All-In PodcastGoogle’s AI Brain Drain, SpaceX's Huge Quarter, Airtable’s 90% Collapse, US Data Fuels China AI
EVERY SPOKEN WORD
75 min read · 14,896 words- 0:00 – 2:16
Bestie intros! Brad Gerstner fills in for Chamath
- JCJason Calacanis
All right, everybody. Welcome back to your favorite podcast. It's the All-In podcast. It's the summer. It's August 6th. Having a hard time getting a quorum here on the podcast.
- SPSpeaker
[laughs]
- JCJason Calacanis
But David Friedberg is here. David Friedberg is back, our sultan of science. How you doing, brother?
- SPSpeaker
Great to be with you.
- JCJason Calacanis
It's great to be with you. And everybody loves when Brad Gerstner is here. He's your Bruce Wayne if markets are your game. He brings that namaste to your payday.
- SPSpeaker
Yes.
- JCJason Calacanis
Buy his glasses at discount-
- SPSpeaker
[laughs]
- JCJason Calacanis
... and he'll get you one of those fancy Trump accounts. All right. Welcome back to the program, Brad.
- SPSpeaker
I love it. I love it. You're bringing the rhymes back.
- JCJason Calacanis
I br- I bring a little intro back. We've been try- Chamath is on the road right now. Chamath is on the road, but we will get a field report from Chamath, and, uh, I, I called Daniel. Somehow Sacks is gonna be here, but you know how he is. He's always late because, you know, can get a phone call from very important people, but he will break in at some point. Oh, wait, I see in the text here.
- SPSpeaker
Oh.
- JCJason Calacanis
Oh, there he is. He made it. [laughs]
- SPSpeaker
Hey, guys. [laughs]
- JCJason Calacanis
You made it.
- SPSpeaker
How do you like my beautiful summer gilet?
- JCJason Calacanis
Um, it's incredible. It fits perfectly.
- SPSpeaker
[laughs]
- JCJason Calacanis
You look warm.
- SPSpeaker
I don't know how Chamath does this.
- JCJason Calacanis
[laughs]
- SPSpeaker
[laughs]
- DSDavid Sacks
[upbeat music] We'll let your winners ride.
- JCJason Calacanis
Rain man, David Sacks.
- DSDavid Sacks
[singing] I'm going all in.
- SPSpeaker
And instead-
- DSDavid Sacks
We open source it to the fans, and they've just gone crazy with it.
- JCJason Calacanis
Love you guys. Ice Queen of quinoa.
- DSDavid Sacks
[singing] I'm going all in.
- JCJason Calacanis
Well, here's the report, everybody. As everybody knows, Chamath is on the road. He, uh... Oh, here he is. He, um... This is a photo.
- 2:16 – 20:39
Major shakeups at Google: AI brain drain or better strategy?
- JCJason Calacanis
Google had, uh, two major shakeups to its AI staff on Wednesday. Demis Hassabis has moved to chair of DeepMind and chief scientist at Google. Reports describe this as Demis stepping down or being kicked upstairs. Uh, we'll get into that. But Google framed it as a promotion, uh, and says he was stepping up. Here's Axios' quote explaining the shakeup. Quote, "Google's Gemini 3.5 Pro is months behind, with some company sources telling Axios that it's in part due to low morale." Interesting. Several top researchers, including Gemini's co-lead, have left the firm for competing AI labs. Jeff Dean, plus three other AI superstars, are leaving Google to start a company called Discovery Loop. Dean is a legend, Friedberg. Uh, and I think you worked with him at Google, one of the world's great AI engineers. He was employee number 30, joined in 1999, and has worked there, from what I understand, continuously for 27 years. Discovery Loop's gonna be focused on deep scientific breakthroughs in AI. Google shares down 4% on the news of Dean leaving, so 200 billion in lost market cap, if you wanna correlate those two things. Friedberg, this is your alma mater. What are your thoughts here? Is this creative destruction? Maybe these people weren't delivering, and they wanted fresh blood, or is this just the siren call of doing a startup in an age of unlimited capital for AI and unlimited opportunity just being too much for the OGs at Google to not take advantage of?
- SPSpeaker
Maybe it's the third bucket, which is if you're the board and the management, you're having a debate about how to best deploy capital. Google has made a commitment to deploy $200 billion in CapEx this year in AI infrastructure data center build-out. Because of the CapEx and accelerated depreciation, making an investment in AI compute in the US right now is hugely tax advantaged. And because of the extreme demand for compute, it's a pretty obvious kind of ROIC model, return on invested capital. So if you make this sort of an investment, you have significant demand for that compute infrastructure. You're very good at running the compute infrastructure. That capital can deliver massive profit returns for you with very high confidence in some forecasted period. Building the most advanced frontier lab-driven model also takes tens of billions of dollars of capital, and the question really is can you deliver the profits from the model? And in a world where open source is becoming so good and open weights models are catching up so quickly, and all the frontier labs are catching up to each other so quickly, does it really make as much sense to deploy tens of billions of dollars against building a model?
- JCJason Calacanis
Yeah.
