Elon’s Empire: SpaceX, Tesla, Neuralink After the Storm & Anduril’s $2.6BN Power Move

1. 0:00 – 1:06

   Intro

   1. RORory O’Driscoll0:00

      How freaking awesome the US capitalist system is. I mean, the United States has 4% of the world's people. We have roughly 23% of the world's GDP. We have 67% of the world's market cap. We won. Not just our GDP, our income is higher than our population ratio, but our wealth, our corporate sector is even higher than our GDP. Some companies that were once worth a billion dollars can go to zero. The definition of a great business is when your customers can hate you and still do business with you. The truth is, SpaceX is just such an amazing achievement that even if one of your biggest customers doesn't much like you, they still gotta do business with you. That's not quite as true for Tesla.

   2. HSHarry Stebbings0:37

      Ready to go? [upbeat music] Guys, I'm so excited for this. You know I love this time more than any other in the week. Uh, I wanna start with IPOs. We were talking about it just before. It is the most important topic for us to discuss. And so I wanna start with Circles, the strongest IPO since 2020,

2. 1:06 – 10:14

   Circle’s IPO: Investors Just Left $BNs on the Table

   1. HSHarry Stebbings1:07

      and bluntly, much needed positivity for the ecosystem in terms of public market response. How did we analyze the response and Circle being so well-received?

   2. RORory O’Driscoll1:17

      It's such a super interesting transaction in the sense that, you know, we've gone from, "Oh, IPOs are hard, nothing's happening," all the way straight through the, "Oh, my God, we left so much money on the table" period, without the intervening period of gratitude for the IPO. I mean, literally, we went from the window was shut four weeks ago to the window is open YAY to, "Oh, my God, we underpriced this thing," right? And in the case of Circle, you know, the data says, I mean, they filed, they raised the range, and then it opened, I mean, I think it's almost 2.5, two, 2X plus the opening price. So first of all, great success. Amazing. It was a good company at the IPO price. It's, it's an amazing outcome at the current price, even if it's not sustainable. Couldn't be happier for all involved. I think the interesting question will then become... You know, the underpricing issue will be even more acute here than normal. Because normally when you have these IPOs and there's a 10-- instead of a, there's a planned 15% pop, and instead there's a 40% pop, everyone's kinda miffed, but, you know, the money goes to the company, so you have, you know, 100 million less than you thought you would. In this case, over half of the IPO was sellers, which means you just opted to sell a security at, I can't rem- I think it was 31 bucks a share, and two days later, it's trading at 80 bucks a share. That's a lot of money to leave on the table. So I'm sure if you chose to sell in the IPO, you're sitting back and going, "Hmm, I feel amazing about the outcome, but oh my God, that's a lot of money on the table." Like, 20 million shares, I think, were secondary and, you know, at 50, 60 bucks a sh- of extra dollars a share. That's a billion dollars that went to the buyers, not the sellers. So that's a fun one.

   3. JLJason Lemkin2:59

      All the, all the last IPOs except for Sale Point are up materially in the last... On average, they're up 76.8%. Averages are, are confusing and misleading. But I thought it was interesting that Mountain Hinge Health, and I guess eToro, which I know less about, those, those are not hyped, those are not high hype stocks. Um, and those are up substantially. It's just Circle and CoreWeave are the crazy ones, and they're at, I think they're at the edge of meme stocks, right? CoreWeave is-

   4. RORory O’Driscoll3:23

      Agreed

   5. JLJason Lemkin3:23

      ... an attempt, attempt to invest, invest in AI, which is on file. And Circle, I mean, Rory and Harry, you may have more thoughts, it's an attempt to invest in crypto when... It's an exciting company, but it has so much interest rate sensitivity. I think these are meme stocks, and I don't know what Bill Gurley thinks about meme stocks, but my su- I suspect at the start of a, of a, of a run of IPOs, you have to be careful on the meme stocks, and toward the end of the bull run, [laughs] you price the hell out of them. [laughs]

   6. RORory O’Driscoll3:49

      I totally agree with what you're saying. I would say, just in the interest of being, I don't know, maybe pedantic, is they're good companies that have meme value as well. I mean, I think something like GameStop was just a meme stock.

   7. JLJason Lemkin4:00

      For sure.

   8. RORory O’Driscoll4:00

      I think, you know, both CoreWeave and, um, Circle are exceptionally good companies in big ass, meaningful industries. But also, you're right, what they have is on top of that, that meme value, which makes pricing hard. And I think it's a great point, Jason. The other three companies that are just solid, boring companies, you know, doing great, you know, did exactly what they're meant to do, had that little 20% pop, trading nicely, everybody's happy, right? These guys, you know, it really ran away from them. And the fun thing is, I mean, you know, I... The fun thing is to be able to... You, you, you can say that, but the interesting question is, what can you do about those kinda... You know, what do you do in those kinda trades? 'Cause, you know, I mean, Bill Gurley's been very vocal on, "Oh my God, you left all this money on the table." How do you avoid giving up the pop, right? Well, the first point is some pop is necessary, right? Because... And you have to start with that fact, because these stocks haven't been traded. You're asking people to step up and write a check, and there's no prior pricing information. So you gotta get paid something for the volatility you're incurring, you know, the risk of a one-day loss. So you are inevit- You start off in the IPO structure, unlike the direct listing structure, having to give some kinda pop. And then the judgment comes on, are you overestima- are you underestimating the real retail demand? Are you underestimating institutional demand, and are you leaving money on the table, right? And obviously, in these cases where there's strong retail demand, you've ended up leaving a lot of money on the table. But the fun question, and th- this is right down in the weeds, is the bankers will say if... A- and it's very zany. They'll say, "If we didn't take these anchor investors at this lower price, the retail demand wouldn't be there," right? And I've sat in the room and had those discussions, and there's a little part of you thinks that sounds plausible and correct, and then there's another part of you that says, "But that's, like, it's a total violation of the efficient market hypothesis, and I just don't believe it," right? And what happens in the end on these deals, and you know, this is a concrete example of very intelligent investors leaving money on the table, I think a lot of the timeThe biggest advantage the banker has is you do this once in your life, or maybe if you're VC, 10 times, and a banker's doing it every week, and you have an informational symmetry there, and they're gonna tell you, "Hey, at 31 bucks, you get Fidelity and T. Rowe, but at 35 you only get a bunch of hedge funds," and they're gonna slip it, and they're gonna flip it. So you opt for 31, and then the really frustrating thing is it pops to 70, and then Fidelity and T. Rowe flip it, and you feel like you're a sucker. But then you just-

   9. JLJason Lemkin6:30

      Yeah

   10. RORory O’Driscoll6:30

       ... go away back to your business, and they get onto the thing next week. So it's a very problematic structure, but it's also worth pointing out the other alternatives don't work amazing. There's only one... I mean, I think y- if you step back, I mean, at various times, I think folks, including Bill, SPACs have been a disaster, right? Direct listing only works when you're an amazing company and you're not raising primary capital because of the regulations, which is not, you know, arguably not been the case here. And then, you know, going back, there was a couple of companies that did those kind of Dutch auctions, including Google, and they seemed to work, even though Google on the day was a little troubling, 'cause it, I remember, underperformed early on, [laughs] but obviously amazingly since.

   11. JLJason Lemkin7:10

       Yeah, just, I'm just curious what... It's a niche topic, but I think it's interesting for the future, 'cause I think this is gonna unleash, I think this is gonna encourage everyone to go IPO, the strong performance. You know, Chime, when people listen to this, Chime may well be public. We, we'll see the timing. But I saw in the media they were saying it's gonna be a banger IPO because it's 10X oversubscribed, 10X. In my limited experience, like, 10X actually isn't enough, because those are soft commitments, and people w- put in over-allocations to make sure they can get it. And you really wanna be, like, 30X oversubscribed to pop hard, which I don't know if that's your, what you've seen on your public companies, but that's tough to get right at the start of an IPO market, like, how much that X needs to be, 10X, 20X, 30X. You certainly don't want it to flop, right?

   12. RORory O’Driscoll7:53

       Yeah. I mean, yes, you do w- and you know, I think most-

   13. JLJason Lemkin7:55

       'Cause even 5X is not enough. 5X is not enough to IPO.

   14. RORory O’Driscoll7:58

       But, I mean, it's all... I mean, all these words-

   15. JLJason Lemkin7:58

       Like, the banks will tell you 5X isn't enough. [laughs]

   16. RORory O’Driscoll8:00

       Sorry. In a world... Yeah, all those 10X, 5X, 20X oversubscri- they're just so bogus, 'cause it, y- you've got this game theory thing of, you know, buyers are putting in bigger orders than they actually want because, um, they don't think they're gonna get cut back. So the demand is entirely theoretical. And the truth is, you have all these... The funny thing about every IPO is you have all these, kind of, what I call them, relationship bankers. They know all about the business. They know all about the story. They've been calling on the company for three years. They have a relationship with the CEO and the CFO, and none of it matters a damn the night before, 'cause you're sitting there, and then there's some person from equity capital markets that crawls out of the hole in New York and sits there and says, "Here's the big long list, but this guy's lying. He won't flip. This guy will flip." I'm sorry, "He will flip. This guy won't flip. This guy doesn't really want 10 million. He only wants two. He's pretending to put in 10." And the entire decision gets made [laughs] by someone, you know, you spend a little time with, but not as much, on the basis of things you don't quite understand. It's a wildly frustrating process, which is why, you know, Bill Gurley's right to be angry about it. The hard thing is, what do you do better? The very biggest... When Stripe finally goes public, they can do whatever they want. They can do a direct listing and not raise any primary capital. They could do the Google-type auction. And no matter what, it'll all be fine, right?

   17. JLJason Lemkin9:22

       Yeah.

