20VC: Mag7 Earnings: Google & Amazon Win - Meta and Microsoft Falter | Anthropic's $50BN Raise & What it Means for a Potential IPO | Atlassian, Twilio and Five9 Beat: The SaaS Apocalypse Over? | Sierra's $15B Valuation: Peak or Potential

AGENDA: 00:00 – Mag Seven Earnings: The "Super Bowl" of Tech Results 04:45 – Google's Cloud Explosion & The AI Search "Disruption" That Never Came 15:53 – Microsoft's $190B Bet: Is AI the Only Thing Keeping Growth Flat? 21:59 – Meta's $150B Future Bet vs. Wall Street's Need for Spreadsheets 28:50 – Palantir's Home Run: Why Big Companies Spend Big Money on AI 38:43 – Apple's Quiet Consistency & The Stealth Inflation of Memory Chips 41:11 – The SaaS Apocalypse Over? Atlassian and Twilio Lead the Re-acceleration 50:50 – Anthropic's $50B Raise & The Math Behind Token vs. Salary Spend 01:05:59 – Sierra's $15B Valuation: Replacing the $400B Customer Service Labor Market 01:13:39 – Musk vs. Altman Trial: Statute of Limitations, Standing, & Private Diaries 01:17:42 – The End of Managers? Brian Armstrong & The Rise of the "Individual Contributor"

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

• 0:00Speaker 00

  The most aggressive quarter in American capitalism. This is leaning in like you've never seen leaning in before. This is the top of the distribution pulling away. Let me repeat, without the AI initiative, Microsoft, the corporation is flat revenue. When the music stops, who has a chair with a trillion dollars on it? Big companies have to spend big money to do big things. If you know the relationship between human spend and token spend for coding as the model load job, you probably have a handle on what's going on.

• 0:30Speaker 01

  Anyone on LinkedIn that talks about their team, fire them. My team this, they're also precious about their team. A CMO today should be able to run their own campaigns.

• 0:38Harry Stebbings?

  This is 20 VC with me, Harry Stebbings, and it's my favorite show of the week. Rory O'Driscoll, Jason Lemkin analyzing the biggest news in tech. Now, this week, it was the Super Bowl of earnings week, baby. Mag seven earnings. So what happened? Well, I'll kind of break it to you. Meta lost, Microsoft eh, not looking so good. Amazon thumbs up and Google homerun winner. Next, is the SaaS apocalypse over? Atlassian 29% up, Twilio 20% up, Five9 23% up. And then in private markets, Sierra raising $950 million at a $15 billion valuation. And then finally, we finish with Sam Altman versus Elon Musk. Week one of the trial begins.

• 1:23Harry Stebbings?

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• 2:09Harry Stebbings?

  Go to Omni. dot co forward slash two zero VC that's omni dot co forward slash two zero VC after omni helps you find the right customers checkout helps you close them over the past 15 years Guillaume Puzaz has led checkout.com through what he calls the velocity years a period of hypergrowth with relentless product building the lesson high growth is a gift but it demands ruthless focus as his mother put it play the game you're good at for checkout.com that game is digital payments obsessing over data chasing basis points and compounding learnings over time and that discipline is paying off 2025 checkout.com processed over 300 billion in total volume up 64% year over year and returned to full year EBITDA profitability they now support over a thousand

• 2:53Harry Stebbings?

  enterprise merchants globally including 63 that process more than a billion annually with brands like eBay vinted Amex ASOS and T moon Guillaume's message so it's pretty clear they've earned the right to win anywhere now they're investing in innovation across marketplaces issuing financial experiences and agentic commerce if you want payments built for what's next talk to the team at checkout.com that's checkout.com while checkout powers the moment money changes hands invisible powers the people behind the work why don't we hear more real AI success stories from big companies the models are insanely good but implementation is the problem it's really really hard there's data all over the place there's legacy tech and manual workarounds it's

• 3:36Harry Stebbings?

  a Ferrari engine in a shopping cart meet invisible invisible trains 80% of the top models and then adapts them to the messy reality of your business take the Charlotte Hornets NBA team invisible took years of game tape and analog scouting notes to go from uncertainty to a draft pick and summer league championship win in weeks not seasons get the data in order first and suddenly AI can do almost anything for you in the enterprise if you want AI that hits the P and L go to invisible tech.ai forward slash two zero VC

• 4:11Speaker 00

  you have now arrived at your destination

• 4:14Harry Stebbings?

  Boys, there's a lot for us to report on this week. We had a big week of earnings. Mag7 Super Bowl was the title that I had down. 540 billion in combined revenue, 700 billion in AI capex. I thought we'd start with like the clear winner, which seemingly was Alphabet. Cloud backlog nearly doubled to 462 billion. Now it sees Alphabet's entire 2025 revenue. Do you agree Alphabet was the runaway winner from this mega earnings season?

• 4:45Speaker 01

  It's jaw dropping at that scale, right? The theme of this episode, I think, and then we can tie it into Twilio and Atlassian and Palantir is just this jaw dropping acceleration, right? And even since we've been doing this show, it's obvious the capex boom has been happening. Rory's been great on this, right? But to see Google accelerate at this scale, 60 some odd percent, I think, it once again makes you wonder why you invest in anything else. Why you invested in the sheer force of spend and everything's clicking at Google. You know, when we started this show, folks were wondering would search die, right? Because everything would go to the LLMs. Clearly, like it hasn't happened economically. It hasn't happened in advertising. And honestly, I was checking even our own little SEO at

• 5:27Speaker 01

  Saster. It's up 60% this year, the highest ever, the highest ever. So a lot of folks are struggling to protect their cash cow versus the investment in the future, right? Should Uber invest in autonomous driving, which it needs to, or should invest in Uber Eats, which is on fire? There's so many trade offs here, but Google has no trade offs. Everything, the only trade off it has is where do I put my chips? I need all the TPUs for myself and for my customers and my partners, and I need it for Replid who hosts every website on it. They just have to figure out who's getting this massive backlog.

• 5:59Speaker 00

  First of all, I agree on the kind of framing. And I actually, I'm going to quote a blogger I read, a substacker I read, Evan Armstrong, who described this quarter, and I thought it was a great description. He writes something called, I think it's the leverage or something, "The most aggressive quarter in capitalism," right? And I'd actually amended to saying "The most aggressive quarter in American capitalism," because it is a uniquely American thing. This was an astonishingly aggressive quarter. And I love the wording because there's two things going on. One, the largest five or six companies on the planet are accelerating at scale and doing plus or minus 20% growth overall, 30, 40% growth in some of their subsectors. So that's wildly aggressive growth. And then even more aggressive capex, right?

• 6:42Speaker 00

  These same companies are doubling down on capex, letting it grow 50, 60%, such that capex is now eating most of their free cash flow. This is leaning in like you've never seen leaning in before. And what a really nice piece that says, you know, normally it's the new guys, the up and comers, you know, being aggressive and the incumbents moving a bit slowly and defending their turf. These are five of the seven largest market cap companies on the planet saying, hell no, we're not going to get pushed around. And in fact, six, if you include Nvidia, which didn't report this week. We're just going to make the bet too, right? So that's the first zoom out comment. This is the top of the distribution pulling away, which is kind of a sobering thing if you start thinking about all sorts of inequality, all sorts of those kind of issues.

• 7:27Speaker 00

  But just from a wow perspective, these are amazingly great companies doubling down. So that's kind of the first big picture framing here. You just can't take it for granted. Second comment would probably be, yeah, you're right. Of the companies, Google did quote unquote the best. It's existing, Jason, you're right. The existing business where you could have made a disruption story around search hasn't happened and the cloud business has accelerated. But I'm going to make a point. I actually think controversial take for all of these companies. I won't say it's disappointing, but this is only the starter. It's not the main event. All these companies are fundamentally, across all of the companies that have been successful out of here, and it's obviously Google. It's not Meta, which we'll talk to in a second.

• 8:11Speaker 00

  It is Microsoft, it is Amazon. If you analyze what they're boasting about, and if you go one level deeper, it's two things. One, we sold a lot of compute to the LLM companies to make their tokens. And then second thing they're boasting about, oh, and by the way, we bought some of those tokens and sold them to our customers because we have distribution too. And both of those statements are too true. And both of those statements made the revenue line go up. But if you zoom out a million miles, what you say is, oh, let me get this straight. You, the five largest market cap companies on the planet, are effectively working for these two privately held companies and doing their distribution and doing their capex investment, while ultimately they own the IP. Just an interesting phenomenon. And that's kind of the second big picture comment here, which is this is a bunch of the largest companies

• 8:56Speaker 00

  growing quickly by servicing these other companies. It's super interesting. And then the last, which is going back to Google. I thought everything was really good, but it was interesting. Let's talk about Gemini. You see all these evals of Gemini and you know, it's nearly as good. It's nearly as good for coding, right? And then they cited a number and I wrote it down and I apologize. I couldn't find it in front of me like the month on month token growth. Q1 was pretty good. It was like 60, 70% X billion tokens per second or some vanity metric like that. But the truth is Anthropic probably grew tokens 15x in Q1. So the interesting thing is I go back to think every other business is ancillary to the business of making tokens as an LLM. And the only guys who are even in the game there are Google because they actually have their

• 9:39Speaker 00

  own model and their token growth, their Gemini growth for coding and related things significantly was underperformed the other two guys. Where I'm going with this, the last sentence is the most aggressive quarter in American capitalism is an underperforming quarter relative to the privates. Jason disagrees.

• 9:56Speaker 01

  I don't want to connect it to another section too quickly, but the point is super interesting, of course. They're at the mercy of these two privately held companies, right? They're the hyperscalers. On the other hand, you know, Palantir blew out the quarter growing, I should have it at hand, 80 something percent at 6 point something billion in revenue. And I watched, I never do this because I just read it, but I watched Alex Karp's analyst discussion is great. He's so entertaining. He has a T-shirt just like Harry's today. And he's with his team. Really interesting. And he made the point, and obviously he's talking his book, to use Rory's point, but he was really insistent that there is no value at the LLM level to Palantir because at Palantir scale, this is not a simple B2B app, right? This is high end AI. He's like, there's no difference between the LLMs.

• 10:39Speaker 01

  There's no, so it is interesting that where the value is at the three layers, right, from application to LLM to sort of infrastructure or hyperscaler. If nothing else, it's a challenge and it's fluid. It's just going to be fluid the rest of the next 12. It's hard to predict. I'm not, I know you're not challenging me. I just, when Alex said that, I don't buy it today, but I don't not buy it, right? It's so fluid.

