Michael Dell – Invest America Act Becomes Law, AI Talent Wars, Compute Demand, Market Update | BG2

Open Source bi-weekly convo w/ Bill Gurley and Brad Gerstner on all things tech, markets, investing & capitalism. This week, they welcome Michael Dell to discuss the Invest America Act, lessons learned from the 90’s, government spending, budget deficit, the AI talent war, AI's Role in Economic Growth and Productivity, the explosion in AI compute and demand, the markets, and more. Enjoy another episode of BG2! Timestamps: (00:00) Intro (4:13) Lessons from the 90’s at Dell (8:37) Invest America Act Signed Into Law (27:12) Government Spending and Budget Deficit (36:05) The AI Talent War (46:25) AI's Role in Economic Growth and Productivity (53:42) AI Compute–Explosion in Demand (1:03:53) Market Check Show Notes: Invest America https://www.investamerica.org/ Next Gen Personal Finance https://www.ngpf.org/ Play Nice But Win: A CEO's Journey from Founder to Leader https://www.amazon.com/Play-Nice-But-Win-Journey/dp/0593087747?adgrpid=186996873828&hvpone=&hvptwo=&hvadid=748008426876&hvpos=&hvnetw=g&hvrand=13228479928161013514&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9031927&hvtargid=dsa-2414841786886&hydadcr=&mcid=&hvocijid=13228479928161013514--&hvexpln=67&tag=googhydr-20&hvsb=Biographies_d&hvcampaign=dsadesk Milken Institute: The Economic Impact of Invest America Accounts https://milkeninstitute.org/content-hub/research-and-reports/reports/economic-impact-invest-america-accounts Produced by Benny Beausoleil Music by Yung Spielberg Available on Apple, Spotify, www.bg2pod.com http://www.bg2pod.com Follow: Brad Gerstner @altcap https://x.com/altcap Bill Gurley @bgurley https://x.com/bgurley⁠ BG2 Pod @bg2pod https://x.com/BG2Pod⁠ Michael Dell @MichaelDell https://x.com/michaeldell

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Brad Gerstner?

  Is the, are the productivity gains from this going to be as big or bigger than what we saw from personal computers in the internet?

• 0:08Speaker 01

  It's far bigger. It's far, it's far bigger. Yeah, I, I, I feel 98% confident.

• 0:28Brad Gerstner?

  Hey, guys. Great to see you both. Bill, maybe, I don't know, you're up in Tahoe or something and we're thrilled to have one of our great friends, Michael Dell, on to chop it up with us. Happy 4th of July, you guys. Most of you know Michael. He's billed, obviously, one of the most iconic technology companies, starting in his dorm room, I don't know what, 40 years ago, Michael? I think you just had your 40th anniversary.

• 0:50Speaker 01

  Forty, forty-one years ago.

• 0:51Brad Gerstner?

  Forty-one years ago. And now a major player in AI. You know, you, you spun off VMware, of course, and now you're a major owner of Broadcom. And Dell remains $100 billion business. I think you own, you know, like, like Larry Ellison, you own a lot of the business, maybe half of the business. And it's one of the largest builders of AI servers on the planet. And obviously, in addition to that, you and your incredible wife, Susan, have an amazing foundation. You do, you do great work in Texas and around the country. I saw that you just contributed to the disaster relief. What a tragedy in Texas. And so, kudos to you both for all the good work you do on so many issues, but particularly in the state of Texas. And then, you know, of course, it was great to have you and Susan as partners on Invest America.

• 1:36Brad Gerstner?

  I know we're going to talk about that today. And everybody should run out and read your book, Play Nice But Win. I'm anxious to ask you.

• 1:43Bill Gurley?

  I would recommend they listen to it because Michael took, what I understand to be a very painful process for an author to read their entire book, but it's Michael's voice and the inflection and the, like, you get nuances I don't think you would get just with the writing.

• 2:00Speaker 01

  Well, thank you for saying that, Bill, and appreciate the kind introduction, guys. Look, I mean, I think if you're going to take the time to write a book, which is a major endeavor, if you really do it yourself and do it right. I did have somebody helping me, by the way, so I'm not going to take full credit for it. I think you should take the additional time to record the audiobook, because you can display emotion, intonation, and really tell the story in your own voice. And it's a powerful way to convey thoughts and emotions at the same time. And I love audiobooks.

• 2:40Speaker 01

  I love going outside, walking, hiking, and turning on a good audiobook is a great way to do it.

• 2:48Brad Gerstner?

  Totally. Well, in the spirit of storytelling, Michael, do you remember when you first met Gurley?

• 2:54Speaker 01

  Yeah, I do remember when I first met Gurley. This was in the 90s. And Bill had written this research report that was super thick. And I'm reading the report, I'm like, how the bleep, bleep, bleep, does this guy know more about our business than we do? It's like, what? We must be totally screwing up here. And he had uncovered a whole bunch of analysis and thoughts about our business. And we were so busy, kind of distracted by growth, that we had missed a few things. And Bill shined a massive light on that, and it was super helpful.

• 3:37Speaker 01

  So I became a fan instantly of his work and have been a fan ever since.

• 3:44Bill Gurley?

  Brad, that was 32 years ago.

• 3:46Speaker 01

  Even though when I read the report, I was like, damn, we should have figured this out.

• 3:55Bill Gurley?

  This is 32 years ago. I was 28, Michael was 29, and running a public company.

• 4:02Bill Gurley?

  And I've always cherished the fact that Michael's a year older than me, so I always have time to catch up.

• 4:09Speaker 01

  It's great to be here with the kids.

• 4:14Brad Gerstner?

  Bill, what was, tell us just a second about, because the 90s, I think, has some, some parallels to the period that we're living in now. So, you know, Dell was growing incredibly fast, obviously building low-cost, high-quality computers. What inspired you to start covering Dell? And then, you know, was, what led you to these insights? Like, did you just focus on that company? Was it, was this, you know, a breakthrough piece of work for you?

• 4:42Bill Gurley?

  Well, Michael's heard this before, so I'll hopefully won't bore him. But I had worked in the PC industry. I spent over two years at Compaq in Houston. And, you know, interestingly, I think being inside of Compaq, we had a view of Dell that wasn't as respectful as it should have been. And once I got outside and was able to look at the numbers in a different way, I was able to see things more clearly. But, but the gentleman that, that made this all click in terms, for me, was Michael Mobison, who you know of. But he had taught me to look at return on invested capital. That's part of what Michael was

• 5:22Bill Gurley?

  referring to. The company had insane, you know, balance sheet turnover in a way that, that the cash flow relative to the earnings was really high and ROIC was 10x anyone else in the business. And, yeah, and then for some reason, probably just youth, I went and did a strong buy on the initiation, which Michael made a bunch of his employees rich. I ended up making a bunch of the salespeople rich there at CSFB, just as a result of, of riding on their coattails. But it was, it was

• 6:00Speaker 01

  The 90s were fun.

• 6:01Bill Gurley?

  The 90s were fun. I mean, you know.

• 6:05Speaker 01

  Yeah, stock went up 130,000%. We had seven stock splits.

• 6:10Brad Gerstner?

  What was the value of the company when you went public? What was the total enterprise value or market cap when you went public, Michael?

• 6:16Speaker 01

  It was like, it was like $150 million or something like that.

• 6:20Brad Gerstner?

  I mean, see, that's, that's the beautiful thing. That's like, I mean, that is a series A in venture capital.

• 6:25Bill Gurley?

  It went up 100x after this initiation, like in the public markets.

• 6:30Speaker 01

  Yeah. So Bill, I just need you to recommend our stock one more time.

• 6:36Bill Gurley?

  There, there, there was an element that I think is, is super interesting, like that was also part of what Michael was referring to. But their, their inventory turns were so damn high compared to the rest of the industry. So they were, they were, you know, building to individual customer order. They weren't building to inventory. They're building to demand. And because component prices fell so much, we calculated they got a 200 basis point gross margin advantage just by having the FIFO queue.

