The Exchanges, every show

Q Product, additional products provide additional revenue, more money. You have essentialism as a core strain of your mindset in life. You also have the, the childhood that you mentioned earlier. How do you think about all of these combining to your, your relationship to money today? Uh, what is your relationship to money stagey thing?

A Wow. This is, this is deep. Um, and I've done a lot of reflection on this. Um, If you would have told me I have, was going to have what I have, let's say when I was 20, and then you would have said, describe to me the house you're going to live in, the car you're going to drive, the life that you're going to live, I would have described to you a life totally different than the life I'm living, ok? From as early as I can remember, sixth grade, I was like, I have to make a million dollars by the time I'm 30. I mean, it was a dragon in my life because it destroyed our lives. Right. It, it was like when my dad went broke, destroyed his health, his marriage, like it was, you know, so when you grow up in that, like that is a real dragon. That's a beast you have to slay. Um, and you know, fortunately because Fiocco and Cutler gave me a shot, I, I, I was able with NLG to slay that beast right at 30. Right? And, um, shortly thereafter, Bajal Samaya and I, Bajal's now running Lightspeed, we, we co-founded, uh, my second company, or our second company together, called OpenList, and we sold that, you know, another little base hit, double, and, and I'll tell you, when I had a few million bucks, I was, like, good to go. Like, I had slayed the dragon, um, because I didn't come from a life of accoutrement. Remember, when I started Altimeter, I started with less than five million bucks. My, I c…

AI assessment note: “when I had a few million bucks, I was, like, good to go.”

Q certain firms, some of your competitors in the growth stage side ripping capital into companies every 24 hours or 48 hours. Where, where does that been normalized? Because aren't we setting up a dynamic where if you have a bunch of growth firms pricing crazy rounds, whose valuations can then will not be able to be held up in the public markets, aren't we creating a different kind of problem?

A Well, um, you know, you and I have watched this dynamic play out probably four or five times over the course of the last 15 years where there's this inversion. Private capital markets. Private markets are actually overvalued relative to public markets. I just look at a few IPOs this week over the last couple of weeks. Deliveroo, hot private company down 30% in the IPO. Applovin came out this week, 20% down in the IPO. Right? At the end of the day, The great day, you know, as, as Munger likes to say, you know, the markets are a voting machine and the public markets are a brutal voting machine. Um, and so, you know, it just is going to take, remember when Groupon got done that last private round at twenty billion and then about nine months later is trading at five billion or Zynga. I mean, you and I can go through the list. We've watched this, you know, so it just takes the smack down and people losing actual money. Um, and, and however, So that's the one side, right? This is a temporary dynamic. Markets will clear. I think it is possible. You referenced, you know, a good friend of mine, you know, who's supposedly writing a term sheet every two days, you know, at Tiger. The truth of the matter is you can hop, you can hold simultaneous troops. You can believe the next three months that we're likely to have more multiple compression in the public markets, right? You could hedge you…

AI assessment note: “so it just takes the smack down and people losing actual money”

Q 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?

A First, 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? She'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 makes 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, 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 passed us, et cetera. Then these things will get a lot more scrutiny, uh…

AI assessment note: “I don't think it will cause us to change our stance... because we're winning.”

Q use cases are and build an organization that deeply integrates into his customers and does it so well all the way up into his roadmap that he's much more deeply embedded Than anyone else is. I, when I, I heard that part, I, I kind of gave him a real tip of the hat on that one, but what did you, you know, Brad, what was your take on that?

A You and I had this conversation after we first listened to it, and you know, if you really telescope out, you know, he talks as a systems level engineer. Right? Even if you hear, like, people, you know, people went to Harvard Business School and say, ah, can this guy possibly have 60 direct reports? Right? But how many direct reports does Elon have? Right? These systems level, and he said, I have situational awareness. Right? I'm a prompt engineer to the best people in the world at these specific tasks. I think when I look at this, the thing that I deeply underappreciated a year and a half ago about this company was the systems level thinking. Right? That these are, that he spent years thinking about how to embed this competitive advantage, and how it really, it goes all the way from power, all the way through application, and every day they're launching these new things to further embed themselves in the ecosystem. But I did hear from somebody over the last two days who, you know, Renee Haas, the CEO of Arm, Right. Rene was also at our event and, and he's a huge Jensen fan. He, he worked eight years at NVIDIA before becoming the CEO of ARM in 2013. And he said, listen, nobody is going to assault the NVIDIA castle head on. Right. Like the mainframe of AI, right, is entrenched and it's going to become a lot bigger, at least as far as the eye can see. He said, however, if you thi…

AI assessment note: “the thing that I deeply underappreciated a year and a half ago about this company”

Q to be deploying. So maybe you could talk a little bit about this austerity measures coming or just belt tightening, or some people may be getting out of the venture business who shouldn't have been in it to begin with. All of this seems like a great setup for more discipline and more disciplined founders. If the VCs have to be disciplined, doesn't that trickle down to the portfolio companies?