- SPSpeaker
And I think that the scientists that we're seeing transition out are the scientists that have been at the core of model development, of making these frontier models, and they were certainly first out the gate. You can look at some of the early interviews with Jeff Dean from a couple years ago, where they actually had a ChatGPT equivalent internally a year before ChatGPT came out from OpenAI. Google chose not to release it for fear of cannibalizing search, and so on. That's when Sergey stepped in, and there was this whole kind of revitalization. But as time has gone on, and as everyone has competed on models, as we've talked about many times on the show, I think it's pretty obvious that it is very hard to get the same sort of return on capital invested in model development as it is in capital invested on compute infrastructure and being model agnostic. What Google has is probably one of the greatest install enterprise bases in the world for compute. So they have the most enterprise customers. They have the most consumers. And in both cases, they don't necessarily need to have the best model to make an incredible business. They can be model agnostic. They can work with Anthropic. They can work with OpenAI. They can work with SpaceX. They have a significant ownership stake in SpaceX and in Anthropic, and they can work with all the open weights models. They can host them all. So now, if you're one of the great computer scientists, you're Demis. You're Jeff Dean, you're this whole crew, and you're inside of Google, and they're allocating capital, not to your models, not to the things that you're most interested in, but they're allocating capital to infrastructure and data centers and supporting the broad ecosystem of models. You start to say, "Well, given the fact that I can go down the road and visit Brad Gerstner and a couple other people and raise a couple billion dollars at a multi-billion dollar pre-money with a PowerPoint deck because I'm the greatest in the world at doing this, that might be a better path for me."
- JCJason Calacanis
Mm.
- SPSpeaker
And I think that that's the moment. So I, the way I would frame it is CapEx is high alpha, low beta in data center infrastructure, that capital. And model development theoretically could be high alpha, but it's very high beta. It's a very risky way to deploy capital.
- JCJason Calacanis
Totally.
- SPSpeaker
So, so if I'm the board, I'm the management, I'm deploying more capital in compute infrastructure, less capital into model development. That's what I think is going on.
- JCJason Calacanis
Brad, what's your take on this?
- BGBrad Gerstner
I think David nails it. I mean, listen, the same thing's going on at Microsoft, right? Satya is out this week saying, you know, citing Morgan Stanley's report and saying they're seeing over a 30% return on invested capital in tokens as a service, right? So in the infrastructure business. So I think David's exactly right. Those are such good businesses, right? You, you, you, you deploy capital, everybody's renting it from you, but the scientists who wanna be involved in super intelligence, who wanna cure cancer, who wanna be on the frontier of these models, right? They're sitting there dealing with this channel conflict at Google because, you know, uh, uh, Google Cloud wants all of the compute in order to rent it out to Anthropic, and those fr- those building the frontier models internally want that compute in order to compete with Anthropic. So you have this inherent channel conflict, uh, between those wanting to build the models. I think David said it really well. Um, and I think that's a, that, that's a big challenge for them. It looks like it's being resolved in favor of being more of an infrastructure company. So where does... You know, telescope out for a second. SpaceX also reported this week. They also have channel conflict. They're renting out their compute to Anthropic. At the same time, they're trying to build their own model with Grok and Cursor. You have that channel conflict at Google. You have that channel conflict at Microsoft, although I don't even really see them pushing the frontier anymore in terms of models. Meta's talking about getting into the infrastructure as a service game, and then at Anthropic and OpenAI, you don't have any of that channel conflict. They say, "We're not in the infrastructure business. We're only in the model business." So I think it's a, y- you know, a, a, a, a clarifying view as we look forward that we may in fact not have those companies on the frontier of, of, of model development if all these people leave.
- SPSpeaker
By the way, thanks to the law passed on CapEx depreciation, if you assume a 26% corporate tax rate, every dollar you deploy in CapEx, because you get to write it off in this year, you're basically getting 26% off. You know, that's-
- JCJason Calacanis
Pretty good deal
- SPSpeaker
... money you get right back. Yeah.
- JCJason Calacanis
Yeah. Hey, uh, Sacks, let me have you comment on, uh, this as well. Polymarket, which companies will have the number one AI model by the end of this year on December 31st. Um, now, of course, in the last time they did this, Anthropic won, so they're not on the list. They're the winner, but who will have it, uh, going forward? OpenAI 32%, Google 20%, Alibaba 14, and then you got Moonshot, xAI, Meta, ByteDance, all at about 10%. So Sacks, your thoughts here on what's the better business. Is the better business being in the language model, frontier model, or is that getting quickly commoditized, and really you wanna be in the token sale business, or is that also gonna be a commodity, and you just need to be on the application layer?
