know, it'll be interesting if, if Anthropic really does IPO in the coming months, right, if it stays on track. I, I have to imagine it's gonna be one of those volatile stocks out there, right? Even a hint of news will send it up and down m- ma- I mean, even Cerberus is massively volatile, right? But if Microsoft has this level of volatility, I, you know, we're gonna be reading every, every tea leaf went Anthropic. Anthropic looks perfectly linear. Um, well I guess it's, I guess it's exponential. Th- th- it all looks perfect and up to the right today while it's private, right, all these rounds. But man, I wonder how the volatility in that stock [laughs] rises. A hint of bad news. [laughs] Boom.

9. 38:51 – 41:13

   Kalshi’s $40BN Valuation: Is This Peak Casino Economy?

   1. HSHarry Stebbings38:51

      Well, the experts in volatility are Kalshi, and Kalshi are apparently raising a new round at $40 billion. They raised their last round in May at $22 billion. Is this just the ultimate sign of kind of the casinoization of society and risk-on mentality from consumers? They recently announced being at 2 billion in revenue. How do we feel about this?

   2. RORory O’Driscoll39:17

      People like to bet. And, you know, they, US had a prohibition on, we talked about this last week, they had a prohibition on gambling on sports for the longest time. Poor Pete Rose never got into the Hall of Fame because he bet on-

   3. JLJason Lemkin39:30

      [laughs]

   4. RORory O’Driscoll39:31

      ... himself. And now we have-

   5. JLJason Lemkin39:32

      [laughs]

   6. RORory O’Driscoll39:32

      ... you know, a couple hundred billion dollar a year industry doing exactly the same. So they're just riding that trend. And they've, you know, they got other products. It's not all sports betting, but it's about, I think, 70%-plus sports betting. And, you know, it's, it, it's killing it in revenue, so it's, it's, makes, it totally makes sense.

   7. HSHarry Stebbings39:52

      Will Kalshi be a $100 billion company in 12 months' time?

   8. RORory O’Driscoll39:56

      I, I doubt it. Uh, I mean look, you get there one of two ways. Either sports betting continue to expand and they can take disproportionate market share, that's one option. Or the other at that is the whole crypto perpetuals business which I just really started to learn about, which is effectively, you know, kind of futures on crypto, which is ga- you know, which is finan- which is gambling to the nth, right? Either that business turns out to be much bigger than we realize, which is not impossible, right? I mean, look, I- ICE, not the ice, but I- ICE as in the inter- the owners of NASDAQ, the, I think, Intercontinental Exchange, has a big ownership stake in Polymarket. Why that's relevant is that's a company that runs, ICE, that runs stock trading and, you know, real financial markets, taking an o- significant, I think around 20% ownership interest in the other big kinda online betting prediction market player, Polymarket, and they're clearly saying this is a huge thing that can have $50 or $100 billion kind of valuation. So it's not crazy. It, but it happens one of two ways. Either, A, sports betting gets ultra huge, and they don't get tied up by regulation and the whole, um, issues around that, or, B, the non-sports betting side of prediction markets, in particular the financial products,

10. 41:13 – 44:03

    Prediction Markets: Sports Betting vs Financial Betting

    1. RORory O’Driscoll41:13

       becomes huge. I don't think predicting who's the next, who's gonna win the general election or, in the UK, or who's gonna be the next president in the US is a huge, enormous, ginormous business. I love it. I find it fun. It's actually the most interesting part of Polymarket and Kalshi, but that's not gonna get you to 100 billion bucks, 'cause the number of people who actually really want to bet on the next president is actually pretty low. It's either sports betting, which works, 'cause we all love sports, um, good luck tomorrow, Harry, um, and, uh, and then or it's financial betting, which we all love betting, 'cause we all love money.

    2. HSHarry Stebbings41:44

       [laughs]

    3. RORory O’Driscoll41:45

       And I'm sure if you, you know, you've got sports, you've got money. If you could bet on sex, you'd have the trifecta. It's the human desires. It's the big, to get, to make big picture, to get a big-ass company, you need to cater to big markets, and predictions on politicians is a small market. Betting is a big market on sports. People love sports. Betting on, uh, money is a big market. That's my point.

    4. HSHarry Stebbings42:06

       Dude, I totally agree. I, I did a, uh, a t- deal into FOMO, which has got their new round on by Index and USV, and their new product is Perps, which obviously allows you to do, uh, much simpler-

    5. RORory O’Driscoll42:17

       Yeah

    6. HSHarry Stebbings42:17

       ... you know, up or down on stock prices for consumers.

    7. RORory O’Driscoll42:19

       Yeah, I meant to actually try that product, actually. It looks incredible.

    8. HSHarry Stebbings42:22

       It's incredible. It's amazing.

    9. RORory O’Driscoll42:24

       No, it's not bad. No, I mean, you know, poor Warren Buffett is like, "It's time for me to die, 'cause you people have lost the plot."

    10. HSHarry Stebbings42:28

        [laughs]

    11. RORory O’Driscoll42:28

        But if you want acti- if you want action on the table, then Perps is your boy. You know, right? If you have a strong feeling on where the market's going the next hour, then go for it.