   18. RORory O’Driscoll9:22

       But the median company, the typical company, is looking to raise primary capital, can't afford to get it wrong. This is a one-time debut, right? You probably aren't so strong that you could power through. Like, if, no more than if Google had failed or if Stripe were to fail, everyone would say, "It's not about Stripe. It's about the market was weird that week." If your little $2 billion market cap company doesn't get done, your deal didn't get done. So you, as the team, you're in intrinsically weaker position, so you end up being discouraged from any innovative process. And it's worth pointing out, most of the innovative process, like SPACs, failed anyway. So you're back to the time-honored build a book, raise 200 million in primary capital, deal with the informational symmetry, do your best, and then some days, especially on the meme stocks, you're randomly wrong. It's a wildly flawed process to which we can find

3. 10:14 – 15:54

   Should Stripe and Databricks Finally Go Public?

   1. RORory O’Driscoll10:14

      none better.

   2. HSHarry Stebbings10:15

      The question for me is, does this very positive response across the board with the IPOs that we've seen, not does it lead to the window opening more, I think we all agree it does, it's does it lead to the window opening to Databricks, to SpaceX, to your biggest companies of today? And then we saw Figma confidentially file for IPO, and I thought maybe. How do we think about those two questions, which is does it lead to the juggernauts, and then what do we think about Figma?

   3. RORory O’Driscoll10:45

      'Cause there are differ- look, the window is, was, and always has been open for Databricks and Stripe. They just don't wanna go through the window, right? There's no, like... The window's open and shut for the $2 billion market cap IPO. The window is always open for the $50 billion market cap IPO. As someone said to me years ago, there's always room at the top, right? So I, I, I... Their decision not to go public is an entirely separate, you know, choice about what they think they can do private versus public. You know, Figma's kinda maybe the low end of really amazing, like Stripe, but the high end of more than amazing. I think that's, that to me is more of the normal. The window's open. Companies, especially, I would say, especially if you nearly had a liquidity event two years ago, right, in terms of an M&A sale, and obviously you lost that, all credit to them for regrouping from that, going forward, and continuing to build. It must have been a very difficult management challenge to pick yourself up, having decided to sell to Adobe for 20 billion, not getting the deal done, having to, you know, getting some capital, doing a secondary at 10. My guess is it totally makes sense for them to get a great IPO under their belt in a way that... And, and not do the Stripe thing of stay private for another three or four years. So I, I, I think that totally makes sense for them. And, you know, if you nearly had the win, and it was taken away from you right at the last minute, you're like, "This time, I'm getting my fricking win."But I am posting the IPO, I'm ringing the bell, I'm declaring victory.

   4. JLJason Lemkin12:10

      The only asterisk and dagger I would add is that these decisions, especially when you get a bunch of VCs and other large shareholders, they're trying to guess, guess all of this. And when everyone's caught up in feeling this is the time to IPO, I think people are gonna try to go. Even if they could have six months ago, even if this data shows, hey, Mountain hinge, Circle, CoreWeave, Toro, even SailPoint all could have IPO'd last year, right? It, it could-- The, the window was sort of open. I just think when everything's trading up, every meeting is, starts to be about should we go public now. Add in a good IPO from Chime, it's just... And once everyone starts talking about it, you kind of convince yourself, and you start having those conversations, well, it's time. It'll give us more rigor. We'll get, we'll get the biggest deal done. And so when people are kind of in the middle, on the edge, they just kind of go for it in this environment.

   5. RORory O’Driscoll12:57

      Ag- agreed. And, and I also like your comment, Jason, about how, you know, the stuff just changes in months. I mean, you know, you mentioned CoreWeave, a wildly successful IPO. Into the-- That was one that reduced, you know, had to come down from the filing range. In other words, as recently as four months ago... So five months ago, the bankers tell you you're worth X. When it gets closer to the day and we actually find out what the end investors are willing to pay you, reducing that range, fast-forward four months later, it's two X up from the IPO, right? It just does-- These high growth companies are hard to value, right? Sentiment matters a lot. Overall market sentiment and specific sentiment about the deals. And to some extent, the only way you find out is putting them out there and seeing what the demand is. I think pretending you have this a priori knowledge of how these things are gonna trade or when, quote, "the window is gonna open," you just have to internalize it's so random, it's so outside your control. You just have to build the company. And once you're at s- once you're at the stage where you could go public and conceptually you think you wanna go public, you should do all the preparations to get ready, and then just accept the fact that the timing, to some extent, is a bit out of y- your control.

   6. JLJason Lemkin14:06

      Yeah, you know, the other interesting one, when, when, when CoreWeave did IPO and we were talking about it, not only did it, I mean, Cor- Rory, you've got the narrative. Not only was it difficult to get done, they had to reduce the range, but we, we almost made fun of this existential risk they had with Coat, which was this, uh, this, this clock ticking down on them, this debt they had to repay. Um, but the af- because the IPO was so strong, they were able to raise two million dollars of additional debt and completely de-risk the company. So that existential risk is, for all intents and purposes, is gone. So, like, maybe you don't need the money like Stripe, but man, if you not only can you IPO in this market and trade up, but if then you can do things, de-risk the company even further like CoreWeave, that's like a triple hat trick they got, right? They went from a company teetering on the edge of, of not being able to repay its debt to, to set for the better part of a decade.

   7. RORory O’Driscoll14:51

      Agreed on that, and two comments is that one is... I mean, what, what I highlight, Jason, is the public markets in the United States are pretty damn amazing. You know, you can access-

   8. JLJason Lemkin15:02

      Yeah

   9. RORory O’Driscoll15:02

      ... large amounts of capital in short periods of time, which is why I believe the whole stay private. Unless you're cash flow positive, if you're the kind of company that needs to raise capital, in the end, at scale, the dominant and best and most cost-efficient way to raise, raise capital is in the public markets or being public and with debt, right? CoreWeave's proven that.

   10. JLJason Lemkin15:21

       Yeah.

   11. RORory O’Driscoll15:21

       And then the other thing, just to put it out and prove it, how little, um, not to say, I said anyone else knows, how little I know. I mean, if we all had great opinions on CoreWeave.

   12. JLJason Lemkin15:28

       [laughs]

   13. RORory O’Driscoll15:28

       There was a two and a half X on the table in four months. You could have bought all the CoreWeave your little heart desired, held it for two or three months, it'd be two and a half X up. I didn't buy any. What kind of idiot am I? Right? So again, it j- [laughs] our omni- where we rank on the omniscience factor is probably a two or a three out of ten.

   14. JLJason Lemkin15:49

       [laughs]

   15. RORory O’Driscoll15:49

       And just internalize that.

   16. JLJason Lemkin15:51

       That's, that's much easier than going from C to series A.

4. 15:54 – 20:33

   US Stock Markets: How They DOMINATE the Global Game

   1. JLJason Lemkin15:54

      [laughs]

   2. HSHarry Stebbings15:55

      My God. We can talk about that later. Rory, I'm gonna tee you up on this one, okay? I'm teeing you up so nicely. We've had Deliveroo bought by the Americans, so taken off the London Stock Exchange, and this week we had Wise, TransferWise otherwise known, announce that they're gonna also list on the US. Bluntly, a pretty big fucking hammer blow to the London Stock Exchange.

   3. RORory O’Driscoll16:17

      Look, it would be fun to make this a ding on the Brits, because I'm Irish, and we always want an excuse to ding on the Brit, but it's not. I mean, the salient f- it, it's, it's not about you being bad, it's just about, again, going back to how freaking awesome the US capitalist system is. I mean, the big p- I was saying the soundbite on this is w- the United States has 4% of the world's people. We have roughly 23% of the world's GDP. And depending on the day, we have 67% of the world's market cap and the stock exchange, right? We won. I mean, it's so funny. Um, I mean, US corporations are efficient, they're highly valued, they have international businesses. I mean, not just our GDP, which is like our income, is higher than our population ratio, but our wealth, our corporate sector is even higher than our GDP, right? When you look at those c- so a couple of things from that, and probably two big conclusions. One is about Wise. But the first one to just put it out there is this is an amazing place to make money. And I, I... When you look at all the, oh my God, things are awful, when you look at those numbers, whatever this system is, whatever this economic order is, it's been pretty damn good for America for fifty years. Let me repeat. 4% of the population, 24% of the income, 67% of the wealth. Yay us. And then now to the Wise thing. You're exactly right. And they just, you just look at that and you go, "There's just way more people who wanna buy my stock when it's listed in the States." And it was interesting. When they announced it, the stock popped 8%. That's basically like saying you can make 8% free money just by listing in the US. But fundamentally, if you wanna list your stock in a market, you wanna be trading on the biggest, most liquid market, and that's the United States. Unless you have structural legal reasons like Chinese companies where you can't be here-Unless you're purely a domestic... Maybe if you're just purely a domestic company, like I don't think the NatWest or whichever bank survived the great crash over in England is gonna list in the United States. But for big public companies with an international business, why wouldn't you go where 70% of the cap is and just join the team?

   4. JLJason Lemkin18:28

      Yeah. The other thing is, um, you know, I don't know how big some of these will be. We sometimes... Rory, I don't know if you've seen your public companies, but sometimes as lay folks, we overestimate how much liquidity there is for a lot of tech stocks. All but the biggest ones are not, are some relatively thinly traded, right? Relatively thinly traded. Especially if you do a smaller IPO like Mountain or Hinge, you might be surprised just how you're at the edge of liquidity. So why wouldn't you... Like, I wouldn't wanna do anything but the US if I was at the edge of that, right? We overstate the liquidity that's out there.

   5. RORory O’Driscoll19:01

      That's a good point, 'cause I thought where you were going is, oh, it's not great. But, but you're exactly right, yeah. If it's mediocre, uh, you... And it is of- often at the $2 and $3 billion level, you just don't have a chance anywhere else. You're exactly right. Is that-

   6. JLJason Lemkin19:12

      There's no analyst coverage. There's... The institutional-

   7. RORory O’Driscoll19:15

      Yeah

   8. JLJason Lemkin19:15

      ... buyers are not there in the single-digit billions, right? And it's just you, you better be wherever there is any liquidity.