A 100%, but it, and while this might happen, while this might happen, I'm going to take the other side. I don't think that's what the lived experiences of most VCs in Silicon Valley today on Series A, Series B, Series C is certainly not in the area we're competing. We're seeing four or five, six hundred million dollar deals get done on zero revenue, two, three million dollars in revenue, and so let me just throw out perhaps an alternative view as to why this might look a little different than the world of austerity that we saw in 2002, 2003, 2009, 10, 11. The first is, right, the stock market is near an all-time high, and we know that, you know, the venture markets are reflexive to the stock market. We talked about that. The second reason, which I think is interesting is most firms on average are a lot bigger. Okay. That creates two issues. We have a situation where younger partners and principals who all did deals that were overvalued over the last few years. They want to put some points on the board in a repriced deal because they have to have some winners. So you have this principal agent problem. The people who used to check them were the senior partners, right? The, the investment committee, but now they have a lot of mouths to feed. So when you put money to work, you pull down more fee, and so, you know, these funds now, I mean, if you're Tiger or some of these big funds, y…

AI assessment note: “I don't think that's what the lived experiences of most VCs in Silicon Valley today”

Q I mean, this show is just the biggest combination of ballers. Now I'm so excited to hand over to the one and only Brad Gerstner at Altimeter. What is your relationship?

A Wow, this is deep, and I've done a lot of reflection on this. If you would have told me I have, was going to have what I have, let's say when I was 20, and then you would have said, describe to me the house you're gonna live in, the car you're gonna drive, the life that you're gonna live. I would have described to you a life totally different than the life I'm living. From as early as I can remember, sixth grade, I was like, I have to make a million dollars by the time I'm 30. It was a dragon in my life, because it destroyed our lives. When my dad went broke, destroyed his health, his marriage. So when you grow up in that, like, that is a real dragon. That's a beast you have to slay. Fortunately, because Fiocco and Cutler gave me a shot, I was able with NLG to slay that beast right at 30. Shortly thereafter, Bajal Samaya and I, Bajal's now running Lightspeed. We co-founded my second company, or our second company together, called OpenList, and we sold that. Another little base hit, double, and I'll tell you, when I had a few million bucks, I was like, good to go. Like, I had slayed the dragon. Because I didn't come from a life of accoutrement. Remember, when I started Altimeter, I started with less than five million bucks. I couldn't even convince my friends from HBS to contemplate being my partner in this thing. They're like, dude, you're embarrassing yourself. Go back to par.…

AI assessment note: “I slayed the dragon around money. My life and priorities totally shifted.”

Q analysis, we can look at, I don't know, enterprise compliance, massive freaking markets, but actually completely category creation markets and massive expansionary markets, you know, so many of these examples From your Airbnbs and your Ubers to your Twilios of the world in enterprise. They weren't big markets at the time. How do you factor in market creation and massive market expansion into that? It needs to be big enough.

A I think you have to be careful of commingling markets and what I describe as super cycles. Ok, so in my investing career, there have been three what I would describe as super cycles. The first was the internet, right? Everybody coming online. It was very clear even by 2000 that we were going to have hundreds of millions or billions of people online. So the question was who were going to be the biggest beneficiaries of that? And so I would describe that period of time for me investing or me founding companies. I concluded that search, making sense out of all this chaos, and e-commerce, which was really search for products, were going to be the two biggest areas of category creation. So seeing through that lens, Airbnb, which was making sense out of all the world's long tail inventory, right, in the way that Craigslist had done, for all properties that were not on bookie.com, like it actually fit, it wasn't a new market at all. That was a business prosecuting a strategy in a massive super cycle with massive tailwinds. Okay. I would say the second super cycle in my career was the move from search and e-commerce to mobile and, you know, and, and, and, um, applications that sit on top of mobile. And so what led us to Facebook in 2012 or what led us to ByteDance early was this idea That this device was going to be the principle and replacement mechanism for entertainment, for communi…

AI assessment note: “I think you have to be careful of commingling markets and what I describe as super cycles.”

Q I totally agree. What's the biggest challenge in firm building for you then?