• 11:00Speaker 00

  What I agree with that. I think he is living on a different plate. Look, and let's kind of play it back to hyperscalers. Unless compared to Microsoft, who went down after their results. Palantir have a exciting enough enterprise product line that despite the whole LLMs are going to eat everything story. They can make that statement and make it credible, and I believe it's credible for them, and we can talk about why later. I don't think Microsoft can make that statement. Hey, our co-pilot is so cool that we don't care which LLM we use. Enterprises are just ripping it off the shelves. I agree. I think that you're correct for Palantir. There's an insatiable enterprise demand for Palantir. The only insatiable enterprise demand that Amazon, Google, or Microsoft are experiencing are the insatiable enterprise

• 11:43Speaker 00

  demand for sell-through of the LLM products that they now host and can sell using their large distribution channel. And it's a great business. Don't get me wrong. It's like, right now, they probably get more revenue from the LLMs than the LLMs are getting because they get the revenue going in on the hosting. In Google's case, they get the revenue going in on the chips. They get the revenue going in on the hosting, and they get the revenue on the distribution side from selling, right? And only a small sliver accrues to the LLM, but my instinct is that over time, that's the attractive sliver. Vis a vis those guys, not vis a vis Palantir, to your point, Jason. Because this is all about, there's clearly a wall of money out here, and everyone's trying to figure out who gets to keep it. When, you know, when the music stops, who has a chair with a trillion dollars on it, right? And that's what we're all trying to figure out here.

• 12:28Speaker 01

  You know, there still remains, probably in that Substack you quoted and others, there remains a lot of skepticism that's investment ties. It's consuming all of their free cash flow. Are they really capturing, yeah, Microsoft owns some of OpenAI's IP, but are they really capturing enough value? And we went from free cash flow engine to no free cash flow, right? The only thing I would say, I know this is Captain Obvious, but it's certainly clear to me when I worked at a Fortune 500 tech company. It's clear today, if there's one thing these companies are good at, it's financial engineering. Day in and day out, they, now, we could challenge them, but they've worked through 27 sensitivity analyses and gone through this. And maybe they're making the wrong bet. Maybe they will regret having squandered their free cash flow on a bunch of chips sitting in depreciating servers, but they know exactly.

• 13:10Speaker 01

  Exactly what they're doing. They know exactly where they can offload risk to CoreWeave. They know what Nebias should take. They know where to do. And they may be making the wrong bets, but it probably doesn't matter because they'll scale them back. Right. But I do believe that it is very thoughtful financial. And when that OpenAI blew up and they fired Sam, Satya kept saying that this is not such a huge bet for us back then. Remember, he kept saying things like, this is not the end of, like, this is important. But this is a week of, I mean, it's gone up. This is not going to ruin Microsoft. So my only rambling point is I think they may be wrong, but I think they know exactly what they're doing to the last decimal point.

• 13:44Speaker 00

  So I saw a kind of a dialogue on Twitter that's what six months back where, you know, someone said effectively that, who are you to second guess these folks? These are the smartest people on the planet making bets. And the response back, which really struck with me was no one at the height of the capex boom thinks I'm just doing dumb shit here. Because they wouldn't do it. Everybody, when you're spending a trillion dollars thinks this is a great idea. It's going to come back. And then just sometimes you're right and sometimes you're wrong. I think, look, they are making informed bets. And right now, I mean, one of the things they're wrestling with is, for example, Microsoft was a little conservative a year ago. And now they're wrestling with that. And it turns out that being aggressive is the winning strategy. And, you know, one of the definitions of a bull, of a crazy bull market is when the most, it's typically, that's when the most aggressive person makes the most money.

• 14:27Speaker 00

  So we're in that stage now. And but you are right about one thing, which is that if they over invest. I mean, the great thing is all, and this is where it is different than 99 is that if they are over investing and they throttle back, they still have their existing businesses, is your point.

• 14:41Speaker 01

  I think it's low risk, lower risk than the than the Substack's claim it is, right?

• 14:46Speaker 00

  It is. I agree. That's why I actually have come up with this distinction between over investment, which may be happening. So far, it's not even over investment. We can't improve over investment and a bubble. I don't use the bubble words because the bubble words are, to your point, Jason, they're making a financial evaluation statement, right? I don't think you have to make that here. You're just simply saying, right now, the compute's all finding a good home. Will it over the next five years? Who knows? But to your point, it's interesting. I want to go back to your comment on Satya that it doesn't matter that much to us. I'm going to say bullshit. One of the most interesting statistics about Microsoft is in this quarter. Taking out their quote unquote AI businesses and to some extent they do this reallocation bullshit, all the good stuff is reallocated, right?

• 15:28Speaker 00

  But if you take out, you know, Copilot growth and Azure growth, the rest of the business is flat to slightly down. In other words, if you didn't have an AI business, you'd be another SaaS company trading at three times revenues. Welcome to our world. Three years ago, that might have been true, but right now, if the AI bet is wrong, all these valuations are wrong, despite the fact that they're not outrageously valued on a PE basis. All the growth is coming from these initiatives. And as I say, it was stunning. Let me repeat, without the AI initiative, Microsoft, the corporation is flat revenue.

• 16:02Harry Stebbings?

  Their AI ARR is 37 billion, their capex spend will be 190 billion. Does that concern you to hear?

• 16:11Speaker 00

  The most aggressive quarter in American capitalism, baby. The beauty, as Jason said, if they're wrong, they just throttle back the future, live off the cash flows and they, you know, they just have a great big digestion period where the stock looks overvalued and goes down. So it's not as terrifying as, let's just say, you had the same bet and you financed about 150 billion of debt. That would be beyond terrifying. But yeah, no, it is, it's an aggressive investment, well in advance of revenues.

• 16:38Speaker 01

  I have just a slightly different take for what it's worth. It's just, we know this, but you especially see it when you work on the other side at an extremely profitable public company with massive margins. Your cash is so trapped, you cannot spend it. Your EPS goes down, your dividends might be impacted, but there are moments in time when the public market lets you spend it and don't take a hit for it, right? And some of this is financial engineering where it sits on the balance sheet, et cetera. That's important, right? But, you know, one of the reasons like Salesforce Ventures and Google, Google owns so much of SpaceX and everybody is you could do something with the cash. You're allowed to make investments. It hurt Shopify this quarter, but when you have these windows and you don't have to be like Jeff Bezos in the day convincing Wall Street to let you spend, when Wall Street lets you spend and doesn't punish your stock, you should spend every dollar on the balance

• 17:22Speaker 01

  sheet that lets you because you'll build it back up. But it's trapped when growth slows. When growth slows, you're literally at the mercy of getting another half cent into your EPS. It's a terrible place to live, like when you're at the mercy of not being able to spend. It is, oh, we have 6 billion on your balance sheet, but if you can't spend it, who cares? Literally, who cares? You can't, you can't grow if you can't spend it.

• 17:44Speaker 00

  I understand what you're saying and you're not incorrect about the wider constraints and how the Wall Street and perception impacts your ability to invest aggressively. But the result you articulate, it raises the risk of bad capital allocation. Because if you're grabbing the moment, not because the ROI is there, but because the permission is there. What you're basically saying is your decision to invest isn't to some part predicated on the street's willingness to give you that permission. And now they're giving you permission. And I think you're correct. Everyone's allowed to lean in right now a little. But it does just, it heightens the risk of group think and the fact that you end up allocating badly. Having said that, I just got to say it again. Right now, the allocation's been great. And the more you allocate it, the smarter you look.

• 18:25Speaker 00

  Like six, nine months ago, there was this, oh, I don't want to buy from OpenAI because they mightn't have the money. Now, you know, Corwe's killing it. OpenAI looks like a good credit. And the more compute you have, the smarter you look. So I don't want to sound like Debbie Downer here, talking about capital misallocation, when right now it's working.

• 18:43Speaker 01

  Yeah, but let me just give you one example. Sorry, I was talking with the CEO of a $20 billion plus public company, software company, where growth is modest today, right? But revenues are very impressive. And we were talking about AI and agents, which is what people want to talk to me about. And he was talking about how they were saving like 100 basis points on their LLM costs. And I'm like, you're dead. You're dead because you don't have permission from Wall Street to do the opposite. You don't have permission to spend 10% to decrease your gross margins 5%, 10%. So you have the best agent in your category. You're trapped in a death spiral. And he's so focused, I mean, the margins of this company are very impressive. But he's so focused on driving them up to keep away, to keep Wall Street happy and to keep the Carl Icos happy.

• 19:28Speaker 01

  The rooms of maneuver is so effing narrow at a $20 billion market cap. And when these guys, when Satya and Google can spend, if I were running one of these companies, I would be like, I would force you to force rank it, of course, but spend it all if we're allowed to. Spend it all, boys, because the day will come when we can't spend nothing.

• 19:45Speaker 00

  If your number one priority right now is to optimize your LLM spend dollars, you're missing the point. Over the medium term, you'd probably want to optimize. But if there's positive ROI and LLM spend in terms of agent functionality. Yes, you should be doing it. So as usual with you, Jason, I agree with the broad trust. If you think you're going to make money by saving money right now, that's not the case. You do want to, I think, be a little more circumspect than some of the investment you're seeing, but err on the side of aggression. And so maybe it's a good time to talk. By the way, when I did find that number for the Gemini token production, they boasted about the fact that their Gemini token production went from 10 billion per minute in Q4 to 16 billion per minute in Q1. All I'll say is Anthropic 10x'd in that period of time,

• 20:28Speaker 00

  and tokens probably went up by more than that, right?

• 20:31Harry Stebbings?

  What's your takeaway from that then?

• 20:33Speaker 00

  My takeaway from that is every time you look at the evaluations, it says, you know, you've got the big two, obviously Anthropic and OpenAI. And then, oh, close behind, you've got Gemini, you've got Grok, and then you've got the open source guys six, 12 months behind. And when you look at what's actually going on, the big two guys are getting all the money. Gemini, for some reason, doesn't appear to be able to do a great job of developing Coto Love and just getting that kind of traction because coding is where it's all happening. Grok is obviously nowhere until it gets Cursor done. And even the open sources, you do see people using them, and you do see the Palantir perspective, which is you can get something done with the open source. And this really matters because it, this one view of the world, the Palantir view of the world,

• 21:15Speaker 00

  there, five years from now, these are all API calls, they're all commodities. And if you look at the benchmarks, you could convince yourself of that story. But if you look what's actually happening, there are millions of developers who have that same choice every day, and they are choosing over and over again, because of the model or because of the harness, to go with the big two. I think Google has outperformed everyone in terms of being AI relevant. They are by far the best of the five people who reported this week. And as yet, in terms of mindshare of coding, taking that as the kind of mother lode and the epicenter of the revolution, they're nowhere compared to the other two guys. That's it.

• 21:52Harry Stebbings?

  Help me out. We have Meta crushing earnings, revenue 56 billion, EPS 10.44 versus 6.67 expected, like insane beat there. And they got crushed because of CapEx raise again from 125 to 145. So why did Meta get crushed on CapEx increases where Google got plaudits?

