The AI Slowdown Debate | Nico Wittenborn, Scott Keogh, Mitchell Green, David Rosenthal & Ben Gilbert, Faraj Aalaei

(04:30) - The "Pacing AI" Debate (27:51) - Nico Wittenborn discusses his journey from growing up in Germany and selling refurbished iPhones to founding Adjacent, a solo-GP venture firm. He shares his investment strategy across consumer subscriptions, AI, hardware, and European technology, highlighting investments such as Speechify, Oura, Revolut, and Bending Spoons. (01:00:18) - Scott Keogh, CEO of Scout Motors and an automotive industry veteran, discusses reviving the iconic American SUV brand as a modern manufacturer of rugged electric vehicles. He outlines Scout’s U. S. manufacturing expansion, direct-to-consumer sales and service strategy, and plans to deliver durable, driver-focused SUVs and trucks beginning in 2028. (01:32:21) - Mitchell Green, founder and managing partner of Lead Edge Capital, discusses the resilience of enterprise software, AI-driven disruption, and the importance of strong balance sheets for continued innovation. He also explores America’s accelerating wealth creation, booming luxury-asset markets, AI regulation and cybersecurity risks, and opportunities to acquire mature, overcapitalized technology companies. (02:00:00) - David Rosenthal discusses how he and Ben Gilbert research companies for "Acquired", focusing on Home Depot’s extraordinary growth and status as the best-performing U. S. public stock since its 1981 IPO. He highlights its scale, employee ownership culture, professional customer base, e-commerce strategy, and resilience through leadership challenges and changing retail trends. (02:31:32) - Faraj Aalaei discusses his four decades in semiconductors and his role as founder and CEO of Cognichip, following two successful semiconductor startups. He explains how Cognichip’s specialized AI aims to dramatically reduce chip development time, cost, and risk by automating routine engineering tasks and enabling designers to focus on innovation. TBPN is made possible by: Ramp - https://ramp.com Public - https://public.com Cisco - https://www.cisco.com Console - https://www.console.com CrowdStrike - https://www.crowdstrike.com Figma - https://www.figma.com MongoDB - https://www.mongodb.com NYSE - https://www.nyse.com Railway - https://railway.com Shopify - https://www.shopify.com Codex - http://openAI.com/codex Follow TBPN: https://TBPN.com https://x.com/tbpn https://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231 https://podcasts.apple.com/us/podcast/tbpn/id1772360235 https://www.youtube.com/@TBPNLive

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

• 0:00Jordi Hays?

  You're watching TVPN.

• 0:02John Coogan?

  Today is Monday, September 14th. We are live from the TVPN Ultra Dome, the temple of technology, the fortress of finance, the capital of capital. Let me tell you about ramp.com. Time is money. Save both easy use corporate cards, bill pay, accounting and a whole lot more, all in one place.

• 0:19Jordi Hays?

  That's right. We're back. Did anything happen over the weekend in tech? Or was it kind of mellow?

• 0:24John Coogan?

  Uh, it was a crazy weekend. There was a lot of news, a lot of back and forth about pacing the AI debate. I was in the hospital because I got Rabdo. It's brutal, but I am recovering.

• 0:34Jordi Hays?

  Explain Rabdo because it sounds really scary and it is bad.

• 0:38John Coogan?

  It can be very bad. Fortunately, I did. Okay. I got an IV, uh, got some medicine, uh, broke a fever, got through it and I'm, I'm healing up, but, uh, it happens and it's the dumbest, dumbest illness you can possibly get. It comes from, uh, working out too much and not being hydrated. Very avoidable. Hopefully AI can find a cure. If there's even a 1% chance that AI can find a prevention for Rabdo, I think it's worth any amount of risk.

• 1:04Jordi Hays?

  Pushing forward.

• 1:04John Coogan?

  Yeah, we, we must push forward. Uh, no, lots of debate over how fast we should push forward.

• 1:09Jordi Hays?

  We have never missed an episode for being sick.

• 1:13John Coogan?

  Yeah.

• 1:13Jordi Hays?

  And I realize that because someone's asking me the other day, what do you guys do when you're sick? We just, we keep going.

• 1:20John Coogan?

  I mean, I did talk to the doctor. They said, do you want a, do you want a doctor's note for work? And I was like, no. I kind of laughed. Uh, but I do think that, uh, like this job can be done while sick because you're just sitting in a chair having a conversation. But I might be a little bit slow today, so bear with me. If I, uh, if I'm not the sharpest on any of the questions, I will be sharp on the ad reads though. I'll tell you about Shopify. Shopify is the commerce platform that lets you do business in seconds, online, in store, on mobile, on social and on marketplaces and now with AI agents.

• 1:53Jordi Hays?

  We got a great show today.

• 1:54John Coogan?

  Yeah, take us through it.

• 1:55Jordi Hays?

  We have, uh, Nico Wittenborn from Adjacent.

• 1:59John Coogan?

  Legend.

• 1:59Jordi Hays?

  Really incredible episode of Invest Like the Best. I believe it was last year or the year before.

• 2:04John Coogan?

  That's right.

• 2:05Jordi Hays?

  Uh, one of the first investors in Aura and a bunch of other great companies. Uh, we got Scott from the CEO of Scout Motors, uh, which we're very excited to talk to.

• 2:14John Coogan?

  Yep.

• 2:15Jordi Hays?

  Uh, Mitchell Green, our dear friend from Lead Edge coming in for some hot takes.

• 2:20John Coogan?

  We got, we got it.

• 2:21Jordi Hays?

  And then we have our friends David and Ben from Acquired rounding it out with Farage from Cognitship.

• 2:28John Coogan?

  Yeah, we're excited for this.

• 2:28Jordi Hays?

  So great show.

• 2:30John Coogan?

  Before we get into the pacing AI debate, uh, what happened with the US Open? Give me a little tennis update. What happened? It's on the cover of the Wall Street Journal. So you know, it's important news. Tennis's US Open climax is in back and forth duel, but there was something interesting.

• 2:44Jordi Hays?

  So Ben Shelton, the American, lost.

• 2:48John Coogan?

  Okay.

• 2:48Jordi Hays?

  Uh, and, uh, what was notable is, uh, hopefully I'm pronouncing his name right.

• 2:54John Coogan?

  Alexander. It's just pronounced Alexander, I think.

• 2:56Jordi Hays?

  Zev, Zevrev, Zevrev.

• 2:58John Coogan?

  Yes.

• 3:00Jordi Hays?

  But anyways, the, the, the most notable thing, uh, was that when he actually hit the winning shot and, uh, and won, uh, he went back and was getting ready for the next, uh, for the next, um, point.

• 3:17John Coogan?

  Yeah.

• 3:18Jordi Hays?

  And, uh, he starts looking around and everyone is standing, you can see people in the crowd are standing up, uh, and, and cheering. And he slowly realizes that he won.

• 3:28Jordi Hays?

  Checking, finally look at the scoreboard. And yeah, it just became very obvious that he was so focused on the next point. He was not actually not looking at the scoreboard at all. It was just like flow state, just, just playing.

• 3:39John Coogan?

  That's awesome.

• 3:39Jordi Hays?

  Um, and I'm sure a lot of venture capitalists out there were seeing that and they're like, yeah, all that matters is your next investment. If you're, if you, you shouldn't even know when one of your companies, your seed companies are going to IPO. You should be so focused on.

• 3:52John Coogan?

  I mean, I think a lot of people that don't like VC Victory Labs would appreciate that too. It's like, we get it. There was an acquisition. Uh, let's focus on what you're doing right now. Um, I also liked the cameraman work. I saw a clip of the scoreboard was counting down. There was zero, zero, seven seconds left. What, who did they cut to? Pierce Brosnan, 007 himself. I thought it was nice camera work. Shows you that there's levels to the game of live production.

• 4:18Jordi Hays?

  Yeah.

• 4:18John Coogan?

  You know, you gotta, he, he, those little touches, clearly that was just spur of the moment. That's not, that's not something that's scripted. That's just someone being creative in the moment with the tools that they have, the switcher, basically. Uh, anyway, the, the pacing AI debate, I wanted to start with some history here and then we can go through the timeline of what actually happened, uh, since we got off stream Friday and then all the news breaks, of course. But, um, uh, the pacing the frontier goes back to July 28th of this year. So there was a, there was a, uh, pacing the frontier statement, an open letter. It was signed by employees and leaders from OpenAI, Anthropic, DeepMind, Meta, and a bunch of other places talking about this idea of pacing the frontier. Uh,

• 5:03John Coogan?

  then, uh, the same day, Sam Altman publicly said, we may have to pace the rate of AI development. Two days later, OpenAI, uh, uh, tells Axios that OpenAI helped shaped, shaped the position, the petition's language and Altman had discussions, had discussed pacing with White House officials. So stuff was happening in DC. This was back in basically the very beginning of August, very end of July. Then August 18th, OpenAI, uh, publishes something called pacing model development in an era of cyber critical capabilities. OpenAI said it actually slowed scaling and paused a major RL run. There was that two week training pause that happened. Uh, on August 31st, Anthropic, uh, official Anthropic

• 5:48John Coogan?

  post explicitly discusses pacing the frontier. So the idea is spreading and calls for coordinating pacing mechanisms. And then on September 12th, which was a, it was actually Saturday morning that, that Dario dropped the essay, we must pace the frontier, turn the concept into a much bigger public anthropic campaign, uh, that everyone's talking about today. So, uh, the, the, the rollout of this was pretty, pretty quick. And there's, there's a few key things from Dario's essay. It hit the timeline at 7:00 AM Pacific. He was up early posting. Perfect time to get a lot of likes on a banger. You gotta feel something. No, everyone else, there's no fundraising news happening. Drop your essay early Saturday morning. Let people digest it with their morning coffee. Elon was clearly engaging.

• 6:33John Coogan?

  By 8:00 AM Elon endorses it. 9:30 AM Sam endorses it. Uh, Saturday, uh, 4:00 PM Demis generally agrees with Dario's point, uh, and argues that it needs some work. Remember Dario put out something pretty similar, talking about, uh, pacing and AI development and the need for oversight generally, uh, months ago before transitioning out of his role as CEO of DeepMind and, uh, stepping up to, I think, chairman. Um, then later David Sacks on Saturday, but at 8:15 has had time to process everything. Uh, he asks some questions about Dario's post, goes back and forth. Sunday morning, the Financial Times reports that Donald Trump

• 7:13John Coogan?

  has rejected calls from tech bosses for an AI slowdown. Um, later that day, Sunday morning, Gavin Baker rang, rounds up the weekend. So we can kind of go through some of this and go through those posts. Uh, but what actually happened in, uh, Dario's essay, we must pace the frontier. He has the three step plan on how to, how he proposes.

• 7:33Jordi Hays?

  Number three will shock you.

• 7:36John Coogan?