   9. HSHarry Stebbings19:21

      Well, should, should those companies be public, though? Those 2 to $5 billion companies where there's a very thin layer of liquidity, should they even be public? I was with the founder of one of them last week, and he was like, "No, we shouldn't be. That's the point. We shouldn't be public."

   10. RORory O’Driscoll19:35

       At some point... Again, it's... Look, we've had this... At some point, you're gonna wanna be, because even the thin liquidity of a public market is better than the, the [laughs] ... The liquidity in the private markets is even worse. Now, yes, if you're amazing, you can access capital, right? And there are some arguments for founders to stay private. But look, as an emp- Let's, let's take another example. As an employee, would you prefer to work for a company where your equity con- your equity compensation can be earned over time, but can only be accessed once or twice a year, to some extent with the approval of management, and depending on the specific markets on that day? Or would you prefer where your equity compensation is freely tradable every day of the year? I, I think it's pretty obvious when you ask that question. So there are... Once you get to some kind of scale, and the trade-offs are different for different kinds of companies between how long you can stay private. But in the end, successful big companies are, in the main, gonna tend towards

5. 20:33 – 25:04

   50% of Unicorns Are DOOMED. What Happens Now?

   1. RORory O’Driscoll20:33

      an IPO.

   2. JLJason Lemkin20:33

      There's 1,500 unicorns today. That's what, that's what, um, Crunchbase says. Close enough, right? Rich Wong from Excel said this last week, 20% will fail, okay? So that leaves us with what? 1,200. How many can do, easily do, um, tender offers of scale? 1%? [laughs]

   3. RORory O’Driscoll20:51

      Got it.

   4. JLJason Lemkin20:52

      2%? [laughs] Like, we've got 1,200 viable unicorns, many growing at abysmal rates. But, like, like, if they don't have a shot at a small IPO, uh, this is... If it's one or... How many of these companies are there? T- 15, 20 that can do these tender offers, right?

   5. HSHarry Stebbings21:05

      Jason, can I just understand, what does he mean by fail? Fail to be a billion-dollar company? Fail-

   6. JLJason Lemkin21:10

      No, Rich Wong, this, uh, Excel said 20% of unicorns this week, um, will just fail. They're just gonna... They're, they're, they're, they're not gonna, they're not gonna limp along. They're just going to fail, of unicorns.

   7. RORory O’Driscoll21:21

      And that's true, and I, I think the, the interesting thing to- the, the SVB report you cited is the other end of the distribution. I mean, this is pretty rough and tough, but my gut would be it's roughly 20% will be good enough to get public in the end, 20% will totally... Maybe 25 on each side, just for arbitrariness sake. And then 50% in the middle are meaningful enough to be valuable, but not so meaningful that they'll get public. And they'll be merged, they'll combine with someone else, they'll be PE. But it's a distribution. It's probably a distribution of something like that. Maybe the, the, the low-end tail is not 20, maybe it's 30. But I think broadly speaking, it's correct. Some companies that were once worth a billion dollars can go to zero. Easily done, especially if you have debt, especially if you have a high-cost structure, and if you're asleep at switch. Many companies that were worth, valued north of a billion can flatten out and, you know, struggle to get 5, 600 million, but will realize some value. And the percentage that will actually get public, my guess is it's 20% plus or minus, maybe even less. So if it's 1,500... I mean, that's still 300 IPOs. That's a lot. And it's only... This is the key point. And it's only that last 10 or 20% who have, quote, "IPO potential," who could get a tender done. And what that says therefore is for most... I mean, so the consideration, the equity compensation for a lot of these companies is notional and not accessible, right? And I think there's also... One thing we're definitely seeing now is as the holding period goes on, I think there's a, there's not just a, the ability to do tender, there's a need to do tenders. 'Cause you can't tell people, "Sign up at 25 to join the startup." It used to be work really crazy hours for four years. We'll go public. You'll ring the bell. You'll get, make, do really well as an employee. It's amazing. Now it's like sign up for four years, that turns into 12 years, and then at the end we're still trying to put a tender offer together. That's just less compelling. And frankly, people have lives. They need to move on. They need to buy houses. They want to start families. So the, the need to just get liquidity to solve employee comp problems just becomes acute. And I, and I, and I think that most can't do tender. If you can do a tender, I think people are starting to do that. But at some point you're gonna say to yourself, "I'm doing tenders as well. I'm not Stripe where I can do them on demand. Should I just ultimately access the public markets?"

   8. HSHarry Stebbings23:41

      I'm increasingly impressed by the liquidity mechanisms and solutions for large-scale private companies today that I see consistently traded.

   9. JLJason Lemkin23:50

      Unless you're in the, the elite, th- that, that may fall apart next year. It may not exist next year if they, they don't hit the growth targets, right? There's, there's always lots of liquidity these days around a financing event, right? And there's often one more-

   10. RORory O’Driscoll24:02

       Agreed

   11. JLJason Lemkin24:02

       ... I don't know what you're seeing, Harry. I think if your growth struggles, it's, it instantly evaporates.

   12. HSHarry Stebbings24:08

       In certain cases, absolutely.

   13. JLJason Lemkin24:09

       Yeah.

   14. HSHarry Stebbings24:10

       Or if there's-

   15. JLJason Lemkin24:10

       I mean, honestly, if I was a top-tier engineer or almost any- anyone that wanted to kind of have the comfort of a l- of a later stage company, I might only join someone with a perfected tender offer program. I mean, I wouldn't even bother for anything else [laughs] Why join any others? That might be my first question in the interview: how does your tender offer process work? [laughs]

   16. RORory O’Driscoll24:29

       Ah.

   17. JLJason Lemkin24:31

       Seriously.

   18. RORory O’Driscoll24:32

       Look, by definition, if you have more risk, you better have more return. You know, if you're saying, if there's two private companies and one of them is the small number of entities that have this monetizable stock and you don't have monetizable stock, there's a premium for illiquidity, and I think you'll see that in terms of what it takes to attract people, which is yet another re- I know I'm sounding like a broken record now, which is yet another reason why as you get larger in scale, it's just gonna be more efficient not to be even doing these tender offers and just going back to once you hit critical mass, wouldn't it be a lot easier to just go public?

6. 25:04 – 30:25

   Founders Fund Just Dropped $1B on Anduril. Why?!

   1. HSHarry Stebbings25:04

      While we're speaking of financings, obviously there's going public, there's also later stage rounds and great, great companies raising later stage rounds. We've discussed before the value of capital concentration, uh, going very, very long in your best companies. I, I didn't realize, but specifically with regards to Anduril's raising two and a half billion Series G, I don't know if you guys knew this, they got a billion from Founders Fund in this latest round. A billion again, making it their largest ever check-

   2. JLJason Lemkin25:36

      Yeah

   3. HSHarry Stebbings25:36

      ... and Founders Fund's prior largest ever check was also to Anduril.

   4. JLJason Lemkin25:41

      I didn't be- I mean, Sam Lessin said it was the only really important company he could think of more than OpenAI.

   5. HSHarry Stebbings25:46

      [laughs]

   6. JLJason Lemkin25:46

      So I, I found it par for... Honestly, I, I mean, in all seriousness, when I, after Sam's insights, I thought that, hey, he's r- dude's right.

   7. HSHarry Stebbings25:53

      [laughs]

   8. JLJason Lemkin25:55

      [laughs] He did point that was the only one. He said that and Allbirds were the ones, so I, I'm, I'm, uh, he, the... I- it's probably my, my... I'm sort of joking, but honestly my learning from that comment he made, it, it's probably an even better company than I realize.

   9. RORory O’Driscoll26:09

      Yeah. I mean, uh, it's the old rule, just 'cause you think someone's being a jerk doesn't mean they're not right, right?

   10. JLJason Lemkin26:15

       Yeah.

   11. RORory O’Driscoll26:15

       I think Anduril-- Look, I'm... So you asked, Harry, am I surprised? No, I'm not surprised, 'cause all credit to Founders Fund. They told you they'd do this back in... When they started the firm, they said, "We're gonna have highly concentrated bets in our best industries, the best companies," tick. And they've also had, again, to be extraordinary f- I mean, to give all credit to them, the, the theme of kind of national security investing, I mean, Thiel co-founded Palantir in, I think, two thousand and three, two thousand and four. It's not like they came Johnny-come-lately to this space and started doing it recently and are rushing in to kinda catch up late stage. They've had this thesis for 20 years. They founded the company, and they've said very clearly, "We're gonna double down and treble down on their biggest bets." Overlay on top of that, you know, there's clearly not just a purpose in terms of capital, but there's clearly a felt purpose in terms of national security that animates the principles in that fund, and I respect that. I really do. I, I'm, I think Anduril's an amazing company. Not our focus area, but when you put all that together, and you're also, let's be honest, at the Maslow hierarchy stage where minimizing risk for your investors is not your one, two, three, or four priority-

   12. JLJason Lemkin27:24

       [laughs]

   13. RORory O’Driscoll27:24

       ... you probably sit there and say, "What do I wanna do with my life? I wanna give as much money as I can to the company I love the most that's doing the cause I believe in the most, which is defending the Western world." I mean, right back to, you know, and then you cite your Lords of the Ring and you're done. So yeah, of course they put it across the table.

   14. JLJason Lemkin27:42

       Plus, I like that they're putting... I mean, they're putting a billion in, right? That's-

   15. RORory O’Driscoll27:46

       Yeah

   16. JLJason Lemkin27:46

       ... much more ambitious than throwing, a growth fund throwing fifty million into the last round of Anthropic, right? Or throwing twenty million into Level.

   17. RORory O’Driscoll27:54

       Yeah, no. I love it.

   18. JLJason Lemkin27:54

       It's, it's a big bet.

   19. RORory O’Driscoll27:55

       I mean-

   20. JLJason Lemkin27:55

       Right?

   21. RORory O’Driscoll27:56

       Again, yeah.

   22. HSHarry Stebbings27:58

       Rory, what percentage capital concentration would be the peak of what you would be comfortable with in a fund?