• 22:14Speaker 00

  Two people are spending a hundred to two hundred billion dollars and one of them has a revenue coming in that's clear and attributable and that's Google and one of them doesn't and that's Meta. That's the big picture company. Let's kind of dive down one level, right? Why is Meta doing this, right? And yeah, you can imagine three scenarios and I think there's only two. One is are there going to be yet another third-party, you know, hyperscaler provider? Doesn't look like that's happening. They're not competing with Google to provide compute to Anthropic. Now should they? So the two reasons they use, one is the, the reason they started to use a little bit over the last couple of calls is, oh my gosh, we're optimizing our ad performance a whole ton using these models and it's making the numbers better. So let's dive into that a little is that

• 22:56Speaker 00

  there's no doubt the numbers are amazing. They are getting, if you do the math, they're saying they're getting 10, 15% lift in the last couple of quarters. The performance is better, but it's super hard unless you see an A B test to just, and this is always the case with lift analysis, right? You need to see the A B test. You need to see half of the ads optimized using, let's call it the Meta Lama five, whatever the new model is called, I can't remember, whatever, and then half not. Are you really getting lift, right? And you probably are getting some lift, right? Is that what 10 billion a year? Maybe 15? But they're spending 150, right? So my point is they've been using this justification, the L L M spend as being it'll optimize our existing business. And I've always felt

• 23:38Speaker 00

  that's bullshit because if it takes 150 billion in CapEx to give a 10% lift on a 200 billion dollar business, it's probably a mistake. And yeah, especially when some of that technology might be available third-party. So it was noticeable in this call, there was a little bit more of the, we're just going to build next generation experiences, kind of qualitative comments on, you know, simply put, if people go from talking to other humans and looking at news to talking to chatbots, I, Facebook, want to be there when that happens. And I think that's the justification. So the market is looking at that and going, I got it. This is not a business. This is a, I want to show up if something happens. So it's, it's a 150 billion dollar bet on the future. That's not quite articulated. So you just put a slightly higher discount on that, right? That's all that's happening here. It's like,

• 24:22Speaker 00

  don't know why they're spending and he's going to do it. No one has, he doesn't have to ask any permission and maybe he'll be right, like he was on Instagram or WhatsApp or maybe he'll be wrong, like he was on Meta. But it's not like Google where you can go, oh, I get it. They're spending 150, but they're getting 60 billion back and it's growing 80% year on year. In two years, it'll be cash flow positive. It's just a different thing.

• 24:41Speaker 01

  I do think that Wall Street is also, to Roy's point, Wall Street is all building these spreadsheets, GPU depreciation, CapEx, where it's going. The meta-model doesn't support that. It's indirect and it just doesn't support it and nor does the math tie, but it's too confusing. They're all running spreadsheets and arguing over the inputs and the outputs of these capital investments to the outputs and they just debate it.

• 25:03Speaker 00

  I like that, Jason, because effectively what you didn't say, but it's true, is, and Mark isn't running those spreadsheets and doesn't give a shit about those spreadsheets. Like, thank you very much, guys, knock yourselves out. I'm going to spend to be relevant. Their little heads are hurting when they run the spreadsheets because they can't touch it. And they can do it for the other guys and they can't do it here. I think you're exactly right. He didn't make $200 billion by running a spreadsheet at Harvard. He just built the product and got the traction. So he ain't going to change now.

• 25:28Harry Stebbings?

  Of the four, Alphabet, Amazon, Meta and Microsoft, you can buy one and sell one. What do you buy? What do you sell?

• 25:35Speaker 00

  You buy Amazon and you sell Microsoft.

• 25:37Harry Stebbings?

  Why do you buy Amazon? It's the one we didn't touch on. And for everyone listening, Amazon, 181 billion revenue, AWS, 37 billion, fastest growth in 15 quarters.

• 25:48Speaker 00

  You know, I mean, look, it's weakly held in the sense of, look, there's two net sellers, two net buyers. Google and Amazon are doing well. Meta and Microsoft, not so clear. So you obviously pick on one each side. And I picked on Microsoft because I just, that sentence that they're flat excluding AI just made me really pause, was Meta, even though what they're doing is crazy, they can always stop and they'll still be the best ad network business on the planet. So that's on the sell. And on the buy, you know, honestly, it's too boring to buy Google at this point. It was great a year ago when we were saying it's great. Now it's up, you know, it's the highest, slightly the highest valued on a PE basis of those four. So it was, to some extent, it was an on-the-fly contrarian bet in that Amazon just has now access to the entropic models and is going to get that

• 26:33Speaker 00

  lift. They have the AWS distribution. They now have the entropic model. So they're more aligned there.

• 26:38Speaker 01

  One thing, we talk constantly about how AI impacts the top line and to a lesser extent, the bottom line. There's a derivative effect that benefits everyone and does not benefit Meta at all, which is, we're not just using AI to make applications better. We are building many, many more applications. There is an application boom. This is the greatest boom in application building in the history of our lives. The amount has exploded. Right now, you make even more money selling tokens than you do selling basic AWS or GCP services. But there's a double boom going on here. So I got to put Meta last because they're not benefiting from the application boom either. They're not benefiting from it. And there may even be a crossover where the AI gets a little mature, which I do not remotely see happening. Okay. But even if it did, the application boom has just begun.

• 27:23Speaker 01

  The thousand flowers of applications and, you know, maybe, maybe this was the quarter SaaS bounce back from the SaaS apocalypse. But I think in a couple of years, we'll look back and we'll laugh at the SaaS apocalypse and say, my God, the explosion of B2B applications were like nothing we've seen before. They were just old guys, old guys that learned a new dance and didn't die. But who care? We'll look back in a couple of years, we won't care because of this app explosion. Everyone's building everything. It's so wonderful. And so like that could lead to a renaissance for Amazon beyond what we've seen, right? Because of its traditional strength. It benefits Microsoft in the enterprise, but not below that. Right? And GCP is in Gemini are this weird thing where it's very cost effective. It's developer friendly. I can't predict, but I know Meta loses in the app explosion.

• 28:04Harry Stebbings?

  Before we move to the SaaS apocalypse, which you mentioned there, Palantir, obviously very, very recently, we added it last minute, home run in terms of performance. RPO is up 134% at 4.45 billion. Rule of 40, they're 145%. Jason borrowing from your tweet here, cops, latter was blunt. This number has only been matched by AI infra companies, Nvidia, Micron and SK Hynix. I mean, guys, I don't know what to say other than holy fuck. These numbers are really fucking good.

• 28:33Speaker 01

  He also said, and it just didn't quite tie to the forward guidance, but he also said that they were, they were doubling. So they're accelerating from there. He was clear. Now, I couldn't quite get that to tie to the Wall Street guidance. So what happens when you shoot from the hip? But he was very clear that they're, that they're doubling. So they are accelerating. I don't, I just think he was shooting from the hip in terms of the timing of when the RPO would land. And Harry, he was very clear that Europe's just started. It's so far behind, not at the startup level, but at the buying level, that that, that's just started on the commercial side.

• 29:01Speaker 00

  The way I was thinking about it is they're just in a very enviable position, right? Because if you're a large corporation, you know, I always think that whenever you're selling application software, you want to be one of the top two initiatives for the most senior person you're selling to. That's how you make money. And right now, they're selling to the CEO and the most senior initiative, the top two initiatives for every CEO in corporate America is do something in AI, right? So, you know, that's what your board is telling you. So what are you going to do, right? If you think about it, you don't have a large number of choices. Yeah, you can sign up something with Entropic and OpenAI. You can buy Copilot or you can buy Coworker, you can buy Claude for every one of your employees. And that kind of gets individuals using AI but doesn't move the needle, right?

• 29:43Speaker 00

  What you really want to do is some corporate-wide initiative that's big. And all the AI apps companies that we all fund, they tend to be, you know, fairly point solution because they've come from that. They've been founded in the last two or three years, right? And they're really good at saying, you know, let's take Sierra, we'll talk about it and say, we'll deal with your customer support. And that's probably the most call-high company in AI land, in new AI land. In other words, Brett Taylor can call higher than anyone else. Most of these 25-year-old founders can't. So that's as high as they can call. So, you know, you can spend $2 million with Sierra, you can spend 200 grand with Harvey or whatever, right? And that's an initiative. If you're running corporate America, if your number one task is to do AI, you don't spend 200 grand because that doesn't solve the problem.

• 30:26Speaker 00

  And then there's this one company that's been selling to the US government for 20 years that can move in 20 and $100 million chunks. They can literally say, yeah, you want to redo your entire go-to-market infrastructure? You want to redo entire, your business intelligence with AI? We can do that. We did it for the US government. We did it for the DHS. We've done it for JP Morgan. They are credibly moving in $10 million chunks. So now this corporate CEO can say, I have two initiatives this year, you know? Launch that new product and make this company AI first. I just signed Palantir for $10 million. They're going to bring in people, they're going to make shit happen. Initiative done, tick it off, report to board, it's June 30th and I'm on track for the year. And it sounds stupid, but... Big companies have to spend big money to do big things.

• 31:10Speaker 00

  And there are very few software companies that are situated. It's why IBM has existed for 30 years longer than it should. Because they can do this kind of big deals, that big initiatives. It's why EDS made a lot of money as an outsourcer. Palantir right now is the only business that can credibly say, "Hey, Mr. Corporate America, Fortune 500, you want to move your needle with an AI initiative that has measurable, demonstrable results? That is about enterprise-wide transformation? We can deliver you that." The alternative to them is Accenture with a bunch of Claude licenses. Whoop-de-doo. I'd go with the guys who are winning the war.

• 31:44Harry Stebbings?

  Palantir is like a general catalyst for AI transformation, you know, for the LP world. You need to move $100 million. You probably won't get fired. Cool.

• 31:53Speaker 00

  Absolutely. And it has, you know, and this is more clearly demonstrated value. No, I know that sounds really simplistic, but you just think of it from, and Jason, you know as well, like you think of it from the perspective of the CEO, right? You can't have your top three initiative be a $200,000 spend. Like with any of these AI, it's just like, oh, that's a bit of a weenie bet. Yeah, you know, you come back in and you say, "We hired the guys that have been doing this for all corporate America and for the government. We spent $5 million. Here's the three-year plan. You're done."

• 32:21Speaker 01

  To add on to that, just maybe two things. One, I'm not, the numbers have obviously gone up because I'm dating myself. When I was a VP at Adobe, there were only two or three big initiatives at a time, to Rory's point. That's it. But they were all 20 million a year and up. So maybe they're 30 today. That's just what it costs at Adobe's scale in the Fortune 500 to have something that was critically important for, you know, five figures of employees. And it was just, that's what it was budgeted. I believe at back in the day, Salesforce was 26 million a year and Workday were 24. Those were the big projects. They took five years to deploy. Now Palantir can deploy it in less than a year, which is magical. But the other thing I would add, it was funny having been doing B2B for a while. Alex Karp on the Earnings Call, at first he talked about the defense business and he talked about how important it is to support our country and that like the only thing more important than our customers

• 33:06Speaker 01

  to support in our country. And clearly they're deeply embedded in the defense in the Western world. But then he went to the commercial side of the business. What he said to me was super interesting, even though it's obviously it's like, this is different than in my Entire year, the last year, he said, my entire year in the commercial side, I get brought in by a stakeholder, marketing, revenue, someone, and then I got to sell to another, even a pounder, I got to sell to another stakeholder and another stakeholder. And it takes a couple of years. He's like, in the last year, every stakeholder shows up to the meeting. Everyone is there. So not only are we a top two or three drive to Harry's point, drive the corporate change. The CEO and the CFO importantly are saying now, everyone come to the table now. And if Palantir is the answer, or at least the bet, we're not going to evaluate for two years.

• 33:49Speaker 01

  We have to do this now. And Alex was like, you know, he was so, so aggro in his somewhat charismatic, weird goofy way on the call. But he was taken aback by the compression of the buying. It was almost, it felt to me like the COVID buying cycle today. Because we just never, he never saw folks on the commercial side. They did deals this big like Adobe, but instead of everyone's there, like everyone shows up to the damn meeting.