• 7:09Brad Gerstner?

  Oh, my goodness, that makes sense. Yeah.

• 7:11Speaker 01

  Exactly.

• 7:12Brad Gerstner?

  Just in time.

• 7:13Speaker 01

  This, this was a, this was a structural competitive advantage. By the way, it still is. So, so the, the point is that the cost of the materials are always coming down. And if your competitor has, let's say 90 days of inventory in a series of queues with distributors and dealers, and you have six days of inventory, which we actually had for about seven years in a row, six days of inventory. Think about that.

• 7:47Speaker 01

  The, it's a structural competitive advantage because you have, you have fresher inventory, you have fresher costs. And of course, you don't have all that capital tied up. And so your, your return on capital is essentially infinite, especially when you're paying your suppliers on a period longer than your, your customers pay you.

• 8:13Speaker 01

  And so you have a negative cash conversion cycle, which which we still have typically around negative 50 days cash conversion cycle.

• 8:24Bill Gurley?

  That's powerful.

• 8:26Speaker 01

  It's a beautiful thing.

• 8:27Bill Gurley?

  Yes, it is. Well, let's transition from 32 years ago to the present.

• 8:32Speaker 01

  Cash is king. Everything else is an opinion.

• 8:35Bill Gurley?

  No, no doubt, no doubt. So so you two just had a big win with this Invest America program that was just announced as part of the big bill. And I know I know that Brad, this was your baby and you spent a ton of time on it. But Michael came on board and helped out as well. So why don't you tell everyone the details? We've talked about it before, but tell them the details of what landed.

• 8:59Brad Gerstner?

  Yeah, thanks. And and and, you know, I remember last 4th of July, we were talking about this bill and I was sitting right here. And honestly, I thought the chance of of getting this passed into legislation was, you know, maybe 10% at best. And we had some good fortune. As you know, we the legislation was called the Invest America Act. It was a bipartisan standalone bill. And it ended up like a lot of other pieces of legislation getting sumed by the reconciliation bill, right? So a lot of these things got packaged together in this one bill. And of course, it was signed into law on July 4th down at the White House. You know, I've been at this four years. You know, I tried to get it done under Biden, but the stars just aligned in this moment.

• 9:44Brad Gerstner?

  And and Michael was pretty early to get on board and support this, joined the CEO Council for Invest America, but played a critical role with the president to help get it into the reconciliation bill over the course of the last 60 days. But let's just talk about exactly what it means now that it's become law. So I think of this as a pretty significant evolution in the social contract. It creates private investment savings accounts privately owned for every child at birth seated with a thousand bucks in the S and P 500. So parents, companies, philanthropists can add money. Anybody can add money to these accounts. You can't take the money out of the accounts. Right?

• 10:28Brad Gerstner?

  It just compounds in the S and P 500 until you're 18 years old. So we will spend the next year putting the program in place. It has to be launched under the terms of the legislation by July 4th, 2026, the 250th birthday of America. And basically we got it expanded. So all kids under the age of 18, that's 65 million kids are eligible. And I give a lot of credit to Senator Cruz who fought to expand the pool of eligibility here. So what that means is that they can open up an account, but only children born after January 1, 2025, get the thousand dollars from treasury.

• 11:11Bill Gurley?

  The others will have an account that someone else could put money in on their behalf.

• 11:17Brad Gerstner?

  And they can add money to it. There are a lot of advantages for their parents adding money, for companies adding money to it. So it makes a lot of sense. And for Michael and I, I think the key performance indicator here is if we're having this conversation a year from now, we want to have 50 or 60 million kids signed up. Now, of course, if your child is born after July 4th of 2026, then they're going to automatically get an account set up when they get their social security number and they will automatically get the thousand dollars. But we have this one time group, all kids under the age of 18. We're going to have a big campaign to get all those folks signed up over the course of the next year. And I guess for me, I was reflecting on this over the course of the last few days and,

• 12:02Brad Gerstner?

  you know, at a time when you have an avowed socialist like Mam Donnie, you know, winning the primary in New York. It seems like the Invest America Act is really just the exact opposite. Right? You're both trying to attack the problem of the wealth gap. But this is by getting everybody into the game of capitalism, making everybody actual owners in the upside of America's success, rather than resorting to price controls, attacking businesses and success, and creating really more dependency on government. So I think we're at this critical crossroads in America, and I think the Invest America Act comes at an important point in time. I think a lot of people think of it like a 529 account bill.

• 12:46Brad Gerstner?

  But I think that dramatically underestimates what this is. This is a lifetime investment account, so that can compound over the course of your life. If you start with $1,000 and you add $750 per year, at 18, that's worth $50,000. At 30, that's worth $170,000, and at 50, it's worth $1 million. Right? So it really is a platform for unlocking dramatic compounding and savings in the upside of capitalism from birth. And it wouldn't have happened without Michael.

• 13:20Speaker 01

  Well, Brad, look, you deserve 99.9% of the credit, so I'm going to give it to you. You really drove this thing passionately for several years, and it's amazing that it got done. I do think you'll see many companies provide matching contributions. And a number of companies have already said they're going to do that. It'll be like a benefit. Come work at our company and have a kid, and your child will get this. And it's just going to be super easy for anyone to add to those accounts.

• 14:00Speaker 01

  I think it's also a chance to teach every child about financial literacy and about capitalism and free markets. And look up in 15 or 18 years, and you've got 70 million kids with these accounts. I also think you're going to have philanthropists.

• 14:23Speaker 01

  Susan and I will definitely be a part of that, that will say, hey, you know, this is a really good way to get money directly to the next generation.

• 14:35Speaker 01

  In a way that it's going to compound and have a difference in their life. Our foundation has studied this very carefully and we believe it's worthy of a significant contribution and Brad's been working with the Treasury Department and others to set this up so that, you know, any philanthropist would be able to say, hey, you know, here's a zip code, here's a county, here's a state, here's a group of kids that I'd like to help. I don't know who they are exactly, but I want to help them and I want to help their future. And I think you'll see a lot of philanthropists get very excited about this.

• 15:19Speaker 01

  I've had a discussion with a number of them and this could be a major platform for philanthropy in our country.

• 15:28Bill Gurley?

  And just to put a sharper lens on that, Michael, they might back every kid in a state or everyone in the nation on a year.

• 15:38Speaker 01

  Yeah, adopt a state, adopt a series of zip codes. You know, I think, again, it'll be a platform for philanthropy.

• 15:50Brad Gerstner?

  Yeah, I think of it, Bill, you know, in some ways like the Giving Pledge 2.0. I mean, we've had massive wealth creation in this country, like unprecedented wealth creation in this country, right? But one unique feature of America that I don't think there's any other civilization in history that you can point to, okay, that has this character, which is the super wealthy in America, by and large, want to give away the vast majority of their wealth during their lifetime or shortly after they die. I certainly know that Michael's in that group. Okay, think about this. In Europe, right, they invented generation skipping trusts. It was about coming up with legal mechanisms

• 16:33Brad Gerstner?

  for creating dynastic wealth so as to not give any of your money away. Okay? And we have a culture in this country where people want to give away large sums of money. The challenge is the charitable infrastructure.

• 16:45Brad Gerstner?

  Has not necessarily scaled to meet the needs of people who want to give away billions of dollars at a time. And I, I, I said to, I asked Michael and Susan the question over a year ago. I said, you know, if you wanted to give away a lot of money in the state of Texas today, like, how would you do it directly to kids? And there's not a good answer, right? Because there's not a financial infrastructure in place that has a set of rules associated with it, you know, where you could have somebody like the Treasury Department. We're going to have a pooled Invest America account at Treasury, where Michael and Susan or other philanthropists could give money to this pooled account, and it would be dispersed to all these kids' accounts, subject to all the rules and regulations of use, so the kids can't take the money out, but they can see it compound.

