Groq’s $20BN NVIDIA Deal | Why Sam Altman Doesn’t Care About Dilution & Invisible Unemployment 2026

1. 0:00 – 1:10

   Intro

   1. JLJason Lemkin0:00

      Everyone's coming for NVIDIA now. NVIDIA's numbers are gonna crush this year, but we're gonna see all the daggers really coming out.

   2. HSHarry Stebbings0:06

      My word, what a schedule we have for you today. Groq acquired for $20BN. Manus acquired for $2BN, and so much more.

   3. RORory O’Driscoll0:14

      In the end, words are words, and half a billion dollars is life-changing, right?

   4. JLJason Lemkin0:18

      For venture, this is the era of, of the spite startup.

   5. RORory O’Driscoll0:21

      No one ever said to Winston Churchill, "Congratulations, you won World War II on budget." They just said, "Congratulations, you won World War II."

   6. JLJason Lemkin0:28

      Over the holidays, my Claude named itself out of the blue. It named itself Ren. I didn't ask it to. It named itself Ren. When most people believe their AIs are alive, you will take it with you 24/7. I do genuinely think you can identify top 0.1% founder without talking to them. I've done multiple billion-dollar exits from cold inbound. Ready to go?

   7. HSHarry Stebbings0:52

      [rock music] Guys, it is so good to be back. Now, so much happened while we were away. I want to start with one of the

2. 1:10 – 16:45

   Groq Acquired by NVIDIA for $20BN

   1. HSHarry Stebbings1:10

      most prescient, Groq being acquired for 20 billion in cash. It happened just before Christmas. Uh, Chamath obviously coming out as one of the big winners. Price is 3x more than the last round price. How did we analyze this?

   2. JLJason Lemkin1:25

      I, I just had two thoughts. One is, um, I was thinking a lot about both OpenAI buying up basically all, all the, all the, all the world's global RAM supply, and Greg Brockman this week, in the new year, talking about how we'll all be running 24 hours of inference by the end of the year. Not all of us, but a s- a subset of us, of, of tech workers, of knowledge workers, will be running AI 24 hours. I'm already up to a couple hours a day I'm running AI myself, and so it's a world of inference, I think, and we... When we started this podcast, we, we talked about building models and LLMs and, and, and all of this, but J- JFC, if all of us, if enough of us by the end of the year are running AI maybe even 48 hours a day, 72 hours a day, right, m- multiple agents running 24 hours a day, inference is all of the growth. And if Groq is even part of the answer, right, part of the existential answer for NVIDIA, it's worth it, and everyone's coming for NVIDIA now. Ev- it's, w- whether it's AMD, whether it's partnering with Broadcom, building your own chips, NVIDIA's numbers are gonna crush this year, but we're gonna see all the daggers really coming out. We just saw the deckchairs being rearranged in 2025. So I don't even know how great Groq is, but if it can possibly address this, it's worth taking out.

   3. RORory O’Driscoll2:44

      I agree. I think, look, I think a couple of things. One is just to kind of c- Jason's comment on inference I think is key. It's that, you know, broadly speaking, in the world of GPUs and TPUs, you know, th- there's two big-picture tasks that every one of these AI companies have to do. You have to train your model once, and that's training, and then you have to run your model every time I submit a query or a question, you're running a model, and that's inference. And the tasks are roughly similar, but they're not quite the same. NVIDIA's totally f- adequate for both. It's awesome for training. Groq had a particular edge for a certain kind of inference, where it was very low latency, very deterministic. In other words, where you have to predictably deliver low latency, right? And what we're seeing now, to Jason's point, is as you live in this always-on AI world, it's kind of irritating if you have a lot of latency, so there's a certain class of users for whom this was kind of a best-in-class option. You know, one of my companies, Tavis, actually was a Groq customer precisely because for conversational AI with kind of real-time digital presence, you can't have a frozen model. You need to be able to respond in real time. So there was a particular use case within inference for which Groq was best in class, so that's kind of the product comment. But the zoom-out comment to Jason's thing is this. At a high level, NVIDIA's got the world's best business and the world's first or second largest market cap, depending on the day, right? They make a very complex technical product. They have a small number of customers whom they charge 75% gross margins to and kick off 100 billion a year in cash, right? The last thing they need is anyone else wandering around the face of Silicon Valley who can make a vaguely comparable product, right? And precisely 'cause Groq, you know, was able to make a vaguely comparable product, I think NVIDIA looked at the analysis and said, "$20 billion is less than 1% of our market cap and less than 20% of our annual free cash flow. For that, we can buy up a competitor and eliminate that potential margin pressure," right? There's only five or six people that can exert margin pressure at all on, um, NVIDIA. This was potentially one of them, and let's get it off the table. And you know, it's kind of a reminder that startups is a, it's a long game with lots of hard moments and then one great moment. That company started in 2016, '17. The founders were part of the Google TPU team, just as the OpenAI and Tropic team were originally some of them part of the Google Transformer team. In this case, they helped build the TPU chip at Google, spun out to do it themselves, funded by Social+Capital. It was a long walk in the woods. You know, as recently as 2023, they were only doing sub $4 million in revenue, but suddenly the wave of AI hits. AI compute becomes, frankly, the most valuable intellectual property on the planet. They start to grow reasonably well, but it's still not a layup in terms of growth. You don't get to 20 billion, to be clear, on a revenue number, right? This was, I think, a year ago, sub $50 million in revenue. As I said, $4 million in '23, 40-ish in '24. You get there because it's a strategic asset that NVIDIA can take off the table for a modest amount of money relative to their absurdly gargantuan cash flow. So they did it. And as I say, [laughs] it must have been a... I would love to know the dynamics of the discussion, 'cause it's an interesting thing in game theory. When you have an asset that's only worth, say-5 billion to you on a standalone basis, but is worth 40 billion to the acquirer on an acquired basis 'cause it protects their $50 billion market, $55 trillion market cap. How do you price that asset? There's no finance weenie answer, and I say that 'cause I'm often a finance weenie. I'm trying to look for, quote-unquote, the right answer. What are the multiples? Blah, blah, blah. None of that applies here. This was a poker game. You know, you can imagine... I mean, I don't know what the dialogue was, but you sit there and go, "Hmm, it's worth 5 billion to me. I know it's a terrifying deal, but it's worth 50 billion to you. Let's talk." And I think 20 billion, as you say, was kinda, it made the last round look really smart. It made everyone a ton of money, and, and NVIDIA said, "Done," and moved on. And I pu- my guess is, in part, it was the willingness to do one of these acquihire-type deals that made it palatable. 'Cause NVIDIA's probably sitting there going, "If we announce this as a classic, quote-unquote, M&A, I gotta believe that even in the current [laughs] regulatory environment, someone at the FTC will have an opinion. But if we just do this as a straight, you know, license hire and just get the deal done overnight, yeah, we pay more," but you pro- they probably paid more for what I'd call transactional compliance. In other words, we're gonna give you your 20 billion. You guys are gonna start on Monday, and we're going to announce it as another fait accompli. So, lots of fun stuff there. Someone had a very busy but very profitable Christmas.