• 34:12Speaker 00

  Look, AI is, it sparks the imagination in the way that digital transformation, our databases, our client server, our SaaS just doesn't. It's got that spark of, oh my God, is it live? Is it sentient? Corporate America now believes it is the way to transform their company. And you're right, Jason, every board is telling every company to get on top of this. Every company, who's going to be the C level executive that says, no, I don't want to join the meeting on the most important quarter initiative. I don't think it's going to work. What it means now is that there's literally not, the naysayer voice has gone to zero. So you do think there's going to be some pretty interesting misallocation. As I say, if you're, if you're selling $5 million solutions right now for the biggest corporate imperative, you're in a golden place and good for them.

• 34:54Harry Stebbings?

  At 349 billion market cap though, is it priced to perfection or is that upside?

• 34:59Speaker 00

  Of course it's priced to perfection. It's priced to more than perfection. I will admit, I exhaled when I saw this quarter. Cause when you pushed me and again, a few weeks ago to name stocks, I'm proud that I named Atlassian, we'll talk about that in a second. But at the, on the expensive side, I said, Palantir is the best situated. And yes, it's wildly expensive. You know, you really have to grow for two or three years to get into this valuation. But you know, if, if, if the boom has legs, they're the most likely to grow into it. You know, it's still, look, it's still a terrifying, I, I woke up the night after I did that podcast. I'm like, ooh, that's a risky one. Atlassian is, you know, it's a value play. It's a no brainer. But this one, wow, you're leaning in, but this quarter kind of justify that. Cause you know, you do the math and two years, two years of doubling and it looks cheap.

• 35:43Speaker 01

  But Alex predicted basically a year of doubling. So there's an argument, if you think that's cheap, I haven't fully thought, if you think it's cheap, it's not the craziest place to get to, right? Because 100, 100, we've already, the CEO has already said, you know, he probably fudged a quarter or two, but he said it's coming. So the thing, the thing just, just, I know, maybe it's Captain Obvious, but just going to Rory's narrative about how corporations work and Palantir, it's just a reminder, every conversation I have is a reminder that no one has this expertise in house, no one. It's so, it's the worst gap between in-house and external expertise in our lifetimes. And so for years, this is going to benefit Palantir, it's going to mean like, even if we were head scratching, why Anthropic and OpenAI are setting up these consulting entities, which

• 36:24Speaker 01

  seem goofy, right? They're not, because the dollars are going to go up, the initiative is going to go up, but the inability to have anyone in-house that can remotely execute, remotely execute. And there'll be folks down, some HubSpot agencies will figure this out, some Shopify DevShops will, everyone in these ecosystems thinks the majority of HubSpot and Shopify agencies who are, who actually deploy most of them, most is not direct at these SMBs. You need an agency to deploy HubSpot. Most of them are gone, they have no AI play, but the ones that do are going to have infinite demand because these, whether it's enterprise or SMB, they, no one has this expertise. It's almost embarrassing how few people have this expertise. Even Coinbase today, I'm laying off 15%, I don't, I have managers managing managers, I don't need

• 37:07Speaker 01

  them, I need folks that will, that will actually do the work in AI, right? If Brian doesn't have the people, what hope is there for the rest of the world?

• 37:14Speaker 00

  And I think, you know, and when you say it, one sense, it sounds all this derogatory, no one has the expertise, but the real truth is this, I'm, you know, donning my micro econ hat here, right? Logically, what you want is to someone to take the time, six months to develop the expertise and then sell it to me and I can only have to pay them for a week of my time and their time. It totally makes sense. Like, I even think about how I learn AI, a good slug of it is doing it myself, but when I get stuck, I just ring our chief data scientist and say, look, I could spend a whole day or two slogging through this point, but just tell me to frickin answer so I can keep moving here. That, you know, in a microcosm is what you need in every organization. You're a line manager in marketing, you've been told you want Roll this shit out, you just gotta hire the expert who knows.

• 37:56Speaker 00

  Which is right to your point, Jason, is that this is a Darwin test for every consultant. And frankly, anyone looking for a job too, which kind of gets to the undergraduate unemployment discussion. If you don't develop the skills you have, you deserve your head. I truly believe if you develop the skills that people want and focus like a laser on the things they actually want, that there's a real demand for that skill in all these companies.

• 38:16Speaker 01

  I call it the $250,000 SDR. There is now a market, instead of SDRs being worth 60 grand in the US or 80 grand, there is a market for a small number of $250,000 year SDRs. But there's almost no need for a $60,000 SDR with six months of junior college research that can't spell 11 labs. You just don't need that person anymore. You needed them three years ago, you don't need them today. But you can spend 250 for someone that's as productive as 20 human SDRs. Those are the skills you have to have.

• 38:42Speaker 00

  Before we, we're going to move on to the SaaS apocalypse next, but it's so funny. We are about to do something incredibly funny. We're about to skip the one line item in the agenda, just to point out, Apple beat across the board, Tim punches out on a high, stunning results, great quarter, no real AI story yet. Thank you everyone else for getting caught in hysteria. Meanwhile, we're just building the largest, you know, one of the two largest companies on the planet and doing really well here, not wasting our money on, you know, capex, continuing to do buybacks, just working for the stockholders. I just felt the need to call that out in passing.

• 39:17Harry Stebbings?

  I thought the memory chip supply constraints were interesting.

• 39:20Speaker 00

  That is interesting, and it's not just for Apple, but just one interesting statistic I saw is, you know, everyone's talking about how the capex budgets have all been raised this quarter, 10 or 20, 30%. A significant slug of that capex raise is for the same physical amount of capex, just at a higher price, because the memory portion of anything you're doing has exploded in cost. So I do agree, and I think that you're going to see some impact of that right down to the price of your iPhone next year. It doesn't appear to have impacted demand, but you probably will see that filter true. That would be the iPhone you can't afford, transported to the US on a plane that can't have jet fuel from the far east. But yeah, there you go.

• 40:01Speaker 00

  Much pain to come, but yes, I think memory prices, and obviously thus memory stocks, is a factor, not just for Apple, but across the whole capex story.

• 40:09Speaker 01

  Well, I mean, Apple basically increased this week the price of the Mac Mini from $599 to $799 because of memory. They dropped the $599 because it's sold out because of these damn open cars. Maybe it's the 16-meg versus the 8. I forget what the difference is, but it's not $200 even at current prices. So all this stealth inflation, it's going to lead to a lot of socio-economic stress when folks don't care whether there's a $799 or $599 Mac Mini and the average individual is hurt. It's like the rental market in San Francisco is almost unimaginably competitive. Versus even when we started the show, it was cheap to live in San Francisco. Now, now you can't rent anything. They don't even exist. No one's going to leave.

• 40:48Harry Stebbings?

  I see buy prices like 3 million higher than the 5 million listed consistently. It's nuts.

• 40:53Speaker 01

  Yeah, I just made 30 million on my anthropic vesting. My partner wants a house. What am I gonna do? Argue that it's not worth 5 mil? I mean, and it's been six months. I'm just gonna buy it. I don't really care.

• 41:05Harry Stebbings?

  Okay, last week, we were in a bit of doldrums and we wanted more positive news. The SaaSpocalypse could be over. Atlassian up 29%, Twilio up 20%, Five9 up 23%. Boys, is the sunshine coming out? Is the SaaSpocalypse over? Or is this a case of three good performing companies pulling away?

• 41:28Speaker 01

  We already categorized these companies the last few times. Let me just break it up. First of all, 59 I'm not interested in. Re-accelerating to 9%, I don't care. Okay? I'm not saying that they're not benefiting, but like, I don't think that deserved to be with the friends. First of all, it is heartening to see Atlassian and Twilio re-accelerate. These are older companies, right? Atlassian is still founder-led. Mike was on the show, right? He's great. But everyone was worried about Atlassian, right? Twilio, they, you know, they pushed Jeff out, who was on the show that we love. And somehow, moldy oldie products were able to re-accelerate. So two great stories. And if nothing else, they support the idea that for folks that are benefiting from AI, we're past the bottom. For folks that are benefiting, we're going to see some more quarters come out that maybe aren't as good, right? Before the next show.

• 42:09Speaker 01

  But I do just wanna, this is my bias and my perspective that Wall Street, a subtlety that I think you guys will agree with that Wall Street didn't see. Atlassian got really good at, and this- We've talked about this monetizing its AI product. It's rovo AI. It's sold the F out of it last quarter and people were happy to pay for it. Okay. Its net new customer account is still slowing. It's net new customer account. Twilio did the opposite. This company was dead when we started this podcast. Now it's re-accelerated to 20, but accelerated. Their disclosure is less clear, but their net new customer account may have grown 40% in the last year because of AI and other startups and other companies. Now the ACV per customer hasn't gone up quite as much, right?

• 42:47Speaker 01

  But there is an explosion. 11 Labs uses Twilio. All these AI folks use Twilio. So Twilio won on two points. Folks use it sort of for AI and they had net new customer growth. Atlassian monetized its base with AI. Thumbs up, right? Passed the test. But it's not clear it's attracting new customers. And so you might be deferring bad news ultimately if your AI story gets more revenue from your base, but does not expand it, right? To be proven, to be proven.

• 43:14Speaker 00

  You're right on the facts. I mean, so going back to that, you said it's a SaaS apocalypse all over. No. Three months ago, we said, I think Teams are by, Atlassian's a buy. If you just avoid going from guardrail to guardrail. The big picture is when people price these stocks like it's all going to zero, you've got this potential for a 20 or 30% bounce. And you saw that right now, right? Taking Lassie for example, I don't think it's like, it's not going to 10x from here. It's not, and it's never going to be a AI-first, you know, 5x, 10x growth company. What it is, is going to be a really well-run company that, as you say, Jason, you know, if you can't add new customers, maybe you steady state growth is 20 or 30%.

• 43:53Speaker 00

  If you can add new customers on top, maybe you can go higher. You know, these are going to be cash flow positive companies, growing 30%. They're going to deal with the SBC issue. And then they're going to be, instead of being worth three times, they're going to be worth six times. My point is this, you're going to move in that bounded range. And when people's heads start exploding and saying it's all going to shit and they trade at three times, but the company's fundamentals are decent, you can buy and get a 2x. And when people start believing all the bullshit and they get, they're still pretty lofty, like ServiceNow was before the last announcement. When you're trading at six, seven times revenues, you're very vulnerable to a correction. And you're right, the low end is five nines, you know, yeah. grew at 9%, the high end, I mean, Atlassian's growth rate was pretty impressive, 32% in gap revenue.

• 44:35Speaker 00

  And I'm not surprised at the lack of new customers because one of my, I always felt these stocks would slow down independent of AI. Because these markets are fairly well served. Atlassian has done a great job over 15 years of meeting the need for this product. And now whenever the, you know, additional customer growth either is new company formation or takeaways from someone else. So it's not surprising. It's a bounded, well-executed company. So I'm delighted for them. I'm delighted I said by it two months ago when we were asked. As I often say here, things are proving out to be exactly what they should be, which is these are solid, high-growth, cash flow generating companies. Probably work closer to six times if they're going north to 30%, maybe even a little higher, which is what they traded at for a decade and a half before COVID. And there you go. So.