    12. HSHarry Stebbings42:38

        Also, also, like when you look at TAM expansion, Perps-

    13. RORory O’Driscoll42:41

        Yep

    14. HSHarry Stebbings42:41

        ... is a brilliant way to expand the TAM to a mega, mega market. Like-

    15. RORory O’Driscoll42:46

        Yeah

    16. HSHarry Stebbings42:47

        ... very exciting.

    17. RORory O’Driscoll42:48

        Yes.

    18. HSHarry Stebbings42:48

        Okay. Um, SpaceX. Has SpaceX IPO frozen the AI IPO market for now, given the size, magnitude, weight of it? Does it, uh- Put barriers up to subsequent IPOs

    19. RORory O’Driscoll43:04

        I mean, worth pointing out that the anti-AI IPO is about to happen today, Lily. We're recording this on Tuesday, I think June 30th. Bending Spoons is gonna go public tomorrow, July 1st, and this'll come out on July 2nd. And, and Lily, Bending Spoons is the anti-IPO. It's by company ... And they own AOL for God's sake, right? Which by the way, we- I remember, has killed their AOL email product, but still is an ad network. They own Evernote, they own a bunch of stuff like that. So that's a company that it literally is, you know, 20-year-old software company's going public at $20 billion. So it's not like the IPO market is shut, right? Which is what I thought you originally said. What you're basically saying is, is the hidden question here, Harry, has the volatility around SpaceX made OpenAI and Anthropic nervous about going out? Is that really your question?

    20. HSHarry Stebbings43:53

        Yeah.

    21. JLJason Lemkin43:54

        I thought this was more interesting when I added it to the list, but as I reflect on it, um, I think as long as the IPO re- remains up, right, I think they'll be

11. 44:03 – 45:04

    SpaceX IPO Volatility: Does It Delay the Anthropic & OpenAI IPOs?

    1. JLJason Lemkin44:03

       fine. Um, the d- it, the volatility has been high and extreme, um, but I think, um, I, I think as we record this, uh, greed will still trump fear, right? But, but, but it's, it's, it's, it's, it's, uh, the volatility's been sufficiently high enough, you could imagine that changing, right? Before now and the day Anthropic IPOs. So I'm sure the bankers who have less to do are monitoring this every day. Um, and I think the board and Dario will think about it weekly, right? Just making sure it is the right time. There i- it definitely shows there's risk it isn't the right time. It shows there is some risk that Anthropic might delay its IPO. It's, it, it, the volatility says it's not a slam dunk, but, uh, up is up. Like everyone's, uh, except for the poor Korean bank that forgot to put in their orders, uh, ever- everyone, most folks that, that buy, at least bought in the IPO are up. [laughs]

    2. HSHarry Stebbings44:48

       R- Ro- Rory, you, you brought up Bending Spoons. When we look at multiples attached to IPOs, you know, Bending Spoons is gonna go out at $20 billion, which will be a pretty hefty multiple. I think it's about a 12 to 14 X, given revenues of one and a half,

12. 45:04 – 47:06

    Bending Spoons IPO at $20BN

    1. HSHarry Stebbings45:04

       um-

    2. RORory O’Driscoll45:04

       Yeah, one and a half in trailing, but 600 million in Q1. Yeah, so probably, yeah, eight, nine X forward rev- yeah, healthy multiple.

    3. HSHarry Stebbings45:11

       For the antithesis of AI company, is that not an extremely juiced up multiple?

    4. RORory O’Driscoll45:18

       It, it is funny 'cause you're exactly right. It's like you have a whole bunch of single product crap, you know, B2B SaaS companies that have slowed out to 10% growth and are trading at three times revenues. And then you have this company, which is an agglomeration of a whole bunch of tired consumer products that were growing at 10% until these guys took them over. And when you read the S1, you realize they don't get organic growth. They don't get new users. They just raise prices, cut costs, and suddenly that's being valued at, you know, eight, nine, 10 times revenues. So it definitely feels kind of a little weird. It would be like as if all the SaaS ... It's not quite the same. It would be like all the SaaS companies that were slow growth were trading at two times revenues, and Constellation Software, which is a roll-up of SaaS companies, was trading at nine times. It definitely feels like, wow, that was a clever way to make money, right? And you do kind of ... You know, it's a well-executed strategy maybe, and it's worked clearly. There's clearly value been created. You do wonder, is it a little frothy? But, you know, good luck to them. I mean-

    5. JLJason Lemkin46:18

       I think it's gonna do well. I think over the medium term-

    6. RORory O’Driscoll46:20

       Yeah, I agree

    7. JLJason Lemkin46:20

       ... here's why. I- I mean, listen, uh-

    8. RORory O’Driscoll46:23

       Because cash flow-

    9. JLJason Lemkin46:23

       ... good God, don't take risk factors into prospectus seriously, right? Or whatever our prospectus said. But, but there's a grain of truth. They said there's at least 1,000 businesses they've already identified that, that are material can move the needle. I think if they're this good at buying, repackaging these companies and there's 1,000 targets, they can maintain outlier growth rates for longer than we would be in the stock, right? So can they ra- c- I guess the, the meta question is, going back to the Microsoft issue, uh, uh, I know Rory's gonna think it's an odd tie, but can they maintain this outlier growth for five plus years, right? To justify some sort of premium. We can debate whether the premium's too high, but outlier growth gets a-

    10. RORory O’Driscoll46:57

        It's, it's a good question

    11. JLJason Lemkin46:57

        ... a premium. I think for without question, if they can execute at the level they have, it's justified for five years, 'cause there's, there's 1,000 targets.