  Uh, number one, give independent third party evaluators access to AI companies so they can verify safety practices. Uh, he calls out meter, which, uh, drew a lot of attention because people were debating how independent meter is. There's some meter employees who have worked at OpenAI, have worked at Anthropic. There's people that work at Anthropic who worked at meter. Like it's, it's all, uh, uh, very much a, uh, revolving door with these AI safety groups and then the AI labs. You go back and forth depending on what you're interested in. So, uh, not as independent as like, oh yeah, we're, we're going with, uh, an accounting firm who, you know, doesn't really have an opinion about, uh, the, like the AI future. These are all people who are deeply embedded

• 8:21John Coogan?

  in the discourse, which could be a huge benefit because they take the stuff really seriously. Uh, could also lead to some, um, what people flagged as like conflicts potentially, but, uh, still, uh, some, some optimism from the community around what that would look like. Two is frontier labs in democratic companies should work together with the, with the government's help to establish AI safety standards. And this was the one that people were going back and forth on. Do. Do the labs actually need government approval from this? Dean Ball was talking a little bit about the Sherman Antitrust Act. There are very clear rules about companies agreeing to do really anything in concert with each other.

• 9:03John Coogan?

  This is the number one reason that you don't want monopolies and cartels forming. Is that if all of a sudden, you know, oh, you know, American Airlines and Delta and United all say, yeah, we, you know, for safety reasons, we should have fewer flights. It's like, okay, well, what would that do to the market? Probably drive up their margins because there's less flights, charge more for them. They have fixed costs. So you could very clearly see that collusion in that market would lead to more profits for them and more harm for the consumer. That's where the Sherman Antitrust Act came from. We flagged this a week or two ago that this might like, even, even though it seems like, oh, well,

• 9:45John Coogan?

  if Demis and Dario and Sam and Elon all agree, like, this should just happen. That's not a problem. There are actual legal and federal regulatory rules that might need to be adjusted or waived for something like this to happen. So that's, I think that's why he's, he's calling for that specifically. He's saying, we need an exception to the rules so that we can actually do this. Because it's great to all write blog posts that we loosely agree on, but to have anything formal, we need government approval. And then third, this is the one that will shock you apparently. The US and other democratic countries should try and coordinate with authoritarian governments. So he wants the US and China to coordinate on AI pacing.

• 10:25John Coogan?

  Of course, China still wants to catch up and there's some tricks there is like, what is the, what, what will happen in equilibrium if both countries have the exact same capabilities? Is that the best outcome? Or do you always want to be in the lead? If you always want to be in the lead, it's very hard to negotiate with someone and say, oh, well, you know, well, why don't you just have half as many nuclear weapons as we have? And like, that'll be great. Like, we'll pace you. And so you, you go back to nuclear nonproliferation and all the difficult debates there. We obviously wound up with a multipolar world with everyone wanting at least some capabilities there. So Elon chimed in agreeing with Dario, then Sam and Demis also agreed. The timeline, on the other hand, had some questions and concerns about Dario's post.

• 11:08John Coogan?

  Who will, who will these third party evaluators be? Why wait for Washington to regulate the frontier? If Anthropic believes AI is advancing too quickly, why not simply slow down on its own? David Sacks raised some questions on X and we can go to David Sacks's post, which I believe here is in the timeline. He said, Dario has written that we need to, quote, pace the frontier and Sam has agreed. People may be surprised by my response. Go ahead. You guys are the frontier by any reasonable metric, market share, revenue growth, model capability. The two of you have a duopoly on frontier intelligence. You've also claimed the lead is widening because of recursive self-improvement. I don't think what you see, I don't see what you see in the lab.

• 11:49John Coogan?

  If the unreleased models are scary enough that you think you should slow down, I support your decision to be responsible. But stop pretending you need anyone else's permission. Stop pretending antitrust law has to be suspended so you can form a cartel. Stop pretending you need a regulatory approval process that supersedes product liability. Stop pretending meter is independent when it is intertwined with Anthropic's investors and staff. Stop pretending that you need those same evaluators to police competitors who aren't even at the frontier. And so, yeah, maybe that's a little bit of an, an issue, although, yeah, I mean, the, the regulatory capture angle is, is always like,

• 12:24John Coogan?

  if the safety rules become super cumbersome such that you can't start a instinct like product, right? It's like instinct is a small team. They're not building a frontier model. They're not training their own models, at least not yet, but they're like doing stuff with AI. If all of a sudden they have to spend a year negotiating with a bunch of third party evaluators, have a bunch of people embedded and then go through some sort of review process and the government's not getting back to them. Like, you can't have a breakout consumer product. And that could be true for the long.

• 13:00Jordi Hays?

  It doesn't feel like there's been any type of effort from anywhere to try to control or regulate like application layer companies. And, and Greg was on Odd Lots. This episode came out this morning talking about not trying to, doesn't, doesn't believe there should be any sort of limits to.

• 13:20John Coogan?

  Application layer stuff?

• 13:21Jordi Hays?

  Yeah, but basically like if you're, if you just want to train a model at home

• 13:27Jordi Hays?

  for your own use cases, you know, there, there shouldn't be limits on that. Yeah. Trump, Trump came out yesterday. He was pretty active over the weekend. He said, the only control or quote unquote guardrails that AI needs is a strong and smart, high IQ president. And the USA has that in spades. The Trump.

• 13:49Jordi Hays?

  The Trump administration has stopped AI people from doing bad or potentially bad things like Dario.

• 13:55John Coogan?

  What are these blogs?

• 13:56Jordi Hays?

  Who is now pretending to be a perfect little angel and we will continue to do so. We already have tremendous criminal and regulatory power over these companies. There is a sick conspiracy going on against AI and data centers. And the only one that is happy about it is China. Whoever wins AI wins. We are leading China and all others and will continue to do so. Conspiracy theorists, treasonists, traitors and leakers beware. Thank you for your attention to this matter.

• 14:23Jordi Hays?

  It is funny to accuse, to accuse like the labs of being in a conspiracy against AI.

• 14:30John Coogan?

  Yeah, that really, really doesn't follow. I don't, yeah, it does not make sense.

• 14:35Jordi Hays?

  But he also followed up just 40 minutes ago, said concerning AI, when in the history of business, capital H, capital B, history of business, did anyone see the leaders of an industry call for regulation? That if strongly implemented, would drive them into oblivion and bankruptcy? AI is taking over the world, destroying humanity and all other things. That is a hoax, no different from Russia, Russia, Russia, Ukraine, Ukraine, Ukraine impeachment hoax one impeachment hoax two. And all the other hoaxes and scams that America was forced to endure.

• 15:09Jordi Hays?

  President Xi of China just announced that China will be doing absolutely nothing to stand in the way of AI or its future. Google has recently stated that they want to build a massive plant in Finland, all because they are finding permitting too difficult in the United States. I'm not happy about this and want them to change their thinking. AI and data centers will be the greatest economic development engine in history. Bigger than oil, gold, diamonds, or even the internet. Bigger.

• 15:34John Coogan?

  Diamond.

• 15:37John Coogan?

  Bigger than diamonds.

• 15:41John Coogan?

  Like of all the technology, internet, internet, the transistor.

• 15:49Jordi Hays?

  Oil, the internet.

• 15:51John Coogan?

  The wheel, diamonds. These are equivalent things.

• 15:55Jordi Hays?

  It will not be stopped by brilliantly run destructive forces during the term of president. Donald Trump.

• 16:03John Coogan?

  Okay.

• 16:06John Coogan?

  Well.

• 16:06Jordi Hays?

  Anyways, I, I'm wondering what the, so a bunch of hedge funds are paying, you know, they paid to get access to this. Let's assume like a minute early, something like that. How did they trade this? Because it's very.

• 16:20John Coogan?

  Long to beers.

• 16:22Jordi Hays?

  Yeah.

• 16:23John Coogan?

  Long, long diamonds.

• 16:26Jordi Hays?

  Yeah, maybe diamonds are, are, are underappreciated.

• 16:28John Coogan?

  I think diamonds are actually in a really rough spot. I think people are moving to lab ground stuff really aggressively. So it's a, it's actually a tough, tough period of time for the diamonds. And I'm sure the diamond industry is calling for regulation for, for sure.

• 16:44John Coogan?

  Okay.

• 16:44Jordi Hays?

  Oh, where were we?

• 16:47John Coogan?

  Interesting. I don't know. We were, we were talking about David Sacks. We were talking.

• 16:53Jordi Hays?

  Oh, we gotta, we gotta keep, we gotta keep going because the president was on a roll this weekend. Let's pull up this video.

• 16:59John Coogan?

  Okay. Oh yeah, they asked him how he used AI. While we pull up the video, let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. The IPO window is still wide open. AI market, little bit down, but overall handling things pretty well.

• 17:18Speaker 02

  We've taken a lot of their cars, car tariffs.

• 17:21Speaker 03

  This week, again, there's been so much concern about AI. Have you heard directly from any of these AI tech leaders? And you seem to downplay some of the concerns that we've heard.

• 17:30Speaker 02

  But it's, you know, it's going to be more good than bad, but by a lot.

• 17:35Speaker 03

  Have you heard directly from any of them?

• 17:36Speaker 02

  Beginning, whoever wins AI and we're leading by a lot. Whoever wins AI wins.

• 17:42Speaker 03

  Have you ever used it yourself or have you been?

• 17:44Speaker 02

  I do.

• 17:45Speaker 03

  How do you use AI?

• 17:46Speaker 02

  But I would say, you know, for the most part, you can use AI for a lot of things.

• 17:53Speaker 03

  Speaking of AI.

• 17:54John Coogan?

  The funny thing is that, is that like, there's AI generated slop on his social, true social account like constantly. Like the slop videos are obviously AI, like both sides of that debate or that discussion should have known that, I guess. But I guess it's like people on his team are creating like the AI slop videos. Cause like, there will be like a new vibe coded, like, like, you know, some sort of simulator that they put up on White House stuff all the time. So, but I guess that's not him. It's probably people on his team that are like, I made this AI video. Yeah. But I don't know. Gavin Baker had a roundup of what happened. Let's go through what's going on. And lots of people just sort of like processing this, going back and forth. People were expecting Elon to be sort of against this, maybe anti Dario.

• 18:39John Coogan?