• 45:20Speaker 01

  Yeah, but, but so, but of course you're right, but to me Twilio is more interesting because it's also benefiting from net new customer growth. When Jeff Lawson was on the show, Twilio was in the, I mean, it wasn't even that long ago. It was in the doghouse, right? Looked dead, a dated product. And Harry asked Jeff about this and Jeff's like, well, I actually haven't been in the game for a little while. I'm working on nuclear fusion and harnessing the sun's energy. But if I had to think about it, Twilio is going to be a beneficiary because APIs are what AIs and the agents need. We have the dominant service and as these agentic products scale, they will use us and Twilio will do well. Maybe not segment, right? And some other stuff, but the core business will. And he was right. It is, it is become, you know, it's just N equals one. If you go into Repli or Loveable, it's also the default choice.

• 46:02Speaker 00

  It goes back to your early framing is, you know, are you getting value for new products to your existing customers? And are you getting new customers? And why would Loveable or Repli bother rebuilding this stack? It's like, especially if you can buy it on an API basis, just call it a day.

• 46:16Speaker 01

  Well, the risk would be if at the infra layer, there, someone had built a better Twilio that was, that was better, you might switch, right? But Sierra, $15 billion run on, run on Twilio, right? There's a lot of, I'm not a total expert, but obviously there's reliability, right? There's infrastructure under the infrastructure. And so my learning is for a lot of folks, nobody beat Twilio. It's not just software. They could. Like it's possible, right? But it's now they're a beneficiary because this infrastructure was good enough like Apple. I mean, it's a little attenuated, but there's something it's good enough to benefit from all the trend happening. It's good enough.

• 46:50Harry Stebbings?

  Who are the other traditional SaaS companies in SaaS jail? That should be released in the same way that hopefully Atlassian and Twilio are being released.

• 47:00Speaker 01

  Well, here's where Rory and I diverge. I that's why I'm worried Atlassian isn't a two pronged AI beneficiary. To be a two pronged AI beneficiary, you have to be able to monetize your AI. And you have to attract new customers. There's two prongs and the ones that have done it so far are close to infra, right? Cloudflare, Twilio, Mongo, Datadog, and even Digital Ocean, which proves anybody can do it. Right? If you're the 11th cloud provider and you can grow 352% stock price, anyone that has a can do it. But I'll tell you the one I'm waiting to see. So HubSpot this this week announced that HubSpot will put agents on parity with humans in their coming release. It'll be their platform will be completely open to agents. And they'll make sure that the agentic version of HubSpot is at least at parity with the human version. That's the right vision.

• 47:46Speaker 01

  Now are they going to overcharge for it? I mean, I'm not even sure anymore it matters outside of SMBs. I want to see if that it's a little late, but it's not too late. It's a little late. It's not too late. I want to see if that works. I want to see if it works. In a way, it's Mark Benioff's headless vision that he talked about, right? If HubSpot can become the hub for agents in all of its categories for SMBs for GTM, it should reaccelerate dramatically. Let's see if it works. If it doesn't work there, I think we can write all the rest off. All of its peers, I mean, it should work, but HubSpot is such a broad customer base. It's relatively more tech centric than Monday, right? So I think this headless thing, I'm not saying it should lead HubSpot to double, right? It's not mathematically possible. I believe over the next 12 months, this strategy, if it's real, should lead to genuine reacceleration at HubSpot.

• 48:30Speaker 01

  Otherwise, it's it. There's no hope for these classic categories because they're going to make it completely open to all agents.

• 48:35Speaker 00

  I think to your point, Jason, far more of them are going to fall into the not re-accelerating. Re-acceleration will be the exception, not the rule. And then for the others, it's a question of is it a slowly evaporating ice cube or a, you know, a quick evaporating ice cube?

• 48:50Speaker 01

  The underlying issues in this SaaS apocalypse haven't changed. For the drama to reduce around it, we need a few more folks to be in that category, I think. I'm not sure Atlassian gets both prongs, but I'm here for it because it lifts it lifts all the tides, right? If we could have three or four of these, then we could kind of like the underlying issues are there, but we can move on and talk about other things.

• 49:10Speaker 00

  Just to push a little bit on the positive on Atlassian again, because I actually, I think you're changing to go, because I thought your other rule was not new customers, but the, which obviously is the best of all. But I don't think it's realistic any more than I think Zoom will ever get a new customer again. Everyone needs to see what kind has one. But the other test you applied, which I thought was a good one, was can they sell new products to their customers? And Atlassian's daily active users, their AI revenues did take a jump. So I do think there's some lift there that you can get. You're right, it would be great if 10 or 15 of the companies start doing that. Then you have a sense of what, you know, good looks like for SaaS companies. Because I think that's what people are struggling with. Because there's no universe in which any of these companies become, obviously, not an LLM, or a Sierra, or a Harvey, or anything like that. That's just not going to happen.

• 49:55Speaker 00

  You can't get there from here. The question is, can you return to 30% growth with free cash flow positive? And stock-based comp under control? And a gross and net retention such that no one's terrified that you have a zero terminal value? If you can do those things and demonstrate relevance, then the advantages you bring to the table in terms of scale, in terms of, you know, a couple of billion dollars in revenue can all come to the fore. And you're right, a couple of these guys have done it. If more of them do it, then we'll know what winning looks like. And to your point, Jason, then it'll become painfully clear what not winning looks like. And, you know, let's be frank, what we saw in Medallia was an investor walking away saying, this thing isn't winning. I just can't get there from here. Even though it had positive EBITDA, that was, you know, five or six times coverage, just like, there's just nothing here.

• 50:39Speaker 00

  Seeing what Twilio and Atlassian have done will be a positive for the people who are on that journey and will be the nail in the coffin for the people who aren't. Because it'll be like, oh, that's what that's what it takes to win, and you're not doing it, Mr. Fill in the Blank.

• 50:52Harry Stebbings?

  Onwards to private company land, Anthropic at $44 billion. I thought Jason's question here, which he put in, was exactly the right one. Are there enough developers for this level of revenue growth to continue? And you can immediately say yes when you look at the TAM of like the service value of developers. But when you look at this, it's 100 million per day. How did you guys react to this?

• 51:17Speaker 00

  I think it's the right question. I think that if I was to pick one number that I'd like to know, which would give me an informed opinion on this. We're trying to figure it out. We're doing some work in the portfolio. What is the steady state token spend as a percentage of salary dollars per engineer for a fully mature AI-first organization? Because I actually did a, I just was looking at it, doing the bottoms up knowledge work TAM. In anything other than pure AGI, which is too arm wavy for me. Most of the other jobs have a task automation potential. And my view that's sub 10%, you know, you can do summer marketing, summer sales, some of accounting, but not all of it. Whereas for coding, you can do a shit ton today. And we don't argue the former yet, Harry.

• 51:59Speaker 00

  The point is coding, it's pretty clear that there's a huge amount of automation that can be done in a way that it's not as clear yet for the other areas. Let's just go with that for now. Therefore, coding is the tip of the spear. Coding is, pick your cliche, it's the canary in the coal mine. So therefore, if you know what the long-term steady state automation, you know, token as a percentage of salary is, you know how big this can be. And at 20% or 30%, Anthropic can grow into that multi-hundred billion dollar revenue category, maybe even half a trillion dollars. At 5%, it gets a lot harder, right? So to me, that's the question.

• 52:33Harry Stebbings?

  When you look at Andre Capathie saying, like, he used to use it for 20% and now he helps it with the final 20%.

• 52:41Speaker 00

  But how much would you have to pay a month to get Andre Capathie to code for you? I can tell you, it ain't 250 grand a year.

• 52:46Harry Stebbings?

  Probably about a billion a month.

• 52:47Speaker 01

  I'm 20K an hour, just for me. That's what I quoted this morning.

• 52:51Speaker 00

  I love it.

• 52:52Speaker 01

  Someone wanted, I got one of those requests to help them look at this vibe code. I said 20,000 an hour, I got a yes. I don't know if it'll really happen though, right? That's my price. Maybe just two things. One, the interesting thing that, you know, David Sacks. Mark Andreessen and others were pointing out that the number of recs out there, job specs for developers and engineers is up, right? Are there just enough developer dollars and everything? It's just interesting that that 20% doesn't sound high to the scale analysis, but it's not going to come from net headcount cut in developers and engineers that are AI-pilled. It's not coming from loss of humans, right?

• 53:23Speaker 00

  I totally agree, because to be very clear, and this is why I don't know why people struggle with this. I think words I never thought I'd say, David Sacks and people are entirely right on this thing, right? And Aaron says it really well. If 20% spend on tokens, 3X is the effectiveness of your developer, then the ROI in developers goes up, so the number of developers will go up.

• 53:42Speaker 01

  Yeah, that's the point P is missing. If the ROI is higher, then if you can attract them, the number will, you'll hire more. People have it backwards.

• 53:49Speaker 00

  Yeah, it's what your point says, and there'll be lots more competition, there'll be lots more bundling. I think software companies will have to cover a wider surface area because there's just going to be more competition, products are easy to make. But there's no doubt that if 20% tokens spend, this is hypothetically, if you have a 200 grand engineer, if 40 grand on tokens doubles that person's productivity, and you had 10 engineers, my guess is you'll have 15, because you're like, shit, these engineers are really good. Now, you might spend less than sales and marketing because your product will be better. So you might have more in cost of goods because your token spend will go up, but your efficiency should go up.

• 54:21Speaker 01

  So can I share maybe one slight bull case on it that I didn't even realize until this week? So definitely, people are missing the point. If you can find the engineers that are AI-pilled and AI-capable, you'll hire more and more of them because they're infinitely more productive. Of course you will if you're growing. If you're shrinking, the calculation's different. But like, actually, if you're hyper-growing, you'll hire unlimited engineers if you can find folks above the line with AI, right? But a funny thing is, so we built this AI VP of Marketing and AI VP of Customer Success at Saster. They're pretty good now. It took a while to get them pretty good. And I got to tell you, I'm too busy. I never looked to see what they cost each month in tokens and others, until I looked literally this week for the first time, I think Sunday.

• 54:55Speaker 00

  I'm glad you're here.

• 54:56Speaker 01

  What do you think it costs to run an AI, a full-time, semi-autonomous API VP of Marketing and Customer Success? What's your guess it costs per month to run those in tokens and everything? These are autonomous now, they're doing everything, they replace many people. 2,800 a month, per one, that is. Okay, that makes more sense. Six hundred together roughly.

• 55:13Speaker 00

  Jason did not want a single efficiency maximizer there. So I'm going to give you three grand. I don't know. Three grand.

• 55:19Harry Stebbings?

  Or you pussy following me 2,800. Oh, I'll give you 3,000.

• 55:24Speaker 01

  This is like Price is Right games, isn't it?

• 55:26Speaker 00

  Absolutely. I did admit I did think that. I mean, yes, there's a bit of gamesmanship in that answer here.

• 55:32Speaker 01

  Two of them full time, two full time human equivalents, $254 a month.

• 55:36Speaker 00

  Interesting.