A I would say saying no. Saying no to all of the, you know, I, I mentioned SPACs last year. Um, saying no to a Middle East sovereign who calls me up and says, Brad, you ought to set up a structured convert fund. We'll sponsor it with a billion dollars because KOTU is doing one and so-and-so is doing one. And, you know, we're gonna, all these deals are gonna be written down. We think you're really good at it. Like the, the opportunity for product proliferation, people proliferation, deal proliferation, I mean, it is incessant, right? And so for me, If I didn't have the conviction and the clarity that I do around essentialism, right, and practicing that every day, it would be a total distraction. But it's the same as Johnny Ive or Steve Jobs when somebody walking, hey, I got a new product feature. You ought to add this, add that, add this button on the home screen, add this. Like, they got shit every day. And you need to build a culture where people are afraid to suggest new things unless they've actually thought about it. Right? If you are an analyst who walks into my office with an idea a day because, you know, Johnny Mac down the street did the deal, like, you will be fired. Right? You better come in prepared, not with Dribbble, but you better have done your work because we're going to have a conversation.

AI assessment note: “I would say saying no. Saying no to all of the”

Q Penultimate one. What's your biggest insecurity today, Brad?

A That my kid, you know, I would say two, two that I really have. Number one, I'm terrified that I will do a bad job as a dad and that my kids Will grow up being entitled and not living to their full potential, and I will have deprived them of that really arduous but beautiful journey up the side of the mountain. Um, and I would say related to that is this idea that whenever I die, whether it's tomorrow or 40 years from now, that I'll have regrets. And, you know, I really, if there's one thing that I feel great about is, you know, just the intentionality that I'm living every day with. I'm doing exactly what I want to do with the people that I want to be doing it with. And that freedom, right, the freedom that comes from Uh, the economic freedom, which is a total privilege and not a lot of people have. Give me the opportunity to have the impact, whether it's Board Challenge or Invest America, whether it's Give Power, all the things I dreamed of doing and having impact, and that's the, that's the challenge I put in front of myself, I put in front of our team, organizations, in front of my friends, which is We live at one of those privileged times in the history of humanity. I think capitalism is an incredible force for good, but it doesn't just happen. Like we've got to fucking show up and we've got to leverage all of this goodness, the technology, the resources, et cetera, and th…

AI assessment note: “I'm terrified that I will do a bad job as a dad”

Q ask, you know, when you look at that and then, you know, your father's passing also, did, did you, did you feel like that you had to grow up much faster? My mother's got MS and since I was like 11, I felt like I'm 25. And now I'm 50 then. Um, did you feel the need to grow up faster and look after your family because of that acceleration?

A Yeah, no doubt. Um, no doubt. Uh, I, You know, I had a very, um, uh, you know, a very trying, uh, you know, period in middle school, in high school. I lived with my sister. I lived by myself. Um, I had a loving family. My mother, 86, beautiful, still alive, incredible. You know, sadly, she feels guilty about my childhood, but she was working two jobs trying to hold things together for four kids, and so I have I mean, she was extraordinary as a mother, and the one thing our family always had, my dad had this tradition, my grandfather had this tradition, ah, they would always say whenever they signed off, love you and like you. Right. There was this idea that I have to love you because we're family, but I also choose to like you. And we had, you know, I'm super close to my siblings today. Couldn't be closer to my mother. And so there was never a question about love. Right. It was really just financial security. Um, and I think that held the ship together when the times were toughest. Yeah.

AI assessment note: “Yeah, no doubt. Um, no doubt.”

Q developed theses in my mind about how I see markets playing out in certain ways or, you know, super cycles developing in different ways. And then I find the company that aligns to my thesis and I jump on it. And actually my thesis just could be wrong. I worry that it just falls very much victim to confirmation bias. How do you think about that as a potential flaw?

A I, you know, I think as, you know, we, we often say around here, we're anthropologists who just happen to be investors. So we, we really have a culture and we spend our days challenging each other, thinking, inviting people in to opine on the subject that we might have, um, you know, around, for example, the modern data stack, you know, that we've obviously written a lot about, uh, you know, on Twitter and Substack, et cetera, discord. Um, but every day we're pulling together the most interesting founders, engineers, and others and study, right? Like drinking the Kool-Aid is a recipe for disaster. But if you really have a culture of continuous learning, right? Because there are plenty of things that we invested in where the facts change or where we were just wrong and throwing good money after bad when you were wrong is a really bad idea. Um, and so for us, it's, you know, it's, it's that constant study. Um, I think being a public market investor is really a value add in terms of that type of culture when you're investing in a venture.

AI assessment note: “drinking the Kool-Aid is a recipe for disaster. But if you really have a culture”

Q Which we don't know exactly what their intent is because they're doing this behind closed doors. Brad, what's your take on this?