   4. JLJason Lemkin7:27

      You know what, another thing I thought about on the deal just for venture is, um, who do you bet on? Do you bet on what I've done my career, which is the outsider, folks no one has heard of, the, the young kid from, from Portugal or, or, or, or, uh, Sydney that no one's heard of that, that, that figures something out, or do you do what Groq was, which is you invest on one of the guys that invented the TPU, Jonathan Ross? And, you know, the, the story in the press is Jensen in particular wanted to, to turbocharge what they're doing in inference. He reached out to Jonathan Ross w- literally just weeks ago, and the deal closed for 20 billion within two weeks. And he told his whole team, "I want it done before Christmas," and it was done ahead of time. And if you want it done in two weeks with no drama, you are gonna pay thr- in fact, you may pr- pay precisely three times the last round. That's been my experience once as a founder. When you come in hot to buy a company and take it off the table, 3X is a traditional way to remove objections and close a deal instantly. If this company had been founded by someone that was unknown, an outsider, uh, what would this company have been worth? 5%? 10, 10%? So this was also Chamath betting way early, way ahead of all this on an S-tier leader and it paying off big this time, right? And this is... I've never made this kind of bet. I can't afford it. I don't have the money. But it does kind of show this bet can pay off. [laughs] But it's risky, right? 'Cause it's not an ARR multiple bet, not yet.

   5. RORory O’Driscoll8:57

      They're at 175 million in revenue, so that would be quite a ARR multiple to get to where they are.

   6. JLJason Lemkin9:02

      And then Jensen wanted him and his team. Now-

   7. RORory O’Driscoll9:04

      100%

   8. JLJason Lemkin9:05

      ... he told his team, "I want this closed before Christmas, and I don't want an- I, I don't want any effing excuses, and I have no direct reports, so just get it done, guys."

   9. RORory O’Driscoll9:13

      Does this harm or does it help Cerebras? Cerebras, obviously their closest competitor, planning to IPO in the next 12 months. Uh, they just raised, you know, a large round last year. I think it was a billion, around the 5 billion mark. Does this help in terms of setting a benchmark or hurt in terms of taking a potential acquirer off the table and placing a big competitor in the hands of another big competitor? It's a super good question. Um, I think emotionally it will help because you'll- everyone will feel as you're pricing the IPO that you have some kind of embedded value, right? So I... And, you know, and eliminates another competitor. I mean, broadly speaking, at a high level, Cerebras, um, Groq, and NVIDIA in the same space are the very different chips, and what Cerebras does has a single-wafer chip. I think it's more for really advanced training than kinda high-speed inference. But be that as it may, I think at an emotional level, ooh, if you're paying up 5 billion, you're suddenly like, "Oh, this feels good. Other companies have transacted here." So from the banker process of, you know, you use comps to justify value, now you've got the world's best comp, right? And believe me, they'll be using it, right? I hear you. From a game th- from a kind of musical chairs perspective, you know, the, the, the, the, the negative view would be there are a finite number of people who can ludicrously overpay for these kind of assets, right? And one of them is NVIDIA. They just did. Google doesn't need to 'cause they have TPU. So you could say you've got one less chair. On the other hand, the remaining players, I mean, I, you know, I wonder does Amazon, does Apple, does, um, Microsoft, does OpenAI have to have a silicon strategy at some point in time? And if they do, if they wanna get out from the NVIDIA tax and Google continues to not be willing to sell TPUs at scale, then maybe Cerebras gets a play. I don't know. It's, it, it, it's a g- it's a good question. My guess is marginally net positive, but kind of it's like the wheelchair. It's one of those weird things where you ask is it a positive or negative? The truth is there's a big embedded positive, the comp, and there's a big embedded of negative, the musical chair problem, and how they add up, who the hell knows? But wow. But you must be sitting there thinking, "Ooh, I wish they'd called me." [laughs]

   10. JLJason Lemkin11:22

       Well, you definitely lost your number one acquirer on the PowerPoint slide, right? That, that's clear.

   11. RORory O’Driscoll11:27

       Yeah.

   12. JLJason Lemkin11:27

       And that's always a bummer as a founder in venture. It always at least sets you back a week, you know, when you, when you fire up the browser and you get an email that, that your acquirer was acquired for mega money by your num- the number one potential acquirer. It alway- it e- it-

   13. RORory O’Driscoll11:41

       And competitive

   14. JLJason Lemkin11:41

       ... it takes you a week to re- best case it takes you a week to reset from that because at least having it in the back of your mind de-stresses your life, right? It, it, it is a setback. Um, one they could do, th- th- they could just deprecate the entire product line and do something brand new. They probably will. So it's hard to, one, it's hard to predict where it will go to, right? Um, two-And this is a psycholog- I know we know this, but I saw this when I was a VP at a Fortune 500 tech company. I saw this when I was at Adobe. You do... It's not just that $20 billion kind of creates a, a new comp. I mean, that is true, as Rory said. Of course, it's true. It's, it really is true that when times are good, this only works when times are good, it does a psychological reset for acquirers. VCs are like, "Oh, here, the 11 companies will buy my portfolio company," or founders like a- acquisitions are, have huge soft costs in organizations. It's not just the money. The massive costs on the team, on time, on distraction, and the amount you have to do to justify a deal of any size that isn't, like, three times revenue, the amount of work it goes, unless you're Jensen who says gets it done before Christmas, for anyone else, it's massive. So when you can walk into a room and say, "We want to acquire Cerebras for $25 million, it's twice the size of Groq, and we need it now," the whole room just get nods. They literally nod. The, all the objections to that massive check float away in the room. I've seen it time and time again. So it is a gift, and it just justifies doing something that only, maybe only Jensen could do until a couple weeks ago.

   15. HSHarry Stebbings13:16

       The only edit I'd have to your statement there, Jason, is billion, not million.

   16. JLJason Lemkin13:21

       Oh, if I-

   17. RORory O’Driscoll13:21

       Yeah

   18. JLJason Lemkin13:21

       ... I'm sorry if I misspoke. Billion.

   19. RORory O’Driscoll13:23

       The, I think, Jason, that's genuine, k- that's very insightful. You're exactly right. There's this, every, you know, six months ago if you said, "I think we should buy Cerebras or Groq for $20 billion," and $20 billion, you were at one of these other companies, you know, five people would dump on you and say, "Idiots." Now you say it and they go, "Well, the smartest guy on the fricking planet in semiconductors just did one of these things." That normalizes it, right? So i- it's a psychological comp. It's not that you run the n- yeah, I, I totally agree. There's a, there's a dam unlocking that goes on here where you suddenly realize what you can do if you want to win.

   20. HSHarry Stebbings13:53

       It is interesting that just funding history-wise, there are not a ton of VCs in this. In terms of, like, funding sources, it was very non-traditional. I mean, as we said there, it was not an easy pathway to where it is today. And I mean, my word, some of those funding rounds were hard with, again, non-traditional funders. And so it's not like a big win for Silicon Valley in the way that I think Twitter's talking about it. It is for Chamath.