  He of course came out in favor and has been talking about how like, he was working with Nick Bostrom in 2014 on AI safety. Has been very concerned about this the whole time. Although at various points in time, Elon has been less of a doomer and more like, we gotta build, we gotta go, we gotta, we, we, we gotta, you know, actually compete here, working both alongside labs, co-founding OpenAI, founding XAI, growing the, the model capabilities there. But he's, he's like firmly in favor of this. So let's see what Gavin Baker had to say. He said, wild 24 hours for AI and lots of different proposals have been made. TLDR, the only tangible new fact is that OpenAI and Anthropic are going to have embedded third party evaluators

• 19:23John Coogan?

  from unknown organizations with Dario floating meter as a possibility. Having third party evaluators is smart as there's no section 230 style liability shield for model outputs. And showing a duty of care will be important in future litigation. Several internet companies might have gone bankrupt without section 230. So limiting liability really matters. I think there are minimal investment implications from this single new fact. But I do think that anyone who wants, quote, a smoother for a longer cycle than most constraints are good. Wafers, watts, real rates and spreads. I was thinking about how the, a lot of the safety folks are worried about just the capability build out

• 20:06John Coogan?

  from the semiconductor supply chain, like they, they would like to restrict the amount of chips that are created. And I'm wondering if. Should we not be pacing electricity generation? Does everyone agree that we should be building more solar, thermal, wind power right now? Is that uncontroversial? Is there anyone who says like, no, we shouldn't be doing that? Because if we wind up in a world where you're pacing frontier AI development, current models are sort of diffusing and there's some economic impact there, but you're not blitzscaling the data centers and the frontier intelligence, can you apply some of that capital, some

• 20:45John Coogan?

  of that human talent to just getting nuclear power online, getting solar power online, re-industrializing the American energy supply chain, battery, really even grid tension? Because everyone who complains about higher energy prices would be happy with that. I don't think the AI safety folks would be upset about that because you could use it for a lot of things. Worst case, it's like, okay, you wound up with like, okay, we can never build, you know, AIGI or ASI because it's too dangerous. At least we have a lot of cheap energy. Is there any reason why you wouldn't, why you would want to pace the build out of the American electrical grid? I can't see why. What do you think?

• 21:29Jordi Hays?

  I mean, at some level, like, yeah, it makes sense because it is like an input, but it's like, seems like way too diffuse.

• 21:35John Coogan?

  Yeah.

• 21:36Jordi Hays?

  Because like, yeah, it's like, if you have a lot of chips, like, sure, you can like, you know, make more data centers that run YouTube or whatever. But like, there's kind of a

• 21:45John Coogan?

  Yeah.

• 21:46Jordi Hays?

  A narrow use case for chips.

• 21:47John Coogan?

  Yeah.

• 21:48Jordi Hays?

  Where power, you can do whatever.

• 21:49John Coogan?

  I wonder if you, yeah, yeah, at what point is there, is there some sort of like AI safety valve that's like, we need to regulate that company in South Korea that makes toilets that also makes films for semiconductors. If we can restrict them, then we can slow down the pace of AI progress, going really, really deep in the supply chain for, for safety reasons potentially. To summarize the events, Gavin Baker says, Dario made the most maximalist proposal of the weekend, embedded third-party evaluators, national regulatory regime for models beyond a certain capability ingredient threshold, a broad international regulatory pact between democracies, stricter limits on compute distillation for China, and then a different international regulatory regime that encompasses China.

• 22:34John Coogan?

  Before there's ever a national regulatory regime, he wants a Sherman Act waiver so that Anthropic can safely coordinate with OpenAI and other frontier labs without antitrust fears. To be frank, this latest proposal is much less maximalist than some of his prior proposals like policy on the AI exponential, where he advocated for an FAA for AI. Now people are talking about FINRA for AI, which is more non-governmental regulation, but industry focused. I believe he is sincere in his beliefs, and despite all the protestations, all of this would also probably be good for his business over the long term. Yeah, there's a, there's, there's a lot of tricks here where people, where something,

• 23:16John Coogan?

  if there are, if there are multiple quadrants of like actions you can take and it's like, it's either good or bad for your business, or it's good or bad for safety, you can land in the good for your business and good for safety quadrant, and everyone will accuse you of being cynical and doing it only because it's good for your business. And so

• 23:35Jordi Hays?

  Yeah.

• 23:36John Coogan?

  It gets really difficult to, to say, okay, yes, like, the thing that I'm advocating for is good for my business. Now, Rune had another take, which is like, no, if you're pacing the frontier, that's going to compress margins because everyone else is just going to catch up and it's going to become more oligopolistic. So if you hold, you know, like, yeah, there's this duopoly right now for the true frontier amongst OpenAI and Anthropic, but if you hold that constant, like, Watermelon from MSL is going to catch up, DeepMind is going to catch up, like, you're going to have three or four, Grok is going to train to that level, and so you're going to have four, five, six, seven really capable competitors. What was interesting is like, Ar Karazian was saying that AI spend declined a little bit in August, and that was mostly because of price cutting. It wasn't actually people using less AI.

• 24:21John Coogan?

  So it's not like people are pulling back on their use of AI, but there's more price competition, so OpenAI is discounting and people are being, we saw like the Fable adoption was a little weak, and a lot of it's like, hey, are we sure we want to use the million dollar model for checking the weather? Like, let's be a little bit more judicious about this. And so if you wind up with a, with a world where there's much more price competition, that could compress the frontier's margins, which is not good for business. So it doesn't really put you in that top quadrant that you have to be so cynical about. The interesting thing is that he said that he doesn't think that it's open source Chinese models that are actually putting pricing pressure on the frontier.

• 25:05John Coogan?

  It's more of the duopoly dynamic. And he, and I think that's because, and I think he sort of alluded to this, that there's just a lot of companies that are like, I am comfortable doing business with an OpenAI, an Anthropic, a Google, of course, something that's on ABS, something that's on Azure. Yes, I could just download the weights for DeepSeek, but I'm not really comfortable with that. I don't really want to deal with that. I don't want to deal with the scaling and uptime of that. And so, yes, there are APIs out there that are reasonable, but none of them are as mature as the, as the frontier labs, not in terms of the intelligence, but in terms of the actual, if I implement this in my business, will it reliably give me the right results? Is there high quality SLA? Will the service stay up? Will uptime be good, et cetera?

• 25:50John Coogan?

  So there's, there is a world where you could get to a place where this is bad for the frontier companies business-wise, and Sam has talked about that in an interview with Fortune, saying like, if it's bad for our business, like, we've, we have said to our investors at every step for like a decade that like, this is kind of a nonprofit, this is a, this is a, you know, there are a whole bunch of different ways in which this is not purely aligned to shareholder interests like other companies. I forget the actual term for the, the structure that both Anthropic and OpenAI

• 26:29Jordi Hays?

  PBC?

• 26:30John Coogan?

  PBCs, yeah, Public Benefit Corporation. So they, so there, so, so, so I think both Sam and Dario feel very confident about being able to go to their investors and say, hey, we're doing something that's gonna slow down revenue growth or tank margins or, you know, just reduce the market cap of the company, but we think it's the right thing to do, so deal with it, and you can't really sue us because you invested in a PBC. And, but no one's really giving them credit for that. Everyone thinks like, no, this is cynically what gets them to 10 trillion, this is what gets them to 10 trillion. And I don't know, maybe, maybe, maybe it is, but, but it definitely seems like, like the, the, if we're, if we're on the mid curve, you know, bell curve meme, like the dumb

• 27:13John Coogan?

  guy thing is like, slowing down is bad for business, right? Like, the mid curve is like, slowing down is actually good for business and the 4D chess and like, you don't want to be the best and have 100% market share. You want 20% market share because you let everyone catch up to you. Like, I, I'm not, I'm not super convinced of that, but, you know, there's plenty of people that are making that case online. Anyway, let me tell you about Cisco and then we'll bring in our next guest. Cisco, critical infrastructure for the AI era. Unlock seamless, real-time experiences and new value with Cisco. Niko, welcome to the show. Thank you so much for taking the time.

• 27:51Jordi Hays?

  What's happening?

• 27:52John Coogan?

  Come on down to the TBN UltraDome.

• 27:53Speaker 04

  Hello.

• 27:54Jordi Hays?

  What's happening? I thought that almost looked like some merch we would make.

• 27:58Speaker 04

  I know, I was trying to match the colors.

• 28:00Jordi Hays?

  Oh, you did it.

• 28:01John Coogan?

  Right in the background.

• 28:02Speaker 04

  Yeah.

• 28:03John Coogan?

  Introduce yourself. Give us, so, let's, let's, let's begin at the beginning. I want to hear the story of, of how you wound up in your current role, your mission, and then there's a million things we can talk about, the market and your strategy, but take us back to the beginning. Where'd you grow up?

• 28:19Speaker 04

  The beginning, my beginning?

• 28:20John Coogan?

  Yeah.

• 28:21Speaker 04

  I grew up in Germany.

• 28:22John Coogan?

  Okay.

• 28:23Speaker 04

  Yeah, south of Germany, small town, Tubingen. Beautiful, was not destroyed in the war.

• 28:25John Coogan?

  And Germany is in, in Europe, right?

• 28:27Speaker 04

  It is, yeah, just mid-east of the US.

• 28:31John Coogan?

  Yeah. Okay, got it. Yeah. My geography outside of the United States is rough.

• 28:35Speaker 04

  I can help you.

• 28:36John Coogan?

  Thank you. When did you come to the US?

• 28:38Speaker 04

  So I ended up doing an exchange here in upstate New York. So my junior year of high school, I ended up in a super small town, three and a half hours north of New York.

• 28:50John Coogan?

  Cool.

• 28:51Speaker 04

  And so that's when I first got to New York.

• 28:53John Coogan?

  Yeah.

• 28:54Speaker 04

  And I was like, I want to live here.

• 28:55John Coogan?

  Yeah.

• 28:56Speaker 04

  And so I started looking for

• 28:57Jordi Hays?

  That's gotta be like, going, going from small town in Germany, passing through New York City and going, going three hours north.

• 29:05Speaker 04

  Yeah.

• 29:06Jordi Hays?

  It's gotta be like the, such a trip.

• 29:08Speaker 04

  It's true.

• 29:09Jordi Hays?

  Because they're obviously, you know, entirely, you're like, I'm going to New York, and then you have this idea of New York in your mind, and then you end up, again, back in a tiny town.

• 29:16Speaker 04

  So I opened a letter from the organization that places you.

• 29:20Jordi Hays?

  Yeah.

• 29:21Speaker 04

  And it's like, you're going to New York? Kandor, New York. Like, where's Kandor, New York? And you look it up.

• 29:27Jordi Hays?

  Never heard of that, bro.

• 29:28Speaker 04

  It's small, but it was a great experience. And, and so the interesting part to that, though, is that, so I was in the middle of nowhere in the US, and then I also got to go to the middle of everything in the US. And so I had a really good exposure to both sides of the US, like kind of elitist coastal urban life, and also the, you know, small town living. So that was the first, first time I came here, then I went back, I did an internship here after school in New York, and then studied in Germany, Singapore. And during my studies, I started selling refurbished iPhones. So that's, so the iPhones first came out in like 2007, eight, and they were locked

• 30:10Speaker 04

  into a, into a contract in Germany, it was super expensive, so I bought a refurbished one and I started reselling them.

• 30:15John Coogan?

  Okay. Was that like jailbreaking them or unlocking them?

• 30:18Speaker 04

  Yeah, there was a tool called Red Snow.

• 30:20John Coogan?

  Okay, yeah. Yeah, and they could use on any carrier.

• 30:22Speaker 04

  Yes.

• 30:23John Coogan?

  Got it.

• 30:24Speaker 04

  Because it was locked in in the beginning.

• 30:25John Coogan?

  Yeah, yeah.

• 30:26Speaker 04

  Locked into like a two-year contract.

• 30:27John Coogan?