A I think there, Dave and I talked about this the other night. I think there's something bigger playing out here. I mean, clearly he's the expert on real politic and, you know, but it seems to me that we have had decades of military diplomacy. Right. And, and most recently, the Powell Doctrine of overwhelming force. We don't want to make the same mistake we made in Vietnam. So, like, we're going to go in with full force. And, you know, basically the public doesn't support, you know, military adventureism anymore. Right. And so now we have, maybe we'll call it the Blinken Doctrine, which is the Powell Doctrine equivalent, but for economic force. It's the nuclear economic weapon. That is on full display by the West right now that I think has really significant implications, right? It's reunited the West. Um, and I don't think this is just about Putin. And I think the reason that the US and Western Europe is slow playing this a bit is they're sending a message to the Chinese as well, which is that we w we are unified and we will use an economic weapon of mass destruction. If, right, you don't play by global norms. And so the box I think we're in from a negotiating perspective, right, uh, in Ukraine right now is not a box around neutrality. I mean, neutrality is already clear. I mean, we had, Zelensky didn't even ask for a no-fly zone. He's not even asking for NATO membership. They'v…

AI assessment note: “I think there's something bigger playing out here.”

Q Brad, any concerns about the militarization in the country that is occurring from you?

A Well, I think, listen, nobody wants abusive tactics, but let me just give you some numbers that cause me to believe this feels more like, you know, a bipartisan issue, and, and we have kind of the pendulum swinging back more than, you know, something that should cause us concern. Court-ordered removals and deportations average 200,000 per year, 1997 to 2000. That's under Clinton. 200,000 a year. They averaged 300,000 a year, peaking at 400,000 under Obama. Right? Deportations plummeted under Biden. At the same time, we know that illegal crossings into this country kind of exploded higher. And now they estimate that Trump is back to the trend line of 300 to 400,000 illegal, you know, deportations and removals. These are court ordered removals. So I might have expected the Trump number to be way higher, given that we just went through this massive step up in illegal crossings. But I think it's really important to point out that this has been a bipartisan, consistent thing that has happened in this country for 30 years. I'm not talking about tactics, exactly how it's going on, but the deportations have been going on by both parties, and we never, it hasn't been an issue before. And so it is curious that it is more of an issue now. And then the other thing I would just underscore is if you look at what Daniel Lurie is doing in the city of San Francisco, he is live blogging on Twitt…

AI assessment note: “this feels more like... the pendulum swinging back more than... something that should cause us concern.”

Q Do you worry that hustle can get in the way of loyalty and discipline and loyalty and discipline? Like if you're so intent on that, you said that money making that, that hustle, that drive, then do they maintain the discipline when times are crazy? Do they maintain the loyalty to you, Brad and Altimeter when someone says, Hey, there's a shiny new toy over here.

A I would say a couple of things. Number one, um, Having figured out a way that you personally can build alpha is a condition required though not sufficient first, right? Like I know plenty of people have a good hustle, but they're actually not great thinkers. I know plenty of people have good hustle who don't have great discernment. So all I'm saying is when you're looking at recruiting somebody, is it plausible? Right? That they have alpha that makes them different from everybody else in the world. Number two, what I would say is, listen, my philosophy about people who work at Altimeter is that, you know, this place is not indentured servitude. You're all free agents. I say to everybody who comes to work here, you may work here a year, you may work here the rest of your career. The only thing I really care about is that it's an incredible experience for you and an incredible experience for us, right? I've had three analysts, including my first analyst, Dennis Hong, who, you know, um, Dennis, the day he agreed to come work for me, he said, listen, I want to work there three years. I want you to help me get into Harvard Business School, and I want to learn everything I can so I can start my own fund. And I said, deal. And we kept that deal. Went to Harvard Business School, he dropped out and he started his own fund and I'm an LP, uh, from day one in his own fund. And so, you know…

AI assessment note: “I don't view that as a breach of loyalty.”

Q of why we want to tell, hey, it's a great story. But also, like, what Altimeter ultimately becomes, and this, you know, you guys, I think are Maybe the purest play example. Certainly one of the first, if not the first life cycle investor, you know, it was just not at all obvious that you should go join a hedge fund at this point, right? Like how did that happen?