   21. RORory O’Driscoll14:16

       Well, I mean, look, Social+Capital get all the credit for being early and doing two rounds, and then you're right, in '21 and '22 there were a couple of, you know, I think D1, Tiger, a bunch of the late-stage crossover. But you're right, there was only one classic Si- Silicon Valley firm, and ironically, [chuckles] it was happening just as that firm was blowing up and becoming a non-traditional Silicon Valley firm, becoming a Chamath private office. So yes, I mean, there's no doubt that the usual cast of characters weren't there, and the reason is pretty obvious, is, you know, we used to do semi, I mean, uh, semiconductors. We, in the '90s and early 2000s, you know, lots of firms, we used to do semiconductors, too. And if you look at the semiconductor exits from 2003 on, almost none, right? In venture land, right? A very hard way to make money. And of course, what happened is in the public markets, semiconductors were hugely profitable. The Philadelphia Semiconductor Index was, you know, compounded up like a crazy person. And then on top of that, you have the AI thing, and then you have this chance for this... It, it's very much a singularity. You have the one-off deal that's just the right product and, you know, you put your hand up and you're there. But it was very contrarian thinking in 2016 with no obvious thesis other than, as Jason said, the great guy, he'll figure it out, and then being smart enough to survive long enough for the wave to hit. I don't think this means that there's going to be 20 more semiconductor great outcomes, to be clear. It's a little like in networking, Arista Networks. Everyone did networking in the '90s and early 2000s, then nobody did networking, and then, you know, Arista was founded. Bechtolsheim founding the company. It did really well. It's public. It's got a $40 billion market cap company. But there's been no other box company since then. It's like it's a one-off. You just, you look at it and you go, "Oh, someone made $20 billion in a one-off. Good luck to them." And then you put your head back around to funding, you know, relevant AI, enterprise AI software companies, right? I don't think there's gonna be 10 more semis. There might be two. But yeah, it was long before 2016 it was, semiconductors were, you know, just had been really brutal for 10 years. Uh, we were there, I remember. Lots of those companies in 2000 to 2010 didn't make it.

   22. HSHarry Stebbings16:23

       I, I, I remember, um, Arij Ritshia had to have a chat with Bruce Dunlevie when he was doing the Cerebras deal, and Bruce was telling him the wisdom of investing in semiconductors and all that he had learned from the prior 15 years of, like, the semiconductor winter that you speak of, um, which I thought, which I thought was interesting. And credit to Arij for doing Cerebras after that. Um,

3. 16:45 – 37:51

   Meta's $2BN Acquisition of Manus: Did They Sell Too Early

   1. HSHarry Stebbings16:45

      but speaking of big acquisitions, we also have Meta acquiring Manus. One of the things that I love about doing this show is because we're not journalists, we also actually have real information. And so I actually know things that actually none of the media do, which is the price was $2.5 billion. It was a 25X current ARR. They were at 100 million of ARR doing 125 million run rate, including consumption. So for a Benchmark, it was, say, a 5X in eight months, um, which is pretty amazing IRR. How do we think about this?

   2. RORory O’Driscoll17:21

      One, first of all, let's start by all, all credit to Benchmark. If you recollect, we talked about this when they first did the deal. It was controversial, and I remember even saying myself, you know, "I'm not making a moral judgment, I'm making a pragmatic judgment. You're taking on a lot of risk here, um, funding a company that at the time looked like it was a China-based company." They did an amazing job of making it a not China-based company. Um, cut off the links, based in Singapore, lot of com- So they created some value by doing that, right? Um, so and it's obviously paid off. They, that's when you, that's the way ventures are meant to work. You take a calculated risk, somewhat of a non-consensus risk, and when it works, you can get a very compelling return in a short period of time.Right? So that's g- so yeah, it's obviously it's a good outcome for them. I mean, from Meta's perspective, in the context of the money they're throwing around, it's not crazy. It's not obvious why a kind of B2B or individual knowledge worker work tool, which is what Manus is, is an obvious product to roll out to, you know, three billion users on Facebook, most of whom don't do knowledge work. But I think that what the Manus team showed is they know how to make AI work at the level of the user, right? And the non-technical user, and I think that's the asset and the team that they're grabbing here.

   3. JLJason Lemkin18:44

      I think the founders decided to sell. I don't think Benchmark was pushing for them. 5X sounds great, the IRR. This is not a three times fund returner. Um, so Benchmark would have every incentive if we're just playing games, if we're just being a- capital allocators to roll the dice. Let's go for four. Did you... Hey, did you guys see the Groq deal? We're better than Groq. Um, so, so the VCs have no incentive, I think, to take this deal unless it's out of money, which I don't think was li- unlikely the case. Even-- No matter what the gross margins were, that wasn't going to be the issue, okay? And I think the founders sitting here, moved to Singapore, whatever it was, a lot of existential risk, running a very clever orchestration layer on top of other LLMs that Anthropic ha- can do some of this. OpenAI is going to do some of this. Um, they are best of breed, but other people are all doing the same thing. We're all running multiple LLMs. We're all orchestrating multiple agents. I think what happened, and listen, this is just me pattern matching to the size of the deal, the timing to everything. They said, "This is our local maximum. To-- Relative to risk and reward, we're each gonna make..." There's no l- capital gains tax in Singapore if they're Singapore residents. It's 0% tax. I... You know, are they a Chinese company? We've already seen these issues. What are the risks? Who will buy us, right? Oh, maybe only so many people wanna buy us. IPOs in China are back, but they're weird. Will it be a US IPO? And they're like, "As founders, we're each gonna walk away with a, you know, we gotta go work for, for that Scale guy and, and, uh, and, and Meta. But we're gonna walk away with hundreds of millions of dollars today for a company probably with, you know, extremely low gross margins, you know?" And I'm not saying it's not an epic product, it is. But we've picked on some products over this pod, the Lovables and Replitz, that I suspect have much better gross margins than Manus does. Okay, Manus is doing, is providing a better product running multiple LLMs at the same time, and it's doing it for pretty low [chuckles] price. I mean, it's hard to see it being, uh, a high gross margin product. So I, I could be wrong, but this feels like a local maximum deal, um, where the founders told Benchmark, "Guys, we're selling."

   4. HSHarry Stebbings20:50

      So the team had 80% of the company still. They took very little dilution and they were very-

   5. JLJason Lemkin20:55

      Okay, 80%, right? And maybe, maybe it's not quite that simple with how the company was founded, but yeah, they took only 20% VC dilution, right?

   6. HSHarry Stebbings21:01

      They had, they had term sheets for the same price for a new round.

   7. JLJason Lemkin21:05

      That's it.

   8. HSHarry Stebbings21:05

      My question to you-

   9. JLJason Lemkin21:06

      That's it. That was the clearing price, was the same price, right? We've all been there. You walk in with, "I've got a term sheet at two and a half." I literally had a massive acquisition that got turned down over the holidays that was exactly at the term sheet price, right? This happens all the time in ve- just going to the prior point. And they, they're... Okay, they're each gonna make half a billion as founders. [chuckles] It's all... I mean, you know, I, I might take that deal. The three of us might split it up and we, we w- we're not quite billionaires, but the three of us might do it and just become podcasters.

   10. RORory O’Driscoll21:35

       Yeah.

   11. JLJason Lemkin21:35

       It might be enough. It might be [chuckles] enough. We might call it a day, boys.

   12. HSHarry Stebbings21:39

       Guys, guys, guys, if, if we're, if we're on the Manus board, it's doing 100 million now. Say it does, uh, 3X, given the growth rates, I wouldn't say that's insanely, uh, overly expectant. Um, they're only doing 8X end-of-year revenues next year. If... It does feel quite cheap. I would be fighting with these founders saying, "You're being underpriced. Like, go another year."

   13. JLJason Lemkin22:01

       Well, then give us a billion, Harry. Harry, if you think we're underpriced, let's do a secondary at 10 billion.

   14. RORory O’Driscoll22:05

       Absolutely.