13. 47:06 – 58:22

    The Bending Spoons B2B Opportunity: Who Buys Broken SaaS Next?

    1. JLJason Lemkin47:06

       Um, and I think there's also gonna be another Bending Spoons in B2B that's gonna nail this. They're gonna buy these horrific products like Marketo and others, put a few smart people in it, and just boost the NRR. They're just gonna boost the NRR and a few other things. And so I think there's, there's a chance for several Bending Spoons to take the struggling, uh, software companies and do a revenue arbitrage because they can package them together into something high growth. I, I think there's five good years here.

    2. RORory O’Driscoll47:34

       I think that's smart, Jason, 'cause you're exactly right. Like, 'cause if you're one of those thousand privately held companies, and let's assume they're all consumer, there's nowhere else to go. I mean, that's the big attraction. These guys are the only way out. So they g-

    3. JLJason Lemkin47:44

       Yeah

    4. RORory O’Driscoll47:44

       ... they g- they can lock i- at least until someone else comes along, they can lock in some kind of rev arbitrage. Yeah, that's interesting. And yeah, you should be looking at it for B2B.

    5. JLJason Lemkin47:53

       I suspect, I, and I don't mean to be unfair-

    6. HSHarry Stebbings47:56

       Jason, you are-

    7. JLJason Lemkin47:57

       Right? I-

    8. HSHarry Stebbings47:57

       Jason, you are, you are the new CEO of Bending Spoons-

    9. JLJason Lemkin47:59

       Yes

    10. HSHarry Stebbings47:59

        ... goes B2B, and you are able-

    11. JLJason Lemkin48:01

        Yeah

    12. HSHarry Stebbings48:01

        ... to choose three targets for your opening quarter.

    13. JLJason Lemkin48:05

        Yeah.

    14. HSHarry Stebbings48:05

        Which three targets would you choose?

    15. JLJason Lemkin48:07

        I mean, Bending Spoons has one trick, which is it uses a lot of folks in Italy that are lower cost for engineering, right? But I assume the other trick it has is it's able to incent GMs to do a decent job on these, like find kids, and they, these kids may be 60 and not 16, well, 26, but find kids to run these Eventbrites and AOLs. And let's assume you have a, a steady enough flow of these kids that give a shit, okay? Then I would start to buy up almost any B2B company with nine figures in revenue with a sticky customer base because I, I mean, literally our wor- I know I talk about our, our worst and mo- the worst product that we use today is our most expensive product. It's, it's Marketo. Rory will remember it. And they threaten us. They threaten us. The API doesn't work. It breaks every day. They just told us they're raising prices 20% next year, like Bending Spoons, but without any features or functionality. The site went down for a full day the other day. You put a kid in here that gives a crap, okay? And you say, "I just want you to take whatever Marketo still has at Adobe," 300 million of revenue left, right? It's probably decaying. Take that 300 million and give a crap. Don't threaten your customers. Like, actually launch some features. Like, remove the rate limits on the API. Like l- do something so that to retain your base. It would work. Like we, even our worst software, we would stay. It's not that hard. So I would take all these ones that have a sticky base and buy ... And, and listen, you, then you take 10 folks at 200 million, you got a $2 billion business growing 30, 40% in StackIt

    16. HSHarry Stebbings49:32

        Yeah

    17. JLJason Lemkin49:32

        You got something pretty nice.

    18. HSHarry Stebbings49:33

        So Jason, can you buy them?

    19. JLJason Lemkin49:34

        But, but the problem is they're just putting mediocre people in charge of these. Like, the non-Bending Spoons are having PE firms put these recycled mediocre executives in charge of it that are going on learning tours for 90 days and coming up with no ideas. That's just not gonna work.

    20. HSHarry Stebbings49:48

        Can you bu- can you buy these assets for a reasonable price?

    21. RORory O’Driscoll49:52

        I think you can buy some, yeah.

    22. HSHarry Stebbings49:54

        Yeah.

    23. RORory O’Driscoll49:54

        I mean, I d- I... What's funny about this is the minute you ask this que- you can tell Jason that I'm gonna do it too. You have this hot button of these are markets that's been bugging you and companies where you're like, "For God's sake, will you do something?" And yeah, I think the Marketo marketing automation space is one we both know, and there's something to be done there. You know, there's other co- I mean, I think... I'll give you two examples, one of which is traded already. Um, I mean, and I know Jason hates the first market, I said it before, Semrush. Semrush is the old SEO optimization. It's so obvious that every one of those customers is gonna need GEO, you know, um, AI optimization. You should buy Semrush, buy some other little tool and just bundle them together and sell them. You can't do that now 'cause Adobe bought Semrush for under two times revenues. Great deal, right? You coulda turned that thing into something. And then another example which, you know, the world continues to poke at is PagerDuty, which is a company that's been out there. It has commanding market share, and it's never added AI-enabled incident resolution. And those are just two markets where-

    24. JLJason Lemkin50:53

        Yeah, put a kid on... If you can buy PagerDuty for what it's worth, put a kid on it that really, that's really motivated-

    25. RORory O’Driscoll50:58

        Yeah

    26. JLJason Lemkin50:58

        ... it could work.