• 17:30Brad Gerstner?

  That simply does not exist today. It's impossible to do that at scale today. And at the, the, the long end of the curve, if you think about, you know, my family as an example, we do a lot with the East Palo Alto School District. You know, uh, some of these low-income school districts in the state of California, where I can just adopt that school and say, for every kid in that school, I'm going to give a thousand dollars a year or two. So this unlocks, I think, massive creativity, Michael, around philanthropy, and that's what I mean. What we know in Silicon Valley, if you build an open platform, a million applications can bloom. A million ideas can be built on top of this. I mean, we've heard

• 18:11Brad Gerstner?

  from states that want to add $10,000 for every kid born in the state if they, you know, if they graduate from high school in the state. So I think we haven't even scratched the surface of the beautiful competition and the beautiful philanthropy and the long tail of philanthropy, churches and parents and friends that will be able to give to these accounts. And so our job is to make sure that we make it as frictionless as possible, that we work and we're, we're, that's one of the core things that we're doing now.

• 18:42Bill Gurley?

  And what you're describing, those accounts don't. Don't solely take money at the initiation. They can take money all along the way, which is how you could support a school or something like that.

• 18:53Brad Gerstner?

  Correct. So the way it works, Bill, is, and all of this, I mean, Michael and I, I think, learned a lot about the act of legislation going through this because, you know, it's one thing to get it put in the reconciliation bill. It's one thing to get high level buy-in. But just in the last two weeks, we were negotiating the nitty gritty. I think this was 23 pages of tax, you know, changes in the reconciliation bill associated with the Invest America Act. So families can give, or recipients can receive up to $5,000 a year from family, from friends, you know, etc. Companies can give $2,500 a year per

• 19:34Brad Gerstner?

  recipient, tax-free, so pre-tax. So Dell Corporation, for example, has raised their hand and said, you know, we intend to give to the kids of our employees. So has Uber. So has Nvidia. So has Oracle. So has Salesforce. So has T-Mobile. So has iHeart Media. So, you know, it's an incredible list that has already come together. And we're going to go to the Business Roundtable. We're going to go to the largest companies in America. And we're going to ask them all to do it. Now, we're not telling them the amount they need to give. All we're saying is give an amount that's appropriate to your company and to your employee base. I just heard from Tony yesterday at DoorDash. He retweeted something about this. Sam Altman, I heard from over the weekend, once he heard it was

• 20:17Brad Gerstner?

  passed, you know, retweeted something about this. So I think the business enthusiasm is going to be very big and substantial. But remember, the most powerful givers are moms and dads, grandparents, friends, birthdays and bar mitzvahs. And all of those dollars ultimately, like, don't really generally find a home for savings and compounding. And we're going to make it as easy as Venmo-ing in this money, Apple paying money in. And, you know, one of the studies that we did that was really profound in partnership with the Milken Institute. They found a whole host of things. One was that low-income cohorts tend to save

• 21:00Brad Gerstner?

  at about the same rate as higher-income cohorts if they have an account. The problem is that nobody in a low-income cohort has a savings account or investment account. So I think you're going to see, you know, a lot of contributions by all sorts of folks once we set this up. We also learned that, once we do this, kids are more likely to graduate from high school and college, more likely to start a business, more likely to buy a home, less likely to be incarcerated. So I think the societal ROI of this will be really large over time.

• 21:32Bill Gurley?

  And it sounds like you're going to try and find a way where if someone wanted to donate, Michael mentioned zip codes, but some other way that if people wanted to just target the low-income, most needy, that there'll be a way to do that. Is that right?

• 21:48Brad Gerstner?

  This was a really important issue to Michael and to myself. And, you know, I'll just, you know, give you a bit of a window into the weeds. You know, we tried to get household income as one of the targeting mechanisms, and we weren't able to get bipartisan agreement on that. But we were able to get a proxy for that, which is you can target by zip codes. So you can target down to groups of 5,000 or more by zip code. And we think through that geo-targeting. So for example, Michael could target the Rio Grande Valley. I could target, you know, East Oakland. You know, so there are zip codes that you could target

• 22:29Brad Gerstner?

  that I think certainly include a predominance of lower-income households.

• 22:35Bill Gurley?

  That's fantastic.

• 22:36Brad Gerstner?

  Hey, Bill, I know you've been involved in financial literacy and education for a long time. Tell us about the organization you're partnering with, and, you know, perhaps as a, you know, kind of a potential partnership for Invest America.

• 22:51Bill Gurley?

  Yeah, my wife and I have been giving to an organization called Next Gen Personal Finance. There's a gentleman there named Tim Renzetta, who has just been pushing for financial literacy in high schools. So we can add a link in here, but from 2021 to 2025, in only a four-year window, we've gone from 11 states to 29 states. And Texas just passed this very recently, a few weeks ago. And so the idea, which sounds obvious, it's actually quite shocking that it's not true, is just to add a semester of financial literacy to the high school curriculum. And we're sending kids out to get jobs and we haven't taught them,

• 23:35Bill Gurley?

  you know, how credit cards might take advantage of them and how to build a monthly budget and how to use a checkbook and, you know, how to plan. And so I think, you know, these two things complement each other quite a bit. But that's another movement that it's nice to see gaining momentum simultaneously with this one.

• 23:56Brad Gerstner?

  Yeah, I talked to Tim. Texas just became, you know, like you said, 29th state, I think, to require a semester of financial literacy education. And, you know, some people said, you know, the Treasury Department, Invest America, they're not going to own the financial literacy. What, again, I think when you create a platform of ownership, now it makes all of these financial literacy programs and organizations across the country just way more effective, right? Because when you're talking to a kid who actually, you say, open up your Invest America account on your phone, let's talk about how you got $12,000, $14,000 into that account. Let's look at how it's compounded. Let's talk about what it means to own the companies that are listed there,

• 24:41Brad Gerstner?

  what it means to be a shareholder. I think you just have a much more engaged student, right? Because today, 95% of those students don't own anything. And they look at their parents and their parents don't really own things. And so it's a lot harder to get motivated to learn about something when you don't think you're going to have the prospect of ownership. There are so many great organizations like Tim's out there. And I look forward to seeing how they take this platform and run with it to turbocharge their own efforts.

• 25:10Bill Gurley?

  Brad, I know you wanted to mention the budget deficit and and the funding for this program and put it in a little bit of perspective. Just with all the talk and concern about how big the budget deficit is.

• 25:24Brad Gerstner?

  Yeah, I mean, listen, you know, we've had a huge debate among our our friend group. About this and, you know, and some of my friends were even critical that, you know, this is part of the problem, if you will. So, you know, to break this down. The max cost of this is 3.7 billion a year. We have 3.7 million kids born every year. If you give them each $1,000, that's 3.7 billion. So just to, you know, kind of put that in context. 3.7 billion is about what we contribute, we give to Afghanistan and Nigeria in the terms of foreign aid every year. So I think one of the things as a country, we just have to ask is about priorities.

• 26:05Brad Gerstner?

  Is it more important to give every kid in America a private investment account, a little seed from birth and get them on the right track? Or to give $3.5 billion to Afghanistan, Nigeria? And I think those are the type of choices we're going to be forced to make. And I'm not saying that the dollars going to Afghanistan, Nigeria are wasted, but we make these decisions every single day in our budget. And so for me, this is, you know, that's one angle. The second angle is just as a percentage of our national revenue, this is 1/100 of 1% of our national revenue. So it's pretty inconsequential in terms of the overall budget. But the final point on it is, as you've heard me argue, according to the studies that were done on this, this will actually be revenue contributing

• 26:51Brad Gerstner?