- BGBrad Gerstner
Here's what I think is going on in terms of the, the market structure is when I saw this Google News, my reaction was, "And then there were two," because like Brad was saying, we used to have five major companies in the hunt to be the leading frontier lab, the leading frontier model just a year ago. Now we're really down to just Anthropic and OpenAI. So the market for frontier intelligence has become a duopoly. Now, Elon is still in the hunt. I'm sure Google would say they're still in the hunt. But like Brad is saying, they may have contradictory incentives there because they can actually do quite well just with their compute. So I think that the market for frontier intelligence has become a duopoly. I think it's a very powerful duopoly. I don't think it's being commoditized. I think that what we're evolving to is a two-tier market structure where there's a market for frontier intelligence, and there's a market for, let's call it kind of commodity or lagging intelligence, whatever you wanna call it, that's six to 12 months behind. There is a market for those tokens, those models, but the reality is you can't charge anything for the weights. You can charge for the compute. You can charge for the inference that you're providing. You can charge for essentially consulting services to help put the whole thing together. But if you're not at the frontier, you can't charge for the model layer itself. If you are at the frontier, you can charge a premium, and that's where Anthropic and OpenAI are. And I think the proof for this is just you look at the growth rates of these companies. The latest we heard is Anthropic is now over 80 billion of ARR. Started the year at 10. It had forecast 100 billion as exit ARR for the year, and most people said that that would be impossible to achieve. Now it looks like they're gonna do it with a couple of months to spare. So their estimates are going up, I mean, 110, 120, or higher for end-of-year ARR. OpenAI seeing acceleration. So I think what you're seeing now is a very clear bifurcation of the market. You've got a frontier model duopoly that can charge a premium. I think of it like Apple. You know? Apple's competing against Android. It's open source. Android actually has more users in the world, but all the monetization goes to Apple because people are willing to pay for the premium experience. I think in a similar way, people are willing to pay a premium for true frontier intelligence if it's really-
- DSDavid Sacks
At the leading edge. But if you're not at the leading edge, there's a huge market for that too, but it's highly commoditized. People are just willing to pay you for the compute.
- JCJason Calacanis
Yeah, I-
- DSDavid Sacks
So, I mean, that's what I see happening right now.
- JCJason Calacanis
Yeah, if you look-
- SPSpeaker
Jason, what do you think? Jason, what do you think?
- JCJason Calacanis
Oh, thank. Uh, well, if you look at Google Cloud, they posted 82% year-over-year revenue growth, which is, uh, something we've never seen, uh, in the history of these cloud providers. Elon Musk and xAI just had the SpaceX earnings. We're gonna get into that, but they also had massive uptick in their Elon web services, as I've dubbed it. And if you look at Google, I still think Google will be the number one, uh, AI company because they have so many people using AI inside of their products already. They have five products now with over three billion monthly users each. Android Search, Gmail, Chrome, YouTube all have over three billion. If you've used any of these products recently, uh, they are becoming AI-first products, YouTube especially, but obviously Chrome and Gmail, y- you're seeing, um, tools pop up there for AI. And then, Friedberg, you kind of alluded to this, they have 13 products total with over a billion, and that now includes Gemini. In Q2, Gemini had over 950 monthly active users, tripling year over year. They will be the number one AI company in terms of consumer usage by far, I think, this year. That doesn't mean that the, um, frontier models are not great businesses. They obviously are. But I have been using exclusively non-frontier models, and for 95% of the jobs I'm doing, Sacks, it's good enough. And I just posted about this, you know, um, and Elon and I got into it a little bit here, and I think you referenced this in our group chat. Uh, I, I tweeted just the other day, "The difference between the open source models I'm using and frontier is negligible already. I believe that to be a true statement for the work I'm doing." And he said, Elon responded back to me, "It's actually a world of difference." You know, if you're doing something other than making a copy of a video game or you have incredible speed needs, the frontier models are not necessary anymore. They're just not necessary. The people using the frontier models are doing it because their company set it up and they... It's too hard to implement open source right now, but it's gonna get easier and easier to implement it, so I'm still going with open source and Gemini being the leaders in this space.
- DSDavid Sacks
Yeah, look, I think it, it's true for your use cases-
- JCJason Calacanis
Yeah
- DSDavid Sacks
... that, let's say, the cheaper commodity intelligence, that middle of the market, is good enough.
- JCJason Calacanis
Yeah.
- DSDavid Sacks
Look, an Android phone would be good enough for me. I could get by on a cheap Android phone. You know what? I still pay a premium for this because I use it so much.
- JCJason Calacanis
Hmm.
- DSDavid Sacks
So if you're a business that, let's say you are a hedge fund and you're in a highly competitive industry, you don't want to take the chance that you're not getting the best intelligence to power your models, you know? And there's a lot of industries like that where the competitive dynamics will drive you to pay for the best intelligence. There's also situations, this goes back to the blog post that Decagon posted, which is if you're looking for use cases, you also want to use the true frontier. Because, again, when you're dealing with immature use cases, you don't know where the value's gonna be, and you're searching for opportunity to use AI. You just want to use the best because, again, the return on finding those use cases is gonna be so much greater than the small premium you're paying at the token level. So I think there's a lot of examples like that when, you know, the use case is immature, where you're in a competitive industry, where you're just deploying AI, you want the convenience of the full stack.
- JCJason Calacanis
So why not go frontier models to summarize your argument?
- DSDavid Sacks
Yeah, and look, again, you know, unless your employees are doing something stupid like you create a leaderboard and they're token maxing, I don't think the cost is that great. And again, the benefit that you're getting is huge. So a lot of people are just like, "Give me the best. I'm willing to pay a premium for the best."
- 20:39 – 45:44
SpaceX's big quarter: Terafab, AI Capex, $1T revenue projection?