   15. JLJason Lemkin22:06

       I'll sell, I'll sell 500 million. Rory will sell 500 million. R- Harry, you put the money and put your money where your mouth is, dude.

   16. RORory O’Driscoll22:13

       Totally.

   17. HSHarry Stebbings22:13

       Rory says, "I don't wanna give you that money 'cause I think you'll be less effective with half a billion dollars."

   18. RORory O’Driscoll22:16

       But, but, but e- exactly. And, and what you'll discover pretty quickly is trying to persuade a founder to hold on when they don't wanna is a very hard thing to do, right? And arguably, you shouldn't even try, right? In fact, not even arguably, you shouldn't even try. In the end, you know, 90% of the time the founder controls the exit decision, and the 10% of the time they don't, it's usually a mistake for the VCs to try and control it, right? Um-

   19. JLJason Lemkin22:40

       Amen

   20. RORory O’Driscoll22:41

       ... you know, you should j- I mean, what you can... If you have a good relationship with the founder, you should be able to talk to them about how you see the pros and cons of each of the things, right? Here's the o- yeah, here's the risk. And help them make an informed decision based on hopefully some wider pattern matching, but they have more specific knowledge, right? I mean, I always tell people when you get an offer, I always say to the founder, "Now would be a really good time when we're deciding to take this offer or not, what it, what, to, to, to fess up to any nagging worries you've had that you've been smothering down in your CEO gullet here."

   21. HSHarry Stebbings23:10

       Can I just play devil's advocate with both of you?

   22. RORory O’Driscoll23:11

       Sure.

   23. HSHarry Stebbings23:12

       'Cause I wanna learn. Two things here. When you're very young and you get a reasonable amount of money shoved in your face, you jump at it.

   24. RORory O’Driscoll23:20

       Yes.

   25. HSHarry Stebbings23:20

       I remember when I was young, I jumped, like a million bucks, I would absolutely freaking jump at it.

   26. RORory O’Driscoll23:25

       I still would. Yeah, go on.

   27. HSHarry Stebbings23:27

       Um, and um, [laughs] and my, my point being, it's very difficult to extrapolate yourself out of the weeds when you're so in them and you're very young and you're quite naive, and the perspective that you guys can bring is very helpful in showing what it can be if it keeps on growing the way it does. And then secondly, they don't have the market comps that we do in terms of where assets are transacting, what it could be in 12 months. And so I, I do feel you should push back.

   28. RORory O’Driscoll23:55

       All, all that's true, Harry, and all that allows you to have a useful dialogue, but in the end, I think Jason's right. In the end, words are words and half a billion dollars is life-changing, right? And I think, y- you know, at some point the entrepreneur can turn to you and say, to Jason's point, I think he nailed this. Like, "If you think two and a half billion is underpriced, okay, don't cash out my 500 billion, but give me 50 million. Let me take that much off the table." Because they're being offered, you know, life-changing money. 'Cause there's actually an implicit statement that you're making that I wanna revisit, right? Even if you think holding on is the right decision, in other words, they're selling early-And they should compound and hold later, right? You can unveil those facts till you're blue in the face, but in the end, they're gonna make their decision, and they should. You're diversified, they're not, right? So I, I, I hear you. I've had this con- I've had-

   29. JLJason Lemkin24:42

       I think so, though I do think it's a little, like, we could... little more than that. I think this isn't just money per se. I think going back, it is a local maximum.

   30. RORory O’Driscoll24:51

       Well, I was gonna go there, Jason
4. 37:51 – 1:00:48

   OpenAI's Stock-Based Compensation Strategy

   1. HSHarry Stebbings37:51

      Lemkin.

   2. JLJason Lemkin37:51

      Yeah.

   3. HSHarry Stebbings37:52

      Um, we, we mentioned OpenAI and the spite startup that is, you know, many of the spin-outs. OpenAI announced that they now spend 46% of revenue on stock-based compensation, $1.5 million per employee, which is 34 times higher than comparable tech companies pre-IPO. How do we reflect and think about this news?

   4. JLJason Lemkin38:15

      Well, if you're a CEO and you have zero shares, you don't worry about dilution.

   5. RORory O’Driscoll38:19

      Interesting point to start.

   6. JLJason Lemkin38:20

      You really don't. Then damn the torpedoes, because I got no shares. That's why he's pushing this far high- This is like three to four X the comp of Anthropic effectively. Now, maybe they'll make more in the end. And Anthropic doesn't do the secondaries, right? They've had a very limited number of secondaries compared to OpenAI. What do you care? Uh, we talked about this once in the pod. Years ago, I worked with a CEO that was guaranteed 6% through IPO. He didn't care either. I saw it. This was a small... This wasn't OpenAI. He didn't care about nothing. He didn't care about how many rounds or how much he gave to his CRO, because he got re-upped. If you ignore the basis and the tax issues, he got re-upped constantly to 6%. Why would S- Sam just wants to build the biggest, greatest AI planet on planet Earth, and if he dilutes everyone 99%, it doesn't impact him at all as a shareholder.

   7. RORory O’Driscoll39:05

      I, I do agree with that. And then, but then on top of that, extra positive comment for Sam is that he may also be right in not caring. In other words, this may be one where you got to do what it takes to win, and you don't want to come up short, but on budget. You know, one of my quotes I use occasionally is no one ever... I use it on this podcast. No one ever said to Winston Churchill, "Congratulations, you won World War II on budget." They just said, "Congratulations, you won World War II." But sometimes mission is-

   8. JLJason Lemkin39:32

      They rarely discuss the budget [laughs] .

   9. RORory O’Driscoll39:33

      Yeah, no one remembers the budget. No one remembers the budget for World War II. We're just winning is the only thing. Remember, we talk about the stock-based compensation, and I'll come back to this point in a second. Those numbers are understated for purely technical reasons, and I'll come back to in a second. But he's sitting there going, "You know, some of my key people are getting $20 million, $50 million offers from Meta, and that's really liquid stock. I got to hold onto my people." Right? So he's doing what it takes to win, and if the market is big enough, then he'll be right. And again, it's this S-tier talent, as to use your phrase, Jason, where, you know, where you have to put up with a lot. You have to swallow your spite. You just got to make it worth their while. So I, I think it's entirely necessary and rational for your top-tier talent. And then to the other point I made, and which is that it, it actually understates the number. If in fact, uh, the stock-based comp accounting is really weird because it all crystallizes at the point when you issue the shares, right? And if you issue op- let's do RSUs because they're simpler. If your stock is at $10 a share and you give someone, you know, one RSU, effectively you amortize, you know, $10 over the next four years, and you give it to them two years ago. Right now, the stock is at $40 a share because the stock's gonna... You still only amortize the initial price. So for companies that are going up in value, the stock-based comp actually understates the amount of economics that are being transferred to the employee. That employee is probably making $4 or $5 million if he's getting 1.3 of SBC, right? By the way, it's really crappy on the downside. You saw this after 2021. If you issue shares to people at a high price, the sense is really odd. Because it's a high price, it's a high stock-based comp, then the share price goes down. The poor employee is literally making nothing if it's options because they got options at a high price. But the stock-based comp looks enormous in the p- in the gap P&L, right? That's why i-i-it's partially relevant. Stock-based comp is, is kind of very complex to track. It's partially relevant, but the other thing you got to look at really as a rough rule of thumb, and it's also not perfect, is what percentage of the company are given away every year, right?