   23. RORory O’Driscoll28:06

       We have a capital concentration limit of ten percent. We typically aim to fi... You know, our typical e- expectation is 20 deals and an average of five, fairly lower standard deviation, so I'd have guessed seven. I do-- Yeah.

   24. HSHarry Stebbings28:21

       Do you think that's enough?

   25. RORory O’Driscoll28:22

       And I think-

   26. HSHarry Stebbings28:22

       Brian Singerman has said to me before they've done-

   27. RORory O’Driscoll28:24

       I'm gonna answer exactly that question. We typically haven't done a whole ton of later stage follow-on, even in our best investments. Our focus has been early dollars at work, maximizing multiple. I think the more late stage you go and the bigger... The, b- Ironically, this is a really weird comment. Just rela- The bigger the fund you raise, the more late stage you're going by definition. And oddly enough, the more concentrated you have to make the bets, which is counterintuitive, right? Because there's lots of things that value at a hundred million that might go to a billion. There's very few things that are at fi- ten billion that might go to 30. So when you find one, you gotta put a lot in. So at the stage we play at, it hasn't been necessary to have the level of concentration beyond... Like, you know, it's our, our limits have been more than fine. We've been in that five to ten percent range. I think to do what, again, to be fair to them, Founders Fund said 20 years ago they're gonna do and have done, you have to have a much higher ability to concentrate to put that one, two billion to work in late stage. It's, it's, it's not been our business, but I think the people who are doing it are doing it right.

   28. JLJason Lemkin29:26

       I mean, if they put a billion dollar into Anduril and they really believe it can be worth a hundred billion, the partners themselves just make a, a billion dollars off that one bet. This is an incremental check, but that extra billion, [laughs] if that goes from 13 to 100 and they keep 20, the partners clear a billion dollars personally off, you know, a one-day decision.

   29. HSHarry Stebbings29:44

       Honestly, I think the most interesting question to ask managers today is what could you, what would you do if your LPs would let you do anything? And I, I fundamentally think, you know, if you have a $400 million fund, you put it in OpenAI, Anthropic, Cursor, and Anduril. Um, and I, I totally agree with you that Lockheed Martin is a $150 billion market cap. Doing this at 40, you can see a three and a half X in this being the next generation of Lockheed.

   30. RORory O’Driscoll30:10

       I think the truth i-i-it's an interesting question. What would you do if you could do anything? I think the probable answer would be just like if you told your teenage kids they could do anything. Some of them would do amazing, but a lot of them will go off the rails. [laughs] And the question as a parent is, would you wanna sign up for that, right?

7. 30:25 – 37:42

   What Would Rory Do If LPs Let You Go Wild?

   1. HSHarry Stebbings30:25

      You're such a smart strategist of venture. What would you do-- You are, you are. I interview so many. Uh, what would you do-If your LPs would let you do anything

   2. RORory O’Driscoll30:35

      I found this job hard when I started, and it's hard to be good at one thing. And I would say I probably have a conservative bias to s- keep doing what we're doing and doing it well versus trying to do lots of different things. And I think the more you spread, you widen your aperture, yes, the more upside you have, but the more risk you take on. And I'm probably just... I, uh, not probably, I absolutely am probably more risk-averse at the margin than, and being willing to sign up for trying to do everything versus sticking to a strategy that you know works. It's the buffer thing, is, you know, know what's in the box that you can do and understand the limit of the box. We do a really nice job on every dimension of seeing these early in revenue enterprise software companies looking to scale, investing in them, As, Bs, and sometimes Cs. I think trying to go for that, especially as a firm and trying to do, and now I'm gonna put 100 and 200 million into something else, it, it, it's just harder to do. It's not a constraint from the LP as much as it's harder to do. That said, I do believe, as I reflect back, I do believe a little more standard deviation in your bet sizing probably for the market we're in now might be appropriate. I, as I, I think I said this on the program before. I'm wrestling with that and thinking about that is you don't wanna go hog wild, you don't wanna lose your discipline, you don't wanna deliver the, deliver the product and the consistency you are. But at the same time, if the market has moved, if, you know, staying private for longer has consequences, you gotta think about what does that mean for your bet concentration. So up for grabs, thinking about it, but I don't feel it's a pu- I'm a, this is... I don't feel it's a pure, oh my God, they won't... I, I don't subscribe to the they won't let me do something school of life. I think I subscribe much more to the, I can do this well and it works. Do I re- I mean, I often say to folks, "Look, every year you wanna build a better firm, right? And every year, you know, when you go to your offsite, you step back and say, 'What can we do to be better this year?' Right? And you know, we've lots of ambitious, driven people, and they'll say, 'We can do this, this, and this.' And I'm also a person who says, 'Yes, and how do we do this and this without losing what we got?''Cause what we got's pretty good, right? And I think there's that constant tension. So it's much less about, oh, they won't let us do this, and it's much more about if you're doing these and suddenly you say, "I'm also gonna do seed and I'm also gonna do tons of late stage deals," it's possible you can be brilliant at everything, but it just gets harder. I mean, the bizarre thing about Founders Fund is they appear to be brilliant at everything, and I give them all credit. I just have to say I'm not sure I could be that brilliant. I mean, you have to go back to, wow, they've executed... They've demonstrated a range of investment acumen across a range of different challenges that's just very impressive. Back to your hypothetical LP question. If everyone was set free to do whatever they want, I think on a- for the median firm it would be value destructive. [laughs] And that was a long-winded answer, sorry, 'cause it was an interesting question that I hadn't had posed before.

   3. HSHarry Stebbings33:37

      It, it's one, it's one that I think of a lot. Um-

   4. RORory O’Driscoll33:40

      It's a good one. It's a really good one

   5. HSHarry Stebbings33:41

      ... I'm, I'm, I'm most actually pushed the boundaries with a lot more. As I said, like fundamentally if our job is to make money quickly for LPs, um, and be conscious of that, you know, late stage if you can get access, bluntly is, is obviously the best case.

   6. JLJason Lemkin33:54

      I'll tell you what my answer is for what it's worth, just think when I thought about it. If I could do what I wanted and offset the risk, right, into other vehicles, into SPVs, into the ether, right, then I, I get that the Anduril OpenAI thing is the smartest play, but what I personally would do would be to do every dollar up to a billion. That would be my version of it. In every winner.

   7. HSHarry Stebbings34:18

      Sorry, what do you mean every dollar up to a billion?

   8. JLJason Lemkin34:20

      Ah. So if you do a seed investment and it turns out to be a winner, right, a top 5% deal, you do every round, A, B, C, D, E, until a billion and then you stop. You buy, you maximize the ownership and you maximize the capital until a billion. If I could offset the risk in those later checks, that the returns might be mediocre if the world didn't go perfectly, that's what I would do. I would do... And I'm watching that in, in currently in like in my little portfolio, the two hottest companies, and I put hot in quotes, that's what investors on the cap table with access to unlimited capital are based, like wildly oversubscribed because they're trying to just put every single dollar into every single round because they have access to, for all intents and purposes, unlimited capital relative to the startup's ability to consume it, right? Why not, instead of putting 5 million or 7 million in, why not put 100 in on the way to a million or 150, um, but still have the benefits of starting with the seed fund? Maybe you have three funds, right, and you stack them. I mean, Harry, you have two. Um, but that's what I w- I would find a way to do that if I didn't have to worry about some of the risk of doing it. [laughs]

   9. RORory O’Driscoll35:20

      The interesting thing about the hypothesis, the, "Oh, I'd double down on my winners all the way," is it sounds plausible, but it's interesting actually when you run the math because it's n- there's not as big an opportunity to stuff money in even most late stage, quote unquote, winners as you'd think, right? 'Cause if you think about... I mean, a- as I said, going back to our likely distribution, we do 20 deals, probably be the, right, 30% of them fail. You don't wanna put a dime in those. 50% of them are a one to 5X on the money you put in, which means by definition the next round, the 2X that, is a two and a half X or less, right? Not a compelling. Only 20% of a deals in any fund if you're doing As and Bs are gonna be amazing, right? So now you're down to only four deals out of the 20 where you can quote stuff money into, right?

   10. JLJason Lemkin36:07

       Sure. But still four.

   11. RORory O’Driscoll36:07

       And remember, amazing is a 10X... What?

   12. JLJason Lemkin36:10

       But still four. Four is not zer- it's four is a, four, that could be $400 million right there.

   13. RORory O’Driscoll36:16

       It's, it's still four, but yes, it could be, but... And remember, what was amazing to you with the A and the B mightn't be amazing on that last round. So probably of that four, let's say the four of them are 10X plus type returns from the A and B prices. By definition from the C and D prices they're gonna be three and 4X returns. It's only if you have the one or two amazing compounding winnersThat you can stuff big money. When you raise that quote late stage opportunity fund, either if you're... One of a couple things happen. Either, A, you right size it such as a relatively small percentage of your core fund, because there's actually not that many opportunities. The second thing that hap- but people don't do that. The second thing you do is, I don't have enough money in my portfolio, I'm just now gonna do general growth investing. I'm just gonna find other deals that do it, right? Or the third is, and I think people who are doing are doing it well, you just ratchet up the end count, the number of deals at the Series A and B, 'cause you're basically saying, to make my math on my overall thing work, I need to have not just a really good $1 to $5 billion outcome, but a fricking amazing $5 plus billion outcome, and the only way to do that, you can say you can do it with great picking, but we've discussed that over and over again. You can, but it's maybe at most one per fund, but if you treble the number of at bats, then you probably roughly two and a half X the chance of being able to move big money at the late stage. So there's a whole

8. 37:42 – 48:27

   What Missing Out on Millions for Docusign Taught Rory

   1. RORory O’Driscoll37:42

      series... So my-- the point I'm making is this. There's a whole series of things you're driven to do once you adopt this, oh, I'm gonna, quote, "stuff a load of money into my late stage deals." It's not as simple. The soundbite always looked good in retrospect. Look, if I knew DocuSign [chuckles] was gonna compound to where it did, I would've done the round at nineteen bucks a share, too. I didn't, right? We did the round at a buck and two bucks, right? But those outcomes are few and far between, and the amount of distortion you get to try and-- it's really hard to pull that strategy off in the, quote unquote, "typical portfolio."