  Yeah, yeah.

• 30:28Speaker 04

  Very expensive. So, so that's, that's my first

• 30:30Jordi Hays?

  I remember all the names of like software like that, like Red Snow. It sounds so, it sounds so sketchy, but it was like the names of all that kind of like unlocking, jailbreaking, all they, all those names were

• 30:41Speaker 04

  Yeah, there was a pineapple one.

• 30:42Jordi Hays?

  Yeah, yeah.

• 30:44Speaker 04

  Yeah, so that was my first like foray into yeah, business, but like, you know, yeah, small internet entrepreneurship. And then I read about a group in Berlin that was really the pioneers of the German internet scene at the time. So everything happened a bit later in Europe, right? And so in like twenty ten, came across this firm in in Berlin. I just reached out to them cold. It was an incubator, so back in the day, they were building companies. And then they had a small six million euro fund on the side. And so they're like, why don't you come during your studies and work with us on this like small investment fund?

• 31:17Jordi Hays?

  Must have been a good cold email.

• 31:18Speaker 04

  I mean, it was, I don't, I'm not, I don't even remember. It was actually, I had, so this, it was important though, because I had a offer from a consulting firm that would have paid twice as much.

• 31:28Jordi Hays?

  Yeah.

• 31:28Speaker 04

  But I opted for the, you know, opportunity to go into startups, because that's where my interest was. And that led to this, you know, so it was really an important decision back then. And and they gave me a shot. I learned about venture. I then finished my studies. And when I came back from Singapore, which was also kind of an exchange, I ended up doing a again, sending an email to the same group, this guy Pavel, who was working there. And he offered me to come back because they decided to spin out the fund. And it became Point nine, which was the first institutional venture fund in Germany. As not, not in, in Berlin, there was another one in Munich. And and so I started working there straight out of school.

• 32:12Speaker 04

  So I just got lucky that like at the time, venture was not what it was. It was just the start of the European venture ecosystem.

• 32:17Jordi Hays?

  Yeah.

• 32:18Speaker 04

  And so I kind of fell into that. And then it was a super small firm. And it's also historically the best performing early stage firm in in Europe. So they did super well early on and I got a lot of responsibility. I was there for five years and they were originally focused on enterprise software, SaaS tools. They were early in Zendesk and Loom later on here in the U S.

• 32:40Jordi Hays?

  Really? So it wasn't just limited to Europe, you were investing all over.

• 32:44Speaker 04

  So we we called it Remote V C. So it's kind of, we were based there, but we were trying to look for the best things across the globe that had, you know, that were fitting our thesis. And then I was recruited by Insight Partners in twenty sixteen. I left to to join Insight and that that's when I moved to New York.

• 33:05John Coogan?

  That's a grind.

• 33:06Speaker 04

  Ten years ago. It was a very different than the small humble.

• 33:09John Coogan?

  It's like a hardcore culture, right? For venture, it's like you gotta be.

• 33:13Speaker 04

  Well, it's, yeah, it is. It is, it's just, you know, the way it works is that they built, they innovated this. So the founder of Insight, Jeff Horing, started the firm when he was twenty six.

• 33:21John Coogan?

  Yeah.

• 33:22Speaker 04

  Twenty million dollar fund. It's now a hundred billion dollars and he's still running it, right? And so.

• 33:28Speaker 04

  No, he's a, he's a legend.

• 33:29John Coogan?

  Yeah.

• 33:29Speaker 04

  And he, he ended up innovating on this outbound sourcing model.

• 33:34John Coogan?

  Yep.

• 33:34Speaker 04

  So they have analysts that are just cold calling. It was literally the phone in the beginning, now it's emails and everything.

• 33:40John Coogan?

  Sort of a price for every company in mind.

• 33:42Speaker 04

  Yeah, and discover every company.

• 33:44John Coogan?

  Yeah, they, yeah, they want to know everything.

• 33:45Speaker 04

  Exactly. Discover every company.

• 33:47John Coogan?

  Very interesting model.

• 33:47Speaker 04

  Yeah, it's, it makes sense and it still works.

• 33:49John Coogan?

  Yeah, really.

• 33:50Speaker 04

  So they scaled that and they bet on the same and on the right trend. So I was there and so I had learned that at Point nine, I had done some SaaS and I did that too. But I was always, because of this iPhone story, interested in consumer software. I was there when the App Store launched. And so some of my investments at both Point nine and at Insight were consumer mobile investments.

• 34:09John Coogan?

  Yes.

• 34:10Speaker 04

  And so I decided to leave Insight, I signed the separation, it was twenty eighteen that we agreed on everything, early twenty nineteen I left. And then I started working on Adjacent. And I guess what's somewhat unique at the time is that back then it was not normal to do it by yourself.

• 34:26John Coogan?

  Yeah.

• 34:26Speaker 04

  You know, like that solo G P was not a thing.

• 34:28John Coogan?

  Yeah.

• 34:29Speaker 04

  And I didn't opt in to be.

• 34:30Jordi Hays?

  Two years later, it was like the main, like it was the main thing that people were talking about.

• 34:34Speaker 04

  Yeah, and and today, I think last year, the majority of new funds were solo G P funds.

• 34:42Jordi Hays?

  Yeah.

• 34:42Speaker 04

  Right, so it became a real thing. And in fact, that's also one of the things that I try to support now by, I have invested in a lot of those funds.

• 34:52Jordi Hays?

  Yeah.

• 34:52Speaker 04

  Two thousands or so, and also anchored a first solo G P fund now with Adjacent. So I kind of like accidentally fell into this, started Adjacent, but then also trying to build this kind of rebel alliance.

• 35:03John Coogan?

  What was the infrastructure like when you started as a solo G P in, is twenty eighteen, twenty nineteen?

• 35:08Speaker 04

  Nineteen.

• 35:09John Coogan?

  Because there were some people that were using Angel List for certain S P Vs and and they were rolling funds. And there was like, there were some tools that you could use, but did fractional back offices exist? Or did you sort of have to roll your own solutions to certain things like, uh, what was actually required?

• 35:27Speaker 04

  So it just started that Angel List were offering services, Carta starting as well.

• 35:32John Coogan?

  Yeah.

• 35:32Speaker 04

  And the the big difference there was that I was actually, you know, looking at what what makes sense for the structure. I knew I wanted to be in New York, but I also was looking at European structures and the infrastructure in Europe is way behind.

• 35:44John Coogan?

  Sure.

• 35:44Speaker 04

  The U S. So I opted of doing it in the U S and I didn't go for the services. And the reason for that was mostly that I didn't feel like they were institutional grade yet. And because I wanted to have institutional investors and there was like limited flexibility. I think that all changed now, which makes it much easier to start.

• 36:00John Coogan?

  Yeah.

• 36:00Speaker 04

  But at the time, it just started. Yeah.

• 36:04John Coogan?

  So basically, just like, yeah, just hiring law firms and accounting firms, like you're a bigger firm, right?

• 36:09Speaker 04

  You have a fund admin, which is easy. Then you have, you have audit as a firm, separate firm. And then you, now, I mean, now really what supercharges is A I now.

• 36:20John Coogan?

  Sure.

• 36:20Speaker 04

  Because you can do so much more.

• 36:22John Coogan?

  Yep.

• 36:22Speaker 04

  You can automate things, you have agents, but also research, like diligence, like sourcing.

• 36:26Jordi Hays?

  Yeah, I was gonna ask, how, at what point does, uh, does like Insights' initial strategy just become fully democratized? Where like there's out of the box. Obviously, if you're doing this yourself, you're always going to be able to find different edges and things like that. But if it feels like you might have access to like a comparable level of understanding of the market with like one person.

• 36:51Speaker 04

  Yeah, I I'm not sure. I I think that certainly it gets easier, but what they're really good at is discovering things when it's still relatively unknown, right? So like from the outside, you don't know what a stealth or new company is doing. Once there's signal and press and more data, then the A I picks it up.

• 37:07Jordi Hays?

  Yeah.

• 37:08Speaker 04

  But I think this, like this broad sourcing still makes sense. And then the other important aspect to it, which actually works for me too, but is that the analysts are not just sourcing, they're also relationship building.

• 37:18Jordi Hays?

  Yeah.

• 37:18Speaker 04

  So they're reaching out to someone and you still want a human to human interaction with a founder, because they don't want to work with a computer. Not yet, at least. And so you have this relationship and you stay in touch with them over two, three years and then you invest. And I think that will still work for them.

• 37:33John Coogan?

  What was the L P strategy for actually raising the initial fund?

• 37:37Speaker 04

  So, yeah.

• 37:38John Coogan?

  Straight shots, endowments, funds, high net worth individuals, what were you thinking, what worked?

• 37:44Speaker 04

  So my, the first close was hard. The whole fundraiser was hard, it was eighteen, eighteen months to get the first fund off. And what made it harder was Covid started at the same time.

• 37:57John Coogan?

  Yeah.

• 37:58Speaker 04

  And my now wife got pregnant with our first kid. So it was just like, it was, it was an intense eighteen months.

• 38:03John Coogan?

  Yeah.

• 38:03Speaker 04

  And but what I did is essentially, I, the first close, I started and going back to the founders that I had invested in that had already proven and made money. So the founder of Revolut, Nick, was one of my first L Ps.

• 38:17John Coogan?

  Yeah, that's great.

• 38:18Speaker 04

  The founders of Com, which we had invested in with with Insight and and then a bunch of G Ps that the founders of Point nine where I started working, Jeff Horing related invested as well. And and then I had friendly, friendly funds like Thrive and Founders Fund that actually helped me with the first fund.

• 38:34John Coogan?

  That's great.

• 38:34Speaker 04

  And so that was the first close. And then the first family office came in.

• 38:38John Coogan?

  Yeah.

• 38:39Speaker 04

  Which was S E S, to give them credit, they were also very early in in both Thrive and Founders Fund. That's how the relationship started. And then based on the first ten million dollar first close, I just started investing. And the second investment I did was Speechify, which ended up doing very well.

• 38:55John Coogan?

  I love Speechify.

• 38:56Speaker 04

  Yeah, Cliff is a character.

• 38:58John Coogan?

  He's amazing, yeah.

• 38:59Speaker 04

  And so with some proof that I could also function by myself, I then went to the institutions and then was able to get a forty million dollar first fund together.

• 39:09John Coogan?

  Sure.

• 39:10Speaker 04

  And then since then, I've been

• 39:14Speaker 04

  pretty consistently increasing it. So I'm, I just started investing out of Fund four now with, in this year. But I've been like kind of pacing it in some ways. Before it was cool, in the, in the growth from like one, two, three, four, adding roughly one L P per fund.

• 39:31John Coogan?

  Sure.

• 39:31Jordi Hays?

  Nice.

• 39:31Speaker 04

  And that has, I mean, gotten somewhat easier because there's more proof. We just had Bending Spoons go public.

• 39:38Jordi Hays?