   10. JLJason Lemkin41:44

       Yeah, that matters for dilution, right?

   11. RORory O’Driscoll41:45

       Typically, for a public company it's, that's not growing quickly, it's 2% or 3%. I wouldn't be surprised if every year some of these companies are literally giving away between 8% and 10% of the company a year. And that's... Uh, because as I say, that 1.5 probably understates what's going on here. You know, you're just giving huge grants to people. I could be wrong, and it could be starting to kind of taper out now. But as an example, you know, just looking at the publicly available information, in the year when, you know, when Anthropic raised money at $4 or $5 billion, then they raised at 14, then they raised at 60, your rough math would say $4 billion to $60 billion is a 15X. It's just under a 5X on a per share basis because you're issuing so much capital to raise capital, and then you're issuing so much capital to employees, and that's just, you can figure that out from the publicly filed document. So there's just a lot of dilution going on because these are business that need a lot of capital, and they need a lot of great employees. But again, if the price is worth it, it'll all pay off, and those people will be-

   12. JLJason Lemkin42:47

       They're still leaving. Even with this, this comp, they're still leaving in the first year [laughs] .

   13. RORory O’Driscoll42:50

       They're still leaving. Exactly. I j- Jason-

   14. JLJason Lemkin42:53

       They still only have like 60-something percent retention in researchers at OpenAI. It's crazy. Even without a cliff [laughs] .

   15. RORory O’Driscoll42:59

       That is a great point because I'm, I'm remembering now, when I, I'm often on a, on a comp committees, and y-you exactly... One of the quest- When people say we got to do more on the equity, my first question is, what's the retention and what's the hi- what's the success rate on new hires?And if I was the VP of HR and I was on the board and I was giving that VP grief about these grants, the VP could turn to me and correctly say, "Hey, Mr. O'Driscoll, you're right, Jason, we only got 60% retention. So by definition, if you believe in markets, Mr. O'Driscoll, we're underpaying. And we've only got, I don't know, 50% conversion of offers. You know, so you're exactly right. It may be that's the money it takes to get these people in the chair."

   16. HSHarry Stebbings43:34

       The money it takes is provided in large part now for OpenAI by Masa. SoftBank closes its OpenAI investment. It turns out it's already up two to three X on paper. Is this Masa's greatest play ever, do we think?

   17. RORory O’Driscoll43:49

       His greatest play ever was doing Alibaba and getting 20% of Alibaba, holding it for 20 years, and making hundreds of billions of dollars, right? Um, but I think it's a fun pl- It's so revealing because if you think about it, and just for people's background, Masa had negotiated a deal to put in, I think, $40BN into OpenAI, but it had to close by December 30th of this year, right? And the price at around 300 now looks cheap. But you just gotta love the risk tolerance of someone, Masa, who is willing to commit $40BN he doesn't have until he sells other shit. I mean, it's literally like he did a little inter-Masa margin loan. It's like, I, you know, I have the right to put $40BN in OpenAI, now I better find the money by selling other stuff, and I'm scurrying right down to the line to find the money the week before Christmas. It's just, like, the level of risk tolerance that that guy has is just amazing, right? And he got it done. And you're right, Jason, the IRR in a day is amazing. You close the investment on December 29th, you put in your $40BN, and next day you should be carrying that thing at 500 because that's what it's worth right now. So, you know, fun-

   18. JLJason Lemkin44:57

       You know what might be his best investment? Even though you're right, Rory, I'm sure it can't compare to Alibaba, uh, over time and the entry price was much better and, and everything. He's the only double-digit shareholder.

   19. RORory O’Driscoll45:07

       You're exactly right.

   20. JLJason Lemkin45:08

       So if, if, if OpenAI goes to the moon, this may be his best deal ever. Yeah, he had to enter later, right? Yeah, the entry price was high, but he got his double... Like, it's not easy to get double, double digits at a, at, at a... This is a pretty hot company. It's hard to get double digits.

   21. RORory O’Driscoll45:22

       It's, it's a great point. I mean, and it gets to the [laughs] interesting, it's a little like the NVIDIA... Uh, funny because he obviously sold NVIDIA at one point in time, but it's that kind of single-mindedness. What you admire about him is when he has conviction on a bet, you know, some of us put in 5% or 10% of our fund. Some of us, you know, like famously at SpaceX, founders put in 20%. Masa would take his fund, leverage it three to one, and just go all in. And when he's right, what it means is, you're right, Jason, that's a great point, is that you end up being the l- I mean, the sentence says it all, the largest individual shareholder in the most important one or two companies of the last and next decade. That's pretty cool.

   22. JLJason Lemkin46:01

       It's Thrive on steroids.

   23. RORory O’Driscoll46:02

       It's Thrive on steroids. You gotta love it, man. Boy.

   24. JLJason Lemkin46:07

       And if it is wrong, he might, he might be Ellison. He might check out. If this one goes sideways [laughs] he might have to retire and call it a day. Ellison can keep going on for his outcome. This one has to work for Masa. [laughs]

   25. RORory O’Driscoll46:17

       Roll and roll again. I love it.

   26. HSHarry Stebbings46:19

       Did you guys see the news about the OpenAI hardware? And, uh, Jason, you put it in the notes well, but, uh, a pen-like object which has camera and has a microphone in it. Did you see this? And, and how did you feel?

   27. JLJason Lemkin46:33

       I believe in it.

   28. RORory O’Driscoll46:35

       I can trump that. I am probably one of only three people in venture who can talk about having invested in a pen company with a microphone and a camera. I did an investment called Livescribe 10 or 15 years ago. We got to under $80M in revenue as a consumer device. Ultimately didn't work out. We had to sell it for not a lot. So I have lived the pen computing revolution dream, right?

   29. HSHarry Stebbings47:02

       I was not, I was not expecting this tangent.

   30. JLJason Lemkin47:04

       [laughs]
5. 1:00:48 – 1:15:45

   Navan Trading at 4x ARR: Who is Good Enough to Go Public?

   1. JLJason Lemkin1:00:48

      it. [laughs]

   2. RORory O’Driscoll1:00:48

      I, I do wanna move to public markets. A very, very different tangent, but Nevan is down to 4X ARR, and this is kind of taking a sway away from kind of the M&A craziness-

   3. JLJason Lemkin1:01:00

      Sure

   4. RORory O’Driscoll1:01:00

      ... and the AI that we've discussed. Nevan, real business, very good business, down to 4X ARR. Andreessen buys more. Question is, if Nevan's not good enough for a strong IPO, what does that say about the market, and what hope do the rest of us have?