   2. HSHarry Stebbings38:13

      When you reflect, Rory, on that, could you have known? Is there a lesson that you take from that? I did it at a buck, I did it at two bucks, and it's now at nineteen. Is that a we were too-

   3. RORory O’Driscoll38:24

      It's now at eighty and I pass... And I didn't do a lot of the round at nineteen. Is there a lesson you could know? I mean, there's a-- put it that, the problem with trying to reflect on that, it's always the lesson on the good outcomes that you could have done more, and the only way you can be intellectually honest is saying, "What other deals did I have that looked equally promising?" That in retrospect, you shouldn't have done the round at nineteen, right? 'Cause everyone does this. In retrospect, I wish I'd put more money in my winners. Duh. Right? It's not an insight, it's an obvious, right? The question is, can you put enough money in your winners to move the needle without putting enough money in your so-sos to drag down your return? And that's a challenge. There's five or seven amazing companies in the last decade. We know the names, right? If you end up at one of those, you probably can stuff to your heart's content. But Chime being a good example, it looked like something you could stuff to your heart content, but it turned out that the price wasn't twenty-five, it was twelve, fifteen-ish, and stuffing-

   4. HSHarry Stebbings39:21

      Yeah

   5. RORory O’Driscoll39:21

      ... didn't work, right? You know, it turns out that-

   6. HSHarry Stebbings39:24

      I'll tell you the, um-

   7. RORory O’Driscoll39:25

      ... hundred billion... Go.

   8. HSHarry Stebbings39:27

      No, no. If the, uh, to, to the DocuSign and even the EchoSign, Adobe Sign lesson, looking back, having been there, right? I think the venture lesson, be visionary but relentlessly honest about TAM. 'Cause it's a TAM story at the end of the day. If you have a number one or number two player in the space and you see a TAM explosion happening, that's where you get a big lift, right?

   9. RORory O’Driscoll39:48

      It's hard to know which ones are gonna be your best and how much they're gonna run. And I think it's not... I also think there's probably been a little bit of a fake signal in '21 because even your okay ones got highly valued. So you probably think it's easier... A, a late stage looked a lot easier in '21 than it probably will look across a decade.

   10. HSHarry Stebbings40:10

       Yeah. With my first fund after 18 months, I predicted my top five fund returners-

   11. RORory O’Driscoll40:16

       Yeah

   12. HSHarry Stebbings40:16

       ... and you had your Hopkins, you had your B Reels, you had your Clubhouse.

   13. RORory O’Driscoll40:19

       Yep.

   14. HSHarry Stebbings40:20

       And none of the five out-performers ended up being the out-performers, and the five out-performers I always had in the middle bucket, actually.

   15. RORory O’Driscoll40:28

       Yeah.

   16. HSHarry Stebbings40:28

       They were always in the mid tier. And actually it was Roger Ehrenberg at IA who said, "That is exactly the same as me, and I see exactly that in our portfolios."

   17. RORory O’Driscoll40:37

       And it's, it's an interesting fact, 'cause actually we have a different experience 'cause we're just slightly there. I think at Seed that's totally true, right? At Seed you almost know nothing. At the A and B stage, what we've observed is this. The going in probability of a 5X plus win, our mental model, remember I said, is 30, yeah, 20% chance of that outcome. If after two years the company has done what we said it would do roughly in terms of performance, in other words it's ramped, the probability of it being a 5X plus outcome goes up to around 60 or 70%. In other words, we can be... And it's just 'cause we're slightly, as I said, we're paying for companies after they have product market fit and are looking to scale. And if in fact they scale, your probability of a strong outcome goes up a lot. And if they don't scale, it's obviously a lot harder. So our data comes back quicker than yours because it's a little further along, right?

   18. HSHarry Stebbings41:27

       Yeah.

   19. RORory O’Driscoll41:28

       But it's still what we remain uncertain of, and to Jason's point is, the next question is, you're, at Seed you're like, "Does it even work?" At the stage we're at, is it a decent business that can grow fast? And then the late stage question is, how big can this be, which is a TAM question, as Jason pointed out, and how will it be ultimately valued by the public markets, right? And that's the thing that, you know, two or three years in, we don't know. And if you're looking for everyone, as you, we, we're all on the same journey at different stages. Yeah. Be good at the... You can be good at the thing you have, but then you internalize at the, at the outer edges, there's the things that just aren't knowable as easily at the, e-even when you're in the deal.

   20. HSHarry Stebbings42:09

       I, I think an important point that you've pushed back on me before on, Rory, uh, you said like, "Oh, I'd still take these companies," but the how fast can you grow and the financing providers to find that rate still attractive. You've said before the double double, treble treble.

   21. RORory O’Driscoll42:23

       Yeah.

   22. HSHarry Stebbings42:23

       But you know, I, I met a company in vertical SaaS the other day. I was talking to Jason about it. They all scale to, from one million to seven million over the next three years.

   23. RORory O’Driscoll42:33

       Three years?

   24. HSHarry Stebbings42:33

       It's not attractive. Yeah. It's not attractive. No one's gonna touch that.

   25. RORory O’Driscoll42:37

       Well, I would change, I would change that word, 'cause you're beginning to sound like our recent friend. It is attractive for themAnd that's the most important thing.

   26. JLJason Lemkin42:47

       [laughs]

   27. RORory O’Driscoll42:47

       It's a great entrepreneurial opportunity. It's just not compelling for our business model. And I think it's an important thing. I was actually reflecting on the conversation last week. You never wanna diss down the entrepreneur. Like, most businesses aren't venture fundable. And to the conversation last week, most venture fundable deals t- don't turn out to be the most important company of the last decade, 'cause by definition, only one company can be the most important company of the last decade. That doesn't mean you piss on the entrepreneur on the journey. I love the fact that this company that's going from one to seven over three years, great for him. He probably has a great business. It's just not our business. That's all. So I'm just being a little kinda entrepreneur... Yeah.

   28. HSHarry Stebbings43:27

       I would respectfully push back and say I'm not pissing on the entrepreneur. I'm saying if you take money with that growth rate, I think there will be an impatience from your venture-

   29. RORory O’Driscoll43:36

       Agreed

   30. HSHarry Stebbings43:37

       ... capital that will, that will make your life hard.
9. 48:27 – 53:26

   The Shocking Data Behind the SaaS Slowdown

   1. HSHarry Stebbings48:28

      It absolutely has. Speaking of kind of growth rates, I do wanna get to an important topic, I think, actually, which is a piece of work done by Jamon Bu that we've seen this real slowdown actually in SaaS spending for H1 '25. The question being, is this an ongoing, more permanent trend? Is this a-... eight at a time and we will progress through it. How do we think about this in context of where we are today in terms of this Sa- SaaS slowdown in spend?

   2. JLJason Lemkin48:56

      It was sort of worrisome, you know, talking about HubSpot and, and Brian Halligan. I mean, he made-- I remember I asked him when, when was the downturn in SaaS. We, you know, we don't talk about the downturn in SaaS anymore, right? We talked about it last year, and I think the general consensus was it was sometime in the middle of twenty twenty-four and, and things re-accelerated. And you even saw, um, older folks like Twilio re-accelerate and... But, um, but yeah, this was tough news to see that the, that, that the, that the rate of growth has actually declined more this year. It is slower, and there can be different reasons. I look, I wonder why Okta has slowed. It's still two products. Um, why Salesforce is still in the single digits. It's so big. But I, I do worry that, um, like the pressure of AI sucking up all the spend. That was the oth- That wasn't directly the point of Jammit's piece, but the, it... Another point person pointed out on Twitter, I've added to my summary of it, like if Cursor did almost half a mill- half a billion dollars in revenue in the same time-

   3. HSHarry Stebbings49:54

      Yeah

   4. JLJason Lemkin49:54

      ... it sucked up an enormous amount of that dollar that would have gone to Okta and Salesforce, right? Five hundred mil- That's a lot in that period of time, right? So AI is sucking up budget. The... Here's a real example of it happening, and consolidation is still coming. It's still coming. So I just think this pressure, it's just, it's just this pressure is not... Even if the, uh, the twenty twenty-four days are behind us, it doesn't appear to be any easier.

   5. RORory O’Driscoll50:19

      I do think the, the slowdown continues even though we don't talk about it as much. And if you zoom out, and we had said this literally four or five years ago, this is not surprising. The industry's mature. And if you think about it, we ha- The, the... About five or six years ago, there was a narrative of, "Oh my gosh, it's been twenty years of SaaS and cloud, and we're only forty percent of workloads have moved to the cloud." And people would articulate that as if it was good news. And I remember at times thinking and saying, "You idiot, it's horrific news. Do you know why? Because you've compounded-

   6. JLJason Lemkin50:47

      [laughs]

   7. RORory O’Driscoll50:47

      ... from one percent market share to forty percent market share. It took twenty years at an average growth rate of thirty percent. Do the math. That gets you roughly there. The problem is three more years of thirty percent growth and you go from forty to about eighty, right? You would... The SaaS slowdown was inevitable once you got to forty, fifty percent market share. These are mature served markets. The best example of that is, let's take it, Zoom, a company I love and so wish I'd done. Who the hell do you think is left in twenty twenty-three who doesn't have a freaking Zoom account? You're done. Like, I mean, if you didn't buy one in twenty twenty-one, there's, you know, you've hit TAM, you've hit complete TAM, right?

   8. JLJason Lemkin51:27

      Yeah.