  Yeah, yeah, yeah. It was the first. Talk about, talk about that. Uh, how did that initial investment come together? And was that always, did that always feel like on, you're more thesis driven than than most V C's? I would say in general, like a lot of, like V C's will say they're thesis driven, but they have like eight, eight active, you know, thesis.

• 40:02John Coogan?

  I thought thesis was buy low, sell high.

• 40:04Jordi Hays?

  That's, that one always works.

• 40:05John Coogan?

  That's a good thesis.

• 40:06Jordi Hays?

  Old, reliable.

• 40:07Speaker 04

  Well, I don't know, if you're in San Francisco today, that's not what they do.

• 40:10John Coogan?

  Buy high, sell.

• 40:11Speaker 04

  Bending Spoons buys for ten percent of the peak market cap, right? Who knows where we end up here.

• 40:17Jordi Hays?

  But yeah, how did that initially come together and like what did you see?

• 40:21Speaker 04

  Yeah, so the, so I, when I started Adjacent, and the thesis has also evolved since then. We can talk about that more, what like led to other investments. And but initially, I, so in twenty nineteen, twenty twenty, then the Covid time, if you remember, there was this crazy SaaS explosion, right? Multiples went up, everybody went crazy.

• 40:40John Coogan?

  Never going back to the office.

• 40:41Speaker 04

  No, it's all, all, all cloud, right? And crypto, actually. So those were the two things, so all the new funds were doing the same.

• 40:49John Coogan?

  Yep.

• 40:49Speaker 04

  And because I had success in consumer, I ended up deciding to to start a fund initially focused on consumer and especially consumer subscription companies. And that was just essentially a transfer from the SaaS and then seeing the App Store and subscription launch on the App Store and like being close to some of the first investments that did well there.

• 41:07John Coogan?

  Yeah.

• 41:07Speaker 04

  So I was quite differentiated in that. So the first fund and the second fund to the most degree were very focused on consumer subscription. There's one problem though with these consumer subscription companies. I mean, there's advantages, disadvantages, but one of the problems as opposed to SaaS is that they're much more churny, right? So at one point, depending on how deep the market is, you'll hit a ceiling, right? And this can be at millions, tens of millions, hundreds of millions. But if you still wanna, if you wanna go for big outcomes, you still need to grow at a really high clip at hundreds of billions of revenue, right? And and Chat G P T to some extent has done that, right? In the beginning, seventy five percent of their revenue was prosumer, consumer.

• 41:43John Coogan?

  Yeah, yeah.

• 41:43Speaker 04

  So the thesis was good, but I'm not in Open A I, which sucks. But it was just a different game and I I ended up. Picking the right trend, but also wanting to have a little bit of um like a hedge against it in some ways, because you could see that these companies kind of get to revenue relatively quickly, pretty cash efficient. They need much less people and OpEx and distribution costs than a SaaS company in terms of headcount. And so they were like a tens of millions or hundreds of millions, but very profitable. So we already had this thesis of like, there's actually a really big play here to aggregate companies. And because if you can synergies. Yeah. And that we I was actually had a an investment in a company called Blinkist, which back in the day, I don't know if you remember.

• 42:26John Coogan?

  Yeah, short books.

• 42:27Speaker 04

  Yes, exactly. Which was very innovative at the time.

• 42:30John Coogan?

  And subscription based, yeah.

• 42:31Speaker 04

  Subscription basis was one of our inside investments, and I knew these guys from Berlin since point nine times. And so one of the founders, Niklas, actually came as an entrepreneur in residence to Jason for a while. And we were thinking about incubating a company that did this. And then I was on a webinar with Luca in two thousand and twenty. And I was like, I think we should just do that. He's amazing. And he was already like doing it. And this was pre chat GPT. And then I think AI also helped them a lot in actually building the synergies and the transformation engine that actually then makes.

• 43:03Jordi Hays?

  Well, it also helps them by, you know, knocking ninety percent off of the the market caps of some of these other companies.

• 43:10Speaker 04

  Always some luck involved.

• 43:12Jordi Hays?

  Yeah.

• 43:13Speaker 04

  In that. Yeah. So that led to Benning Spoons.

• 43:16Jordi Hays?

  And then when did you actually, when did you do Aura?

• 43:19Speaker 04

  So I want to, I heard you say this in the beginning, and I just want to make sure that I I'm I did invest in Aura, but this was around the time of the first close.

• 43:26Jordi Hays?

  Yeah.

• 43:27Speaker 04

  So I couldn't, I didn't have a fund yet. And it was around that was like, I don't know if I should even do that with the first ten million dollar first close.

• 43:34Jordi Hays?

  Yeah.

• 43:35Speaker 04

  And so I ended up investing personally with a group of friends in an SPV. It was actually the and the friends of mine that I did this with is was the team that I was leading at Insight. And they left, also started a fund called Left Lane.

• 43:48John Coogan?

  Oh, yeah.

• 43:49Speaker 04

  This guy Harley Miller. Yeah. And so we did it together.

• 43:51John Coogan?

  Cool.

• 43:52Jordi Hays?

  Nice.

• 43:52Speaker 04

  Back then, yeah.

• 43:53John Coogan?

  What was the initial portfolio construction thesis for that ten million dollar fund?

• 43:59Speaker 04

  Well, one last thing on Aura is just interesting, I think, also that. So the reason we understood Aura back then, even though it was a hardware device then with no subscription, was that we had done calm and calm had inflicted by launching sleep stories. So a lot of the growth actually came from people not wanting to meditate, but needing to calm down before sleeping.

• 44:18John Coogan?

  Oh, yeah.

• 44:18Speaker 04

  Because sleeping was such a big problem. It still is to a large extent, right, in the Western world. It's like the foundation of your health and psyche and everything. And so we we did Aura, and then we were pitching also the move to subscription. And hardware and subscription worked, and that then also to this hardware subscription thesis, which led to Board, Backbone, Traktive, a company we sold also this year. And so that was that.

• 44:40John Coogan?

  What is that company, Traktive?

• 44:42Speaker 04

  Yeah, Traktive was the it was probably the biggest exit in Austria ever. So it's a small, small town in Austria. And they built a tracking device for pets.

• 44:53John Coogan?

  Oh, okay.

• 44:53Speaker 04

  So you put it on the color. So Aura for pets in some ways, but plus location. So if you're in a remote area, you know where your dog is, you can like call them back, and you see them on the map, you see how they move, how they sleep, and things like that. Yeah, it's cool. And actually, who bought it? Benning Spoons.

• 45:07John Coogan?

  No way.

• 45:07Speaker 04

  Yeah. It's like von von von von.

• 45:10John Coogan?

  Yeah.

• 45:10Jordi Hays?

  Nice.

• 45:10Speaker 04

  Yeah.

• 45:12Jordi Hays?

  It's great. You're monetizing both sides.

• 45:14John Coogan?

  Yeah.

• 45:14Speaker 04

  Yeah.

• 45:14John Coogan?

  And subscriptions are fascinating, because your pet doesn't come to you and say, hey, I want I want a churn from this dog food, you know?

• 45:22Speaker 04

  Exactly.

• 45:23John Coogan?

  But so.

• 45:24Speaker 04

  No, this is but this is like, this is literally.

• 45:27John Coogan?

  Well, the the the Blue Apron, you know, Blue Apron was like a subscription food company. And eventually, people would just be like, I want to try something different. Like, I'm just sick of this.

• 45:35Speaker 04

  That's why Farmer's Dogs works.

• 45:37John Coogan?

  Yeah, yeah, yeah, exactly.

• 45:38Speaker 04

  Right? And Traktive, the same, because actually, the average subscription was years.

• 45:41John Coogan?

  Yeah, exactly.

• 45:42Speaker 04

  By purchasing it.

• 45:42John Coogan?

  Yeah. Whereas people might even take off a Fitbit or something and be like, I'm out of this fat, I'm under the womb, I'm under the move around a little bit more.

• 45:49Jordi Hays?

  So so.

• 45:50John Coogan?

  It's hard to get spooky.

• 45:52Jordi Hays?

  The thesis has has expanded, but I want to get your updated updated kind of point of view on consumer right now. I feel like a year ago, people were really pounding the table, being like, now is the time for consumer.

• 46:05Speaker 04

  Yeah.

• 46:06Jordi Hays?

  Consumer AI. And yet, if you look at the iPhone charts, it's been the still like the time of of language models, right? So like, most of the new apps that maybe weren't in there five years ago are are various chat apps. And then the other sort of popular apps that you're seeing are like short AI drama slop stories, which is.

• 46:31John Coogan?

  Consumer.

• 46:32Jordi Hays?

  Which is, yeah, which is consumer, but but maybe not the explosion of of different types of of applications that I think a lot of people expected. And I think part of that, my my point of view is like, the chat apps can just do so much. Like, there's so much you can maybe, maybe the example I use that's not super relatable for most people is like checking the surf. Like, if I want to get an understanding of like swell and tide and all these things, I actually don't need a net new app for that. I don't need like the AI for checking the surf app. I just need like chat GPT or whatever someone's preferred LM. So how are you thinking about the the overall landscape, especially right

• 47:15Jordi Hays?

  now, because you have a new, you know, horse race with with instinct and Muse? And so it feels like the we didn't, we didn't have the end of history with consumer.

• 47:25Speaker 04

  Yeah.

• 47:25Jordi Hays?

  Yet, but.

• 47:26Speaker 04

  Yeah, I mean, it's it's it is definitely true that the world changed after chat GPT, right? So like twenty one launch, and then the coding help. It's actually so. So one interesting trend is that the number of new apps, one of the other like proxy investments I did with Fund One is a company called Revenue Cat.

• 47:44Jordi Hays?

  Yeah.

• 47:45Speaker 04

  Which is powering sixty percent of the new launched apps and their subscriptions today. And through that, we can see it's just like an immense increase in new apps that are being launched.

• 47:54Jordi Hays?

  Yeah.

• 47:54Speaker 04

  So for venture, for me, I actually had to move on somewhat from consumer at the time. I think there will be new applications in consumer plus AI. And I'll talk to that. But it definitely it decreased the barrier for new things significantly, right? So the ceiling, if you think of just like theoretically, the competition increases significantly because so many more new apps. So getting to a venture scale outcome is even more even harder, right?

• 48:18Jordi Hays?

  Yeah.

• 48:18Speaker 04

  So even though we have more niches served, the venture outcomes are more difficult, right? So I think that that like, if it's very simple, it doesn't make sense. And there is consumer things like I invested in popcorn, which is which is a next gen telco. So they're building their own core infrastructure for telco. They have an eSIM, you download an app, you get the international number. But also, they have AI features integrated. So you can use a call assistant and stuff like that. So I think if the technology goes deeper, more differentiated.

• 48:44John Coogan?

  Never put a phone call through to me ever.

• 48:47Speaker 04

  No.

• 48:48John Coogan?

  That's basically what I want.

• 48:49Speaker 04

  I have an assistant.

• 48:50John Coogan?

  Yeah.

• 48:50Speaker 04

  Jenny.

• 48:51John Coogan?

  Springs everything.