• 55:37Speaker 01

  I sent this to Amelia on our team and she's like per day in Slack and I said, no, it's the whole month. So it just may be, this kind of ties to notions saying that open source LLMs are fine. It may be that not only is engineering the first and best use of LLMs, okay, for all the reasons we've tested. It may be that the next wave are great, like they're just as good. But man, we don't need as many tokens as we thought to replace Jason on the marketing team. We only need $254 a month for both of them running full time, right? It's going to be a little higher this month because of Saster Annual, but not much, man, not much. That's deflationary and weird at the same time. We thought, Amelia literally thought that was per day.

• 56:18Speaker 01

  $254 a month to run two highly valuable autonomous AI agents for marketing and customer success. Pretty crazy.

• 56:26Speaker 00

  I would have guessed you'd be sloppier than that.

• 56:29Speaker 01

  I am sloppy. You get it. I don't have time. I don't care.

• 56:32Speaker 00

  I don't know what to make of that information. It's odd because it would have been my prior. When we did some of the survey results on the engineering spend, it's, you know, 2%. We found one at 15%. So it's not anywhere close to the 20%. Yes. So, you know, that implies that someone's spending, you know, even in engineering, you know, hundreds of dollars a month, not thousands, right? I'm trying to disaggregate that from the.

• 56:56Speaker 01

  I mean, the captain obvious thing is you don't have to refactor a massive code base eight times a day to run a lot of agentic workflows, even very, very high quality ones, right? And, and to be clear, it's kind of crazy. This AI VP marketing we built now, every damn morning it comes up with three great ideas, which are better than any human's going to come up with. It's exhausting. It's so many ideas. And it could do all of that for $94.27 in tokens last month. It beats any human. And ideas, not in execution. This beats any like ideas that humans have for 94 bucks a month. That's just an argument that at some point, as we get into these other categories, they're just not as attractive as an engineering for token consumption, right?

• 57:35Speaker 00

  And that's why I had said, yeah, I think it's 20% and 5%. But what you're saying is even that might be high, which is just interesting because it's funny. I'm frustrated myself now because that would have been my gut. Because I've done the data and I've looked, for example, some of our companies, you know, where they're selling a software product that's LLM enabled. And I said, what's the token intensity there? And it's sub 10% and that's on the COGS line, not the employee line, right? And I looked, I talked to our internal guy and what we're looking for the stuff we're doing. I'm like, oh, that feels relatively small. So my prior would have been around there. But if that's the case, I really struggle then to figure out how they're doing 44 billion.

• 58:11Speaker 01

  Well, that was my had the question, will it? It's clearly true. It's just, I need someone smarter than me to tick and tie all the math, right?

• 58:17Speaker 00

  What it means is that there must be small numbers of engineers literally doing half their salary to get to that kind of number. The second order question is, are they the tip of the spear? And this is the way the world is going. And therefore, the 20% overall number will happen. Or are they token maxing for performative reasons? And some of this is overdone and you could get the same, you know, the Jason, I never thought it. A more efficient use of tokens is possible. In which case, obviously at 44 billion, it's not as much of a run rate as you thought. That's why I go back to my, I don't know the answer as evidenced by the fact that my guess was wrong and influenced by Twitter. But I do know enough to know it's the right fucking question. If you know the relationship between human spend and token spend for coding as the mother load job, you probably have a handle on what's going on.

• 59:02Speaker 00

  And that's why we're serving our customers as we speak, our companies as we speak.

• 59:05Speaker 01

  25 seems like a good framework for today. It just, we'll see where the rest of the year takes us. There's so many, I mean, some token max and maybe performative. But imagine like literally you could run a code review every single day, like in real time. You're constantly finding bugs. Already the agents find bugs themselves in real time. But what if you could do meta reviews constantly every day, massive of massive code bases and iterate it? It's easy to see going up in order of magnitude.

• 59:28Speaker 00

  Agreed, because that's the policy spin. Because remember, the one thing you always have to remind yourself. Is tokens get cheaper by the year? Every turn of the crank on GPUs gives you a 3X. Every turn of the crank on LLM optimization gives you another 3X. You're looking at 10X price falling every 18 months. In a weird kind of way, it might pay you to be inefficient now to get good at doing it. And just you'll become more efficient over time. So that's why I go back. This is the question. How much intelligence can you stuff into this economy and at what price?

• 59:56Harry Stebbings?

  At what price? Roughly $900 billion valuation, Rory, according to the latest. And I've had like seven LPs ping me being like, Harry, you know, everyone. How do we get in?

• 1:00:08Speaker 01

  How do we get shares? How do we get in?

• 1:00:09Harry Stebbings?

  How do we? How do we get in? Anthropic is $50 billion round at $900 billion.

• 1:00:16Speaker 00

  I'm going to admit, here's one where I was, I keep track. Here's one where I was wrong two weeks ago. I thought they wouldn't have to do it. They should go straight to the IPO. But that was stupid old world thinking because the truth is you shouldn't do it if A, you have to spend a whole bunch of time doing a raise and B, those ways give you rights around an IPO block or anything like that. But we live in a world where they can just send out a fricking email and people respond in 48 hours and it's no drama and they take the terms they get. So yes, they should grab the 50 billion.

• 1:00:46Speaker 01

  Yeah, you had 48 hours to decide. No, nothing. That is better than any IPO on planet Earth.

• 1:00:50Speaker 00

  You're right, Jason. And, you know, we talk about public versus private. As long as you can raise capital like that in the private markets without any statutory liabilities, any disclosure liabilities, why would you go public?

• 1:01:01Harry Stebbings?

  Well, that was going to be my question. Does it do anything to the timing or the price of this supposed Q4 IPO?

• 1:01:09Speaker 00

  It might do nothing to either of them, but what it does do if you're the if you're the Anthropic CFO, it allows you to exhale. You always hate to have to do something that you have to do because there's no doubt had they not done this, they would really want to get public in the back half of this year. And you could see a scenario where that's not possible to circumstances beyond your control. So I think what it does. I don't think, I mean, there's a mild anchoring effect on pricing. I'm sure there's no blocks on IPOs. So to a rounding error, we should assume these shares are powerless and ill and, you know, have no votes and no knowledge. There might be a mild anchoring effect to the high end. But the real point is it just gives you that degrees of freedom. You don't have to do it. And one of the math I did, I tweeted it because you guys helped me think through it is every

• 1:01:51Speaker 00

  dollar of revenue that Anthropic does means someone, either Anthropic or its partners, has to invest three or four X in capex because it's just expensive in terms of compute to service AI. And then on top of that, if you're going 10X and you have to forecast one year out, you're now guessing not your revenue today, but your capex a year from now, right? So when you're doing $10 billion in revenue, a run rate, you're actually making capex predictions that might be 10 times that amount times $3 per dollar of revenue. You're committing 30 billion in capex for every 1 billion in revenue you have. It's amazing. Now, a lot of that, you lay off that risk to the hyperscalers. But when you zoom out, there is no, my big aha is, and that's why I was wrong two weeks ago, there is no such thing as too much cash on your balance sheet.

• 1:02:36Speaker 00

  There is no such thing. Dario is entirely right. This is the riskiest game of financial guesswork I've ever seen. You're betting somewhere between five and 10 times your revenue at any point in time to meet the capex demand one year out. It's huge. There's never been a bet like this before. And the only thing you can do is de-risk the bet, raise capital. But I do think it somewhat decreases the odds of an IPO this year.

• 1:02:58Speaker 01

  Mathematically, if you can raise 50 billion, literally in 48 hours with no rights or no anything, if arguably, and again, I've become on Team Sam and OpenAI recently with my agents, as my agents have taken control of my life, I've, I've changed my allegiances to some extent. OpenAI said today they thought about spinning out their hardware business they just bought for $6 billion. It's like, and the slight drama with aligning Sam and Sarah Fryer. If OpenAI pushes out its IPO timeline and Anthropic is well-funded, they may be in less of a rush to deal with the headaches of being IPO. So if they, if they really feel like OpenAI is a second half 2027 IPO, the combination of the two decreases the odds. The IPO this year, we'd have to check Polly market.

• 1:03:40Harry Stebbings?

  Do we think that we've all said all along that both will go out this year? Do we think this is actually the first sign that this is true slippage? And both will actually go out in 27?

• 1:03:50Speaker 00

  I think the truth is now they don't have to. OpenAI, remember how quickly we forget, raised $120 billion six weeks ago. And so I pick raise 30 and now it's another 50. Neither of them have to go public this year. I'm with Jay, I think Jason described it well. You still will in a fair with a favorable wind. If things are organized, if you feel you're predictable, you won't if you're not. And now you don't have to. So in the right circumstances, they'd be crazy not to go. But you can't control the circumstance. You know, first of all, you have another IPO pricing in advance of you that has way more risk and story risk in it in terms of SpaceX. So you can imagine the world getting a little disrupted because of that. There was a war on as a reminder, lots of shit can go wrong. So I think the big aha, if you're the CFO of Anthropic, you go home after you raised

• 1:04:36Speaker 00

  $50 billion after two days work and you say to your spouse, good week at the office, hon. We got it done. Problem?

• 1:04:42Harry Stebbings?

  I didn't logistically know how they do it with the amount of 10s and 20s and 30s. And just like the logistical challenge of collecting $50 billion from every family office institution under the sun.

• 1:04:56Speaker 01

  Well, the key is having a Brex and a Ramp account. If you've got to split it up between the two, right? That's the, that's the insider trick, right?

• 1:05:03Speaker 00

  And you get the credit card points. I look genuine, that's why you end up with these minimum check sizes that are huge. That's why you end up with people doing bundling and SPVs. So it looks like a single check size. You just end up with those structures to make it happen. The point is, when you have unlimited demand, you just tell people what they have to do. Cause look, it's not like, I mean, sometimes in a deal, you have a minimum close. I'm not going to close unless you raise a minimum of 10. That's not going to happen here. So they can truly look everyone in the eye and say, let me tell you how we're going to accept the money. The first person in the door with the money and the completed paperwork gets the full allocation and it goes down from there. And then people will just make it happen. I bet you there's an account somewhere in the Fed that's just seeing a wall of money keep coming in. It's like, you know?

• 1:05:45Harry Stebbings?

  I remember speaking to one of the leading GPs of one of the leading firms. I said, how much does it cost to take a meeting with you to get one as an LP? 250 million bucks. That was the entry price. I was like, wow, I'm really thrilled that you're thrilled that you're on the show. That's awesome. Speaking of OpenAI, OpenAI's chairman, Brett Taylor, is out in market raising $950 million at a $15.8 billion price for Sierra. They're at $150 million in ARR. They've got some amazing enterprises as customers. It's 105x revenue multiple on the negative side. It's a $400 billion customer service market on the positive side. How did we read this raise?

• 1:06:26Speaker 01

  I'm starting to get worried. And what I mean is, on the legal side, we clearly have, if nothing else, proven, I think the TAM is a little larger than when we thought in Agentic. I'm not just 100% convinced the CX market, as big as it is, 400 billion, whatever you want to call it, I'm not convinced it's grown 10x because of AI. I believe it's grown a bit. I believe it might have grown 50%. And I believe that these agents, you know, everyone from Brett Taylor to Owen at Intercom, everyone sees these agents merging and they're going to do sales and CX and enterprise. I'm not saying it's not true and that you're not replacing all these humans that we saw early. And I'm not saying I'm even right, but I'm worried that the overall TAM is being flattered by the desire to just reduce headcount.