   9. RORory O’Driscoll51:27

      And that's an extreme example, but I think DocuSign wrestled with some of the s- similar things, right? Salesforce, most companies have a CRM. You know, I know they'll, they'll show you some survey that says on a TAM basis there's other companies, but the truth is you've had twenty years to buy the damn thing. It hasn't changed. If you haven't bought it now, you are a trailing edge adopter. Independent of AI, the SaaS industry was, was gonna hit the mature stage. And you're right, Jason, it's all the things that happen at that stage. Bundling, consolidation, grinding out the weak, right? Fortunately for us as technology investors, right at the same time, you got this new, new thing which is sucking up all the attention and the dollars, and it's ex- And most importantly, 'cause it's not quite s- And it's taking a lot of the attention and definitely contributing to the slowdown. Now, the good news is it's not quite zero-sum. This is the key hope statement. If AI was just rep- If you were just replacing CRM with let's call it AI CRM, then there's no TAM expansion, then it really is a knife fight for limited resources. If, in fact, the AI is taking over some of the work and, you know, taking over some of the labor dollars, then to some extent it's additive, which is obviously what we believe it is, but that's the crucial statement. You know, I don't think it's a scr- a fight for table scraps. I think AI is the new, new thing and c- to some extent, from a economic perspective, the cursor dollars in software development or any other of these things aren't directly taking away from the SaaS dollars. I think it's TAM expansion. But at the just practical level of getting shit done, my guess is a CIO, you know, people can only take on so many projects. There's no brownie points for taking on a SaaS conversion in twenty twenty-five. There's a lot of brownie points for doing something in AI. The attention has shifted. One is, you know, the SaaS business is definitely in the s- it, it, in the consolidation stage and the AI business is exploding. Almost too much

10. 53:26 – 1:03:29

    AI vs. SaaS: The Great Budget War Begins

    1. RORory O’Driscoll53:26

       in that. I kinda overloaded that, but I think-

    2. JLJason Lemkin53:27

       No, it's good. You can't argue. The forty percent math is a good one. You can't argue with that, right? I mean, if you don't-

    3. RORory O’Driscoll53:32

       No, no

    4. JLJason Lemkin53:32

       ... if you don't dramatically expand the dollars going into, into co- traditional business software, you just can't compound at the rate the markets want. It's just not possible, right?

    5. RORory O’Driscoll53:41

       Yeah.

    6. JLJason Lemkin53:41

       So, yeah. It's not.

    7. RORory O’Driscoll53:42

       So, so exactly. So I agree. I think that part was clear. I think on the AI stuff, it, it, it's a question of unlocking new dollars and expressing that clearly.

    8. JLJason Lemkin53:50

       The only thing I just want-- I think that, um, I mean, Harry, you drive the conversation, but there's a, there's so much groupthink on social media. I, I, I think, I wanna believe, I wanna believe, but I think the evidence that AI will unlock massive budget from the human side of replacing humans from s- the services budget, I, there's some evidence of it, but I don't think it's, uh, I don't think it's a slam dunk today when we're doing this today. I don't think it's a slam dunk that the, that the TAM will q- of overall for B2B will go five X because we'll, we'll atta- we'll attach from other human budgets and replace it with AI. I don't, I don't know that we've proven that. It, it makes sense, but I don't think we have as much evidence of it as we claim on social media.

    9. RORory O’Driscoll54:31

       You've been more apocalyptic in the past, so I'm glad to hear that, 'cause I thinkI think the evidence, it's classic thing is the future is here, it's just unevenly distributed. I think in some areas you are seeing the unlock and you are seeing the automation. But it-- one of the reasons I'm pretty, um, relaxed about any kind of, you know, all these mass unemployment stories, I think it's a long secular 20-year trend that we can invest in, and I think you will see replacement of labor by AI on a pretty consistent basis, but not an explosive basis. And thus, it's a great investment theme. I, I think when you want to-

    10. JLJason Lemkin55:11

        But I was actually making a slightly different point for what it's worth. Not to interrupt, sorry.

    11. RORory O’Driscoll55:14

        No, go ahead. Do interrupt.

    12. JLJason Lemkin55:14

        But I actually think it is happening very quickly in the contact center at, at the extreme, right?

    13. RORory O’Driscoll55:20

        Agreed.

    14. JLJason Lemkin55:20

        I'm just worried from a t- going to your point of the TAM, I-- 'cause I have a lot of exposure to the contact center. It's, it's, it... Half the folks-

    15. RORory O’Driscoll55:28

        Yeah

    16. JLJason Lemkin55:28

        ... are being displaced at these companies, but you're not getting that much more ACV. That's my worry. You're replacing a forty, fifty thousand dollar a year human, sixty thousand dollars a year fully burdened with benefits and taxes, with a tw- not with a twenty thousand dollar a year bill, with a 20-month dollar a month bill. That's the issue. There's not-- there's onl- I don't know that there's enough TAM appreciation when you trade in a fifty thousand dollar a human for two hundred and forty dollars a year. [laughs] You can help me do the math. [laughs]

    17. RORory O’Driscoll56:01

        I, I-- if that's what's happening, then you're right, but I don't-

    18. JLJason Lemkin56:03

        It is happening. [laughs]

    19. RORory O’Driscoll56:05

        [sighs] I think-

    20. JLJason Lemkin56:06

        I can just tell you, I just look at my portfolio. When I look at Gorgeous, which is-- which dominates Shopify for the contact center, right? Their a- they have-- their average customer has replaced forty to fifty percent of their humans with AI, and their ACV is only up fifty percent. It's only up fifty percent with half their humans replaced with AI, right? So how much... You could help me think about it intellectually, but how much does that really expand the TAM? Like, if it's only fifty percent, that's not enough for your compounding math to be exciting, is it?

    21. RORory O’Driscoll56:34

        If what you're saying is correct, it wouldn't be. But I, I wonder on each of the dimensions. I mean, my... Funny, I've, I've just been doing some refresh work on the, as you say, the call center, contact center space. And interesting, you come up with roughly the same rules of thumb that I see in robotics, a totally different space, which is people tend to replace labor when there's a two-for-one arbitrage. In other words, when we're selling robotics, and I've seen this over and over again, you go in and you say you're spending a hundred grand on labor. If on a RaaS, robot-as-a-service basis, we can do it for 50, they'll do the deal. Less than that, it's not worth the brain debt. But you typically can get that, you know, you can halve the market, you can... a- a- and you can get that. So, and I think in call center, for example, I think that email and call resolution is a two to four dollar a pop kind of human, you know, e- e- email human resolution-based process. I think s- we are seeing companies getting, you know, plus or minus a dollar. So I do think you can get that kind of, you, you, you, you get half the labor you save to you, right? So by definition, if you're only saving a little bit of labor, you know, you're, um, you know, you're not gonna get enough to uplift. But zooming out, the contact center software market is ten to fifteen billion a year of annual spend. The contract center labor market is at least a hundred and fifty billion dollars. So now I'm gonna arm wave just for a second, and you can give me shit. So you could look at that and go, "Oh my God, it's seventy-five billion if you do the two-for-one rule." So it expands from a fifteen billion to a seventy-five billion market if you can, quote, "eat the labor." I don't think you can eat all the labor by any means. But I do believe there is going to be at least a 2X TAM expansion, 3X TAM expansion as you take the, the simple contact center queries and resolve them, you know, on a two-to-one basis, you know, for half the price using AI, and you'll... and the AI company will be able to take that capital, take that money, right? So I do think there'll be TAM expansion. I don't think it will be all... It's not gonna eat the whole contact center market. There's gonna be humans on phones and answering emails for the foreseeable future. But I do think there is both automation to be done and TAM expansion to be gained. If you're pricing it so low that you're giving it just at the margin to your existing stuff, then yeah, that's gonna be hard. But I, I, I think the value is there such that you can command more.

    22. JLJason Lemkin59:04

        Well, I'll tell you, I just... I'll give you two other quick thoughts for this sort of thing. Harry, you can take me off it. Like, one, um, a lot of the folks that are s- exploding, I, I don't mean to, uh, uh, uh, ex- in the AI contact center with huge numbers, have either acquired or indirectly acquired BPOs. So they're attac- tac- attaching into that seventy-five billion in a very interesting way. [laughs] Not all that revenue is necessarily software, SaaS, or AI. I'm not saying it's sketchy, but it might be the-- some leaders might be at the edge of slightly sketchy. But I'll give you an ex- Like, I look at what's... Like, m- maybe that's gonna happen. Uh, the, the one I'm watching, I'm just curious, I don't have the answers, is I, I'm, I'm huge proponent of AI replacing sales reps, right? AI, uh, uh, we can-- and we've talked about that. Everyone out there in the market selling these products is basically trying to sell a 30 to 50 to 60K price point and up. Um, when we get really good at it, it might be 20 bucks a month, it might be 20 bucks a month. It wouldn't surprise me if when the cursor for sales comes out for real, it's not a bunch of traditional sales processes trying to charge 50 grand. It's like, this is just software. This is just... This is a really good wrapper, and it's 30 bucks a month. Um, I, I don't, just don't know that we're gonna be able to... that all these price points that we hope are sustainable in venture and startups, I don't... I'm not sure when the underlying cogs approaches zero, if it's gonna be as sustainable as we hope this one for two. I hope it is, but, ah, that's, that's my concern for the TAM.

    23. RORory O’Driscoll1:00:36

        On the software side, um, yourI just know it's working at time. It's just gonna, uh, my... It's just gonna take... Maybe this is coming. It's just like SaaS. At some level you go, in 1999, duh, ev- this is it. Everyone was gonna do SaaS. It was obviously the way of the future, and no one founded another non-SaaS client server company. That's a true statement. At the same time, it took 20 years to get everyone across from non-SaaS to SaaS, and the sequencing became really important, and it wasn't just random. It's easy to say so, it was... It turns out the things that had the highest value from that shift, like sales, like, um, CRM, went first, and the things that are lower value, like accounting, took longer, and I think it'll be exactly the same here. It's not going to be a cataclysmic change in one day. I think you have to pick the spots where it works now and avoid the spots where it's gonna take five more years. And if you do that, you are seeing value. I mean, I think you're seeing it in your contact center. The automation is working. I mean, let's start with that. Y- you, you're saying, in, in Gorgeous' case, you're definitely seeing labor reduction. Correct?