A Yeah. I mean, so there's a little bit more in between, you know, so September 11th happens, which is, you know, really catastrophic event, particularly for our company. That was an online travel company. And so we negotiated kind of the soft landing with IAC. I won't take you through all the Trials and tribulations, but it was a good outcome for General Catalyst. I thought I was going to go back and join David and Joel. I knew they were two extraordinarily special human beings, and they were going to build something really big, but I had kind of been bitten by the startup bug. A friend named Bejo Samaya, who now runs Lightspeed in India and Southeast Asia, had an idea, and it effectively was, think of Yelp pre-Yelp. And so, Beige and I started this business, um, we bootstrapped it, had a bunch of venture capital term sheets for a variety of reasons, didn't take them, and we sold that business a couple years later to a public company in Seattle. And again, in the first transaction, you know, I'd worked really hard at NLG, and I think I walked away after being the CEO and helping put the deal together with a million dollars, which for poor kid from Indiana, that was game changing. But by Silicon Valley standards today, people would be like, you know, are you clueless? There was a lot of work that went into that. The second business I started with Beige, I think I owned 40% of the…

AI assessment note: “I mean, so there's a little bit more in between”

Q We're on the exact same page. Well, I think this is a really compelling idea, Brad, and obviously you're eager to be helpful on this one. Hopefully we can get some of our listeners just to step up on it as well. Where can they find out more, by the way, about it?

A So, Twitter handle, Invest America 24, um, and, uh, we'll be launching more, I, you know, I, uh, follow my Twitter handle, add alt cap, um, you know, we, we've pushed out a few 15, 22nd spots that give you a sense of, kind of, where we're going to go in the campaigns, um, but we're gonna be pretty aggressive. We have lots of people who've indicated a willingness and a desire to get behind this financially. We've got greats, right, the greats of, of finance and investing who wanna spend their time and energy helping us build the, the, the financial literacy that's gonna go into middle schools and high schools, right, that are built, that's built around Invest America. This is, this is something that really can unite us as a country, unite Democrats and Republicans around a cause that we all believe in, which is American democracy supported by free market capitalism.

AI assessment note: “Twitter handle, Invest America 24, um, and, uh, we'll be launching more”

Q ask, you know, when you look at that and then, you know, your father's passing also, did, did you, did you feel like that you had to grow up much faster? My mother's got MS and since I was like 11, I felt like I'm 25. And now I'm 50 then. Um, did you feel the need to grow up faster and look after your family because of that acceleration?

A Yeah, no doubt. Um, no doubt. Uh, I, You know, I had a very, um, uh, you know, a very trying, uh, you know, period in middle school, in high school. I lived with my sister. I lived by myself. Um, I had a loving family. My mother, 86, beautiful, still alive, incredible. You know, sadly, she feels guilty about my childhood, but she was working two jobs trying to hold things together for four kids, and so I have I mean, she was extraordinary as a mother, and the one thing our family always had, my dad had this tradition, my grandfather had this tradition, ah, they would always say whenever they signed off, love you and like you. Right. There was this idea that I have to love you because we're family, but I also choose to like you. And we had, you know, I'm super close to my siblings today. Couldn't be closer to my mother. And so there was never a question about love. Right. It was really just financial security. Um, and I think that held the ship together when the times were toughest. Yeah.

AI assessment note: “Yeah, no doubt. Um, no doubt.”

Q probably have some good insights since you've talked to them on a regular basis. Chances they get out in the next six to nine months, both of them, you'd say a hundred percent chance, unless there's some outside event, you know, blockade of Taiwan, some black swan event that we're not anticipating. What do you think the chances are they're public when we're sitting here and I'm skiing in Hokkaido?

A Yeah, I think, I think it's very high, but let me, let me first say, you know, the SpaceX IPO where we were also investors and we also bought in the IPO. I mean, it was textbook. It was a hugely successful IPO. They raised seventy five billion dollars at 1.75 trillion. Ok, so it went out below where we are today. It's up 25%, you know, and let's call it on thirty five billion of forward revenue. So if you think about that revenue multiples trading at two trillion, On roughly thirty five billion of forward revenue. It's an incredible achievement. I think it was textbook. I think Anthropic and OpenAI were watching very closely because frankly, we had not had an IPO of that size and to Elon's credit and to the team's credit, Brett and Gwen, they really pioneered some really smart and interesting things as part of that IPO. So You know, you heard from Gavin. Anthropics rumored to be, you know, trending over a hundred billion in revenue compared to the 35, right? If they exit the year at a hundred, that means their gap revenue next year could be well over a hundred. So based on the SpaceX success, I think it would be a blockbuster IPO. And I think SpaceX has shown them the way on things like the total raise, pricing, liquidity, inclusion into the indexes, how to do the lockup, like I think they've gone to school.

AI assessment note: “Yeah, I think, I think it's very high, but let me, let me first say”

Q they have of you changes, I find, they, I always find they want something from you now. There's always a reason why they want the dinner, and, and it changes so many of your relationships. Have you found that, and how do you think about retaining purity of relationship when you know that a lot of people actually now want something from you? We're really going into the therapist advice.