• 48:51Speaker 04

  Calls, like, instead of voicemail, she picks up, what is this about?

• 48:54John Coogan?

  What is this about?

• 48:55Speaker 04

  Yeah. And then if it makes sense.

• 48:56John Coogan?

  Better have a good reason, because I'm not putting you through. I get so many spam calls. My phone's always like, do not disturb.

• 49:02Speaker 04

  Exactly. I don't, I don't, I don't have, I don't.

• 49:04Jordi Hays?

  No, that's so. So the most annoying thing to me is someone calls you, but they don't leave a voicemail. Like, I don't really want a voicemail. But if I get a call that I'm not expecting, and then there's nothing, I'm just kind of wondering then. But I but I don't want to pick up the phone. I don't want to take a random call.

• 49:19John Coogan?

  Do you remember those spam calls that you'd get where it would play the Chinese music in the background? And then you'd hear Chinese, like, you have a pitch for something? It was like a scam call. But they specifically put like Chinese music in the background? You ever got this?

• 49:32Jordi Hays?

  No.

• 49:33Speaker 04

  No.

• 49:35Speaker 04

  Where did you sign up?

• 49:37John Coogan?

  My phone goes everywhere, because I've like started businesses, and my phone numbers leaked all the time through like customer service and stuff. So I always have gotten like the weirdest spam calls ever. But it was a fun one.

• 49:48Speaker 04

  Yeah. So I have now one good number that's my spam number.

• 49:50John Coogan?

  Yeah.

• 49:51Speaker 04

  That I use on the internet for two.

• 49:53John Coogan?

  I need this.

• 49:53Speaker 04

  Autification. And then I have my popcorn number, which nobody has except real people.

• 49:56John Coogan?

  That's good.

• 49:56Speaker 04

  You know?

• 49:57John Coogan?

  That for sure.

• 49:58Speaker 04

  Um, anyways, I do think there's a new era coming.

• 50:01John Coogan?

  Yeah.

• 50:02Speaker 04

  Which instinct, I mean, there's just like a lot of instinct policy. Like, there's companies that are now doing things that are prosumer consumer that are personal agents.

• 50:11Jordi Hays?

  Yeah.

• 50:11Speaker 04

  And I think I do expect that there will be a lot of things that work there. But also, it's very difficult today to to understand what of that will be eaten by the labs, right? So how vertical can it be? And then also, you have Meta playing for it, right? Like, the problem, essentially, it's just, it's so crowded, and so many big companies are playing for that, that for me, that wants to go in early, and not at five hundred million or a billion dollar valuation, it's very difficult for me to play there right now, you know?

• 50:37John Coogan?

  And there's also like plenty of scaled unicorn, deck of corn companies with founders who are live players, maybe reengaged. And they are monitoring the model releases on a daily basis and saying, I'm going to implement this on day one, have a team that's sprinting to implement this feature so that there's not an opportunity for my SaaS company plus AI getting funded.

• 51:01Speaker 04

  Yes.

• 51:01John Coogan?

  Because I'm doing it.

• 51:02Speaker 04

  Yeah.

• 51:02John Coogan?

  You know, on day one.

• 51:03Speaker 04

  Yeah. And I think like Muse is a great example of that, right? Like, I think the the speed at which Meta moved on this personal agent trend and launched Muse is really impressive.

• 51:11Jordi Hays?

  It's still still unclear to me that what when they actually started working on Muse, because. It feels like, I mean, I'm sure they tried to buy Instinct, but that doesn't necessarily mean they weren't working on some.

• 51:24John Coogan?

  I think they've been working for like six months. Like Matt Freeman's been there for almost a year, maybe more. And.

• 51:30Jordi Hays?

  But, but, but the level to which Alex has just been like taking direct shots at Instinct all the time on the timeline.

• 51:37John Coogan?

  Does he have a nickname for it?

• 51:39Jordi Hays?

  What?

• 51:39John Coogan?

  Does he have a nickname for it?

• 51:40Jordi Hays?

  Oh, yeah, insect.

• 51:41John Coogan?

  Oh, really?

• 51:42Jordi Hays?

  He called it, yeah, yeah. I wasn't sure if that was a typo or intentional.

• 51:45John Coogan?

  Yeah.

• 51:45Jordi Hays?

  Um, but it, but it rare to see a trillion dollar company like heckling.

• 51:50John Coogan?

  Yeah.

• 51:50Jordi Hays?

  And while cloning a, like a startup that's 11 months old.

• 51:54John Coogan?

  Yeah, they didn't really do that with TikTok or Snapchat. They're pretty quiet. They're just like, we're excited to launch stories. We're not going to say anything about.

• 52:02Jordi Hays?

  Well, yeah, no, no. In that case, it was like Evan would be kind of like taking little shots.

• 52:05John Coogan?

  Evan was the smug one. Yeah, yeah.

• 52:06Jordi Hays?

  And that's what you'd expect, right? You're like the.

• 52:08John Coogan?

  Totally. The underdog takes the shot.

• 52:10Jordi Hays?

  Takes a shot, but this time you're a trillion dollar.

• 52:13John Coogan?

  Punching down.

• 52:14Jordi Hays?

  Yeah.

• 52:15John Coogan?

  I don't know.

• 52:16Speaker 04

  Yeah. Well, that's the, the reason why the, the, the stock market has been driven by a lot of these companies that are just still compounding.

• 52:22John Coogan?

  Yeah.

• 52:23Speaker 04

  Same with Alphabet, right? It's like, it's just, it's been, it's been hard for VC to actually like benchmark themselves because the markets aren't so great because all the tech companies are just doing amazing things.

• 52:32Jordi Hays?

  How, how are you thinking of, of investing in, in Europe considering that, uh, there were some, some proposal I just saw that was saying like Europe basically needs to spend hundreds of billions of euros to try to sort of quote unquote, catch up in AI. I have a buddy, um, uh, from Austria and I was, uh, he's working for an American company right now, but I was like, what are you doing? Not just like starting, uh, like a NeoCloud right now. I was like, I know people in the US that are dumb as rocks and they're gonna be, they're gonna be billionaires. Because like they just like picked a hard problem with an exceptional amount of demand. And I've just been working on it for years and I feel like Europe's lagging a little bit and you just roll up your sleeves.

• 53:17John Coogan?

  You're dumb as rocks. You can do this.

• 53:19Jordi Hays?

  No, no, the point, the point was like you're, you seem like very, very smart and capable. Um, and, uh, and like if you just focus on figuring out how to get, uh, you know, a powered shell and some chips, you're probably going to be able to figure out some, some demand. But, um, how are you, how are you thinking about?

• 53:37Speaker 04

  Well, I, I look, if in my career, Europe has been super important. Revolut, Bending Spoons, Aura, right? Like those are companies that are really important, but also they oftentimes were in the category that was, was not yet very hot in the US.

• 53:51Jordi Hays?

  Sure.

• 53:51Speaker 04

  You know, so if like, it's, it's not easy. I mean, they, it is true that Europe, we have not done enough to support innovation. And this is everything from regulation to, to bureaucracy and like, um, labor laws. Like there's a lot of problems that like startups are tied into the same regimes as big established companies. So that doesn't allow us to move as fast, right? And that's a problem and I hope that changes. And, but I do think Europe has amazing talent and Europe has also the ability to build new things. AI completely missed it, um, probably as a consequence of having already not done as well in software and the infrastructure built out that's required to actually do this well.

• 54:26John Coogan?

  I mean, just pattern matching on the last cycle, it's, it seems important that Europe never got European Facebook, but Europe did get Spotify, which, which was.

• 54:38Speaker 04

  Yes.

• 54:39John Coogan?

  Which was built on top of Facebook and benefited from the Facebook network and algorithm, but it wasn't a direct clone because.

• 54:45Speaker 04

  Exactly.

• 54:46John Coogan?

  And, and when I see these things where it's like Europe needs its own LLM, I'm not entirely sure about that. I'm not entirely, I'm not entirely sure. Like if you're going to do China and you're going to do firewall, then you get the Chinese Google, the Chinese Facebook. Europe hasn't gone far enough to actually, you know, truly create a, uh, an area where you could have a European Google and make it so hard for Google that they get kicked out and then European Google wins. But you can go and do a Spotify, which is an actually new idea.

• 55:15Speaker 04

  Yes.

• 55:15John Coogan?

  Wins and is not directly competitive, actually, actually very compatible with Facebook. They were, you know, obviously a lot of investors in common and stuff.

• 55:24Speaker 04

  Yeah, I think it's very hard to catch up in, in, in, in AI, hopefully will to some extent. But there's also like energy and defense, like we had dependencies for too long.

• 55:34John Coogan?

  Yeah, for some of those like Helsing and stuff, you can see that being a clear line. But, but when it comes to just like global innovation, like running your own race seems to make a ton of sense.

• 55:43Speaker 04

  It should be differentiated into their own strengths.

• 55:45John Coogan?

  Yes, exactly.

• 55:46Speaker 04

  And so, and I think that will keep going and we, we started later, right? Like there's still like, we have Spotify soon, we have a Revolut, we have, but like those companies, it, it takes some time to trickle down.

• 55:57John Coogan?

  Yeah.

• 55:57Speaker 04

  And so it's important that like Bending Spoon says, we're an Italian company. We're listed in the US because that's where the markets are, right? But like, and we acquire companies in the US, but like we're an Italian company, right? And like, I think those, like that, that ecosystem, the same with Daniel Ek, he's doing a lot now with your material to like support companies, Helsing and Niko and stuff in Europe. And I, I think that is just like, hopefully with time that also works.

• 56:18John Coogan?

  Do you spend any time in Estonia, um, birthplace of Skype?

• 56:22Speaker 04

  Um, I, well, he, yeah, so, um, I, I don't. Um, I have one company that is actually a Ukrainian defense company and they're based there. So that's become a bit of a defense hub in Estonia, um, for that. Um, but I think the, the, the original founder of, um, Kazaa has built up, um, he, he was one of the first investors in Atropic.

• 56:44John Coogan?

  Yeah.

• 56:44Speaker 04

  Back then and stuff. So there's like also, there is a lot going on there. It's just like not one of my core geographies so far.

• 56:49Jordi Hays?

  What do you think about the, the disconnect between what Bending Spoons will currently pay for a software business and what VCs will pay to invest in a potentially future Bending Spoons portfolio company?

• 57:04Speaker 04

  I mean, I, I, I would not be surprised if Bending Spoons buys a lot of the hype AI companies.

• 57:11Jordi Hays?

  Yeah, yeah, yeah.

• 57:11Speaker 04

  Yeah.

• 57:12Jordi Hays?

  No, and I, I've just been.

• 57:13Speaker 04

  For the same price.

• 57:13Jordi Hays?