- JCJason Calacanis
Uh, all right, let's talk SpaceX here. Uh, they had their first earnings report as a public company. Shares dropped 13%, uh, I think because people were a little concerned about the surging AI Capex. It's down 30% since going public in June, but it's now trading at, it seems to have settled in at a $1.4 trillion valuation. Went public, obviously, above 2 trillion. Q2 results were, uh, spectacular, is the only way to put it. 7.8 billion in revenue, up 92% year over year. Let that sink in. Uh, and 67% quarter over quarter AI revenue. Elon Web Services more than tripled quarter over quarter to $2.6 billion. That's not Cursor. That hasn't closed yet. Uh, but that's gonna be one of the great purchases in history. This is from Elon Web Services, uh, renting out compute specifically to Anthropic and Google from the Colossus, uh, collection of servers. But Capex was up 18.4 billion in the quarter. That's 6X year over year. Obviously, you can do the math there for a run rate of about $75 billion. I'll stop there and get your reaction, Brad, to the SpaceX IPO. I know you've been tracking this and commented on it heavily.
- BGBrad Gerstner
Yeah. I mean, listen, I think that, one, first, let's start off. $1.4 trillion of value creation for this company is extraordinary. So the fact that from peak to trough it's down 40 or 50% from the IPO, we had that chart out a few weeks ago. Remember that within six months of the IPO, almost all these tech stocks are down 50% peak to trough. We see it again here with SpaceX. I thought it was a really solid quarter. I thought his guides were pretty extraordinary. 100 billion in ARR by the end of the year, and he pulled forward the $1 trillion target in ARR by a year from 2031 to 2030. Now to just put that in perspective, Morgan Stanley's 2030 revenue estimate is 325 billion, which is also extraordinary. Remember, this company did 18 billion in revenue last year. So whether you're taking Morgan Stanley's numbers or Elon's numbers, clearly the market is not pricing that in. At 2 trillion, we were pricing ahead a couple years. I think now it's, it, it, you know, the, the value reflects kind of where we are. The market has questions about a few things. Here's what they are. Number one, on the rental business, the rental of compute business, he rented out a huge block of compute to Anthropic. It's the question that we've been talking about here. Are you gonna use the compute to build your own frontier model, or are you going to rent it out? And if you rent it out, are you going to be able to find those people who have the capital to offtake that compute? He's talking enormous numbers, 10 to 20 gigs, and people are wondering how they're going to be able to finance that. And remember, those businesses, the GPU rental businesses, tend to trade at very low multiples. Look at CoreWeave, et cetera. On the frontier model business, I think this is the sleeper. I think he said on the call that Groq tripled tokens in the month of July. That doesn't include Cursor. Cursor was already on a path to go from 3 billion to 10 billion by the end of the year. Cursor plus Groq could be at 10 to 20 billion by the end of the year. That would be an extraordinarily valuable asset gonna trade at a much higher multiple than the data center business. And then of course, we haven't even talked about Starlink and what he's going to do, uh, you know, I think gonna run the table on mobile. So this is the normal consolidation. We have funds like, uh, uh, across Silicon Valley that are distributing their shares. The stock has traded down a bit. Nothing surprising to me here. Now it's all about execution. I think the most important thing to watch, the two most important things to watch are, number one, how do the Groq and Cursor revenues end the year?
- JCJason Calacanis
Hmm.
- BGBrad Gerstner
And number two, um, you know, the traction they get on, um, you know, continuing to replace traditional mobile carriers with Starlink.
- JCJason Calacanis
The distribution started, I think, today or yesterday. I got my first distribution from a fund I'm in. I'm in a couple of funds that are in SpaceX. Seems like everybody's in that. And that will obviously create downward pressure if you are amongst the people who wanna cash out and have been in it for a long time, but I'm holding these for my grandkids.
- BGBrad Gerstner
Sacks, your take on these spectacular, yeah, I guess is the only way to describe them, results coming from a vertical that wasn't part of SpaceX's business but nine months ago.
- DSDavid Sacks
Yeah. Look, I thought it was a very bullish earnings call. I was a little bit surprised that the stock went down after the earnings call because not only was it a beat and raise, but also I think Elon spoke to a lot of their plans. The only thing I would add to, to what Brad said was around Starship. Elon basically said we all saw it, right? That the Starship test flight was successful, that Starship's floating in the ocean, the heat shield worked. That's gonna enable more flights of Starship now at a more accelerated rate. That paves the way for the V3 satellite, which enables much more bandwidth for the Starlink network, which then powers the whole direct-to-cell play. So you had that piece of it. I mean, just the whole telecom aspect seemed very on track, and they're very bullish about that, and then you've got the whole AI data center play. Now, on the data centers, I think what they said is that they expected to go from 1.4 gigawatts of compute to about 2 by the end of the year, and Elon said that the spot price for compute's in the $30 to $50 per watt range. So, you know, you do the math. A gigawatt is a billion watts, so $30 to $50 per watt means 30 to 50 billion per gigawatt, and I think they're at the high end of that range right now. So when Elon says, "Look, we're gonna end the year at 100 billion of ARR," all you have to believe is that they're at two gigawatts of compute running for $50 a watt to hit that. That doesn't include Starlink or the launch business or the Grok cursor piece or any of these things. So I think that's why they're so optimistic.
- BGBrad Gerstner
Again, multiple ways to win is what you're saying, Sacks.