    24. JLJason Lemkin1:01:47

        Massive, and very early. Last year, massive reduction. Just not the ability to command such a large premium that it disrupts the TAM.

    25. RORory O’Driscoll1:01:56

        But at least you... I mean, my mental model is there's a two-step process. Step one is, does the AI work and allow automation? You're over that hurdle. And you're right, the second question is, can you get paid for that enough? And I, I, I can't speak to the specifics of your company. I do believe, and maybe this is it. I actually think it's har- interesting comment. It's harder to command huge value on top of software on the SMB side, 'cause typically the amount of labor you're saving is not a lot. The wonderful thing about automation for large corporate America is when you have 2,000 people in a contact center and you're paying them each 50 grand a year, the quantum of money gets big enough that the quantum of savings from automation becomes compelling. I do think that for those things you will... For those kind of higher end implementations, you will be able to command value from what you're delivering with AI.

    26. JLJason Lemkin1:02:48

        Next generation AI for B2B, as you approach true SMB, it's more and more gonna be base and included with a limited upsell opportunity. In the enterprise we're gonna char- try, we're gonna try to do agent force and charge massive amounts of money, and we'll see where this all leads. But when the AI, when an S-tier AI is included for free in an SMB product, and when it's extr- when it's charged f- to rep- $20,000 a year to replace one human in the enterprise, we'll see how that works out over the coming years. [laughs] But you're gonna look at, instead of looking at the SMB products that are kind of like crummy compared to the enterprise ones, we m- we may again be looking at them in AI and saying, "Wow, they're better. Look what I get for free included with my, with my, with my SMB CRM.

11. 1:03:29 – 1:11:16

    SpaceX, Tesla, Neuralink: Elon’s Empire After the Firestorm

    1. JLJason Lemkin1:03:29

       It's included for free."

    2. HSHarry Stebbings1:03:30

       Final one, guys, before we do a quick fire. I was in Sweden at this dinner, and Elon's tweet came out, and we're not going into politics, so it's not a political question. Um, but Elon's tweet came out, and I think half the people around the table had over $100 million in SpaceX and probably another $100 million in other Elon companies. Purely from the business perspective, again, I'm not going into politics-

    3. RORory O’Driscoll1:03:53

       Yeah

    4. HSHarry Stebbings1:03:53

       ... I'm not going into health or drug use, nothing.

    5. RORory O’Driscoll1:03:56

       [laughs]

    6. HSHarry Stebbings1:03:56

       Not doing that. How do we evaluate Elon companies from here? Is it business as usual? Is... How do we think about that?

    7. RORory O’Driscoll1:04:05

       It was never going to work, so you probably just got through that pain point, right? I think it's pretty clear from a comp- step back. It's pretty clear from a company building perspective, most investors would have preferred to skip the whole thing.

    8. HSHarry Stebbings1:04:21

       [laughs]

    9. RORory O’Driscoll1:04:21

       Right? And if you'd stayed on the sidelines making nice, kind, supportive noises, but without putting your head up the power part, you would have probably got all the benefits that the market was a trip... Reminder, as late as December, January, there was the, "Oh my God, it's going to be amazing for Tesla" trade going on in the market, right? And the stock went way up, right? If you'd stayed less involved in doing what he did as visibly as he did, you probably could have got the benefits without the pain, right? Always worth noting. Again, you go back to the shrewdness of Peter Thiel at Founders Fund. Got some of the benefits of perceived support for the current administration. Probably get some of the halo effect from that without putting himself in the line of fire, right? Elon, just 'cause he is that entrepreneur who leads with his heart, did the other, and the process of doing it and then withdrawing from it has been painful. And that's why you're right. I was wrong when I said you're better off than a month ago. That was an incorrect statement. Given that it was always going to fail, thank God that's over, is probably their feeling, but it would've been so much better had none of it ever happened from, from a pure company perspective.

    10. HSHarry Stebbings1:05:33

        Is there a company that is more materially impacted than others, do you think, Rory?

    11. RORory O’Driscoll1:05:37

        I think if any, it's Tesla, only because the truth is electronic vehi- e- electric vehicles have a whole bunch of specific subsidies, both around purchase and around, you know, the ability to resell emissions credits to people like GM, right? And all those things can be withdrawn by Congress. And not only... There's no obvious direct political cost, is a much better statement of doing that, and there's no obvious impact on the government. I think the wonderful thing about Starlink and why it's an amazing business is you kinda go through the, "Oh my God, I hate..." I mean, I can see the government sitting in a room going, "We love you, Elon. God, we'll give you a lot of business." Then, "Oh my God, we hate you, Elon." And then it's like, "But there's nothing we can do because we don't have any other rockets." It's the definition of a great... I mean, definition of a great business is when your customers can hate you and still do business with you, right? And I think that, you know, the truth is, SpaceX, it, it's just such an amazing achievement that even if your, what was your largest customer, interestingly, is now no longer your largest customer 'cause Starlink is such a big business. Even if one of your biggest customers doesn't much like youThey still gotta do business with you. That's not quite as true for Tesla. So yeah, I think the impact is slightly worse there.

    12. JLJason Lemkin1:06:54

        I think let's just give it a year. I think as you point out, Harry, the news cycles are so fast, right? Um-

    13. RORory O’Driscoll1:07:01

        So fast

    14. JLJason Lemkin1:07:01

        ... clearly Elon's alienated himself. I mean, Tesla's the closest to a consumer product of those until the... And so he's alienated a certain segment of his population, which has impacted, you saw it in Europe most, most extremely, right? Some of the, some of the sales. But let's, let's give it a year. I think, um, we'll never forget this episode. Um, but, um, I, you know, stock prices go up and down. I, I, I, I, I... This may sound crazy, but I think in a year we will not have forgotten about it, but maybe no one cares. I don't even know if Trump cares anymore, so I don't know if the rest of the world will care. He may not even care. [laughs]

    15. RORory O’Driscoll1:07:33

        Yeah. A- And I'm just glad he's back to doing, um, I mean, 'cause we mentioned Neuralink and the fundraise here. You just gotta go back to putting that episode behind. What an amazing entrepreneur. Just what... I mean, you know, let's reminder here, you know, eh, reminder to the haters, Tesla, wow, SpaceX, wow, and then we forget it, but, well, he won't forget it by God, OpenAI founding, wow, and now Neuralink, wow. I mean, you just gotta step back and say, please. I mean, the recarving-

    16. HSHarry Stebbings1:08:04

        Rory, Rory, Rory, Rory, you're also forgetting another one that everyone forgets, the Boring Company.

    17. JLJason Lemkin1:08:09

        I, I knew I did but I-

    18. HSHarry Stebbings1:08:10

        Reinventing city, reinventing city infrastructure around the world.

    19. JLJason Lemkin1:08:14

        Have you done it?

    20. RORory O’Driscoll1:08:15

        No.

    21. JLJason Lemkin1:08:16

        It's pretty cool. [laughs] It, it just, I'll tell you, it just works. It just works. It's pretty cool. At least in Vegas, it's, it doesn't do much, but what it does do is pretty cool. [laughs]

    22. RORory O’Driscoll1:08:26

        And I, you know, I think that, you know, I was just thinking about this this morning, is like, it's such a shame, and that's just such an unparalleled record of entrepreneurial success, and it's kind of like a, a management failure of massive proportions, if you think about it, to hire the guy who did that for something that's not like that. It's not something that's political, something that involves making cuts, something that involve making political decisions. It's so good that he's back to doing the thing he's best at. Everyone should play the position where they can score and win, right? And this is the position. So regardless, uh, so that, that gets back to what I said earlier. It's not that it's better, but it's just everyone's back now in the right place. Elon is back building amazing companies. Yay, everyone. Oh my God, that was a painful six months, is I'm sure the mental model.

    23. JLJason Lemkin1:09:13

        The, one of the beauties to X is we can see how, what every billionaire thinks, right? There's so many billionaires on X, in text, and we can see what they think. The meta question I wonder is, you know, should you invest once a billionaire becomes unhappy? Chamath seems unhappy. I don't know him. I mean, I, I met him and he was brilliant for so many years. Elon doesn't seem happy. C- Can, can folks still be as innovative and groundbreaking when they reach the unhappy billionaire phase? [laughs] I don't know.

    24. HSHarry Stebbings1:09:41

        Well, the one thing I would, the one thing I will say on Chamath is the public persona and the private persona are drastically different. He's actually very humble and kind privately. The public is a very different display.

    25. JLJason Lemkin1:09:55

        The only meta question just is, are your best days behind? If you s- become the... Let's leave Chamath out of it. That might, I don't really know, but my very limited interactions are consistent with that, Harry, for sure, right? Um, but I would say at least 50% of the tech billionaires on X are unhappy. Can they still innovate at that stage? Do they still have the same level of, of drive or passion, or is their, is their grouchiness an inhibitor to be a, an innovator?

    26. RORory O’Driscoll1:10:19

        And I think that's the sentence here, and I love what Harry said, is that let, I just think so, the point is this, you don't know if someone's happy till you know them personally, right? The, the truth is social media and politics just tend to drive a perso- it takes a certain persona to be perceived as winning. You know, we all understand the kind of the heightening effect in social media of the most extreme situations. So I think it's one of those environments where like Gresham's law for money, bad money drives out good. Well, the equivalent of that in social media is bad opinionated people drive out good boring people. When you're in the political arena, when you're in the social media arena, it just, it just forces a persona that comes across at least as very angry and unhappy, and I'm like, "Whatever." You know? I, so I don't have an opinion. I mean, I, I'm willing to suffer the risks of getting a billion dollars and seeing how I do. [laughs] I'm not sure it's gonna happen, but I'm willing to run that risk.

    27. HSHarry Stebbings1:11:14

        I love that.

    28. JLJason Lemkin1:11:15

        One more good

12. 1:11:16 – 1:22:48

    Kalshi Quick-Fire Round

    1. JLJason Lemkin1:11:16

       deal.