    27. RORory O’Driscoll50:59

        I totally agree. A business-oriented executive who maybe picks up a YC, you know, failed SWE, uh, yeah, kinda software, incident automation software product, and put it together and just... You know, as Jason says, if you're not re-accelerating, you're dying. But dri- I mean, if you could get re-acceleration to 20% by just upselling a slug of the install base, yeah, at, at 2X revenues, you could be Jason Lemkin's Bend- B- Bending Spoons B2B, BS B2B.

    28. JLJason Lemkin51:26

        I, I think what folks don't realize is, um, it's so many of these companies we're talking about, right? I can tell you 'cause we interact with these people. They've given up. The entire team, their, their, their customer success team has become a, a, a force of evil, right? Uh, they threaten you with lawsuits. They threaten you with every... You know, they've given... You can smell that their, their culture is, "We, we... It's not that we're not in terminal." Like, I used to have a guy on my sales team whose last job was working for the Yellow Pages, okay? And his job, he got a huge bonus if his patch shrunk less than 20% each year. He was one of the top performers, right? His, his patch shrunk, like, 16%, [laughs] okay, every year. I mean, at some point you gotta move on from that job. I feel like this is working with the Marketo team and other teams we work with. The, the knives are out, okay? So it is... My point is, it is not hard to turn around a team that has completely given up, right, if they have a sticky customer base. This is not... But you gotta find people that want it, and the cultures are just broken at... It's not just Marketo, they're broken everywhere, right? These cultures have given up. And, um, so I like, I like this model, and I like the 1,000... I think there's 1,000 targets for Bending Spoons and, um, you know. I almost wonder if Constellation needs... I- Listen, they, they've been wildly successful. I wonder if their model needs to be rebooted so they can get an ep- I don't know if, like, these kids wanna work for Constellation or not. Um, in, in the portfolio company that, where I've watched PE take them over, right? They're not running the right model. The, the... I've, 'cause I've sold a lot of companies to PE, right? And I'm not close to them, but I watch them. They're, they're still bringing in 2021 managers. They're bringing in folks that, that, yeah, they're, they're never a CEO before. They were never really a great success on their own, but they have a good set of logos on their account, and they're a people person. Jason's really a people person who's going on a speaking tour, who's going around the world for 90 days to just meet with the team and then, "I wanna meet back with the board in three or four months and come up with my ideas." Like, that don't work today, boys. Okay, that was great when you bought, when Thoma Bravo bought you in 2021, right? We need the Bending S- I bet at Bending Spoons when you buy that thing, man, crap happens [laughs] the first 30 days. People are moved out, people are moved in, products are shut down. We need that level of action, man.

    29. RORory O’Driscoll53:34

        Pushing on that, it may be in part because it, and I could be wrong, but what Bending Spoons is trying to do is similar to what Constellation and PE was doing five, 10 years ago in B2B SaaS, where in other words, don't change the business all that much, but just optimize it. And you're right, so that's an easier task. I think what you're saying, Jason, I think it's true, is if you buy a B2B software company today that's pre-AI, it is highly unlikely that simply optimizing and pressing the buttons will be enough, right? In other words, you can play the Vista moves from 2021. You can cut the cost, you can move headcount overseas, et cetera, et cetera. But I think what you're saying is correct. Unless you're kinda generating new revenue from AI and significantly re-engineering the company, which is a bigger ask than just, you know, optimize the existing thing, right? It, it won't be successful. So to that extent, I think that Jason's B2B, B2B dot, uh, sorry. Bending Spoons B2B run by Jason will be actually a harder managerial task than Bending Spoons. 'Cause I think all Bendings, all Bending Spoons had to do was take Evernote, take AOL, and just ruthlessly raise prices and optimize. It's, it's a little... There was a little less innovation required than I think would be-

    30. JLJason Lemkin54:48

        For sure
14. 58:22 – 1:01:24

    Chamath Goes CEO: Can a VC Billionaire Actually Grind a Startup?

    1. HSHarry Stebbings58:22

       from new builds to code refactoring, complete with governance. What do we think about this one, team?

    2. RORory O’Driscoll58:29

       I just love the fact that you had Chamath not in the rage bait category. I mean, that in and of itself was progress, right? I, I... All credit to him. I mean, at the risk of making the cliché, you know, he used that quote a long time ago, but give him credit. You know, he gi- he did the, the man in the arena quote. And, and he got slammed for it. Well, now he is the man in the arena, and all credit to him for trying. Good luck, right? It's a great ma- it's a super interesting market. There's obviously a ton, a ton of competition, but it, as he said in his tweet, it's the most exciting space you've seen in decades. You know, how is all of software gonna be remade? So I just give him huge credit for going for it, and g- and good luck. One of the things I'm trying to do, Harry, is like y- I don't have to be a snark all the time. If s- you know, 'cause it's easy to be snarky at someone like Chamath, who just lends himself so well to snarkiness given his stuff. But let's just kind of take the high ground and say, "Well done. Good luck." Um, you know, go team.