  I've been, yeah, yeah. No, I, I, I feel very, very strongly that that will happen. Uh, even though the companies have great teams, they're growing revenue super quickly. But it's just extremely notable that when you look at some of these software businesses and you look at, I see, you know, in some of these acquisitions, you can imagine that Bending Spoons was like the real, only serious like bidder for some of these companies and so they get to set their price. And so two things need to happen. One, Bending Spoons thesis plays out and, and people sort of globally realize, hey, we should have been like more comfortable with the risk associated with this, buying a software company at like three times revenue is like

• 57:56Jordi Hays?

  kind of could be stealing it. So if their thesis plays out, there becomes more buyers like Bending Spoons, right? Cause there's plenty of capital.

• 58:04Speaker 04

  Yeah.

• 58:05Jordi Hays?

  That could help prices come up, but the alternate, you know, that it feels like the most likely scenario is like we get these companies today where I look at them and you'll have a company, you know, a hundred million dollars of revenue, trading it at, in the billions. And you just see like this company is, you know, how many more of these sort of like hype?

• 58:26Speaker 04

  Yeah. I mean, it, it like, since VC works in a way that it's very foremost driven, FOMO driven, consensus driven. Everybody thinks everything is going to be very big. And then we have these hype cycles where I, I'm not saying AI is a hype. Obviously this technology is super powerful and it will change the world, is changing the world. And, but with that always comes a lot of money chasing things that the Luna turn out, right? Most of the venture bets do not turn out and they are orphaned at one point, right? The founders move on, the VC moves on, people just want to have some money back to invest into the next hot thing.

• 59:00Jordi Hays?

  Yeah.

• 59:00Speaker 04

  Right? And that's what the core insight is that's driving the success of a company like Bending Spoons.

• 59:07Jordi Hays?

  Yeah. Will be interesting.

• 59:09Speaker 04

  Yes.

• 59:10Jordi Hays?

  But it, but it, but it's notable that like, it's not like there were the wave of Bending Spoons big high profile acquisitions was like five years ago and now we're doing it again. It's like, all these things are getting priced now. Wow, we're doing it all again in the same present moment. And it's like.

• 59:25Speaker 04

  Repeats, the cycles repeat.

• 59:27Jordi Hays?

  It's repeating in real time.

• 59:28Speaker 04

  Yeah.

• 59:29Jordi Hays?

  Why, uh, what brought you to LA?

• 59:31Speaker 04

  Well, okay, last, uh, last question here. Um, no, I'm happy to keep on.

• 59:35Jordi Hays?

  No, I wish we had more time.

• 59:36Speaker 04

  No, I know. Um, I am here, uh, so one of the first like break, breaking away from the thesis was, um, a company called Inversion Space that is here in, in LA. Um, they're doing hypersonic delivery from space. So they partnered with Unreal on the Golden Dome. They just did a contract with NASA also. So I'm here to, to see them.

• 59:55Jordi Hays?

  Amazing.

• 59:56Speaker 04

  And then, um, one of the funds, um, that I like a lot here in, in San Francisco, Kantos. Um, Ian, you had Ian on. Yeah, yeah. So I'm a small LP there and, and he's hosting, uh, an event on Wednesday. So I'm there for that.

• 1:00:07Jordi Hays?

  Great. Awesome. Well, thank you so much for coming by.

• 1:00:10John Coogan?

  Thanks so much for coming on. We'll talk to you soon. Let me tell you about Railway. Railway is the all in one intelligent cloud provider. Use your favorite agency to deploy web apps, servers, databases and more. While Railway automatically takes care of scaling, monitoring and security. Scott, thank you so much for taking the time to come on down to the TVP in Ultra Dome. Uh, I would love to start with an introduction on yourself, but also, uh, the, just the story of Scout Motors. It's a fascinating company, goes back decades if I'm not misinformed.

• 1:00:39Speaker 05

  The sixties, yeah.

• 1:00:40John Coogan?

  Tell me the story, yeah, of, of, of both the company and, and how you got involved and where you're going next.

• 1:00:46Speaker 05

  Wonderful. I mean, uh, I'll start with myself.

• 1:00:48John Coogan?

  Please.

• 1:00:48Speaker 05

  I think where it starts with me of course is New York, uh, the automotive business. Obviously with my last name, I have a Irish background. My family is a classic, uh, American tale.

• 1:00:58John Coogan?

  Yeah.

• 1:00:58Speaker 05

  They came here with a suitcase. They came to Ellis Island and my dad was in Brooklyn. My mom was in Rockaway and they wanted to make their way in the world.

• 1:01:05John Coogan?

  That's amazing.

• 1:01:06Speaker 05

  And of course, uh, it brings me here to, uh, here to today.

• 1:01:09John Coogan?

  Yeah.

• 1:01:09Speaker 05

  I think if you look at Scout Motors, how it all came about, I think first and foremost, as you know, it's a iconic American brand. Basically invented the SUV segment, invented a lot of these things back in the 1960s. I think what happened to Scout is exactly what happened to America in the 1970s. So high inflation. Uh, stopped making things, outsourced a lot of things, had troublesome labor relations, high inflation on that. And this American dream, this American icon went away. And how it came back to life, I think it's sort of three things came together. I think first and foremost was let's say the business necessity. Uh, the Volkswagen group at the time said, how can we get more successful in America?

• 1:01:51John Coogan?

  Yeah.

• 1:01:51Speaker 05

  And the way to be successful in America is to go after these profit pools where the trucks and rugged SUVs are. And of course they had purchased a company called Navistar.

• 1:02:00John Coogan?

  Yep.

• 1:02:01Speaker 05

  Navistar had the heavy truck business of international. Of course they had the rights to Scout.

• 1:02:05John Coogan?

  Yep.

• 1:02:05Speaker 05

  And there came the genesis of this idea. Could we bring back this magical icon with the backing of a company that knows exactly how to make things and get good cost and bring it back to life with a clean sheet? And, and that was the premise.

• 1:02:19John Coogan?

  Yeah.

• 1:02:19Speaker 05

  And that was four years ago. We had one employee and a couple of PowerPoint slides. And now fast forward, we have 1,600 employees. We're industrializing a factory in Blythood, South Carolina. We're going to show you a pretty cool prototype car behind me in a little bit and, uh, and here we are. I think the other thing that's important to look at is sort of the softer side of the thing. And for me personally, I think a lot of us during COVID, I drove across the country with my family. When you drive across the country, right? You go to Ohio, you go through Pennsylvania, you go through Indiana, you see some of these manufacturing towns and you do have to ask yourself, what happened?

• 1:02:57John Coogan?

  Yeah.

• 1:02:57Speaker 05

  Why is this?

• 1:02:58John Coogan?

  Yeah.

• 1:02:58Speaker 05

  I think at the same time, we saw a lot of the geopolitical environment with Tavas and the resurgency of saying, let's build things again. Let's do things again.

• 1:03:07John Coogan?

  Yeah.

• 1:03:08Speaker 05

  And then the other final sort of piece of the puzzle is Scout was a super cool, glorious icon. It's like, why do we let these things go out of business? Why do we let these things fade away? Why don't we do it right? And you put it all together and we're here at this magical moment doing something difficult for sure, but doing something really cool. So that's the background in a nutshell.

• 1:03:28John Coogan?

  Yeah, yeah. I mean, the idea of reindustrialization, making cars in America today feels like there's a ton of tailwinds, but 2022 is a different era. Is that a lot of luck just being in the right place in the right? Because when I think about all the tariffs and everything, I'm just like, oh, this is a win for Scout. There's another win for Scout. And I mean, we were, we were watching the president talk about AI. The, the, literally the question right before was about making cars in America.

• 1:03:57Speaker 05

  Yeah.

• 1:03:58John Coogan?

  And so there's a lot of positive economic forces that are working. Was the plan that this was, this was coming and that there would be more reindustrialization movement in the future regardless of who is in the Oval Office? Or was this just like a lucky break that happened down the road?

• 1:04:18Speaker 05

  A lot of luck. We're profound geniuses. We looked into the crystal ball and we knew absolutely everything was gonna happen. No, I think there was a, let's say, movement, sort of gentle drumbeat, if you were listening. You saw the transition, let's say, from NAFTA to USMCA.

• 1:04:35John Coogan?

  Sure.

• 1:04:35Speaker 05

  And clearly you can see where that was setting. That was the horse back in 2016.

• 1:04:39John Coogan?

  Sure, sure.

• 1:04:40Speaker 05

  You also knew from COVID that supply chains were becoming, let's say, tenuous.

• 1:04:44John Coogan?

  Yep.

• 1:04:45Speaker 05

  For lack of a better term. It was difficult. And then you knew in this segment, if you look at this segment, majority of this segment says, I want to buy things that are American. I want to buy things that are made in America. So Scout's whole premise was always going to be that. But based on that, of course, a lot of other things came their way, from tariffs to geopolitics, everything. And no, so I think it was a good core idea. It's a phenomenal core idea that's gotten more.

• 1:05:08John Coogan?

  Yeah.

• 1:05:10Speaker 05

  More tailwinds as it's, it's come, which has been great.

• 1:05:12John Coogan?

  Yeah. I recently heard that the, that the life of a new car has basically doubled since, I believe, the seventies. And new cars will often last until 250,000 miles, whereas it used to be 100,000 miles, it's time to get a new car. Is that a secular pressure that you think will, will be overcomeable with new technology? Or do you think that's something that we're gonna settle into? Or maybe there's a world where people wind up with more cars? Just, I'm thinking of like, what are the general pressures that you're worried about around new car purchasing?

• 1:05:50Speaker 05

  Yeah. Look, I, I think you raised a key point. I think a lot of what's driving that, of course, is a high cost environment where people want their cars to stay with them a long time. I think that's particularly true of this segment. This is a segment that's not what I'd call a flip and purchase for a vehicle that's just gonna get you down mainstream. It needs to do real work, real play, take you somewhere, do something. So we've fundamentally engineered the car to be super robust.

• 1:06:16John Coogan?

  Yeah.

• 1:06:16Speaker 05

  The second thing we've engineered the car for is to bring a lot of do it yourself type of business back into it. I think a lot of people where they've engineered these cars, they're complete spaceships. Just look at them. Don't touch them. Don't touch them. And I think we've intentionally brought a lot of mechanical, physical characteristics back so you can do the actual work. I think the other thing that's breaking down, and I remember this back in my Mercedes Benz days, was, you know, electronics, can't update them, 100,000 miles, it's gonna be gone.

• 1:06:45John Coogan?

  Sure.

• 1:06:46Speaker 05

  Or batteries. That was the one on batteries, right? They're gonna last. And I think that myth is being broken all the time, but these batteries are holding their power.

• 1:06:53John Coogan?

  Yeah.

• 1:06:53Speaker 05

  They're holding their charge and they're holding their robustness. I think the right way to look.

• 1:06:57John Coogan?

  I saw someone put like 300,000 miles on a Model S recently.

• 1:07:00Speaker 05

  Yeah.

• 1:07:00John Coogan?

  And like, people thought that was impossible. Like, and, and the depreciation curves are still really rough for electric vehicles. We can go into that, but.

• 1:07:08Speaker 05

  Yep.

• 1:07:08John Coogan?

  But I mean, it does feel like the fear of like, this battery will be impossible repair and the car will be totaled because of the battery. That has been pretty.