    2. HSHarry Stebbings1:11:17

       I, I wanna do a quick fire. Um, so this is Kalshi's Quickfire. Again, this is like the performance marketplace where people bet on different outcomes. And, uh, so let's start with number one. Sundar Pichai leaves Google this year. Yes or no?

    3. JLJason Lemkin1:11:32

       The only thing I thought about when I saw this, when I was a VP at Adobe and Shantanu was the CEO, not a founder, but on the rise there, I mean, I didn't directly interact with the Adobe board or others, but when I saw the vibe, like, they were n- that, they were not gonna let that guy leave. [laughs] And this was a company that it was no longer founder run, and he had figured out the transition to cloud, and you could debate decisions, but his ability to steer that ship in the right direction, like, everyone at senior Adobe know, like, it was even riskier to have anybody else, right? So I suspect it's similar at Google, right? I suspect none of the large stakeholders want him to go no matter what, and they will do almost anything to keep him, um, despite all the, on the search side, which is the, still the majority of revenue, despite all the threats today. I, I, that was my sense, 'cause Shantanu is just, I mean, he's a great CEO, but, like, they, I'm sure the board and others would just grab him by the jacket and not have left him ever leave Adobe when I was there even, even, you know, for many, many years.

    4. RORory O’Driscoll1:12:31

       Yeah, some version of yes, 'cause I mean, really the q- you're right. The question is really, you're abstracting from personal stuff. Random events could cause it. You know, there's some probability that anyone can leave at any point in time. It's called death. Um, so, you know, I presume that's not what we're saying. What, what, what is really a proxy for saying is, is he doing an amazing job at Google?I think we've definitely gone from the, "Oh my God, the world is ending at Google," to, you know, they're doing good stuff, they're getting good models out there. It's not obvious it's all gone to hell in a handbasket. They have the classic innovator's dilemma of, you know, the Google model, the search model is awesome. It's a cash-spewing machine. But let's be honest, when I get the, when I get the, the, the lineup for the Harry Stebbings podcast, I start on ChatGPT to do my research, not Google anymore, right? So they have that long-term dilemma. It's not clear that putting someone else in the chair will solve that. So my guess is by far the pri- the, the, the most likely outcome is not leave, just continue to manage what you've got reasonably well without ever solving the existential problem.

    5. HSHarry Stebbings1:13:32

       The-- I agree with you both. The only thing that I do think is just interesting is Sergey is back, and he's back back, and he's speaking publicly about being back and how it's the most exciting time ever and how they have to win more than ever, having had a hiatus. And I'm just intrigued to see what that interplays like.

    6. RORory O’Driscoll1:13:49

       I mean, if it were to happen, that's been the default. I mean, if you look at the... You know, the, look, the founder comes back narrative is definitely there are precedents, including obviously the most amazing one, and then the Starbucks guy who keeps coming back every three years, like it or not. So, um, yeah, it's, it, it, it would be the narrative that would easy to sell. My guess is if he, if the founder decided he wanted to do that, there'd be a real con- you know, it, it would be on the table. But yeah.

    7. HSHarry Stebbings1:14:14

       So Ka- Ka- Kalshi Way agrees with us. They say absolutely, uh, you know, he will stay. Um, so if we go to the next one, New York Times wins OpenAI lawsuit. This one's pretty evenly split.

    8. RORory O’Driscoll1:14:27

       [laughs]

    9. HSHarry Stebbings1:14:27

       Yes or no to New York Times wins OpenAI lawsuit.

    10. RORory O’Driscoll1:14:32

        If you include win or settle, then I'd give it 80%. In other words, I can't believe that OpenAI is just gonna wanna let it run forever. So my... I mean, i- i- if you lump settlement into the equation, do I think OpenAI-- Do I think New York Times is gonna come away with, quote-unquote, "a win of sorts" out of this? Yes.

    11. HSHarry Stebbings1:14:53

        Mm.

    12. RORory O’Driscoll1:14:54

        It might, uh, you know, less than more likely to be a settlement just 'cause always in the end close to the trial, people settle, um, than a, oh my God, it goes all the way to, I don't know if it's a, a jury or a, or a bench trial, and then they win. But I think, you know, they've got enough of a case to be in the room, and it's one of those pro- issues where money ultimately can help solve it. So yes, I think they win something from suing. I think fundame- may- maybe even make it more clear, I think they win more from suing and then p- settling than the people who did small, the other companies who did smaller media deals with OpenAI. In other words, to, to make it harder for myself, I think their strategy of suing will be validated versus just cutting a $20 or $30 million deal with OpenAI two years ago. I think they will get something from their effort.

    13. JLJason Lemkin1:15:42

        Yeah, I ag- uh, listen, I don't know. I agree with Rory that if it's, um, if they've already determined that they're gonna pay in the end, then it has to settle, right? And it, and it will get, and in that sense, they'll, they'll win, but they may not win the lawsuit because it gets settled. I mean, at some level, if they don't, it's gonna go to the Supreme, it has to go to the Supreme Court, and the folks in the Supreme Court will decide what fair use means in the age of the internet, and that's a big, that's probably a 48% gamble because it's, it's easy to see them coming down on the side of the content providers, and maybe Sastre gets a check. Maybe I deserve a ch- I think I deserve a check. I mean, they, ChatGPT scrapes a lot of our content. I get a lot of traffic from it already.

    14. RORory O’Driscoll1:16:19

        Yep.

    15. JLJason Lemkin1:16:19

        Why don't I, seriously, why don't I get a ch- why does New York Times get a check and not me? I don't think it's right or fair under, under fair use. They're, they're directly taking my content, which is very unique and specific to me. So there's, there, in theory, there's an argument to take it all the way to Supreme Court and win and not have to pay anybody because OpenAI has slurped up the entire internet. Um, uh, so they should settle because it's, uh, it's pretty, it's pretty confusing. We've basically, in the age of AI, we've decided to surrender a lot of copyrights and surrender a lot of privacy. Um, now OpenAI can record our, our, all of our conversations 24/7 in their macOS app already. So we're giving up copyrights, um, we're giving up privacy, and it's qui- we're gonna learn where these new lines are, but they're not gonna be the same as they were two years ago. They're not gonna be the same. But the Supreme Court's conservative. It's a bunch of Harvard grads, um, and they, they, it's, I mean, I guess it's Republican-dominated, but I don't know which way it'll go.

    16. RORory O’Driscoll1:17:12

        I just wanna just say, I think the most fun thing about that answer is Jason, without blinking or laughing, described Harvard as, quote, "conservative." I think they would be so glad. I think they're gonna put that on their Harvard website. "Look, Harvard grads are conservative. Leave us alone, please, damn it." [laughs]

    17. JLJason Lemkin1:17:28

        I don't know whether it's right to, to, to, to take on the Trump administration. I know there's a lot of principled reasons, but I do think there's conser- not politically, but with a small C, gotta be the most conservative organization that I have any affiliation with. Very conservative.

    18. RORory O’Driscoll1:17:40

        I think one nuance on this that's gets to it, it, w- uh, w- we picked up on a very interesting reference we did on another deal, which this is really interesting. Obviously, OpenAI and all the models need access to, quote-unquote, "modern news" to be able to answer the real-time questions the way Perplexity initially did, and now everyone has copied. You know, uh, you have LLM plus web search. So they clearly need that. So that's a given. They need access to modern news sources. A really interesting fact i- a really interesting question, rather, is this: If I have, as OpenAI, say, Washington Post and Wall Street Journal, do I need New York Times? In other words, is a third national news source additive or not? And it raises a very, it's a very interesting question. I hadn't thought about it until I talked to this person who made the point. Yes, you need news to be able to be a, like, to, to give the full LLM experience, but do you need the third or fourth marginal news source? Maybe not. And that's the thing that would maybe make my, hedge my bet. It may be separate issue from what are the legal rights on this. You could imagine an LLM saying, "I need to get n- modern news from AP and one national newspaper, but I sure as hell don't need six." 'Cause if you think back, if you reflect even on your experienceS- on a Sunday morning when you'd read three or four newspapers back when they were papers, right? By the time you got to the third, you're like, "I know already." 90% of the content is repetitive, right? The argument for OpenAI gutting it out is they're saying, "Hey, I already have it from two or three people. Yeah, maybe I should have paid you for the past, and maybe I'll lose that part of the case, but I don't need to license your content on an ongoing basis to be able to deliver the full search plus LLM experience, provided I have one provider." And if that's the case, there'll be an interesting game theory process going on on media content pricing.

    19. HSHarry Stebbings1:19:35

        And that's why Jason with SaaStr will get paid so handsomely-

    20. RORory O’Driscoll1:19:38

        Absolutely. Unique content

    21. HSHarry Stebbings1:19:39

        ... because there's no other provider that offers it. You need-

    22. JLJason Lemkin1:19:40

        You think I'm kidding, but Harry, how much do you get paid by... I get, like, three or four grand from Twitter a month. How much do you get? Do you have it turned on?

    23. HSHarry Stebbings1:19:46

        I, I get fuck all.

    24. JLJason Lemkin1:19:47

        What?

    25. HSHarry Stebbings1:19:48

        I'm so pissed off about this. I see everyone post. I don't know how to... Dude, you know me. I'm a Luddite.

    26. JLJason Lemkin1:19:53

        Maybe-

    27. RORory O’Driscoll1:19:53

        I'll show you

    28. JLJason Lemkin1:19:53

        ... I don't know how to-

    29. RORory O’Driscoll1:19:54

        But if, but if I'm making 50 grand a year for... Now, I know it's not the same because Twitter's opting to pay its creators. I'm getting paid 50 grand a year for my tweets. I want $500,000 a year from OpenAI for its SaaStr content. It's more valuable. I want, I just want, I just want, like, 40 grand a month. That's my, like-

    30. HSHarry Stebbings1:20:09

        You get 50 grand a year

Episode duration: 1:22:58