    3. JLJason Lemkin59:25

       I don't mean to be snarky. I will say one thing, just in general, right? This is abstracting away from Chamath. I... And, and there are counter examples. I can give a few counter examples. But I, my scar tissue, I don't believe he's working 100% on this. I, I don't believe every waking hour is on this. I believe he's got a team, right? And, um, uh, at this point in life. And I just... When wealthy folks, e- e- especially VCs, wanna be a CEO, but they're not working at the insane rate of a traditional founder CEO, I just find those run out of energy. And I'm not saying he's not the exception to the rule, right? I know the Spotify guy that Harry's close with, uh, runs this scanning company too. That one. We have a lot of CEOs running side companies that are very successful, right? Listen, anyone that's started a startup, it's all fun and games in the early days if you have any money. You pull together a team, there's a lot of whiteboard talking, you use your brand to get Accenture, whoever's backing you. It's all kind of fun until the S hits the fan. But do you wanna be running this services, AI business forever, 100 hours a week? Or do you wanna, like, be hosting $25 million fundraisers in your palatial home? I mean, I don't know that you can do both successfully. I know there are examples. I just wouldn't in- like, I just wouldn't invest. There's certain things for me personally, I have scar tissue. I've written small checks into successful founders doing multiple things just for fun, and they're all zeros, right? And I, and I remember one of them, I asked this successful founder, I'm like, "I don't really need to know what the, I don't care about the valuation. I don't g- just, are you, are, are you telling me this is the only thing you're gonna be doing?" He's like, "Yeah, this is the only thing I'm gonna doing." 30 days later, I see him working on another startup, right? So I, I'm, I'm out. If Ch- if literally Chamath drops everything but 8090, everything, and I see the sweat from his brow and I see all, and I see n- and I see that, 'cause the dude's fit and he's looking good, right? He, he, uh, he's just had a massive, the massive, largest win of his career as an investor. I wanna see

15. 1:01:24 – 1:11:07

    Harry's Controversial Tweet

    1. JLJason Lemkin1:01:24

       the, the, I wanna see the paunchy middle, the hair loss, the, his, his right-hand person quitting on him. Then, then I'll invest. Not until then.

    2. HSHarry Stebbings1:01:33

       That was good, Jason

    3. JLJason Lemkin1:01:34

       I have too much scar tissue here. It's too b- it's too easy to start up today. Whether you're, whether you launch into YC and raise it 30 pre when you started three weeks ago, it's not easy, but it's too easy. It's just too easy to start up today. So I'm out.

    4. HSHarry Stebbings1:01:47

       Wow.

    5. JLJason Lemkin1:01:47

       It's for suckers, boys. It's for suckers.

    6. HSHarry Stebbings1:01:49

       [laughs] It's for suckers. We're making the T-shirts. I really raged the internet again this week. Turned down a founder this week. Why? They were finishing the year at one and a half million ARR, finishing next year at five million ARR. Today, brutal as it is, this isn't good enough to raise a good Series A. Opportunity cost of cash is real. Now, I deleted it because honestly no one engaged. It got 30 likes after an hour, which is not very much, uh, for our tweets. And so I took it down 'cause no one cared and it looks bad on my timeline. [laughs] And then they took it back up and it became a thing. Do you think I was wrong?

    7. RORory O’Driscoll1:02:31

       I think you... Okay, I can answer. Yes. I think that y- y- the sta- the factual statement you made is correct. In the kind of growth rates you're seeing now, the bar- the opportunity cost of doing something with a lower... It's not impossible. We have done deals with those kind of growth rates, which would've been very top quartile in the age of SaaS, but isn't in the age of AI. I can imagine doing some of those deals, but it's the exception, and you'd need some other extenuating factor. So as a matter of pure truth, you were, it was a correct reflection of the current venture market. Were you correct to put it up? If you're not careful, I, I find as a VC when you're saying your one and a half to five million deal isn't, quote, "good enough," you really have to phrase it carefully so you don't sound like an obnoxious prick [coughs] telling people their life's work is not good enough, and that's tricky, Harry.

    8. HSHarry Stebbings1:03:22

       Well, I'm re- I'm, I'm really sorry. If that's gonna ruin your day, don't be a fucking founder. Life's harder than a VC tweeting and it ruining your day.

    9. RORory O’Driscoll1:03:29

       Yeah, agree, a- agreed.

    10. HSHarry Stebbings1:03:30

        Like-

    11. RORory O’Driscoll1:03:31

        But, but, but I think life is hard, but it's precisely because the rest of your life is so hard that a little bit of compassion from the capital wouldn't hurt. But your message is correct.

    12. HSHarry Stebbings1:03:39

        And I had loads of found- and VCs be like, "Oh, class suit Charles." I was like, "Dude, Lagora, lovable, McCaw, fire him."

    13. RORory O’Driscoll1:03:46

        No, I, I... Look, you could've-

    14. HSHarry Stebbings1:03:47

        Come on.

    15. RORory O’Driscoll1:03:48

        I'm just pushing a... Now, look, yes, you, you... A lot of people say you're mean, but what you're saying is correct. But a- again, y- you wanna deci- look, we, we've discussed this before. Rage is still engagement, so you're all happy. Okay, now I'm gonna say my important... I definitely don't think you should've taken it down 'cause that looked like you were blinking, and, you know, n- yeah, that was a mistake. You blinked, dude. That, that's the bad part.