- DSDavid Sacks
Yeah.
- BGBrad Gerstner
There's multiple ways to win with this stock.
- SPSpeaker
I think Starlink's just an unbelievable juggernaut cash machine. If you look at the financials, their segment reports space, connectivity, and AI, and on the connectivity side, the Starlink side, it, they generated $2.6 billion in adjusted EBITDA. You can kind of approximate that to be kind of operating cash flow. Space was kind of, you know, negative 200 million, so call it break even, and AI was plus 1.1 billion. But AI, to Brad's point, it's unclear whether the pricing they're getting on compute rental today is temporary and at a premium because of the lack of compute available in the market today, and people that need compute are paying Elon a premium for that compute.
- DSDavid Sacks
Right.
- SPSpeaker
So I think there's a question mark where that goes. But the connectivity piece on Starlink, 4.3 billion in the quarter and 2.6 billion in adjusted EBITDA. He's got 12 million subscribers. That's doubled year over year. $66 RPU per month, uh, what people are paying per month, and he grew 20% quarter over quarter. So if you extrapolate this out, he's pretty close to being at a 24 million subscriber run rate. On this multiple, I'm assuming this enterprise stuff, which is like airlines and other things scale, which they seem to be scaling with the consumer business, Starlink alone could be generating on the order of $40 billion of revenue top line with a huge amount of that flowing to free cash. That could be a $30 billion free cash flow within the year. That alone provides the cash flow to fund much o- of what, what Elon's doing, and if you just put a 30X multiple on that, which I think you can because these subscription businesses are very high renewal rate, very low CAC, I think you could probably get a 30X just on the Starlink business. The Starlink business alone could be a trillion-dollar market cap within two years, within 18 months, let's say. That, I think, funds all of the rest of this as kind of science projects and upside. So I'm kind of making a bull case. It's crazy to me how well the Starlink business performs, [laughs] and you can see it in AT&T and Verizon, HughesNet, ViaSat. I mean, these companies have been decimated. I used to have a HughesNet satellite dish on my Sonoma County ranch. In order to get internet, that's what we had to use. It was like, you know, 200 bucks a month or something.
- BGBrad Gerstner
Terrible-
- SPSpeaker
Terrible service
- BGBrad Gerstner
... 'cause those are high orbit, right? And they take forever to-
- SPSpeaker
Terrible service.
- BGBrad Gerstner
Yeah.
- SPSpeaker
And that market got decimated by Starlink. And if he launches the handset thing, that subscriber growth is gonna go... Right now, he's adding two million subscribers on the consumer side a quarter. You could see that going to 4 to 5 million a quarter. You could actually see an acceleration in the consumer subscription.
- BGBrad Gerstner
There are 400 million mobile sub-
- DSDavid Sacks
Right
- BGBrad Gerstner
... 400 million mobile subs just in the United States. Just in the United States.
- SPSpeaker
I think you can make, you, you can make the bull case on Starlink alone-
- DSDavid Sacks
Yeah
- SPSpeaker
... and then the rest of it is like, "Hey, is Elon gonna do well with investing the excess capital that's spinning off of Starlink? How's Elon gonna do with that money?"
- DSDavid Sacks
[laughs]
- SPSpeaker
"Well, I don't know who else I'd give it to [laughs] to, like, you know, do what he's doing with Starship and with AI compute and the Terafab." I don't know if you guys-
- BGBrad Gerstner
Oh my God, this is science fiction, uh, this is gonna be in Grimes County-
- SPSpeaker
I mean, like, if you wanna talk about-
- BGBrad Gerstner
... Texas
- 45:44 – 48:01
All-In Summit Speaker Announcements!
- BGBrad Gerstner
about them.
- JCJason Calacanis
All right, everybody, the fifth annual. If it's September, you know it's time for the All-In Summit. The fifth annual is happening. Yes, that's right. Uh, David Friedberg's been at work, and we have an all-star, all-star list of people joining us. Jensen Huang, founder and CEO of NVIDIA. If you care about where AI is headed, you won't wanna miss this conversation.
- BGBrad Gerstner
The best, the oracle.
- JCJason Calacanis
Satya Nadella, CEO of Microsoft, fan of the pod, will be coming on for the second time. Jared Isaacman from NASA. The one, the only Brad Gerstner and Bill Gurley, BG too, coming back. SpaceX's Gwynne Shotwell. My guy, Jake Paul. Nick Scherer. Lot of incredible people coming. Martin Shkreli maybe is even coming. He's... That's gonna be fun. Go to theallinsummit.com to apply today. allin.com or theallinsummit.com. Any of those will get you there. And we're taking over Universal Studios again. We'll have our own private playground. Dave Friedberg, great job on the summit. Casino night too. I heard it's gonna be a big casino night.
- SPSpeaker
Biggest yet, and the concert to be announced who will be performing at the concert, but it is gonna be incredible. So I'll just say, one of the things about the summit, we've had people come to the summit from over 60 countries. It's really incredible-
- JCJason Calacanis
Mm
- SPSpeaker
... to meet all these people, entrepreneurs, investors, people that are just really interested in the topics that we talk about. We try and have the world's most important conversations, but it's really this amazing community experience. That's what brings folks back. So we try and invest more and more every year in making it an amazing experience, not just cool content on a stage, which I think is [laughs] what a lot of these other shows really deliver. But it's like, how do you actually come and have a, have an experience for a couple days? It's gonna be awesome. So we're excited.