   5. JLJason Lemkin1:01:18

      I mean, I think it was, it's a, it's kinda ki- as the Lemony Snicket book, a series of unfortunate events. I mean, they went public just before Christmas. I mean, well, step back. First of all, to me, it's not an AI first story, which means it doesn't have automatic love, which means it's gotta stand and fall on the fundamentals and facts and circumstances. I think the fundamentals are good

   6. RORory O’Driscoll1:01:40

      I think this is a 27%, 28% growth company. The GAAP loss is high, but the non-GAAP, the non-- it's non-GAAP profitable, and a lot of the GAAP stuff is just, um, actually SBC stuff related to the, uh, um, restricted shares. So the fundamentals are, this is a 27% growth company trading at four times revenue that's cash flow positive and operating income positive on a non-GAAP basis. Actually, after this call, I made a mental note to follow Andreessen and buy some, right? Perfectly good, boring business. It's not gonna 10X from here, but it's probably significantly undervalued here. Why? One, they went out at a weird time. Two, they went out with that kind of at the point in time when the SEC was shut, so they had this weird exemption that says, "You can go public, but if you get the shit wrong, we can give you grief later." Then their CFO said at the first earnings call that she was stepping down, and, you know, no nefarious thing, but, huh, for us, you know, um, maybe she was just brought in to do the IPO. But you just add up the whole bunch of weird stuff, and you kinda go... And, you know, guidance overall fine but, you know, some questions on the OPEX structure. So you look at it and you go, "Perfectly good company, probably 30%, 40% undervalued. You know, maybe you should buy some." So I don't think it's a indictment of the IPO asset class. I think it's just, as I say, circumstances. It will be easier to go public if you've got a mega AI story than if you've got a solid high-growth business. But, you know, Rubrik and plenty-- ServiceTitan and plenty of others have proven those standard companies can get there too.

   7. JLJason Lemkin1:03:11

      I would say here's a narrative, and feel free to challenge it. Um, maybe Navan says the IPO window, though, really isn't all that open. And what I mean is, I think Navan had, um, $700 million in debt and only $200 million in cash. It had to IPO to pay off its debt. Maybe it would've figured out another way, but this was already a down round. It had likely fatigued its investor base, right? And so I think it IPO'd because it had to. Not literally, but quote. That's why you IPO in the middle of a SEC shutdown and in a suboptimal time. Look, it got done. They raised the money. They paid down their debt, right? It's a good company. They will fight on to another day. They will fight their way to, uh, decacorn status. But maybe it says the window isn't really that open. M-Maybe Navan only IPO'd because it was their least best bad option. And maybe, maybe if you're not Figma or better, it's gonna be rough out there. That's what it says to me. If you're not Figma or better, it's gonna be rough out there. And that all these VCs are saying you can IPO at 100 million, and the, the IPO, it, it... N-Navan says no. To me t- it says it's just barely cracked open. It's barely cracked open.

   8. HSHarry Stebbings1:04:15

      D-Does this not go to what y- Does this not go to what you said, though, before Jason, very well, which is, like, one, unless you're co-attached to AI or unless you're replacing labor, you're gonna get hit, a la Duolingo, a la Monday, both which are not either. I'm just using them as examples. And this is another example of that. It's not co-attached, and it's not replacing labor.

   9. RORory O’Driscoll1:04:36

      It's not, which means it doesn't get a, a kind of-

   10. HSHarry Stebbings1:04:39

       AI premium

   11. RORory O’Driscoll1:04:40

       ... premium. But at the same time, it's also not, as, as of now, I mean, you can talk about are you worried that the AI will do the travel booking and you'll go away over the medium term. I'm gonna leave that out. But it, it, it should be valued on the fundamentals. Like, stop all the noise. Like, it's a 27-- You know, just look at the growth rate, look at the free cash flow, run your model. I don't think you come up with 4X ca- uh, revenues, right? So again, in the short term, the markets can be very narrative driven, so I mean, it's worth pointing out Evan dunks on CoreWeave. I think CoreWeave was one of the strongest performing companies last year simply and solely because it was one of the few ways for the public markets to pay the AI bet, right? Over the medium term, fundamentals on all of these things will reassert themselves. And if they con- To Jason's point, if they really are gonna make, quote unquote, if they're gonna be a decacorn, you know, so if they can double in four years, then they're worth $10 billion. If companies that are worth $4 billion can't go public with 27% growth in cash flows, then I think it's more... Th-Then I'd say this, the public markets can quit bitching about how all the value's been created in the private markets. Then the people who choose to stay private are actually correct. They can look the public markets in the eye and say, "You guys just aren't a compelling product." Right? And I do think there are questions about the public market being a compelling product. They have to be, 'cause they're in competition with late-stage IPO, late-stage private capital to get access to these great companies. And when you have, you know, if you have the kind of market where you, where it's a pain in the butt to raise money at $4 or $5 billion of enterprise value, then you don't have a great market.

   12. JLJason Lemkin1:06:17

       You remember, I mean, all these weeks ago on this pod when Cliff from Canva came on, he said the one advantage to going public is he'd get a, a better valuation, that it was a reverse arb. Do you think that's true today?

   13. RORory O’Driscoll1:06:28

       I think at some point it has to be, but, uh, y- y- it's a great question. In, in other words, are the private markets still prepared to give money at higher prices than the public markets? Possibly still. And, uh, then one of two things is true-

   14. HSHarry Stebbings1:06:40

       I'm looking for an un-unwaveringly still.

   15. RORory O’Driscoll1:06:42

       Yes.

   16. JLJason Lemkin1:06:43

       What's that? No, I th- no, Cliff's odd point, when Cliff came on, all these IPOs had happened. They were high-flying from their initial day, right? CoreWeave's still a great one, but it is down from its peak. I think Cliff's point was, if we went public at Canva now, I'd get a better valuation than I could get from the private markets. That, [chuckles] that seemed a brief moment in time. [laughs]

   17. RORory O’Driscoll1:06:59

       And, and that just makes no s- Put it this way, it makes no sense on any kind of rational risk-return basis, leaving out behavioral aspects, right? It makes no sense that you get a higher, cheaper capital when it's illiquid, t- higher expense structure associated with that capital, but you're still as a company able to access capital cheaper there than the public markets. It makes no sense long term, because the public markets you have liquidity. As an invest- I should be more willing to pay a higher price if I have the ability to sell than if I don't, all other things being equal, right? So it makes no sense. But as, yeah, Jason, you're right, is that right now that's not the case. And the, the w- I caveat it the behavioral comment. It may well be one of two things is true. Either this is a massive arbitrageAnd at some point, it's gonna switch, and the public markets will correctly have a lower cost of capital than a private. Or, B, there's this weird behavioral thing, which is maybe it's easier to build companies in the private market just because the public markets are so shitty and so annoying and so in your face with activists and quarterly reporting that literally the human beings running these companies perform better in the private market than the public. That's the only long-term explanation. Short-term, it's an arb question. Is there a discon- continuity in valuation? But the argument, and Stripe seemed to make that in spades. They're basically saying, "We love running our company private. It's really good. No one bugs us, and we do a damn good job. Why would I bother?" Right? And you're right. They started-

   18. JLJason Lemkin1:08:28

       Yeah. They stay the number one navon. Why, why... Unless you have to pay off your debt, why IPO like that?

   19. RORory O’Driscoll1:08:34

       Because, I, I mean, I, I, I will quote, I will quote the very funny, but there's a caveat to it. Zendesk, I remember Mikkel, the CEO at Zendesk, made a very funny quote about going public when he said, "Eventually, you have to move out of your parents' basement." It was such a good line about growing up and going public, and in one sense it was very funny. But of course, you look back five years later, and because he was public, they had activists. Because they had activists, they had to sell. And once again, you can argue maybe being public wasn't as good as it could've been.

   20. JLJason Lemkin1:09:06

       And have you seen what the kids are doing this year? They're s- they're staying in the basement.

   21. RORory O’Driscoll1:09:09

       They are staying in the basement.

   22. JLJason Lemkin1:09:11

       It, it's a gen- generational change from the Zendesk days.

   23. RORory O’Driscoll1:09:12

       No, you're right. That's a super point, Jason.