A I mean, what I would say is, um, you, you know, you mentioned a few people at the start of the show, um, you know, Bob or Rich or others who've been, you know, Fialco like brothers for 20 years. I mean, I can't do anything for them. I can't give them anything. Um, you know, that they don't already have or have for themselves. My buddies from high school will be the first to call me up and call me out on something. Hey, I saw you on CNBC. You look like an idiot. Fix your hair, do this, do that. So I think it's about the choice of the people that you surround yourself with. I don't have a lot of people in life who I feel like are hangers on looking for something, perhaps because I just don't do that. Right. I don't have the. 400 foot yacht in San Tropez. So maybe I, you know, Like hanging out with me as eating a cheeseburger at Bucks and sitting in my backyard around a fire, and maybe the people who would be more inclined to hang out with, you know, uh, you know, hangers on aren't as intrigued by that. But maybe I'll leave you with this because I do think it's related to it, but not, not something you asked specifically. But a lot of my friends say, Brad, you know, you kind of are living your life at warp speed. Um, you know, you're trying to pack all this in, like, what's, what's this all about? Um, you know, and I mentioned I lost my dad when I was young. I lost my best friend …

AI assessment note: “I think it's about the choice of the people that you surround yourself with.”

Q Yeah, and like Bill said, turn that into a premium offering, right? Say that's the, you know, the gold. And, you know, the silver and the bronze are built off, you know, something that's, like I said, one-tenth the price.

A That seems to me, Bill, you know, if, if I had to forecast You know, if I'm open AI, I'm running a consumer business with really high gross margins, right? Because consumers are, uh, uh, less sensitive to what they're paying. Their, their, their, their intensity of use is lower. Whereas when, if, if somebody's writing code, you know, there's, the variable intensity is high. And so, you know, for them, it would make sense to launch an open source model back to where we started the pod. And price it really low to, you know, drive share knowing, you know, reminds me a little bit of Amazon back in the day. Amazon had this monopoly retail business they could use to subsidize AWS, gain share for a decade, and then begin to take price. That would be a rational strategy for OpenAI to follow. So you take the profitable consumer business, you use it to subsidize, you know, the, the, the market sharing other applications that you hope to build.

AI assessment note: “That would be a rational strategy for OpenAI to follow.”

Q minutes and, and they did say that they're not raising rates, but they do expect two more 25 basis point rate hikes later this year. Maybe you can tell us what market data is indicating. Is that actually the case? And is the fed not giving a, a, a clean reading on economic activity and inflation as it's being published in other places than what the fed is currently reading?

A Well, I'm, I mean, I think the most interesting thing here, and perhaps the most non consensus thing here is the fed kind of seems to be orchestrating a pretty soft landing. Right? Nobody wants to hear it. The market fought it for the first half of the year. The Nasdaq was just up 39% in the first half, and most people didn't participate, so everybody wants to talk this down and say that inflation's still out of control. Chamath's been talking about inflation higher for longer, but notice he doesn't say that's a problem or the economy, therefore, is going to crash. It's just like inflation's going to be a little stickier on the way down. Rates are going to be a little bit higher for longer. I think when you look at this in totality, The reason they hit pause is because they've come a long way quickly. They know that things are starting to trend in the right direction, so their own forecast for CPI is that it comes down a lot by the end of the year. Goldman Sachs is now at 3.3%, and I know we have readings like true inflation that say the inflation today is actually lower than that, but you don't even need to get to the debate between true inflation and CPI. They're both trending a lot lower, but we got a really interesting reading this morning because like, Why do we want to, you know, raise rates? Well, we want to cool off the economy. And so everybody's looking for that indic…

AI assessment note: “you don't even need to get to the debate between true inflation and CPI”

Q seem if Elon does with Twitter, what seems to have been leaked here correctly, according to all reports, And there's a 20% riff at Facebook, and we start to see people take the medicine. Is that the ultimate setup for now? Hey, these companies are being run to throw off cash. And we have some way out of this, what people think is going to be a very hard landing.

A Well, I mean, you know, first just let's talk about, you know, where rates are, you know, today, you know, we're at four, three on the, on the tenure. I mean, technology's performed incredibly well for a long period of time with rates in this, in this range. So the adjustment period is very difficult, right? And so when you, when you look at the convexity and going from zero percent interest rates to four and a half, like that has been a shock to the system. It has been destabilizing to multiples. Multiples were basically infinite last year, and now multiples have come back to reality, and so I don't question, in fact, I actually think Free capital was a weapon of economic destruction, right? Free capital hurt good companies from being great companies. They hired too many people. Their margins were too low. You know, SoftBank funding all of these rideshare companies around the world to compete with Uber meant that Uber, even though they're a market leader, did not have market leadership economics, and so the ringing out of the system of that excess, that grift, that stupidity, That's gonna be good for the fundamentals of these business, but the transition from, you know, that low-rate environment to the high-rate environment, it's dislocating for investors. It's dislocating for management at these companies, and it's gonna be, this is not, you know, a, a six-month phenomenon. W…

AI assessment note: “ringing out of the system of that excess, that grift, that stupidity, That's gonna be good”

Q Like, do you have, do you have any belief that you could even get a meeting with the CEO and management where they would listen to you appropriately?