    16. JLJason Lemkin1:04:10

        Can I, can I break it down just a little bit on the-

    17. RORory O’Driscoll1:04:12

        Yeah

    18. JLJason Lemkin1:04:12

        ... on, on the tweet? F- first of all, I think, um... Listen, I'm supportive of it. I would've retweeted it and I'll also be supportive here. I think the problem with the... And I wanna share a story. The problem with the tweet is there's two things going on, right? The first part of the tweet is the state of the Series A market. The second part, which is, uh, which is more triggering, although people might not miss it, is opportunity cost of cash is real. 'Cause those are different points, okay? I, I'll tell you something that I think is subtly toxic that all these nice VCs are doing. It's subtly tox- I've watched two portfolio companies I have recently that were growing at great rates, okay? Are gonna compound to huge winners, okay? They're, they're like, uh, that are capital efficient, but they're not quite at Harry's level. N- not at the A, at the B or the C, okay? I've watched all the VCs say, "Good luck, guys. Go, go do your round." I do this thing where I built an AI pitch deck generator that uses all the benchmarks from Iconic and BenchMark. It tells you honestly your odds. It told all of them that, that for a round they're a B. Okay? It will tell you. Go to SaaStr.ai, use pitch... Just upload your pitch deck. It will tell you. Not a single VC in either of these companies would be honest with the founders. I tr- I've tried in the past. I get my head cut off. In both of these cases now, I said, "Well, why don't you back..." Here's my new thing. I'm like, "The hot companies in your space are basically, they're later stage, right? They're getting funded at, like, 30X ARR, okay? Back solve into what numbers you would need to get to raise at 30X ARR," right? This is me trying to be, to guide founders there. It's too subtle. They don't listen. And then, um, uh, two months later they're like, "Hey, I'm growing, you know, at this still top 10% rate, but not enough," and no one's honest. So the honesty of Harry's thing was very helpful. The opportunity of cash [laughs] it's a little, it's, it's a, it's a, it's a little, it's a, more for people to process, right?

    19. RORory O’Driscoll1:05:56

        For what it's worth, I do agree. Uh, and maybe I, I don't know if... I don't think I'm changing my mind, but I like what you said, Jason, 'cause I'm playing the pattern back and I've seen the same thing where you look at these companies and you're like they're planning to raise... Everyone around the table knows that that's not a deal they'd do, but they say to the company, you know, "Have a go," and they're not being, they're not, uh, you know... They're looking at the growth rate and they're saying, "That's not compelling compared to the other things I'm seeing. Just have a go," when perhaps the better advice might be, "If you're only growing at 50%, you know, should you converge on profitability? Should you raise a lower amount?" Right? But you're right. Sending people out to get a harsh message, harsh message from the market just 'cause you're too big a wuss to give it in the boardroom is actually a pretty pathetic act, and I do agree with you, Jason. And so to some extent, I'm, I'm backing into Harry's maybe people-

    20. HSHarry Stebbings1:06:46

        Do, no, do you know what? I told this, I told this founder, which is why I actually tweeted. I told this founder exactly this. No bullshit.

    21. RORory O’Driscoll1:06:52

        Yeah.

    22. HSHarry Stebbings1:06:52

        He said, "Do you know what? That's really helpful. I had no idea that wasn't good enough." And so he was super receptive and he was like, "I, honestly, dude, I didn't know that. That's really helpful, and I'll change how I project future revenues."

    23. JLJason Lemkin1:07:02

        To dig deeper, maybe Harry doesn't wanna go this deep, I do think there's a logic... Here's the, what's wrong in Harry's tweet, okay? Harry's tweet is, "Turned down a founder 1.5 finishing, finishing next year at 5.00. That's not good enough to raise a Series A." If, if this was a long tweet, it might be... Or maybe it is, but you might have to meet 150 VCs. That's what I would kinda add. And so I think if, if you're, if people are honest, I think they should be like, "Listen, you're at the edge. You, there's nothing wrong with 1.5 to 5. Like, you did better than I did back in the day. There's nothing wr-" And, and, and the ma- put it on a spreadsheet. If your burn is low and you don't quit, you can build a generational company with those numbers. But- But it, and it, but what it means is the... When, I mean, I mean, literally frigging, you know, Hi- Higgs Field were, I invested in seed, and Harry invested, you know, they're just crossing 500 million in revenue in less than 18 months, okay? And when I, when I thought about that this day is I, I looked back at my email, I'm like, "Why didn't I invest even more?" And so then I get a- another email from a portfolio company growing at decent rates. It's hard to even pay attention, right? It's hard to even pay attention. Um, and so you have to realize g- just getting the attention's hard in this crazy world, and you've gotta hunt Higgs Field or better. That- that's- that's your job, right? And the fact that, the fact that when I started talking about Higgs Field on the show, nobody even heard of it, you know, you know why that's interesting? That means go find it. Go find it and stop, stop worrying about the 1.5 to 5. But if you talk to 150 investors, you're gonna find someone that believes in you and says... 'Cause the 1.5 to 5 doesn't really matter, does it? It's where it's gonna go over the next decade, right? And someone may take that bet, but don't run a process. Don't build a data room, give people one week to look at it, um, and, and ask for checks, right? Uh, give it, give it time. [laughs]