   24. JLJason Lemkin1:09:15

       The kids are, the kids are staying in their basement. [laughs]

   25. RORory O’Driscoll1:09:15

       Yeah, you're right. Maybe Evan's gonna stay in the-

   26. HSHarry Stebbings1:09:17

       Then why is Ali from Databricks suggesting that he might not stay in the basement? He didn't rule out a 2026 IPO.

   27. RORory O’Driscoll1:09:24

       Because maybe when he started going around the second half of the alphabet and someone said to him, "You know, we've got it. We've done an L. We can do an M, but if we start to get into the bottom 13 here, dude, it's getting weird." Right? Look, you know what I believe. I believe in the end it won't be better to be in your parents' basement. In the end, you will go public. But the question is, to the Ali comment, is it best to go public at 150 billion or at five billion? And it's funny. I was actually just thinking about this. I, uh, uh, 'cause I was mentally thinking about the structure of the venture industry, and my big aha, which is Captain Obvious, as Jason would say when you say it, is this. There really are two different late-stage businesses now. It used to be late stage was, I remember Meritech would say, "Beyond 10 million is late stage," and you'd think 10 to 100 million was, quote, late stage. Now, late stage is 10 to 400 million, because below that you just can't realistically get public. But then there's this entirely separate asset class, I would argue, which is beyond 400 million. You know? Right? Which is when you could go public, but you're actively choosing not to, right? And that's just a different category. Like Stripes in that, Databricks is in that. I decided... I was, I was thinking this morning. I decided to call it post-IPO scale, still private. And if you do the in- initials on that, if you do the initials on that, Harry, it's PISP, 'cause they are-

   28. HSHarry Stebbings1:10:40

       PISP

   29. RORory O’Driscoll1:10:40

       ... kinda taking the piss here, right? It's still private. It's, like, all these companies who are doing two billion, three billion in revenue and just could go public and are choosing not to. And it's almost like it's a different asset class from simply not being at the scale to go private, which is maybe 400 million. There's this entire category of choosing not to. And you have to ask yourself, as the public markets, why are they choosing not to? Why are we such... If I was running NASDAQ or NYSE, why is our product so uncompelling to Ali at Databricks that he got all the way to 150 billion in enterprise value before he thought going public was a good idea?

   30. HSHarry Stebbings1:11:15

       If you're on the Revolut board, they're doing nine billion in revenue, three and a half billion in profit in 2025, would you be saying we should go public?
6. 1:15:45 – 1:17:25

   The Rise of Invisible Unemployment

   1. RORory O’Driscoll1:15:45

      the way.

   2. HSHarry Stebbings1:15:45

      Jason, no jobs in 2026. This was Stanford grads saying that they can't find jobs, was the-

   3. JLJason Lemkin1:15:52

      Yeah

   4. HSHarry Stebbings1:15:52

      ... I think the title. How do you feel about this in the labor markets in 2026?

   5. JLJason Lemkin1:15:59

      I call it invisible unemployment, and it's all around us, and it's gonna grow this year. It doesn't show up in the government numbers yet, um, but it's everywhere. It's, um, Shopify saying for the third year in the row they can hit insane growth without adding, adding any headcount for the third year. It's every single CEO wanting to keep headcount flat and backfill with AI. This is not AI, these are not robots firing us, okay? This is tighter and tighter companies, radically higher ARR per employee, um, and no one wanting to hire entry-level people, no one wanting to hire mid-pack people, no one wanting to hire work from home people, um, folks not able to reskill. Reskill is a delusion. Reskill is something we say to, to make everybody feel better. Reskilling is like when you get, when you, they do layoffs and they bring you in the room and they give you a packet of jobs potentially. It's just to make people feel better. No one's ever reskilled anyone ever, and it's harder in AI. So I call it invisible unemployment, and, um, it may benefit us as VCs, which is a, a terrible thing to say. It may bene- it may, it'll make our companies more efficient and make us more money and make them move faster and iterate faster. But I am really worried by the end of this year we're gonna feel, smell, and live in this invisible unemployment, and it, it's, it's gonna be a big deal.

7. 1:17:25 – 1:27:18

   The Future of Work and Education in an AI-Driven World

   1. HSHarry Stebbings1:17:25

      How do you think that first shows up, Jason?

   2. JLJason Lemkin1:17:28

      Well, it's showing up, like, literally kids can't find jobs in college unless you're the best. If you're the best, this is, it's true of everywhere, but if you're the best, you have infinite job offers right now. If you're top of your class in math at any school-

   3. RORory O’Driscoll1:17:41

      Yeah

   4. JLJason Lemkin1:17:41

      ... you will be found by Anthropic and OpenAI. You don't have to appl- you don't have to be- have an AI apply to a job. They will find you, okay? It ain't that hard. But for the other 99% of your class, right, that, that sort of l- the, y- why do we, why do I need you with Cloud Code? Why do I need you? Why do I need any SDRs? We don't need any of them. There'll be... Th- this is the year where we will see the end of so many entry-level sales jobs. We still need AEs. We still need people knocking on doors. We do not need 21, two-year-old kids sending emails. The, the, those jobs will disappear. And so all these entry-level jobs are, it is, they are truly disappearing in front of us, and at the same time, what we're seeing, a lot of the folks that the three of us has known, especially Rory and I have known, that are senior executives aren't able to reskill. They're not a- they, they can talk the talk on LinkedIn, and they are quietly leaving the workforce. We see a lot of, I, a lot of folks we know are just leave... And this is why it's invisible. They're just quietly l- they, they're mo- You'll, "Hooray, I'm moving on from this role at wherever," and there's not gonna be another role for them. There won't be another role for their 2021 toolkit. There's no ro- there's no job for them.

   5. RORory O’Driscoll1:18:48

      Yeah. Jason, you're brutal.

   6. JLJason Lemkin1:18:50

      The top end and the bo- the s- the senior execs and the entry level are gonna be under massive stress in 2026. Massive stress. And so my, my, and my advice to them is stay wherever you... IBM reported that turnover was almost 2% last year. No one left IBM 'cause they know they got no, got no other job. [laughs]

   7. RORory O’Driscoll1:19:07

      Agreed. Um, if you're, yeah, q- q- q- quitting, to, to, to J- there's a lot in Jason's point, and there's a lot to unpack there, but one of the things is I think the unemployment numbers, you always get confused 'cause there's unemployment, there's, um, and then people who are still in full-time, uh, still in study work, and then you have, you know, are they in the, are they actively looking for a job and all that. But one of the real tells on unemployment is quitting rate. People don't quit their job when they know they won't get another job. And if you look at the quit rate, that's a really good tell that, "Oh my God, I know where I am is good and I ain't leaving," right? So that's the first comment, and I think Jason's right there. And it is interesting to look at this in the context of the discussion we had about, you know, people, um, using AI, uh, you kind of AI engineers getting paid $1.5 million, maybe $4 million really, right? It's, it's what Jason said, is that there's a coterie of people who have the secret skill, and they're, the demand for them is infinite.And then there's folks who don't have quite that level of knowledge, and it's not. I mean, so clearly, if that trend doesn't change, and I think it can and it will, but that's, that's not a great societal trend, to state the obvious, right? And it's this kind of concept of the overproduction of the elites. We may well have put 40% of 18-year-olds into college through a world where only 30% of them are gonna get jobs, and therefore, 20% of them have just wasted their dollars on a mediocre degree from a mediocre college in a mediocre subject, right? And they're gonna struggle to get work. That's a real problem. And it is different than the... I mean, I, I love the way Jason distinguished between the, the, the last job people, you know, when you punch out of your job and say, "There is no retraining at 55," right? "I mean, if I, if this VC thing doesn't work out for me, I'm just gonna, you know, t-t-take, take my computer and just go off into the night," right? "I'm not gonna retrain as a programmer," right?