  20 to 30 years out because the taxes you have to pay when you exit the accounts on the capital gains will be more than what the government is contributing on an annual basis into the accounts. And so among the things we should be worried about when it comes to the budget, I don't think this is one of them. However, I would say unquestionably that But I remain as concerned about the budget deficit as ever. And, you know, been a supporter of a balanced budget amendment for a long time. I happen to think that this is something that is aligned with that, not at odds with that. Making every kid a capitalist from birth is going to better align us with the policies that allow the company, country to be, continue to grow.

• 27:32Brad Gerstner?

  And I think growth is a critical element to making sure that we get our deficit to GDP back in a, you know, in a manageable place. Michael, I know you care a lot about that issue. Any, any other thoughts on, on that particular point?

• 27:45Speaker 01

  Yeah, I mean, government's obviously been spending too much. And there's been some, some renewed attention and focus on that. That's, that's a good thing. It gets priced into, to the currency, right? And we see it in all the effects.

• 28:04Speaker 01

  You know, whether it's inflation or the value of the currency. And you can't really escape that. I think the, the, the spending has to come under control. Now, maybe we get this incredible productivity lift. Sure, we're going to talk about that as we get to the AI fund portion here. But we shouldn't be spending so much more than, than we're taking as, as a government. We, you know, we, I've sort of stepped back from the hysterics and you say, we don't have a loan to value problem as a country. We, we have a spending problem.

• 28:49Brad Gerstner?

  Talk to us about the, I want to dig into that because it's a really important point. Talked about loan to value. When you say loan to value, what do you mean by that?

• 28:58Speaker 01

  Yeah, what, what I mean is the value, the, the, you know, loan to value is a common term and phraseology used in banking and credit markets and essentially refers to, you know, the, the amount of, of a loan relative to the value that it's, it's being borrowed upon. If you think about the deficit, you know, as against the value of all the assets in the United States.

• 29:29Speaker 01

  We don't have a loan to value problem.

• 29:32Brad Gerstner?

  Right. So the total value of all the assets in the United States are a couple hundred trillion. Our annual deficit is two trillion. So you would look at that and say as a loan to value, that's not an issue at all.

• 29:42Speaker 01

  Well, I would look at the total deficit as against the total value of the assets.

• 29:48Brad Gerstner?

  Right. So thirty six trillion, thirty six trillion of debt against two hundred plus trillion of assets.

• 29:54Speaker 01

  Right. Now you have to take into account private assets and private debt also. So it would be a different equation there. But also the government has taxing authority and so it could, you know, increase the taxes. But net it all out, the government shouldn't be spending what it's spending relative to what it takes in. And there's many ways to address that, but

• 30:22Speaker 01

  we should, we should be worried about where the deficit is and the rate of increase.

• 30:29Brad Gerstner?

  Let me ask you a question about that. Well, first, maybe to level set. So the argument out of the White House is that the reconciliation bill cuts the deficit. So the deficit was about 1.9 trillion. Their argument is that it cuts the deficit by about 150 billion a year, so 1.5 trillion over 10. Okay. And then they also argue you get another $250 billion in tariff revenue incremental from the start of the year. Right? We saw that in the run rate revenue in the month of May. So you add those two things together. Now you're at 400 billion. So if you're at 1.9 trillion deficit, now you're down to about 1.5 trillion dollar deficit.

• 31:12Brad Gerstner?

  By my math, that drops it to about 5% deficit to GDP. Besant has said he will get it to 3% deficit to GDP, which is what most people say is, you know, reasonably healthy. I think people would like to, you know, not have any at all, but I think most people view 2 to 3% as reasonable. He thinks he can get there by 27 or 28 through the two things I just mentioned, right? Tariff revenue and the deficit reduction in the reconciliation bill, plus an incremental 100 to 200 basis points of growth in the country caused by, you know, lower taxes, less regulation, AI productivity, et cetera. So, you know, our

• 31:57Brad Gerstner?

  Is your view that we just have to wait and see? You know, like, does that show up or does it not show up?

• 32:04Speaker 01

  Well, obviously, we have to wait and see.

• 32:08Speaker 01

  I think on the, on the, on the trade and tariffs front,

• 32:14Speaker 01

  I think this is, this is very tricky, right? We have products flowing back and forth and we have services flowing back and forth. And if you think about, you know, the market cap of the US companies versus the rest of the world.

• 32:36Speaker 01

  Hey, guys, the US is doing really well relative to the rest of the world in market cap. And the reason is that we have a substantial lead in the most valuable industries in the world.

• 32:51Brad Gerstner?

  Correct.

• 32:52Speaker 01

  And, and so the, the issue there is that if you, if you think about,

• 32:59Speaker 01

  you know, the, the trade in products, you also have to think about the trade in services. And, you know, how that's going to be dealt with in a negotiation. I don't know how they'll all get sorted out. But I, I, I don't think it's a, I don't think it's a simple one line item fix.

• 33:20Brad Gerstner?

  Right, right. No, I think it's, you know, I, it's all relevant right now. Elon's talking about forming a third party, the American party, really in response, what appears to be frustration over Doge and the budget deficit. And the concerns by folks like Ray Dalio about, you know, a debt spiral in the United States. You know, you got guys like Scott Besant saying, you know, Elon, you catch rockets, leave the finances to me. Besant seems very confident that he's going to get this back down to two to 3% deficit to GDP. I, I actually like the, the suggestion bill by DeSantis.

• 34:02Brad Gerstner?

  You know, rather than forming a third party, which seems to me just chaotic and a lot of overhead. And has not historically been that successful. I would love to see Elon, you know, like if this is his main issue, if it's if it's the budget deficit and debt, which I would love to see him take on. Right. He could do a series of things. Number one, he could really sponsor a balanced budget amendment to the Constitution of the United States under Article five. If he put $10 billion against that effort, it would be the single largest constitutional effort in the history of the country. I think there's broad bipartisan support for a balanced budget amendment. We have 30, 32 states that have supported this in the past. I think you

• 34:43Brad Gerstner?

  only need 34 to get it a constitutional convention called 38 states to get it ratified. You know, it would hasn't happened. You know, the founders made it hard to amend the Constitution for a reason, but I actually think if he put those type of dollars and that type of focus behind it, we could get it done. And then on top of that, he could target both Democrats and Republicans in primaries around this issue. And to me, it just seems like that targeted approach, that very focused approach to balancing the budget would have all sorts of positive impacts. Number one, it keeps the country focused on this issue. It keeps this administration focused on this issue. And, you know, I think

• 35:25Brad Gerstner?

  you have an outside chance of getting a constitutional amendment, and you certainly are going to have a lot of Republicans and Democrats who will run on that issue if they think they'll get, you know, Elon support. So I'm not sure how this will all evolve, whether there's going to be a third political party or not. But I would love to see this issue get dealt with. I remember Ross Perot tackling it 1992, 1991, Michael. I know you know, you knew Ross. Yeah. You know, to me, that that type of attention is the type of attention that that we're going to need. Why don't we, why don't we shift gears here for a second? This one, I, you know, I've been dying to ask you both about, there's this really unprecedented war for AI talent going on.

• 36:11Brad Gerstner?

  And it was kicked off by, by Zuckerberg and Meta. They made the Aqua hire of, of scale for $15 billion.

• 36:23Brad Gerstner?

  They brought on board Alex, Alexander Wang, you know, to help lead that effort. Then they brought on board Nat Friedman and Daniel Gross. They've poached a bunch of people from OpenAI, a bunch of people from Google, and now today, another, you know, announcement of somebody from, from Apple. The talk is 75 to $100 million annual pay packages, massive signing bonus, really dollar amounts, Michael. And Bill, I don't, I've never heard of, uh, you know, in the tech industry. So Bill, given that recent set of facts, like, what is this?

• 36:58Brad Gerstner?

  Is this a good thing? Is this a bad thing? What do you think the downstream implications of this are?

• 37:04Bill Gurley?