    24. RORory O’Driscoll1:08:47

        Yeah. No one fast process. I, I, I think, yes, some versions of what you're saying, you're right. If you're the one and a half to five, it has to be the... If you wanna raise money, just understand the facts, which are the deals that peop- the deals that are getting swept off are going one and a half to 15, right? You're not that, so that has consequences. It has consequences in terms of number of people you'll have to talk to, the range of people you have to talk to, the amount of capital you can realistically raise, et cetera. I don't discount the fact, but I just wanna say this because founders listening, I do agree with you, Jason, you can be one and a half to five and still end up with an amazing generational company because, yeah, we've seen that data. I can't remember when, but, uh, there is a correlation, but it's modest between initial growth rate and overall outcomes, and companies that have grown slowly at the start have been huge at the end. CoreCore was a slow grower and then became a huge outcome. So I do agree you, it's not a... But we're not s- what you don't wanna be saying to a founder is, "Your dream is impossible. Go away and die," 'cause that's just not productive, especially when they're growing one million, 1.5 to 5. What you do wanna say is, "If this is your reality, you better think about how to cut your cloth accordingly and how you plan your raise."

    25. HSHarry Stebbings1:09:52

        And maybe you're not a venture asset anymore in a new world of venture, and that's totally fine too, but, like, that's okay.

    26. JLJason Lemkin1:09:59

        You might be. I still think... Listen, I just think, I think there's two different tweets in your tweet, right? For, to Rory's point, the reality is 90, 95% of investors you're gonna meet today are gonna say the opportunity cost of cash is too high here, right? They're gonna believe that, and even if they don't believe it, their job's on the line. They have to find a, the, a high fly. Like, even if they, even if they'd be happy to do this deal, they might get fired, right? If they don't run the place, right? So they've got to find... Everyone's gotta have one of these light- lighthouse investments in their portfolio, or you just might not be part of the next fund, right? Th- this is a reality issue, right? So they're, that's a different tweet than what are the odds if you're at 1.5 going to 5 that you're gonna raise funding today. They're just different tweets and, listen, I, I, I've got your back, but you gave people two different reasons to get triggered, and, uh, you saw their, their reaction, right? Doesn't mean any of it was... It was all correct, though. It's all correct.

    27. RORory O’Driscoll1:10:45

        Yeah. You, you should just run the Jack Nicholson "You can't handle the truth" quote. You know, that little film of Jack, you know, doing the, in the movie. That's what you're saying, Harry. They just can't handle the truth.

    28. HSHarry Stebbings1:10:55

        I, I, I agree. That's gonna really work in your-

    29. RORory O’Driscoll1:10:58

        But you are, you are a little bit punchy. You are a little bit punchy

    30. HSHarry Stebbings1:11:00

        ... it's gonna work in my favor, isn't it? Really win them back with that one, Rory. [laughs]
16. 1:11:07 – 1:17:56

    Claude Tag in Slack: Existential Threat to Salesforce or Just an Entry Point?

    1. HSHarry Stebbings1:11:07

       else-

    2. JLJason Lemkin1:11:07

       The best one's the best one.

    3. RORory O’Driscoll1:11:07

       Yeah, one thing. I would be curious to get people's thoughts on the whole, you mentioned here Claude Tag and Claude Tag in Slack. Jason, I'd love to get your thoughts on that.

    4. HSHarry Stebbings1:11:15

       Can we just provide some context? What is Claude Tag for those that don't know? Just context that here.

    5. RORory O’Driscoll1:11:21

       It's basically the ability to have a Claude as a fully present member of a Slack channel focused just on whatever that is, be it, you know, if you look at the announcement, be it your legal team, it's a, it's a Claude agent that's legal, that, that's just focused on legal, that just has access to that sort of information, but is a fully present member of your channel.

    6. JLJason Lemkin1:11:41

       Yeah, and, and, and it, and in theory, it's autonomous.

    7. RORory O’Driscoll1:11:45

       Yes.

    8. JLJason Lemkin1:11:45

       Right? That's, that's the-

    9. RORory O’Driscoll1:11:46

       And it can just go do shit. Yeah

    10. JLJason Lemkin1:11:46

        ... it's not just that it has... Well, listen, first of all, I don't know because I tried to deploy Tag, right? But you have-

    11. RORory O’Driscoll1:11:52

        Yeah

    12. JLJason Lemkin1:11:52

        ... I'm not, I'm, I'm not-

    13. RORory O’Driscoll1:11:53

        You have to be in the beta list.

    14. JLJason Lemkin1:11:55

        Well, you might have to. I, I think we're just, I, I'm just not on the right enterprise plan, and Claude is the biggest issue. So I haven't used it, right? I tried to use it for the show, right? So li- a lot of things like Claude Design, before the internet and information says the world has ended, let's give it, let's actually see how important this product is to Anthropic. If this product is as existentially important to Anthropic, this is, could be the biggest deal for traditional software there ever is, right? It runs acro- it runs crop platform, it runs on Salesforce, it runs on HubSpot, it runs on all the other things. If the agent can run 24/7 autonomously, take all your data in, build all the analytics, build all the dashboards, run autonomously out of it, um, then your data can flow between apps and you won't even care where it lives, and all the fears about headless become true because Claude is your head and, and you don't need... And they, and Salesforce and HubSpot really do become dumb databases. Like, there is a version of this where Anthropic puts its best people on and doesn't quit, where it is existential to everything. Um, uh, let's give it a week, right? Or is this Zapier on steroids? Um, or is it even very good? Because Slack has a Slack bot which is pretty good, right? So the, one of the things the press was like, "Why is Salesforce supporting this when they launched their own version of this a couple months ago?" Well, what choice do you have, right? At some level. But I wouldn't be surprised if this is not, if, if the, if the, this vector does not maintain so much energy that Slack bot isn't better, right? That'd be the most logical thing, but we could be wrong. Like, enterprise is the big battlefield, and, uh, Tag, a- as, as much as Tag created some anxiety at Salesforce, it might be the Trojan horse and in six months [laughs] it's like it's a big effing deal, but we have no evidence of that, right? We have no evidence Design is gonna kill Figma in any way, shape, or form at this point. We have no evidence there's a long-term commitment to that. So I'm, I'm skeptical, but existentially, man Could disrupt everything in software-