A We've certainly got meetings with management before. So yes, I believe we could, whether or not that impacts, you know, how they build product, how they, how they run the business, you know, the influence, et cetera. But again, I, I, I think that's not really the problem here, but the point I would totally agree with you on Chema. We've had 10 years Of where the cost of capital was zero. 10 years of hyper growth for these social networks. Right? In each of the last five years, Facebook has hired more people in each of the last five years than they had 10 years after the company was founded. Okay? So as we've seen this growth begin to turn over, I have seen the companies really slow to react. To right size their behavior that they had over the course of the last decade. To put themselves in a position to compete for the next decade. So it's one thing just to throw your hands in the air and say, well, this is all Apple. We couldn't do anything about it, but we, we really haven't seen leadership in terms of cost control. We really have, we all know these companies could run.

AI assessment note: “We've certainly got meetings with management before. So yes, I believe we could”

Q How do you know when you're wrong versus a blip? And how do you communicate that to the founders? It's something that I'm still very weak on.

A Can't necessarily use all the specific names, but I would say this, the reality is we made this pre-revenue investment in Snowflake. And I remember Mike called me maybe six months after we made the investment. And he said, Hey, we're not hitting the milestones we need to hit to get the next round of investing. Okay. But we need, so, so let's just put in a little bit more money, kind of an interim round. And, you know, because we'll get there and we talk through the reasons why, et cetera. And it was very clear to us that what was going on in the business, focused on recruiting, dealing with a bunch of customers, et cetera, had no outcome on the big bet. So that was a very easy decision. I mean, that, that conversation lasted a minute. Yes. We'll put more money in the business. You know, let's go. I would say, you know, we're an investor right now. Listen, there's been a massive dislocation in the world, and there's a bunch of really bad stuff that occurred last year, right? And a bunch of valuations that are totally not supportable. We have a software company, you know, where, where people, where they misplanned by 70%, right? An incredible group of investors around the table. But this particular group, right, the lack of truth telling About what's really going on, confronting the truth, right? I mean, I think that's so important, and having the courage. I'm not being a good fr…

AI assessment note: “I'm not being a good friend to the founder if I'm blowing smoke”

Q Product, additional products provide additional revenue, more money. You have essentialism as a core strain of your mindset in life. You also have the, the childhood that you mentioned earlier. How do you think about all of these combining to your, your relationship to money today? Uh, what is your relationship to money stagey thing?

A Wow. This is, this is deep. Um, and I've done a lot of reflection on this. Um, If you would have told me I have, was going to have what I have, let's say when I was 20, and then you would have said, describe to me the house you're going to live in, the car you're going to drive, the life that you're going to live, I would have described to you a life totally different than the life I'm living, ok? From as early as I can remember, sixth grade, I was like, I have to make a million dollars by the time I'm 30. I mean, it was a dragon in my life because it destroyed our lives. Right. It, it was like when my dad went broke, destroyed his health, his marriage, like it was, you know, so when you grow up in that, like that is a real dragon. That's a beast you have to slay. Um, and you know, fortunately because Fiocco and Cutler gave me a shot, I, I, I was able with NLG to slay that beast right at 30. Right? And, um, shortly thereafter, Bajal Samaya and I, Bajal's now running Lightspeed, we, we co-founded, uh, my second company, or our second company together, called OpenList, and we sold that, you know, another little base hit, double, and, and I'll tell you, when I had a few million bucks, I was, like, good to go. Like, I had slayed the dragon, um, because I didn't come from a life of accoutrement. Remember, when I started Altimeter, I started with less than five million bucks. My, I c…

AI assessment note: “I slayed the dragon around money. My life and priorities totally shifted”

Q they have of you changes, I find, they, I always find they want something from you now. There's always a reason why they want the dinner, and, and it changes so many of your relationships. Have you found that, and how do you think about retaining purity of relationship when you know that a lot of people actually now want something from you? We're really going into the therapist advice.