- JCJason Calacanis
It really is those three things that we focus on. One, you're gonna learn something, right? You got these great people on stage. You're gonna learn something from them. You're gonna meet new people. You're gonna network, and then you're gonna have these great experiences. It's the trifecta. Folks, you excited, Brad? You excited to be back?
- SPSpeaker
What, when are the dates? What are the dates again?
- JCJason Calacanis
[laughs] Look at your calendar. You're speaking.
- SPSpeaker
September 13th through 15th in LA.
- BGBrad Gerstner
This couldn't be better dates for the summit. I mean, we're, we're gonna be within 60 days of an election, midterm election. We're gonna be within 30 days of an IPO, you know, potentially of Anthropic. I mean, like-
- JCJason Calacanis
Mm.
- BGBrad Gerstner
It, it's gonna be heated.
- 48:01 – 1:05:56
Airtable sells for a 90% discount: SaaSpocalypse?
- JCJason Calacanis
The SaaSpocalypse, not the Sacks-pocalypse, this is the SaaSpocalypse, is I guess winding its way out. Uh, the indigestion might be clearing. Airtable just got acquired for less than it raised. Uh, it's a profitable SaaS company, a great product. $480 million, half a billion dollars in annual revenue, growing 20% a year, respectable if it was a public company, with almost a billion dollars in cash, has been sold. It's been sold for $1.28 billion, about 10% of its peak valuation, which was $11.7 billion in 2021. Now, they did have a bunch of cash, so if you include the cash position, sale was $2.25 billion. They were acquired by a firm called Bending Spoons. This is an Italian company, Milan-based company. They buy challenged but, you know, interesting businesses, AOL's legacy business, Evernote, Eventbrite, Vimeo, Meetup.com. And they just went public last month. Shares, uh, that is, uh, Bending Spoons went public last month. Shares jumped 15% on the Airtable news. Sacks, when we look at this, this was a company that had done a lot of things right, had a massive amount of cash in their war chest But, uh, rumors were maybe the founders were a little exhausted, maybe some of the investors were exhausted who bought in at a high level. What can we take away from this transaction in Bending Spoons? Are they the buyer of last resort now?
- DSDavid Sacks
Well, I think they're creating a great business for themselves because I think this will end up being a fairly profitable acquisition for them. Let me just add a piece to this, which is-
- JCJason Calacanis
Hmm
- DSDavid Sacks
... Airtable spun out its AI agent business, uh, which is known as Hyperagent, into a separate independent company prior to this acquisition. So I think what's going on here is that the founders and talent of the company, they said, "Look, we don't wanna have to make this legacy product work. That's basically a private equity play." I'll explain what that means in a second. "We wanna focus on the new thing, the AI company. That's where the big value creation's gonna be in the future, or the potential for it." So essentially, the talent is gonna focus on the venture play, and then they're selling the private equity play to Bending Spoons. Now, why do I think this could be a good acquisition for Bending Spoons? I think there was a really interesting data point that I saw in the commentary on this, which is only 30% of Airtable's sales team was making quota. They had a 30% sales attainment number, and that told me a lot about this business, okay? What it told me is, and I'm reading between the lines here, but this was a company that had a successful PLG motion, in other words, organic growth, product-led growth, and they were growing about 20% a year. But that was not good enough for its board. You know, these are investors, some of whom invested at an $11 billion peak valuation. So they're looking for a venture-type outcome. So what happens? The board pressures the founders to do something that frankly is unnatural for them, which is they say, "Look, you should bolt on a traditional sales-led motion here to get the growth up faster." Does that work? No. They probably get a little bit of growth out of it, but they only get 30% attainment. So they've got hundreds and hundreds of sales reps here trying to push on a string, and it's not making it grow faster. So now what's the opportunity for the acquirer here? Bending Spoons can go in here and do what Elon did at Twitter, eliminate 85, 90% of the cost structure. Don't do this sales-led motion. Just go back to your product-led growth roots. You'll probably keep most of that 20% growth, and it'll be a very profitable company. You'll be able to-
- JCJason Calacanis
80% profitable probably, right?
- DSDavid Sacks
Probably. I mean, people are saying-
- JCJason Calacanis
400 million to the bottom line pays for the acquisition in a couple years
- DSDavid Sacks
... people are saying they'll, people are saying they're only gonna generate 30% EBITDA margin. I think like you're saying, it could be 80, 90%. I don't think you need to keep most of this business-
- JCJason Calacanis
Hmm
- DSDavid Sacks
... or most of the cost structure associated with this business. Um, Airtable is a company that has its fans. Um, I think they will probably stick with it and, you know, you'll, you'll be generating, I don't know, you could probably generate 300 million of EBITDA a year, or 400 million, uh, while growing, you know, 10 to 20%.
- JCJason Calacanis
Yeah.
- DSDavid Sacks
So that's the play for Bending Spoons. But look, that's a-
- JCJason Calacanis
And the venture investors here, Sacks, they're-
- DSDavid Sacks
Yeah
- JCJason Calacanis
... happy to get their money back and move on to the next thing. It's a bit of a push for them, you know, in terms of at the blackjack table.