• 1:07:08Speaker 01

  It seems to flatter the TAM expansion. I just think it's TBD at this valuation if there's $100 billion company here for sure or not. I don't know.

• 1:07:18Speaker 00

  Broadly agree. Because just for my, my guess is the customer support software market, which exists today, is probably 20 or 30 billion. And the customer support labor spend is 400 billion. So you're exactly right. If you're selling a story that says we're going to replace the old customer support software with new, you know, you're going to replace Service Cloud, which is the Salesforce product, which Brett Taylor obviously knows really well, with Sierra, that's not a great business because you're going to be grinding out replacement for the next couple of decades, right? You have to buy into some level of there's TAM expansion from labor replacement. But to Jason's point-

• 1:07:53Harry Stebbings?

  Not only, that's right, Roy, not only TAM expansion from labor replacement, but actually expansion into sales and upsell massively to-

• 1:08:00Speaker 00

  I agree. Because remember, in the abstract, you have TAM expansion from labor replacement. But once you have three or four customers competing for the same thing, then you can't- Competition is not labor. Your competition is three other companies, all of whom are using LLMs for the same thing. So to state the obvious, there's a fair amount of leaning in here at 100 times revenue in a world where you can buy on Tropic for 20 times revenue. To state the obvious. Now, I think the fun thing about it is, is that, you know, when you have this whole dialogue, software is dead, right? Because if you think about it, there's two sub dialogues of software is dead. There is all software is dead, which is the SaaS apocalypse. And then there's the more terrifying version, all software is dead because the LLMs are going to eat everything. And what I like about this is, this is the guy who's chairman of what's still the biggest LLM company, OpenAI.

• 1:08:45Speaker 00

  And they clearly believe that there's value to be added on. It's the same story Alex Karp is telling. There is value to be added on top of LLM software to build a large independent company. When people are giving me is software dead, are the LLMs going to eat everything story? People are voting with the dollars that say it's not, right? With companies like Sierra. And I believe them to be correct. One rule of thumb, going back to my failed math earlier, but now trying to get it right. It's one of the things I look at in these companies, token intensity, which is how much they spend on tokens on a cost of goods sold basis. And how much does it cost to deliver a next generation Sierra customer agent? And my guess is their LLM spend is sub 10% of revenues. In other words, LLMs are not the dominant portion of the value they deliver.

• 1:09:27Speaker 00

  It's the LLM plus the software, plus the whole thing, plus all the domain specific knowledge. So the fact that they can raise this kind of money, it's healthy and it speaks to the belief in the next generation software companies. The multiple, you can definitely, look, anytime you're paying 100 times ARR for any software company, no matter how fast it's growing. You know, you really are leaning into a very aggressive future. I hope they're right.

• 1:09:50Speaker 01

  Rory makes such an important point here. The SaaS apocalypse assumed that no one was going to buy software. Sierra is a counter narrative to that, if nothing else. We want to buy, as is Palantir from this week. It's meta good news, but maybe not for a lot of our portfolio. But at a meta level, it's great news.

• 1:10:05Harry Stebbings?

  Are we really running out of ideas that much, GV and Tiger? My friend Tom Hume runs GV, so I'm, I love him and I'm taking a dig at him here lovingly. But like, seriously, if it's a $100 billion company with no more dilution, you're doing 5.5x.

• 1:10:20Speaker 01

  Yeah, but we want Tiger to be back. That's good for everybody, Harry. So let's distinguish between GV and Tiger. Okay, we want Tiger to be deploying lots of capital into our portfolio companies. So let's cheer them on. Okay, we need Tiger to be strong again.

• 1:10:32Speaker 00

  No, it doesn't. I think, Harry, we're all Pavlovian. Investors are the most Pavlovian things out there. We do the things that feel good, and we do more and more of the things that feel good until it feels bad. And the truth is this, buying marquee assets at absurd prices has been by far and away the best strategy for the last three years. So you're just going to do more, and you're just going to keep doing it until you overshoot. Is this the moment they've overshot? I don't know. I would have guessed 380 billion for Anthropic. Ooh, that feels a bit lofty, right? The point is that.

• 1:10:59Harry Stebbings?

  The point is also, on the flip side, OpenAI would buy them today for 40, 50 billion to get Brad as CEO.

• 1:11:07Speaker 00

  Actually, the truth is this, because we've got to say it, something has happened at OpenAI. I mean, we suggested this a while back, and when I suggested, I was also saying it shouldn't be necessary because really, all we need is for someone to tell the team at OpenAI, "Come on, just, just stick to your knitting, do two or three things, do them well, get rid of the external noise." And to be fair to them, you've seen some progress in that direction. So you don't need to have, quote unquote, Brad Taylor run this company. I think whatever's working, Mr. Altman's decided to focus a little bit, reduce the extraneous noise, and they seem to be getting better performance. I'm kind of, to Jason's point, being a little bit back on Team OpenAI, not from a bandwagon perspective, but from a, "All you have to do is just do the ordinary things well, and you'll do great."

• 1:11:51Harry Stebbings?

  Which has more upside, if you would have put a dollar to work, Sierra or Anthropic?

• 1:11:56Speaker 00

  Anthropic, not even subject for a second.

• 1:11:58Harry Stebbings?

  Wow. You're saying it's more likely than Anthropic is worth 6 trillion than Sierra's worth 100 billion?

• 1:12:05Speaker 00

  Yes, I think the likelihood of both of those happening are low, but yes.

• 1:12:09Speaker 01

  They're just different bets because entropic is a bet that there's boundless upside. And Byron Dieter was on CNBC or whatever this week saying by far, this is the best round to invest in. Right. And a little bit, he's talking to his book, but I definitely, we all know Byron. I believe he believes that this is the best round. Okay. I believe Sierra, I don't know. I mean, I met Tom once through you when he was at Saster London. But I believe that they all believe there's also downside protection in this deal. And it's just a different type of deal. People were kind of snippy when they did the round at 10 billion. And again, I don't know gossip, but I was at a big event and people are like, well, they did that round because they wanted access to Brett. I don't believe that, but the sense that there's massive downside protection when folks are still struggling to deploy capital in venture. It's not easy. These bets are risky. They're very expensive.

• 1:12:53Speaker 01

  I don't know how big the round was, 950, I can put half a billion into Sierra. At least my downside is protected. You don't want every deal to be like that in your portfolio, but there's some comfort in having downside protection, even if it's pretend. But it's part of venture investing is downside protection is real. We just overstate it, right? And the number of potential acquirers is real. We actually overstate that too. Well, worst case, Claude tells me this the other day, I was talking about my portfolio. He's like, well, worst case, this one will exit for one and a half to 2 billion to one of these three folks. I'm like, thanks, Claude. I mean, I feel better.

• 1:13:24Speaker 00

  Let me explain. Yes, that's because the training data doesn't include the decades that I remember. Well, let me tell you, there are worse.

• 1:13:30Speaker 01

  Worst case, Jason.

• 1:13:31Speaker 00

  Worst case is going to 1.5 billion dollar exit for your investments. I assure you of that.

• 1:13:36Harry Stebbings?

  In other news, Musk versus Altman trial, week one. Rory, going back to this that you mentioned earlier. Musk admits ex AI distilled open AI models partly. Importantly that he said partly. Also Greg Brockman claims that his stake is now worth $30 billion. Another revelation that came out. Boys, what's the analysis on week one of Musk versus Altman?

• 1:13:59Speaker 00

  First of all, thank you, God, for this gift for the tech version of TMZ. It's gonna be the gift that keeps on giving. It's kind of, you know, rubbernecking on a car accident because it's going, it's just gonna be impossible to tear your eyes away from it. And yeah, Evan's gonna come out and it's just gonna, yeah, FIBL aren't gonna look great. But which is different than actually, and we should talk in a second about the actual legal issues here, which are much distinct. But yes, in no particular order, yeah, the distillation comment wasn't a good look for Elon. The being asked under oath to rank the models and, you know, having to rank OpenAI and Anthropic above him probably hurt deep in his soul, right? And it just show whenever you get to this kind of law, it's always embarrassing for both sides.

• 1:14:42Speaker 00

  I mean, I feel for Greg Brock when, you know, you have this private diary where you write your inner thoughts and suddenly you get, you know, a document retention request and now your private, personal diary, because it doesn't have attorney-client privilege, is out there forever and to sneer at you. It's kind of bullshit. So under 30 billion, think people have been not, well, of course, someone that Twitter treats, oh, he owns 30 billion, he didn't put any money in. Well, yeah, that's how equity works when you're kind of a founder or near founder. He is one of the top two or three executives in a company worth $800 billion. It would be surprising if he was worth less than $10 or $20 billion. The most surprising thing is Sam Altman's worth zero on this, which I still think is weird and a mistake. It will be easy to throw kind of shit at both sides, but it actually doesn't matter to the legal issues.

• 1:15:26Speaker 00

  The legal issues, I think, are going to be, you know, that no one talks about. Super interesting is one is statute of limitations. These are what's actually going on. One is, there's a time limit on when you can bring these cases. And the earlier you see threads from Elon about, hey, this might be something I want, the earlier it says you should have known then and you should have sued then. This, he may lose on statute of limitations. The judge may just decide, dude, you had to bring a case within three years, five years have passed, so I'm not gonna rule on the merits. It's been fun listening to you guys for two weeks, but I'm ruling it out on that. Then another one that's kind of super obscure, but the minute, here you go, we'll get it, is a lot of the money came through his donor-advised fund and I, you know, anyone uses a DAF, it's super efficient, you distribute stock.

• 1:16:09Speaker 00

  Talk into it and then you advise the fund how to spend the money. But it turns out that that DAF is a separate legal entity. And once you give the money to the DAF, it's not your money anymore. So the DAF is the person who's been harmed when Elon's DAF gave that money to OpenAI. So Elon may not have standing in the case. These are the legal issues that are going on on the need to surface. So what's going to happen here is, and sometimes, especially in a pure jury trial, if someone looks like a jerk on the stand, it can, you know, impact them. And both sides are going to look like jerks on the stand, possibly because at times they are jerks. But it doesn't matter because the jury, it's a weird thing. The jury is advisory in this case. In other words, they have the right to give advice on some of the issues. But ultimately, it's kind of a weird thing. The judge decides.

• 1:16:53Speaker 00

  So in the end, this is going to boil down to one judge, probably a series of legal issues. And then at the margin, you know, the merits of the case. You know, when you look at it the first day is that no one looks great, maybe is the truth. But in terms of the merits of the case, Elon probably went backwards just because of these kind of technical issues. But I mean, I will admit, I say all that and I give this virtue speech about we shouldn't be looking at the car crash. And then I'm looking over at the car crash, just like everyone else. It's like, oh, my God, you did that, you know, it's just gonna, and it's gonna continue.

• 1:17:25Harry Stebbings?

  Jason, we can choose one final topic of the week. There's a lot in the venture and private markets from Founders Fund's new $6 billion fund. Coinbase cutting 14%, Vanta 63% growth at 300 million ARR. Rogo raises at 2 billion.