   8. JLJason Lemkin1:20:48

      We're Vibe Code together, but keep going.

   9. RORory O’Driscoll1:20:49

      Yeah. We're Vibe Code together, Jason. But, so and I think that's true, and I think, you know, it's, it's tragic 'cause you see folks, you know... It, it, that, that 55 to 65, not having a job, not yet eligible for Social Security is a pretty tough time, and I have a lot of co- I have a lot of compassion for that. On the other hand, if you graduated in computer science from Stanford in 2025 and you didn't take enough AI classes to at least be relevant, what the frick, A, were you thinking, and B, what was Stanford thinking? I mean, I saw a really interesting program where someone was doing, where they were taking, they graduated a bunch of computer science students, and then they were doing a one-year AI kind of booster program to basically take their skill and reskill recent graduates. And I think colleges need to take responsibility for making sure they're getting people out with relevant skills, 'cause there clearly is a massive shortage of AI-trained engineers. And if for the last four years you've been sitting there in Stanford, and they've been giving you CS-101 and then teaching you how to build compilers, that's fine, but if you didn't cover AI such that you could be credible in this space, then WTF, right? I think that... So youth unemployment is a different thing. I think, I think there is... I mean, I, I, I was more bullish. I, I was le- less concerned than Jason, and I've changed my opinion. I think Jason is right. There is definitely... I don't think mass unemployment is taking place because of AI, but I think in a couple of key areas, and one of them is very visible, and one of them is customer support, and that's not that visible given the kind of people who do that job. But brutal comment, one of them is kind of high-end knowledge worker, recent graduates, and they are kind of visible. I think Jason is right that even though it's probably 0.2%, 0.3% of the total workforce and a sm- a small increment to unemployment, I think because those are highly educated, highly articulate 23, 24-year-olds, I think you're gonna see, to Jason's point, a lot of tension on this issue if it continues, right? You know, the AI billionaires, you know, all this talk about a wealth tax. If I was pitching a wealth tax to a bunch of 23 and 24... I'm not saying I'd support it. I'm, I'm the exact opposite. But I know how I could get a whole bunch of 23-year-olds who just got a Stanford degree and don't have a job, I could get them pretty mad pretty quickly by talking about-

   10. JLJason Lemkin1:22:58

       Yeah. Why, why do you think David Sacks moved? He didn't, uh, he just moved. It was the [laughs] he saw the future. He's like, "I'm going to Austin." [laughs]

   11. RORory O’Driscoll1:23:04

       Yeah. You'd say to them, you'd say to them, "These guys have built a future that doesn't need you. They've left you behind, and they don't give a damn, and the only way to save yourself is to take some of their money."

   12. JLJason Lemkin1:23:14

       Yeah.

   13. RORory O’Driscoll1:23:14

       That's what you'd say.

   14. JLJason Lemkin1:23:15

       I mean, it would be just-

   15. RORory O’Driscoll1:23:15

       You'd just be like Huey Long-

   16. JLJason Lemkin1:23:17

       ... build or bust

   17. RORory O’Driscoll1:23:17

       ... Huey Long in 1934, like, you know, all, e- every single Democratic, you know, populist since the dawn of time. You'd be like, "We need their money," right? "They shafted you." I mean, M- M- Mondavi just did a brilliant version of that in New York, you know? But yeah, so I, I do think it's an issue. I, I, I think in the end people... I do believe one thing very strongly. Unlike 55-year-olds, 22-year-olds can reskill, and you can save yourself. And I'm, you know, we've a- all been through periods of our life where you, things didn't work out and you... So I do think they have to have a little more age. If at 22 you're saying, "It's not fair. Woe is me," then I think you need to have a lot more agency. So that's what I believe, but I'm not saying that's what they believe. And that, that, to my point, Harry, I'm not saying the populism would be right. It just should be anticipated.

   18. JLJason Lemkin1:24:03

       But the problem is you're, of course a 22-year-old is the best to reskill, right? The problem that I've seen, um, with my kids in college, but more, and just importantly at the founders I work with, I think all your founders say the same, is, listen, we've just, people have not grinded for the... Outside of Harry and the 996 world, we haven't grinded in a decade, okay? And kids d- don't, don't have a... Most of them don't want to g- grind in the... The thing is, these entry-level jobs, these AI jobs, not only might you not be skilled for, they're hard, they're, like, more work than the old jobs. They're harder jobs, and they're more hours, and they're more intellectual, and they're more work, and throughout history, just most people have not wanted to work that hard. [laughs]

   19. RORory O’Driscoll1:24:41

       I think that's true, but there's also another impact that I've been thinking about, which is the founders of these companies are themselves around the same age typically, and they're grinders. And one of the things that's really a subtle thing, which is I think of that, that kind of 20-something, you know, good college, AI, smart, as the hive mind, and they know everyone else who is a grinder. They've all, they are their compatriots. They're their cohort years, right? And I think a brutal comment, as a 40-year-old manager, can I tell the grinder 22-year-old from the non-grinder 22-year-old? Maybe I can, maybe I can't. But the grinder 22-year-old at MIT, like take the guy who founded Cursor, he knows the five people in his class who were smart and the 95 who didn't grind, and he's only gonna hire the ones who were smart. The scariest judge of young talent is young talent.

   20. JLJason Lemkin1:25:29

       [laughs]

   21. RORory O’Driscoll1:25:29

       But, and I think one of the really interesting things is, I mean, you talk to any of your founders who are 25, they're mark to market on their team and on other people. They know because that's, you know, the generation they grew up in. They're founding these new companies now, and they're gonna hire the best, and they're gonna discard the rest.

   22. JLJason Lemkin1:25:43

       What's happening also, this is what, what I'm seeing at the companies that I've invested at scale, if you're that way, you used to have to give up because you needed 1,000 employees to get to ever many revenue. If you can get there with 200 employees, you don't have to give up, or you can, you can wait until you're much later stage than Manus to, to, to give up and say, "Okay, I've gotta, I've gotta accommodate lifestyles and any interest outside of work and anything we should as human beings." If you don't need 300 people to get to 100 million in rev or to 20 million in revenue anymore, you just don't need 300 people, so you don't have to give. So that means no jobs for those people. It's terrible.

   23. HSHarry Stebbings1:26:17

       But Rory, we, we, we, we bring Jason to bring a positive element-

   24. RORory O’Driscoll1:26:22

       Totally. No, absolutely

   25. HSHarry Stebbings1:26:23

       ... to the panels.

   26. RORory O’Driscoll1:26:23

       No, he's, he-

   27. HSHarry Stebbings1:26:24

       That, that-

   28. RORory O’Driscoll1:26:24

       And, and the scary thing about his negativity is I think he's-

   29. HSHarry Stebbings1:26:28

       Right

   30. RORory O’Driscoll1:26:28

       ... increasingly correct. I mean, I'm changing my opinion on this one. I'm-

Episode duration: 1:27:28