- DSDavid Sacks
Yeah.
- JCJason Calacanis
Rather than they've gotta go 10X just to catch up, and then they would have to go 10X again to make their LPs happy. It's not gonna happen.
- DSDavid Sacks
I think the question is, if Bending Spoons can basically take this business that's not making money and probably s- generate 400 million a year of EBITDA and pay for the acquisition in just three years-
- JCJason Calacanis
Amazing
- DSDavid Sacks
... why isn't that something that the company could do on its own? And I think that's the structural problem is I think it's very hard for both VCs who are on the board and the founders to shift into private equity mode. Why? Because they're gonna have to demolition what they've built, right? They've got all this loyalty to the team. They don't wanna think about, "How do I eliminate 80, 90% of the cost structure?" It's just not what they do. I mean, what-
- JCJason Calacanis
Of course
- DSDavid Sacks
... what founders wanna do and, and the outcome that the board members are going for is a venture-backed outcome. And I think they coulda done this. They could do what Bending Spoons does, but-
- JCJason Calacanis
They're not built for it, Sacks, is what you're saying
- DSDavid Sacks
... they're not built for it.
- JCJason Calacanis
They're not built for it.
- DSDavid Sacks
And moreover, the structure of the cap table's all wrong because they're sitting behind this giant liquidation preference. All these investors who have to get paid back, who invested at this $11 billion valuation and, and, you know, all the way up, uh, as well.
- JCJason Calacanis
The, the incentives are broken, Brad.
- DSDavid Sacks
Right.
- JCJason Calacanis
And you, you yourself at your firm Altimeter, you were pretty frisky in this period. You made a lot of bets. So, uh, I don't know if Airtable was one of them, uh, but you made some SaaS bets there. Some of them were at high valuations. How are you looking back at that time period? Any lessons that you take going forward?
- BGBrad Gerstner
Multiples of revenue can compress very quickly, right? It works great when a company's growing greater than 50%, but remember, it's just a heuristic. It's just a very rough estimate used almost exclusively in Silicon Valley. You know, so people are saying, "Oh my God, this thing sold for two times revenue." But when you actually look at it on a look-through basis, probably sold for maybe 30 times free cash flow. I don't think it's easy to get it to 400 million in EBITDA. I think if it was, the board would've done that. I'm, uh, y- you know, we're involved in some of these companies. Once they slow down, the company morale goes to hell. Turnover among your customers, uh, y- you know, begins to spike. Um, it starts to feed on itself. So I think that the-
- 1:05:56 – 1:15:16
Chinese AI labs are buying US training data to catch up
- JCJason Calacanis
Okay. Fourth story here, China is training on US data from US providers. Forbes published an investigation called These American Startups Are Making China's AI Smarter, and I think this, uh, relates to a lot of your work in the early part of the administration, Sacks. They claim US data labeling startups are selling valuable training data to Chinese labs, which in turn is helping them catch up with the US frontier ones. Two startups, Surge AI and Miracor, are both valued at over $20 billion. They sell training data sets to people like OpenAI, Anthropic, federal agencies. Um, they all sell the same data sets to top Chinese AI companies according to this report, like Tencent, ByteDance, Alibaba, Moonshot, et cetera. Top six AI labs in China, according to this report, uh, are spending $500 million a year buying what Forbes calls secret sauce, uh, PhD-written content, reinforcement learning, knowledge pipelines, uh, all that kind of great stuff. I have investments in a couple of these companies, including Micro1. The founder of Micro1 didn't participate in selling to China. He made that decision, Sacks. What do you think here about this new wrinkle in terms of really the secret sauce behind a lot of these models is the data. We've run out of, uh, open data on the web, obviously. We talked last week about the books being, uh, you know, having the spines taken off of them and scanned in. I mean, people are looking for data. Mercor, MicroOne, all these companies are providing it. Should they be providing the same data and selling it to Chinese open source companies or not?
- DSDavid Sacks
Well, look, I think we gotta decide what our objective is here. Are we trying to just get in, like, a full-blown economic war with China? Are we just trying to prevent all of our companies from doing business over there? If that's our objective, then you can take that position. Historically, the rules have been that you wanna be careful about technology transfer of technology that has a dual use, right? That it, it has a military application. My sense of data is that it's largely a commodity. I mean, data labeling certainly is. If you basically tell them that they can't use data labeling, I guarantee you there's no shortage of labor in China that they can use to do the data labeling. In fact, they probably are. What I'm saying is there's a lot of ways to get this data. So look, if we basically ban these companies from selling to China, we should expect reciprocal actions taken by China to ban companies over there selling to us, maybe rare earths. These two countries are not completely independent of each other. By the way, I want us to be as independent and sovereign as possible. I don't want to have any dependencies.
- JCJason Calacanis
No dependencies.
- DSDavid Sacks
But we still, at this moment in time, do have some dependencies. So I think you have to ask the question, is this data really proprietary? Does it have a dual use?
- JCJason Calacanis
It, it is. Yeah, it's not data labeling.
- DSDavid Sacks
Does it have a military application?
- JCJason Calacanis
Yeah.