  Well, I mean, I would, I would back up a little bit. I don't think it started with Meta. I mean, I think it started with the cycle that we've been under in the private funding market. You know, we saw some of this stuff during ZIRK, but, um, you know, we've moved to a world, and I, I talk about this in detail on, on O'Shaughnessy's podcast, if someone wants to go listen to it from a few weeks back. But we've evolved to a place where, when there's a successful company, the late-stage private market writ large, tries to shovel feed cash into them. And so we have private companies that have raised not just 100 million, but a billion or more.

• 37:45Bill Gurley?

  And we have a handful of private companies, um, including OpenAI, who are, um, Voracious and audacious enough to burn two, three, four, five billion dollars a year. And so you start doing that and you create a situation where private companies, and we saw this a lot during Zerk, but private companies have an odd advantage against public companies in that their, the, the, their investors are more willing to let them lose a lot of money. Then the public investment, you know, investors may be willing to. And so they get bold and they get audacious and, you know,

• 38:26Bill Gurley?

  OpenAI, Anthropic, they were all paying people tons of money before Meta did this. They were paying them 10 million a year, you know, maybe of the smaller than what you were talking about, but they were doing it. And they were providing liquidity earlier, like two years in, instead of waiting for four. And liquidity is a private company and all of these things, which in some cases may have let these people leave because they didn't have any lock in. So that may, that part may have backfired. But in Zuck, you know, you have someone who's had his back against the wall a couple of times. And gotten bold and changed what he was doing and succeeded again. And so he has conviction that he's willing to take a big bet.

• 39:11Bill Gurley?

  I think he's very willing to look at cost as a percentage of his market cap. And if you risk is spending against a percentage of his market cap, not everyone's capable of doing that. I think it may be the right math, actually.

• 39:26Bill Gurley?

  In terms of, you know, how, how big a bet he wants to make. But yeah, it's an, what he has done here in the past three weeks is it is an experiment that's never been tried before. But there's unlimited free agency in business, unlike sports. And he just went and bought the, you know, 27 Yankees, you know, of AI.

• 39:47Brad Gerstner?

  Yeah, I mean, and, and I, I think your point is a great one. And listen, we're shareholders in Meta, we're shareholders in OpenAI, I wouldn't be a shareholder in, in Meta if I didn't think, you know, in fact, I remember back in 22 when, you know, when we took our big position there and people said to me, oh, what are you, what are you doing? This is a founder controlled company. He's never going to become more efficient. He's never going to do these things. I said, the whole reason I want to be all in on this company is it's founder controlled. I think it is a massive advantage that he has today, right? And he's talking about risking 1% of his company. Right in order to reboot around AI that seems to me to be a very, very rational economic

• 40:27Brad Gerstner?

  decision and there's no, this is just a talent war. He's got a, you know, Lama four was not where it needed to be to compete heads up, but he has one advantage. None of those other companies have. He has the world's biggest printing press, shooting out billion dollar bills, right? He's not relying on the beneficence of venture capitalists. The guy has a business model that is generating the cash to fund all this. And so he's leveraging that cash as a source of competitive advantage, which seems to me to make a lot of sense. I think it's going to make it very difficult. And I'm, you know, that's why I was asking about the downstream implications, Bill. If you're a company that's trying to compete against that, I don't think many venture

• 41:09Brad Gerstner?

  companies can compete against that on a, on a durable, long-term basis.

• 41:13Bill Gurley?

  Yeah, I was having a discussion.

• 41:14Brad Gerstner?

  Certainly not the real startups.

• 41:15Bill Gurley?

  Yeah, I was having a discussion with a real AI startup founder this weekend and, you know, he was asking about talent and like, I don't know what you do. I mean, I don't think you hire anyone that's top thousand in the Bay area. You won't be able to afford them. But, but I do think there is a fundamental question because it's easy to, and I want to get Michael's opinion on this. It's easy to say the percentage of market cap and make that bold decision, but there are cultural implications, right?

• 41:47Brad Gerstner?

  Yeah.

• 41:47Bill Gurley?

  Of bringing in employees that make radically different amounts of money than the other employee base. How, how do you think that will be? How difficult will that be to manage?

• 41:58Speaker 01

  I think it'll be a challenge culturally for sure. You know, he could have a long line outside of his door with people, you know, wanting this or complaining about that. And that could be a distraction. So I think people generally have a sense of fairness, right? And they, they want to be treated fairly relative to others and relative to the, the opportunities that they have out there in, in the overall market. And if they feel that they're not being treated fairly, that's gonna be a problem. So I don't know how that, I don't know how that gets sorted out.

• 42:41Speaker 01

  I do think the math could work for them, given, given everything you guys just talked about. And, and obviously if you reduce this down to a race to superintelligence or something along those lines, the size of the prize is tremendous. And they do have an incredible business that is aided by these advancements in a, in a big way. And there aren't a whole ton of companies that can go do this.

• 43:15Bill Gurley?

  Yeah. And by the way, Brad, you mentioned that they have the, this unfair advantage of this huge printing press. But Apple and Google have the same exact printing press and chose not to do this.

• 43:27Brad Gerstner?

  Yeah, but, but, but neither of them are controlled by founders. And you know, that's what I was, the point I was trying to make. These are the type of bets that I think is very, very difficult for a Google or an Apple to make. For the reasons you mentioned, Bill, you know, can they sell it to the public markets? You know, do they have the type of decision-making in the boardroom that allows this to occur? I mean, at the end of the day, I think at Meta, if Zuckerberg wants to do it, that's what's happening. And that board, you know, it gets on board. In fact, he's reshaped the board over the course of the last couple of years with folks who are, I think, signed up for this, for this mission with him.

• 44:07Brad Gerstner?

  And Michael, to your point, that's why I think he reorganized this into the kind of superintelligence division. I think the way they'll try to manage this culturally is to say, listen, there's going to be an elite SEAL Team Six group, which is called superintelligence, and we're going to pay them elite pay because it's good for the entire business. That doesn't mean we're going to inflate everybody else. And in fact, what I think that Meta will do is, you know, you'll probably see them rolling back like you see with Microsoft, like you see with Amazon. My sense is that Companies are generally going to get smaller, right? On the backs of the productivity gains from AI. But they'll redeploy some of those profits into these areas.

• 44:52Brad Gerstner?

  If you're in the model business and you want to be on the frontier, competing in the front, you know, for superintelligence. And there are only whatever, five to seven companies that really are in that game. Then I think you're going to have to have something similar. Now, in the case of OpenAI, it's only 2,800 employees. And they're all part of that division effectively. But you have to really get scale quickly. Because if you're not bringing in 10, 20, 30, 40 billion dollars of annual revenue, I don't think you can stay in this game. And so the question is whether or not Anthropic and X and OpenAI have a sufficient escape velocity, right?

• 45:32Brad Gerstner?

  That they can take on this frontal assault by Meta and still compete. My sense is OpenAI does. My sense is both of those companies do. But it's not a long list that can compete with.

• 45:45Bill Gurley?

  And by the way, the Nat Friedman addition was particularly interesting. Just with his GitHub background. You know, we had talked in the past that Meta had made a couple of hires on the enterprise side. And we'd heard rumors of, you know, certain payments when they pass through the cap on the open models. But, you know, you have to wonder with Nat coming on board, if there are more aspirations on the enterprise side.

• 46:10Brad Gerstner?

  Yeah, it's a great point. And certainly want to create some optionality there. Hey, Michael, question for you. You know, on this related topic of productivity gains from leveraging AI and kind of what you're seeing at Dell. We've talked on this podcast, what we call the golden age of margin expansion. You know, this idea that you're seeing AI has certainly re-accelerated your top line in a pretty dramatic way. But doing that at a lot of companies. At the same time, you're able to do more with less. Is that overstated? Or do you think that we're in this phase over the next three, four, or five years? Where generally as an economy and certainly within a lot of companies, that they're going to be able to, you know,

• 46:55Brad Gerstner?

  have their top lines grow faster than their operating costs? Because of AI.