• 1:17:42Speaker 01

  I'm going to give a quick shout out to Vanta. We don't have to spend the time on it. Another story of re-acceleration of growth. It's not just Palantir. It's not, we had Rippling last week, 70% at a billion. Vanta 60, I think every week we got to have a shout out. So shout out to Vanta, our good news story of the week. But I don't think we need to talk about SOC 17 compliance this week. So why don't we just leave it as a cheerlead? Even though I hit it at the beginning, I do think, at least as we record this, to me, the Coinbase thing, if people really think about it, is pretty important and transformational. Brian's saying that I just don't need anybody at Coinbase that isn't also an individual contributor anymore. I just don't want anybody here is what he said this morning when we record this. So, you know, a day delay, but we do not need managers of managers and we do not need managers.

• 1:18:27Speaker 01

  If you can't ship and manage, if you can't deliver a campaign and be the head of marketing, if you can't manage sales agents and be a sales manager, I don't want you a Coinbase. I think that's how all founders have felt and then we give up at a certain point. Like it's always true of the first 50 and then we start to give up. And then around 500, I've learned in the old days, you would just capitulate. And then you have managers of managers and then you start not meeting people as CEO before they leave. I remember I was at Aaron Levy's office when they crossed 500 and he said, this was a learning moment for me. He's like, now people leave Box before I've ever met them. He didn't mean managers of managers, but, but we capitulated to this. And Brian's saying, no more with AI. We will even have teams of one that are self managers and I'm living that today.

• 1:19:10Speaker 01

  And I know every founder, every founder wants this world to exist where there is no one anymore working in my F and company that isn't shipping, that isn't committing, that isn't building. And I think if this really hits, it will just, he's putting into words. What many of us have struggled to say is we don't want managers anymore. You gotta build or you gotta go. Everyone wants this, every founder wants, it's not the layoffs.

• 1:19:34Speaker 00

  What percent of managers can also build?

• 1:19:37Speaker 01

  5%. They all gotta go. They build Kanban cards and have, and talk about their team. Anyone on LinkedIn that talks about their team, fire them. My team this, they're also precious about their team. My team did this, that means they did nothing. Lead from the F and front with AI. But it also is AI lets you lead from the front and this is who we want to work with. This is who we want to invest. This is who we want on our teams. We want folks that lead from the front. Managers of managers lead from the rear. They lead from HQ, from their comfy office and their mug and we're done with it. I'm done with it. So anyone that talks about how great their team is, get your four months of severance and two, two weeks for each year you've been at the company. Good luck to you.

• 1:20:14Speaker 00

  As usual, you know, there's a part of me wants to recoil against this, but I'm coming around to your perspective. I mean, I'm gonna start with kind of Coinbase, Brian Armstrong. I mean, cause you know, a while back I, we talked about this and I did a tweet on it, got a lot of pickup on, you know, all the performative lying. Reasons why people are blaming AI for terminations either because they've over hired or because you know the growth has slowed or because they just spend all the money on CapEx or as you pointed out, they need different people, all of which being different than the pure I just can do more with less. Right. So my assumption is when people use AI as a justification for layoffs, I'm now mentally guilty until proven innocent. You're lying. But, and this is a big but, I got to give Ron Anson credit.

• 1:20:57Speaker 00

  He he's demonstrated clarity of thought in how he thinks about hiring, firing and company culture. I mean, go back to when we were locked in, you know, what turned out to be a fairly destructive period of conflating politics with how you run your company and bringing your political self to work, which proved divisive. He was one of the ones who early on said, we're not going, he didn't say, I believe in this and you believe in that. He just said, we're not bringing that to work anymore. You remember that manifesto he did? And basically said, I'll pay you, you know, I'll give you severance if you want to go.

• 1:21:26Harry Stebbings?

  To a lot of backlash at the time.

• 1:21:28Speaker 00

  To a lot of backlash and in retrospect, an excellent call. I mean, an excellent, not only because it wasn't just a political call, it wasn't taking the other side, it was taking no side, which has turned out to be entirely the correct position. So my mental model is when he says something, I'm going to assume there's going to be less cant and hypocrisy in it than the average CEO blaming AI for the thing. That's the first comment. And then to your thing, you know, you want to believe that managers should manage and at some point, you know, Alfred Sloan managing, you know, the guy who built GN, you know, managing the margin corporation. But there's a part of me that agrees with you, Jason, is that, you know, I think if you're not hands on, you just don't have a feel for it.

• 1:22:08Speaker 00

  And I think the best CEO at every level, you know, you can't be, and what you're not saying, you can't be an individual contributor all day. Because you know, Jamie Dimon is not out there making loans, but you have to do enough to know what's happening on the front line with the new stuff. You can't be so dissociative from it that you don't understand because then you're in the grip of the experts. And today, that thing is AI. I mean, if you kind of a different example, if you look back to 2008, 2009, the financial crisis. If you really examine what happened, those companies that went, the financial companies that went bust. It was like CDO, CLO, my 25 year old kids are doing this, my quants are doing this and I don't understand. So I'm just going to accept, I'm going to be as Jason says, a manager of managers. And I'm going to accept that they did their work correctly and it'll be fine. And they all went bankrupt.

• 1:22:52Speaker 00

  I think the same thing that Jason's right today. If you're not using the technology yourself, at least 10% of your time. Then you're in the business of listening to other people tell you things that you don't know if it's true or not. You know, I mean, I always run my own models for our companies. It's like, I just want to see the numbers. Where does the cash go? Makes me a little old school, but I think there's an element of hands-on authenticity. That I think Brian Armstrong is speaking to, I think you're speaking to Jason, I actually think is a thing. Because without it, you just end up disconnected.

• 1:23:18Speaker 01

  But I think that was true last year. I think Brian wants more. So let me give you an example. So last night, we had our AI VP of Customer Success. Reach out to 120 sponsors for SaaS to annual, asking them exactly what their issues were, telling me everything they had to do and get it done. You don't want a chief customer officer that has to tell three people to do that. Today, you want a chief customer officer that actually understands, why is that possible? How did that happen? Why is that better than any humans done on my team? And that they can then talk to Claude Code or Repliter, Love or whatever, and make it better tomorrow. That's what you want on your team. It's not just that they dabble, because pre-AI, a chief customer officer could not reach out to 150 customers at 12:32 last night in the morning like we did.

• 1:24:01Speaker 01

  Now with AI, our chief AI officer reached out to 100 and something customers at 12 something in the morning. You want that person or move them out, promote the director that knows how to do that. It's a waste of time having that overfed person talk to the VP, tell the director and tell someone else that takes three weeks to do this. But we did it at 12:32 in the morning last night to 100 and some odd sponsors, to 10 million of revenue.

• 1:24:21Harry Stebbings?

  Dude, they wouldn't ask for feedback. They'd ask for a meeting to give the feedback, which would take two weeks to get the meeting, to get the feedback. And then they'd do a brainstorm.

• 1:24:28Speaker 01

  Yeah, but we want, and for sure, that's what's always frustrating. But now we know that the best executives, let me make it even simpler version. A CMO today, and I know this is really triggering to 90% of CMOs, but you know what's true. A CMO today should be able to run their own campaigns. And this is why, I'm not saying you have to spin up Marketo or HubSpot. I'm saying you should be able to tell your agent and our agents. Our AI VP marketing started running its own campaigns the last two weeks and it's better. And so you don't even need to know exactly how that works. But the CMO should be able to interact with the agent and say, let's talk about the three best campaigns. We should run to support, scale, whatever, and run it themselves now. Because you don't need a team to do it. You and the agent should do it and you should want to do that and you should be passionate about it.

• 1:25:10Speaker 01

  And you should get rid of the executives in your organization that are resisting that. Get rid of them.

• 1:25:15Harry Stebbings?

  Jason, again, I love it, but like what percent of CMOs can do that?

• 1:25:19Speaker 01

  Two percent, one percent. Maybe you just need a director or VP that cares and you don't need a CMO.

• 1:25:24Speaker 00

  But the interesting question on that, let's say it's 10% or less. The question is, do they become the most successful CMOs?

• 1:25:30Speaker 01

  Yeah, they're gonna crush it.

• 1:25:31Speaker 00

  If Jason is right and there's a correlation with success, then the one thing I do know is that economics is Darwinian. And you know, over time, that 10 will become 20 will become 40 because the people who can't do it will be forced out. And I think what you're saying, Jason, is what it takes to compete is changing. If the people who have it succeed, capitalism works. It excludes the people who can't do it.

• 1:25:53Speaker 01

  And we might be better off without them.

• 1:25:55Speaker 00

  And that's why all the CX executives show up to the Palantir meeting. Because they know Jason's on the board and he's going to put him against the wall if they don't know how to do this shit. It's a genuine comment is that at all times, if there's that level of imperative to do shit, then anyone with an ounce of survival gene in them, make sure that they're in the room when those decisions are happening and wants to be part of it.

• 1:26:14Harry Stebbings?

  I want to ask one question in a new round called Rage Bait But Real. I often tweet things and people think they're rage bait and it's not. It's just genuinely how I think and you can tell me if I'm an idiot or I'm not. Work from home Fridays is BS and it's an excuse for a three day weekend. Real or rage bait?

• 1:26:34Speaker 00

  Well, you always rage bait, but as I comment, our work from office days on Monday and Friday always have been. And my logic was, we had our two partner meetings every Monday and every Friday in the old world pre-COVID. And why should we change just because that's happened? Now, once in a while, we allow people, if you're on the road, if you want to make a longer thing, you can use five chats a year and work from home on a Friday. But 90% of the people are in the office every Monday and every Friday because those Those are the best two days to get people together. So I'll answer that question.

• 1:27:03Harry Stebbings?

  Real. Jason?

• 1:27:04Speaker 01

  The question is, is there a problem with it? Is that the question?

• 1:27:07Harry Stebbings?

  My point is, everyone said to me, that's not true. When you have four days a week in office and Fridays, work from home, excuse for a four, three day weekend.

• 1:27:17Speaker 01

  Right. And the people, the 90% of folks that don't want to work hard and 5% of the remaining 10% that do want to work hard, but it's so hard, they think you're toxic. And at Coinbase, you've got an email to your personal email this morning. Sorry, your Coinbase accounts no longer work. We had to do that for, to protect our customers. They sent the email. Your email no longer works. So that's what's going to happen to those people criticizing you. They're not wrong in terms of quality of life and the way they want to live. They are right. You're both right. They're all right that, that what you're describing is not the way they want to live. And you are right that you should not invest in those companies. And not only should we not invest as investors, you should not invest your time. If you want your equity to be worth something, if you want to contribute to this world, rather than just collect a paycheck.

• 1:28:00Speaker 01

  And we are going to more and more bifurcate to folks that just want to collect a paycheck. So the agent doesn't displace them. To folks that want to change the world and that's fine. Let's not conflate the two like we did in 2021.

• 1:28:10Harry Stebbings?

  I love it. I like that. Rage bait but real is a new round. Rage bait but real. Rage bait but real. I got more for you next week, boys. Thank you so much for doing this. Exciting week as always.

• 1:28:22Harry Stebbings?

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• 1:29:52Harry Stebbings?

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