- DSDavid Sacks
Well-
- JCJason Calacanis
I don't think it has military. It's definitely not data labeling. This is, like, hiring PhDs, hiring super professionals to, you know, create unique data sets. So it's science.
- DSDavid Sacks
Well, look-
- JCJason Calacanis
It's, you know-
- DSDavid Sacks
... Chi- China can do that, too, and I guarantee you they are. I don't think this is gonna give us a decisive advantage in the AI race. It's gonna annoy, it's gonna create annoyance, it's gonna create friction, and how bad do you want our relationship with them to be? Do you want to risk starting another trade war? Look, I'm not against restrictions when I think they're gonna pack a punch. For example, I'm really glad that the first Trump administration limited the export of EUV lithography machines to China. You know, that was all the way back, I think, in 2019. So that was a really important decision. And so look, I think targeted strategic controls make sense. I would just make sure that this one actually meets that bar.
- JCJason Calacanis
Brad, any thoughts here on this open source catch-up, the data being sold to China and our adversaries? Are you concerned about these open source models and then us providing data to them?
- BGBrad Gerstner
First, uh, you know, I'm in absolute agreement with David that we want maximum competition. At, as we sit here today, the US is winning. We talked about it at the start. Our frontier labs are winning, our open source is winning, and we have fairly limited regulations, right? Xi's coming here in September in a bilateral meeting to meet with the president. We're advancing relations on a variety of fronts. So I think everything looks good, and you want to continue down that path. With that said, I will tell you that this will irritate people in Washington who feel that this, along with distillation and other things, um, could be the export of chips, all of which at a certain level make sense, cause people to wonder whether or not we're making it too easy on the Chinese labs to catch up with American labs, uh, you know, in the race to frontier intelligence. So it, y- you know, it's the type of story, Jason, that I think will continue to muddy the waters, that will continue, uh, to be monitored. The reason I don't think it will cause us to change our stance with respect to China is because we're winning. But if the president asks his advisors, you know, one of these days, six months down the line, "Are we winning against China?" And all of a sudden he gets a response, "No, we're no longer winning. They've caught up. They've passed us," et cetera, then these things will get a lot more scrutiny, uh, than they're getting today. I think the only reason they pass muster today is because we're still leading the race.
- JCJason Calacanis
I gotta say, using Kimmy and Qwen and, you know, GLM-52 for the last 60 days, my lord, these things are good, and I don't think it's very patriotic to be giving them an advantage. I wouldn't do it. I'm glad the company-
- DSDavid Sacks
Sorry, what's the advantage? What's the data set that you, you're worried about that's so proprietary?
- JCJason Calacanis
Any of these data sets are, um, created by experts here in America who are given, like, the queries that have errors in them. So when you give, um, you know, a thumbs down to a query that's highly technical, it could be code, it could be biology and science, these are, you know, PhDs going in there and putting in the latest and greatest content and then verifying it, double verifying it, and that's why we're getting better and better results out of the LLMs. So essentially you're just helping them catch up, and this could be a big advantage for America if we weren't sending it there. I think a big reason these models are getting better is because data's being leaked to them.
- DSDavid Sacks
But what, what makes you think that China can't do this? They have tons of PhDs over there.
- JCJason Calacanis
They would need to hire-
- BGBrad Gerstner
And who can they-
- JCJason Calacanis
No, no. If they were to do it at this scale, they would need to hire the best and brightest, uh, scientists and experts in the West. So basically all the knowledge of the West is being, um, you know, put into packages for our LLMs to get better. They're sending those same packages and reselling them to Chinese companies, which means they catch up just as quick. I think it's a big part of why they're catching up. I- i- in line with distillation, you know? They're, it's, it's, it's really s- very similar process.
- DSDavid Sacks
Look, if there's something truly proprietary here, I don't want us to sell our secret sauce to China, so you know, I'd have to look into that and see, like, is there some real secret sauce here? But this idea that it would seriously disadvantage China, you know, they're graduating more math and science graduates every year than the rest of the world combined. I mean, th- they don't have a shortage of smart people, especially-
- JCJason Calacanis
Yeah
- DSDavid Sacks
... in science.
- JCJason Calacanis
And we're graduating them and kicking them out of the country. [laughs] That's the other problem. We gotta get that fixed. Uh-
- DSDavid Sacks
Well, it's like, this, l- a lot of different issues here. I don't know how many you want to conflate, but I, this idea that they can't-
- JCJason Calacanis
All related. Yeah
- DSDavid Sacks
... but the, this idea that they can't recreate those data sets, I mean, look, if there's something truly proprietary here, if it has a dual use, if it's military related, but I don't know that that's what this is.
- JCJason Calacanis
Well, they're all proprietary by design, but I don't know about the dual use 'cause I don't have the data sets here. All right, folks, that's another amazing episode of your All-In podcast. Thank you so much, Brad, for joining us. Chamath, good luck on your world tour. Hope you're enjoying a little, uh, rest, and good luck, um, trying to buy a white turtleneck this season.
- BGBrad Gerstner
[laughs]
Episode duration: 1:15:17
Install uListen for AI-powered chat & search across the full episode — Get Full Transcript
Transcript of episode muRIXCDw-k0