• 47:00Speaker 01

  It's it's absolutely real, Brad, and we are doing it. We know of other companies that are doing it. And I think, you know, maybe only 10% of companies, large companies have figured this out. And the other 90% are sort of a bit confused at this point. But, you know, if I step back and look at this, you know, 10% productivity improvements, pretty easy, 20%, you know, reasonably common sightings of 30% or 40%. Those are massive numbers. If you sort of step back and you think about this, you know, you got 114 trillion dollar

• 47:42Speaker 01

  global economy, right, in 2025, and services economy is 2/3 of that. You know, if we believe that a 10% improvement is possible in productivity, if you just keep it simple, you say 10% improvement, that's worth 10 trillion dollars, right? And so, the amount of investment that is occurring today in AI could be quite a bit less than is really justified. I mean, if we if we believe in a 10 to 20% improvement, and I don't say that lightly, because that's like,

• 48:22Speaker 01

  that's like an enormous thing if it were to occur. But let's just stick with this for a second. If we had a 20, 10 to 20% improvement, the investment in AI should be more on the order of 2 to 4 trillion dollars.

• 48:37Brad Gerstner?

  Per year?

• 48:39Speaker 01

  Yeah, yeah. And that's not, that's not where we are. It's a lot less than that. So, you know, I don't want to get too ahead of myself here, but but I do think there is a big change that is occurring, and we're just at the beginning of it. And it's going to affect every part of our world.

• 49:05Brad Gerstner?

  Well, you you you have particular standing here, Michael, right? You saw the productivity gain that came from a computer on every desktop. You saw the productivity.

• 49:14Speaker 01

  Yeah, that was the 90s. We were talking about that 90s. That was fun.

• 49:18Brad Gerstner?

  You saw the productivity gain from the Internet. And now you're two years into observing this. Is the are the productivity gains from this going to be as big? Or bigger than what we saw from personal computers in the Internet?

• 49:33Speaker 01

  Oh, it's far bigger. It's far, it's far bigger. Yeah, I I I feel 98% confident that it's far bigger than than than the PC.

• 49:44Brad Gerstner?

  What about the Internet?

• 49:49Speaker 01

  Yeah, I mean, so of course, all these build on each other, right? It's compounding, but this is this is this is bigger because it is essentially all knowledge work. And I think I think it's an expansion of the pie, right? It's it's really easy to figure out what will be more efficient and how you can reduce costs. But, you know, if you go back 20 years ago, it was very hard to see where the new jobs would be. I think we're in a similar situation here as well. I do. I do think it will be expansionary for the overall economy and for

• 50:33Speaker 01

  prosperity and for well being and human potential broadly across all domains, whether it's in education, health, societal outcomes, etc. Uh, but yeah, this feels this feels bigger.

• 50:51Brad Gerstner?

  I remember in 2001, 2002, Michael, some companies that were early to, for example, Google, they figured out how to gain, you know, like, I think a booking.com, right? They figured out how to arbitrage the Internet and Google to build this giant business, right? And so I would say like they figured out productivity gains before the next person. And and and that was hugely advantageous. And when you say that only 10% of companies are are leveraging this today, it kind of sounds like the same thing. Like, the early companies are really there, but there's a huge amount yet to come.

• 51:26Speaker 01

  Well, you know, I think I think I think about the big companies in the world. I'm talking like, you know, 10 billion plus revenue companies. Yeah. 50 billion, 100 billion plus revenue companies. These companies have an incumbency of sorts, right? They have data, they have customers, they have brands, they have IP, etc. But if they don't move quickly to reimagine their businesses, given all this technology, they will be destroyed by new companies that come in with a totally clean slate and, you know, that's you can already see signs of that happening. So I think this is all going to play out,

• 52:11Speaker 01

  you know, in the next three to five years.

• 52:16Speaker 01

  And it will become sort of an urgent priority for companies to reimagine themselves. And you know, what we've done at Dell is, you know, our team knows this because we talk about it all the time internally.

• 52:37Speaker 01

  You know, I think it was almost two years ago, I stood up in front of a group of our leaders and I said that five years from then, that would be three years from now, we're going to have a new competitor. And that new competitor is going to be in every business that we're in, except they're going to be faster and more efficient and more capable. They're going to put us out of business. And the only way we're going to prevent that is we're going to become that company. And this is how we're going to do it. And I sort of laid out our best guess as to how to do that, you know, two years ago. We're pretty far, you know, into that path and well on our way. And it's working.

• 53:21Speaker 01

  But it's not an easy thing to do, right? This is a good, this is sort of gut-wrenching stuff to reinvent, reimagine. We've had to do it many times. If you don't do it, you just go out of business. So and that's no fun. So we're not doing that. And and and not everybody wants to do it, you know, it's it's uh it's hard.

• 53:41Bill Gurley?

  Yeah, you're you're I was wondering if you could expand on that a little bit. So your server division is your fastest growing division. You've, you know, we've talked about on this podcast, some of the big wins you've had as part of large AI clusters. How did how did you get Dell in a position to be part of that next wave? And what are the key? What's the key value add from your products in those large deployments?

• 54:07Speaker 01

  Yeah, so last year, our server networking business grew 58% uh year over year. Um, in the first quarter, we had, uh, we received 12.1 billion dollars in AI orders. Uh, and by the way, our our shipments uh for all of last year in AI servers were about 10 billion dollars. So so we so we And two years and two years ago were 2 billion. Yeah, it was it was it was not very much two years ago. So we we took orders in the first quarter for over 12 billion.

• 54:48Speaker 01

  And last year, we shipped about 10 billion. So this is growing super fast. And now we have a backlog of of a little over 14 billion. So what happened? Well, um, you know, we we we were already the leader in servers. We we kind of saw the GPU thing.

• 55:11Speaker 01

  And it's a it's a combination of things. I mean, when when Nvidia releases a reference design, um, it it's kind of a reference design. It doesn't really work. You know, we love Nvidia, but but, uh, you know, somebody's got to make all this stuff. And so we, uh, tons of tons of engineering. And obviously, there's logistics of the supply chain, building these 100,000 plus GPU clusters and making them work reliably is super complex. So it's a combination of engineering, uh, operations.

• 55:56Speaker 01

  Um, you know, we we often will help with the financing of these with our Dell Financial Services.

• 56:05Speaker 01

  And you know, the scale of these things is enormous. I mean, right? We talked about this at Deltech World. Right now, we're deploying these systems that will produce, you know, deliver more than 50 trillion tokens per month. And if you put that in the context of Google statements or Microsoft statements, I mean, this is massive scale systems. And yeah, I don't think there are a ton of companies that are able to do this and have them work reliably.

• 56:41Brad Gerstner?

  And Jensen has said, you know, you guys have distinguished yourself against your competitors, other ODMs like Foxconn or Quanta, et cetera. You know, you've been first to market. You're launching the GB300s right now.

• 56:55Speaker 01

  Yeah, we delivered the first GB300s a couple of days ago to CoreWeave. We announced that. We actually have delivered another GB300 system to another customer. I don't think we've disclosed who that is yet, but inform listeners of this podcast and probably guess.

• 57:18Brad Gerstner?

  So the thing that I'm, you know, a year ago, we were all sitting around and talking about the ups and downs of the overbuild in 2000, right, around the internet. And, you know, and yet, when I look at the trajectory that we're on, right? I saw Mike Intrator on, you know, CNBC today, and he said, listen, we're still underestimating the amount of demand that's out there in the world. And when he says it, or when you say it, or when Jensen says it, in some ways, people would argue it's self-serving. Of course, you guys are going to say that. That's your business. You're gonna, you're gonna tell everybody your business is great. But you're known as a very sober guy who tells it like it is.

• 58:01Brad Gerstner?

  And what I want you to do is reflect a little bit on the comparison between this and the period in early 2000 when we did get overbuilt, right? And, you know, as the saying goes, every shortage ends up in a glut. Why are we not near that point yet today in this market?