    15. RORory O’Driscoll1:13:45

        Yeah

    16. JLJason Lemkin1:13:45

        ... in business software.

    17. RORory O’Driscoll1:13:46

        That is a good summary, Jason. I, I agree. I, I think, you know, someone did the why did Salesforce let it happen? They have no choice. They own Slack. They have the Slack bot. But you can't be the cross-platform comms, um, you know, communications platform for your company and then not allow access to, you know, to an agent that's enabling you to do better work, 'cause that just pushes people away from you. So I go- I think the interesting thing here, look, is if you're s- if you're lurking on a Slack channel as an AI, you really just do get a very good handle on how people do, you know, the, the, the bit, you know, the context part of work that, you know, that lovely post from JR on Foundation Capital talking about capturing context. Basically, which is a, a fancy word for capturing all the weird shit people do on top of the actual apps, which reflects how they actually do their work and how they configure their work to suit the SaaS apps, which is what happened in the prior generation of software. And capturing that context is really useful 'cause it allows you, it allows an AI to automate that work. And the truth is a lot of that context exists in Slack. So if you're watching people interact on Slack, and if you watch it autonomously for weeks and months on end, you probably will get a pretty good handle on how people do work and, you know, how does Jason and Rory handle whatever exception we're dealing with and when we're talking about it on Slack. So I think it's an interesting entry point. You're right, it's only an entry point. It's not the end of the world. But I think Salesforce is right to say, "Okay, you're in there now, and we're gonna have a damn... We're gonna make sure that the Slack bot is better and remains better." So yeah, I said I, I agree with your assessment. Super interesting. Watch this space. But definitely an interesting entry point into capturing what's going on at the context graph level.

    18. JLJason Lemkin1:15:25

        I mean, by the end of this year, Anthropic will have more revenue than every public software company combined, right? So you have to wonder-

    19. RORory O’Driscoll1:15:31

        Unless Bryan Armstrong has his way and cuts it in half.

    20. JLJason Lemkin1:15:33

        Yeah, maybe, but, i- it's just-

    21. RORory O’Driscoll1:15:35

        Sorry

    22. JLJason Lemkin1:15:35

        ... it's just for predictive, we ha- we, you know, we just have to wonder does, is some of the stuff that we think is very, or in the, and in the media and acts like it just may not be material to Anthropic and OpenAI. It's just not... Like, a- as these guys cross 100 billion in revenue, 200 billion in revenue, they, they just may... It may be like the early day... When, when, when I started in B2B as a founder and when I first met Rory, most folks thought it was just too small. It just wasn't worth anybody's time. These markets were just too small. Now they're, they got big, but AI got so much bigger, and Th- they may not, it just may not be worth Dario's time to worry about whether he's disrupting Salesforce. It's just, it's not even the F- Salesforce is 42 billion. He may be looking at the net new bookings. What is Salesforce adding at 10%, eight billion? He's like, because, you know, materiality has always been 10%, right? So if I can't make 10, 20 bill- 10 billion plus, I don't know if Anthropic can get out of bed for something that's not, doesn't generate 10 billion of revenue. It's not m- that's always been the definition of materiality in my experience. I think it was even the SEC's, right? 10%, you gotta disclose it in the old days, right? I don't know if Anthropic can get out of bed for less than 10 billion of revenue by the end of the year. It's just not enough. Now, it's one thing to just do an experiment or build, or build something that makes Claude better, right? That's an integration. Like, we'll make Claude better. We'll integrate... They want to integrate more with every single app and take in the data, but, but I don't think they, they may not care about that revenue that the leaders are terrified of losing. That's probably why there was that crazy disconnect with the guy from leaving the Figma board, right? And, like, there was such drama to, to Dylan. To Anthropic, they're like, "Oh, we didn't know you'd care." [laughs]

    23. RORory O’Driscoll1:17:03

        Gotcha.

    24. JLJason Lemkin1:17:04

        Like, this isn't even important. Like, oh.

    25. RORory O’Driscoll1:17:06

        Yeah, sorry.

    26. JLJason Lemkin1:17:07

        Sorry.

    27. RORory O’Driscoll1:17:08

        Our bad.

    28. JLJason Lemkin1:17:08

        Genuinely sorry. We didn't even... It wasn't even... It's, we don't even talk about this each week at the, at the... [laughs]

    29. RORory O’Driscoll1:17:13

        It, it, it, it, it's the, you know, when elephants dance, the little people get trampled. Exactly.

    30. JLJason Lemkin1:17:18

        Yeah, we didn't even know.

Episode duration: 1:18:06