A I mean, what I would say is, um, you, you know, you mentioned a few people at the start of the show, um, you know, Bob or Rich or others who've been, you know, Fialco like brothers for 20 years. I mean, I can't do anything for them. I can't give them anything. Um, you know, that they don't already have or have for themselves. My buddies from high school will be the first to call me up and call me out on something. Hey, I saw you on CNBC. You look like an idiot. Fix your hair, do this, do that. So I think it's about the choice of the people that you surround yourself with. I don't have a lot of people in life who I feel like are hangers on looking for something, perhaps because I just don't do that. Right. I don't have the. 400 foot yacht in San Tropez. So maybe I, you know, Like hanging out with me as eating a cheeseburger at Bucks and sitting in my backyard around a fire, and maybe the people who would be more inclined to hang out with, you know, uh, you know, hangers on aren't as intrigued by that. But maybe I'll leave you with this because I do think it's related to it, but not, not something you asked specifically. But a lot of my friends say, Brad, you know, you kind of are living your life at warp speed. Um, you know, you're trying to pack all this in, like, what's, what's this all about? Um, you know, and I mentioned I lost my dad when I was young. I lost my best friend …

AI assessment note: “I think it's about the choice of the people that you surround yourself with.”

Q Are SPACs done? How do you evaluate the next few years for SPACs?

A Um, listen, I don't think SPACs need to exist in the world. Um, they're a mechanism by which companies come public. Um, they have forced more innovation, innovation in the traditional bank IPO. They have forced more innovation in the direct list market. And what I really care about, what I'm trying to solve for is making sure that entrepreneurs and founders of iconic businesses have a fair and easy step into the public markets. It shouldn't be so Byzantine. And we want to be partners to them because remember, some of the greatest venture returns in the history of venture capital occurred in the public markets. Booking.com price line from one billion to a hundred billion. Go through the list. Those are venture returns in plain sight.

AI assessment note: “I don't think SPACs need to exist in the world.”

Q these companies doing hiring freezes, layoffs, at the same time that the housing market tanks, at the same time crypto tanks, at the same time the stock market tanks, this feels like a major shock to the system. Is it time to maybe reconsider some of these, um, No. You know, for the Fed to reconsider, or just slow and steady wins the race here? What, what's the best option?

A First, we should erect statues to Senator Manchin for saving the Republic by vetoing STEMI-II. That would have been devastating. That would have been devastating. So we'll revisit that. Listen, the Fed said two really important things this week. They said, number one, our communications have been helpful in shifting market expectations. What that means, the Fed is the air traffic control. They said to the markets at the beginning of the year, you're 90 degrees off runway heading. Get your ass back on runway heading. It was a slap in the face to markets, and it was a radical adjustment. Now you hear the Fed in these little statements. This week they said, hey, we're well positioned this year to assess the effects of policy firming in the back half. So they're saying we're going to hit it with fifty-fifty, and then we're going to take a look. So now think of it as air traffic control. You're two degrees to the left. You're two degrees to the right. They're steering us on runway heading. I don't think the Fed wants to do anything at this moment to lose credibility in the inflation fight. We're going to get 50. We're going to get another, another 50. But they're doing what they want to do, which is keeping markets sufficiently tight, right? They wanted to take the crypto market down. They wanted to take all the excessive risks in the stock market down, right? You're absolutely righ…

AI assessment note: “All the things they needed to do, they're doing. Right? They need to stay the course.”

Q How did you decide on wanting to go to HBS? Did somebody inspire you or encourage you to do that?

A It's a slightly embarrassing story. Like, I didn't really do much research. I remember taking the, you know, the entrance exam like the last day, scrambling to fill out the application. In fact, I didn't even finish the application because I ended up getting an interview, and I remember the person who interviewed me said, this is a unique situation. I can't say that I've ever Interviewed somebody who didn't have time to complete the application. And so he started with, why didn't you have time to complete the application? You're like, well, I'm deputy secretary of state right now. I went through it and it wasn't, you know, it was just, I decided late and I was, I was working my ass off, but I said, now's the time. And we went through it.

AI assessment note: “I didn't really do much research... I decided late... I said, now's the time.”

Q Yeah, that might have been 14. But that moment in time, did you have some insight that you felt nobody else had at that moment, or was it the right time, like how?

A I, I, a few things. Number one, I did have confidence that, you know, I was a decent Investor. Right? So we worked really hard. We're blue collar. There's different ways to prosecute the strategy. I think there's some people who work the cocktail circuit. And, you know, we really were, we're students of, we're anthropologists about like where things were going and what was going to be big. And at the time, there was a lot of pessimism, frankly, about cloud computing. Salesforce, you know, had some quarters where they saw more deceleration than people thought. And there were really, kind of, these obstacles. One was the cost of computing the cloud versus the cost in a data center. But the big one was this perception that, like, I'll never put my customers' data in the cloud. Right. It was really a security issue.

AI assessment note: “we're anthropologists about like where things were going and what was going to be big.”