• 58:22Speaker 01

  Well, I mean, you guys, the students of the market can go back and, you know,

• 58:29Speaker 01

  sort of review what the multiples were on earnings and cash flow, you know, around that time. We're nowhere near that, for the most part.

• 58:40Bill Gurley?

  Right.

• 58:41Speaker 01

  But if we go back to the underlying activity here, it's all about the tokens, right? And as we go from basic queries to test time compute to deep reasoning to agents and multi-agent systems, the number of tokens just explodes. And what are we talking about in tokens? When we're talking about tokens, we're talking about knowledge. And, you know, I don't know about you, but I'm using these tools like 50 times a day

• 59:19Speaker 01

  by thought partner to solve problems and, you know, quell my curiosity. And, you know, my usage is skyrocketing. And, you know, often multiple models and it's going out there and querying all these websites, doing calculations for me and helping me solve problems, you know, faster than I ever could in the past. And, you know, the, this, this, I think it's just at the beginning, right? And the substrate for all of this, of course, is compute and data, right? So we love that at Dell Technologies because that's what we do.

• 1:00:04Speaker 01

  And so there is a, there's just a ton of growth here. I think it will also be highly distributed. I think it will be, you know, it'll occur in devices, it'll occur in the edge, it'll occur, you know, in all sorts of places. And it does, it does feel like we're still a lot closer to the beginning here.

• 1:00:27Bill Gurley?

  What can you share about on-prem AI deployments? Michael, are you seeing anything interesting there?

• 1:00:34Speaker 01

  Yeah, so we, we in the last year, you know, delivered a little over 3,000 of these still AI factories. And, you know, those are increasingly to enterprise and commercial customers that want to bring the AI to their data, not the data to the AI.

• 1:00:57Bill Gurley?

  Yeah.

• 1:00:57Speaker 01

  And, you know, there's just a ton of data that is still on-prem and being generated on-prem. And it turns out, you know, these large models are fantastic, but you don't always need the largest model to solve every problem. A lot of the corporate use cases are perfectly done with smaller models and open source models. And so you see this enormous proliferation and hugging face of models of all shapes and sizes, tons of cascading innovations. And so I think this is going to be highly distributed. And we're definitely seeing growth in on-prem.

• 1:01:40Speaker 01

  And COLAs are also a big deal, you know, because many customers don't want to have the data center themselves. And so they'll, they'll put it in a colocation facility. And we've also adopted the consumption type models so you can pay on a, you know, usage type basis.

• 1:02:01Brad Gerstner?

  What is your, you know, when you look at just kind of the relative distribution between, you know, kind of the custom ASICs world, what you see happening across, you know, folks like AMD and Nvidia, you know, there's obviously a lot of chatter. You have an interesting perspective, both as a consumer of these products, also as a builder and distributor of the products. Is, is there, are there any, you know, pending big changes? Or as you look ahead over the course of the next year or two, that's probably as far ahead as you can see, does it look like the relative landscape is stable? Or are there big breakthroughs coming that may unseat somebody like, like Nvidia?

• 1:02:41Speaker 01

  You know, Nvidia is in a great spot. I mean, to your question, I think for the larger model companies and hyperscalers, certainly custom ASICs are gaining a lot of share. And when you have control over the workload and you can, you know, take the time to optimize your workload, you know, that's certainly going to be a part of what occurs in the infrastructure. But it's a, it's not a large number of customers. You were talking about the number of companies developing models. It's sort of that number of customers, but

• 1:03:25Speaker 01

  they're large, right? As you've seen with Google and Meta and others who are deploying the ASICs.

• 1:03:33Brad Gerstner?

  You know, maybe just in the, to be respectful of time, Bill, I could talk to Michael for, you know, for hours about this particular subject, but maybe do, you know, one of the people I talk to when the market's going wild is Michael. You know, we certainly saw that earlier this year. You know, it's pretty incredible to see the snapback that we've seen out of the NASDAQ, the S and P. I think the NASDAQ is now up 32% off of its bottom two months ago. Just as a data point, I think, I think Dell got as low as, I don't know, 75, 72 bucks. It's back at 120 bucks. Now, that is an incredible bounce off the bottom,

• 1:04:17Brad Gerstner?

  but it's still basically up, I don't know, 5 or 10% on the year. It's not like it's in this astronomical range when you look at kind of year to date or over the course of the last 12 months. And, and so when I look at the markets and I want to get both, you know, your read on this as well, Michael. Here we are, we have the NASDAQ and the Q's and the S and P at an all-time highs. Bitcoin's near an all-time high. The VIX is back to 15 or 16, basically where it was in February, despite, you know, all of the things around tariffs. The 10-year, everybody talks about this, you know, the great debt spiral that we have

• 1:04:57Brad Gerstner?

  in the country, but the 10-year's been between 3.7 and 4.7 for the last two years. It's at 4.2, kind of smack dab in the middle, if not at the lower end of that range. You know, and then you see companies like TSM and Nvidia and Microsoft, Oracle, Booking.com, Uber Dash, they're at all-time highs. But notwithstanding the fact that they're at all-time highs, you have Tesla down over 20% on the year, Apple down 15% on the year, Google's down on the year, Amazon's basically flat on the year. So you have a lot of dispersion in the market. When you look at the market, you know, does it feel to you, again, like we're in this bubble territory?

• 1:05:42Brad Gerstner?

  Does it feel as a company that is, that is kind of accurately reflecting? Set aside your stock, I don't want you to comment on your stock. I'm just talking about the market writ large. Are the US markets higher in three to five years or they, or you know, or are they not, given, given where we sit today?

• 1:06:00Speaker 01

  I would bet they're higher. I would bet that more and more companies figure out how to, you know, grow their businesses. You know, I talked earlier about the productivity and efficiency. I think the ultimate benefit is going to come from the speed at which companies transform and the growth that they're able to create. That's certainly how we see it in our business. And, um, yeah, I think, I think, you know, a lot of these companies will be able to compound their earnings on a double-digit basis and the market largely, you know, overall indices will, will become more valuable.

• 1:06:43Brad Gerstner?

  Yeah, it's a, you know, I do think that this moment in time, we're seeing a lot of dispersion. I mentioned it, right? Some companies being down this year, some companies up a lot. I really think the companies that are leveraging AI that are in a position to leverage it and to capture that margin expansion, we're going to see a re-acceleration. And we've heard this out of folks like McDermott and Shredar and Jensen, you know, at all these companies, how they're re-accelerating top line, but they're not adding people, right? That, you know, it's kind of net flat. We see this out of Uber, we see it out of Dell.

• 1:07:17Speaker 01

  When the market dipped down, our share buyback program went into, went into high gear, you know?

• 1:07:24Brad Gerstner?

  Right.

• 1:07:25Speaker 01

  And we bought back 22, we bought back 22 million shares. So, you know.

• 1:07:29Brad Gerstner?

  That worked out well for you. As I look at this flight path, we just, we just landed, you know, the reconciliation bill. So there was a lot of uncertainty in the world to start the year. One was what was going to happen was this reconciliation bill going to pass. Now it's passed. So we have tax predictability, right? You have an extension of the existing tax regime. And then you have the no tax on tips, the no tax on overtime. So you have this incremental stimulus now coming from the reconciliation bill. On top of that, you know, tariffs while still up in the air, the market kind of has digested the tariff stuff, right? And absent some big blow up between us and China, you know, if we follow the best in

• 1:08:12Brad Gerstner?

  accordance that they reached in Switzerland and then reiterated in London, it seems like the big pieces of the tariff puzzle are falling in place. And then on the rate front, the market is estimating that the next move is down, whether we're going to have one or two rate cuts, you know, at the end of the year is, is the question. Some people, the Fed is saying we're on hold, we're going to wait and see whether or not inflation re-accelerates this summer due to tariffs. So that's what everybody's eyes are on over the course of the next six to eight weeks. Does core PCE tick up, you know, due to those tariffs? I'm taking the, the under on that, but we're going to have to wait and see. And then on fundamentals, I think what we're hearing from companies, and this is where

• 1:08:55Brad Gerstner?

  the rubber meets the road, earnings, I think we had 85% of companies beat in the S and P 500 in the quarter. And if you just go through and look at keywords, it was accelerating, it was AI, it was reinventing our business. There is a real growth. Um, you know, feeling in the market and among these companies. And so from our perspective, and we try to uh give people an indication of where we are. I mean, I was as negative, as you well know, Michael, um, early in the year, I was as negative as if I've been in 10 years, because I thought if we were going down the path of Navarro and $2 trillion of tariffs, that it was all, you know, every, all bets were off.

• 1:09:34Speaker 01

  That was a scary path, you know, and, and, you know, we talked about how if they went down that path, I thought they would reverse course because it wouldn't work. You know, and this, I think this is a very iterative team that will experiment, lay some stuff out there, not all of it's gonna work, there'll be some bad ideas, and then they'll reverse course.

• 1:09:58Bill Gurley?

  Yeah, I hope, I hope we don't.

• 1:10:00Speaker 01

  We didn't do that.

• 1:10:01Bill Gurley?

  I hope we don't snatch uh defeat from the jaws of victory here with, with policy, though, you know, I, I think, you know, going back into the tariff game, um, some type of bold confrontation with China, um, and, you know, our AI policy, I mean, one thing we didn't talk about in this past week, the, the AI moratorium got removed from the bill, and we're gonna have 70 state laws in the United States, which is not great for AI startups. So, anyway, I hope we don't, I hope we don't, I hope we don't, I hope bad policy doesn't upset what would be an otherwise uh very potent landscape based on AI.

• 1:10:44Speaker 01

  Yeah, I fully agree.

• 1:10:46Brad Gerstner?

  I, I think it's one thing that the three of us are in violent agreement on. One of the things that's moved this country forward for the last three decades is we've led globally in technology, and we've led globally in technology because we've allowed our best technologies to move freely around the world and to compete and to win. This is the first time since I've been in this business that we're talking about export controls and AI diffusion laws that are restricting the ability of our technology to go compete and win, right? And there's both the question mark as it relates to inside of China, but also the question mark outside of China. And while we've seen the repeal of the Biden diffusion rule, what I'm told is that no new licenses have been granted

• 1:11:31Brad Gerstner?

  for, you know, for distribution of AI technologies around the world, despite all of the discussion around this. So it's critical that Washington follows through and that we accelerate diffusion around the world of the entire American AI stack, that we don't regulate that out of Washington. And then I think there are some legitimate regulations that you can have as it pertains to China. But even there, I would much rather let our deprecated chips out of Nvidia go compete against Huawei in China, keep the developer mind share in China, because it's going to make it easier for us to win globally and elsewhere around the

• 1:12:10Brad Gerstner?

  world. And I think it's important that Michael, myself, everybody else, Bill, you are, those voices are being heard. We're not out of the woods on this by a long shot.

• 1:12:20Bill Gurley?

  By the way, you reminded me of one other thing I'd just like to harp on, which is the skilled immigration piece. So someone highlighted to me that they made like the huge warning poster of all the people that Meta has borrowed from other companies, like, like 60 or 70% of them were of Chinese origin. And as I understand it right now, you know, there are PhD students or candidates in China that can't get visas and get in to the United States right now. And we go back to what Trump said on All In, that he wanted to staple a visa to every diploma. I'd really like to get, not that we're in charge, but I'd

• 1:13:02Bill Gurley?

  love to get that conversation going again. It would be very powerful for the country to increase skilled immigration. And it feels like we might be decreasing it.

• 1:13:12Speaker 01

  Yeah, I absolutely agree. And, and to your point, Brad, I mean, if, if we don't aggressively work to, you know, sell our technologies around the world, other countries are going to do that. And, you know, reminded of

• 1:13:32Speaker 01

  Story, long time ago, the Defense Department had this thing called MTOPS. And it was a, it was a, Bill might remember this, but it was, it was like a restriction on how fast a computer was that, you know, you had to get approval from the government and to sell it. And I was in this group of technology CEOs and we, we went, we went to the Pentagon to talk to the generals and, and before we went, we went to Toys R Us store and we bought a Playstation. And we took it out of the box and we brought it to the Pentagon, you know, this big room.

• 1:14:15Speaker 01

  And we, you know, set the Playstation down on there and we said, you know, this exceeds the MTOP restriction.

• 1:14:22Brad Gerstner?

  Right.

• 1:14:23Speaker 01

  But unfortunately, you know, it's not, it's made by a Japanese company. And so, you know, it doesn't follow under the rules. So anybody can buy it. It's, it's also $399, right? So you guys think you're gonna control the access to this thing or little things that, you know, move easily, you're kind of fooling yourselves.

• 1:14:48Brad Gerstner?

  Yeah.

• 1:14:49Speaker 01

  And so we have to come up with more intelligent ways to restrict access to the most advanced technologies. And oftentimes you just get all kinds of unintended consequences with these rules that are created. And it doesn't create the outcome that, that the government was originally looking for.

• 1:15:13Brad Gerstner?

  Well, and, and I think that's a, a good way to wrap. Michael, it's awesome having you here. I, I wanted to say, you know, Michael and myself, Dara Khosrowshahi, David Solomon from Goldman, Rene Haas from ARM, you know, Bill McDermott from ServiceNow, and a group of us were at the White House a few weeks ago to testify on the Invest America Act. And Michael kicked it off. And if you haven't seen the video of it, we'll include it here, you should watch it. But he reminded everybody, captivated the entire room.

• 1:15:54Speaker 01

  We view this initiative as a powerful platform for philanthropic innovation aimed at helping children thrive wherever they come from, particularly those families who have been historically left behind. Mr. President, you articulated it perfectly. These Invest America accounts will give every new American child a genuine opportunity to participate in history's greatest engine of economic growth, the American economy. The funds in these accounts, invested in American enterprise and innovation, will grow over time into substantial nest eggs, providing support for education, homeownership, and starting families.

• 1:16:34Speaker 01

  The ability of families, friends, benefactors, and employers to match the government's generosity amplifies the life-changing potential of this initiative. Thank you, Mr. President, for your visionary leadership on this critical issue. These Invest America accounts will profoundly impact countless young Americans, ensuring they truly benefit from what Abraham Lincoln described as the right of every American, the right to rise.

• 1:17:00Brad Gerstner?

  As I sit here on the Fourth of July weekend, you know, I'm just, I'm super grateful to you, Michael. You did a huge service to the country by helping us get the Invest America Act passed. And I think everything that we just talked about here, including allowing American technologies to go compete, remember, these Invest America accounts are only worth something if America does great, right? And the fact of the matter is- Warren Buffett has said, Warren Buffett has said, the smartest thing he did was just bet on America. He bet on America. And I'm betting that the next 50 years, next 100 years are going to be an American century again, but we can't get in the way of the innovation and the entrepreneurship, you

• 1:17:43Brad Gerstner?

  know, and the creative destruction, frankly, that has allowed America to be so great. And finding that balance between government and Silicon Valley has always been, you know, challenging, you know, as you just related, Michael, with M-Tops. But, you know, we have to show up, we have to have a voice, we have to, you know, continue to push in that direction. I think if we're allowed to compete, our best days lie ahead. If we get in the way, Bill, like you talk about, then I think we can upend our advantage. Thanks for joining us, though, on short notice, Michael.

• 1:18:16Speaker 01

  Thank you, guys.

• 1:18:18Bill Gurley?

  Appreciate it.

• 1:18:19Brad Gerstner?

  Great to see you. Bye bye. We'll talk soon. Take care.

• 1:18:31Brad Gerstner?

  As a reminder to everybody, just our opinions, not investment advice.