• 1:07:18Jordi Hays?

  How much, how much does your, how much does your segment care about autonomous driving? And how much, and do you think they'll care more about it in a couple of years?

• 1:07:26Speaker 05

  I don't think it's core to the segment. I think we've engineered the vehicle where this is a vehicle that you want to have control of the narrative and control of the vehicle. So we've intentionally made a vehicle where, yeah, I want to put a real door handle on the thing. When I get into the vehicle, I want to use real switches and get that mechanical connectivity, if you will. And driving, I think it's the same exact thing. This vehicle has to work, wants to play. They want control of the vehicle. Now, to that end, the Scout will have level two plus, because I think where you can offer that highway convenience, if you will, where driving is more tedious.

• 1:07:59John Coogan?

  Yeah.

• 1:07:59Speaker 05

  100%. But I think this segment and what it stands for in terms of, let's say, freedom and control has much more to do. And honestly, if I look at autonomous, you wouldn't build this type of vehicle. You'd build a much more A to B type of vehicle. Take me for here, take for there. You wouldn't have solid body on frame. You wouldn't have solid rear axle. You wouldn't have 1,000 pound-feet of torque, 800 horsepower, all of these capabilities.

• 1:08:24John Coogan?

  Mm-hmm.

• 1:08:24Speaker 05

  I think you'd build a much more, let's say, cyber camp, not to give a simplistic vehicle. So I don't think it drives this segment. I think level two plus for sure is where we'll be and what we see they want. But we want to be a little bit more, let's say, old school, where we can put the driver and the customer back in charge. That we see as a mega trend. Like, I want to be in charge. Screens aren't taking over.

• 1:08:46John Coogan?

  Yeah. So you said, what was it, 2021, 2022, there's one employee?

• 1:08:50Speaker 05

  Yep.

• 1:08:51John Coogan?

  There's hundreds now, thousands now?

• 1:08:54Speaker 05

  1,600 employees.

• 1:08:57John Coogan?

  With first customer deliveries in 2028?

• 1:08:59Speaker 05

  In 28, exactly.

• 1:09:00John Coogan?

  28. So when do you actually start building out the plan to hire all those people? What will the company look like in 2028 when you're doing deliveries?

• 1:09:09Speaker 05

  Toof. So the plan is a ramp up. When we look at 28, at the factory itself, will be roughly 3,000 employees. If I look across the total workforce, will be roughly in the zone of 3,800 to 4,000, somewhere in there. The preponderance of the workforce is gonna be basically being, doing two things. You're either making a car or you're selling a car. And I think one of the things we've done very smart is get all of the overheads out. SGNA, extremely tight, overheads extremely tight, because we want people doing active things, which is buying a car and, and of course, and of course, manufacturing a car. At the plant itself, if I look at the 1,600, more than half of that are down in the factory

• 1:09:49Speaker 05

  right now as we speak. And that's because we're building the very first early prototypes. And I think this is a pretty cool thing that we're doing. What most companies would do would outsource that to a third party. They would then hand you the car and you'd integrate into your plant.

• 1:10:04John Coogan?

  Okay.

• 1:10:05Speaker 05

  Since it's a new factory, we're training new workers. They've never made cars before. We want to get that muscle memory now.

• 1:10:11John Coogan?

  Yeah.

• 1:10:11Speaker 05

  So we're building these prototypes. It'll make us much more stable for ramp up.

• 1:10:15John Coogan?

  Sure.

• 1:10:16Speaker 05

  Which, as you know, is critical.

• 1:10:18John Coogan?

  What is the state of dealerships in the automotive world? How is it changing? Tesla's taken a different approach, but there's still shops where you can go see a Tesla. What will your strategy be? How has it evolved over the last couple of years?

• 1:10:32Speaker 05

  Our approach is clear. We are gonna go direct to consumer.

• 1:10:35John Coogan?

  Okay.

• 1:10:35Speaker 05

  We will be selling the vehicles directly to the consumer.

• 1:10:38John Coogan?

  Yeah.

• 1:10:38Speaker 05

  And in my mind, I look upon it as three fronts.

• 1:10:41John Coogan?

  Yeah.

• 1:10:41Speaker 05

  One, there's no debate that we can handle the transaction far smoother and far straight with a lot more transparency. We're gonna build the ecosystem to do that. I think if you look at a brand such as Carvana, they've without a doubt proven.

• 1:10:56John Coogan?

  Yeah.

• 1:10:56Speaker 05

  There is a good digital path to sell a car and make it happen.

• 1:10:59John Coogan?

  Yep.

• 1:10:59Speaker 05

  I think the second thing today, I think there's no world where if you don't control the relationship to the customer, have all the data that comes of that relationship. You can't be successive. And the third one, without a doubt, is we are going to do a lot of work to build the infrastructure. I think where a lot of the brands you mentioned fell short a little bit is you have to have the service infrastructure built ahead of the wave.

• 1:11:22John Coogan?

  Yep.

• 1:11:22Speaker 05

  Not behind the wave.

• 1:11:23John Coogan?

  Yep.

• 1:11:23Speaker 05

  And those are the big things we're focused on. We're executing that. And it's critical.

• 1:11:28Jordi Hays?

  So I think about what does it, what does that actually look like? I mean, it seems, it seems like one of the biggest challenges because you need to have service. Are you going to have a central service hub? Or I imagine that that's tough if you're having to, you know, ship cars around all over the US. Is there specific key regions that you need to be set up in? Like, I'm just curious.

• 1:11:45Speaker 05

  You got exactly right. I mean, the good news is it all starts at the factory.

• 1:11:49Jordi Hays?

  Yeah.

• 1:11:49Speaker 05

  From the factory, we've laid out nine distribution networks that we will have. We can put these in very smart locations where you can have lots of space, relatively inexpensive, and let's say line up the cars there.

• 1:12:01Jordi Hays?

  Yeah.

• 1:12:01Speaker 05

  Then from there, they'll move into the retail stores. We will build 100 stores over time. But what this allows us to do, we can be way smarter on inventory, way smarter on cost front. And then what you have now is a lot of these dealerships, you have extremely expensive inventory, extremely expensive parking, and we can put this in much less expensive real estate. I think the other thing, speaking of real estate, where we see the action being is we can build in sort of class A fronts where we can get off of Main Street, get off of the expensive stuff and build it in smart locations. 85% of the investment will go into service, since that's where the most critical function is.

• 1:12:37Jordi Hays?

  Yep.

• 1:12:38Speaker 05

  And that's what we're building pretty much as we speak. But again, if we have the data from the customer, the data into our factory, and the data into our suppliers, we can sort of get out of this world of let's build a couple of thousand cars and send them across America and hope they sell. Then they sit in a parking lot, they sit there for 120 days, you throw incentives on them, the RVs collapse. We can avoid that. We can be way smarter using data, using intelligence, using AI to get the right car into the place and basically hold, hold pricing power.

• 1:13:08Jordi Hays?

  Yep.

• 1:13:09John Coogan?

  How important is the test drive to conversion in a direct to consumer relationship? Is it unnecessarily high? Like, should more consumers be buying cars without ever test driving them? I feel like

• 1:13:22Jordi Hays?

  I'm, I'm a, I'm a, I'm a psycho. I've bought like probably six cars without ever

• 1:13:29John Coogan?

  test driving them. That feels uncommon.

• 1:13:31Speaker 05

  We like that.

• 1:13:33John Coogan?

  But is that the future? Or is Jordy actually a psycho?

• 1:13:35Speaker 05

  Look, I think

• 1:13:36Jordi Hays?

  But I, but I, but yeah, part, part of that is like, I grew up buying things online.

• 1:13:40John Coogan?

  Yeah.

• 1:13:40Jordi Hays?

  Very comfortable looking at a picture and a video and maybe a review and saying, cool, looks good.

• 1:13:45John Coogan?

  And there's so many trusted car reviewers, Doug Demuro, Forest Auto Reviews, that if there's a consensus across three or four people that I trust, I'm probably just going to be happy buying the car. But, but what, what does it look like now? What do you think the future looks like?

• 1:13:58Speaker 05

  Look, I, I think what we're planning for, we're planning for, we're a startup brand that people don't know that well. And in order to get to know well, you're going to have to establish trust.

• 1:14:06John Coogan?

  Yeah.

• 1:14:07Speaker 05

  It's number one word. I think we'll have phenomenal reviews. We'll have phenomenal reservations, which we have already. But when you come to these service centers, we want to have an environment where you can take a test drive. Beyond that, we're going to set up test drives, obviously, in the big markets and get this done. I think there will be a huge group that's going to say, I love this car, send it to my driveway, done, we'll take care of that. On the flip side, there will be a group that wants verification.

• 1:14:30John Coogan?

  Yeah.

• 1:14:30Speaker 05

  So I think at this early phase, I would say 85% is going to want to get in this vehicle, drive it, test it out. We have new technology with the e-rev, we have a new vehicle. And I think the more we establish trust, the more units in operation, the more all of that happens, then that's

• 1:14:45Jordi Hays?

  It looks, it just looks, I can't wait to see it outside, but it just looks, it looks incredible.

• 1:14:49John Coogan?

  It's awesome.

• 1:14:50Jordi Hays?

  It's like exactly

• 1:14:51John Coogan?

  I was wondering, you guys are looking at it.

• 1:14:52Jordi Hays?

  This is exactly what consumers want. I mean, you look at, you know, some of, you know, the new Toyota Lexus models are, are, are solid and have been

• 1:15:01John Coogan?

  Yeah, a lot of these longer, newer projects, by the time they make it to market, they look outdated because, oh, like clearly the designs were from five years ago. This feels perfectly where the consumer is.

• 1:15:13Jordi Hays?

  What happens with, it feels like the, the legacy manufacturers and brands, they get very stuck on certain like interior styles and materials and the, and the updates go from, you know, the, everything I've seen from the interior with the Scout, it feels like you guys really consider, considered materials and, and patterns and the touch and feel and all, and all these things.

• 1:15:38Speaker 05

  Yeah.

• 1:15:38Jordi Hays?

  And have thought about it from the ground up. You would think that other manufacturers would just say, hey, why don't we just redo, why don't we, when we refresh this car, why don't we fully redo the, the interior? And what I typically see is he's more like, hey, it's like 5% different, but fundamentally, it still looks exactly the same. Why is it so hard to do a full, basically cosmetic interior refresh for these brands?

• 1:16:05Speaker 05

  Look, you nailed it. One of the things we loved is the power of a clean sheet is one you have to take maximum advantage of it. What unfortunately happens in giant OEMs and giant companies is to make any change, there's a big giant machine, there's an existing factory, you don't want to alter tooling, you don't want to have new supply bases. So every little thing gets so expensive and so challenging and so difficult, which is why you see a world of, yeah, these white tweaks, and they say all new and all this, and basically it's a tweaked fabric or whatever it is. I think what you see here, and I'm, I'm glad you appreciate it, this is a grueling labor of love, love, love. We have fought

• 1:16:45Speaker 05

  every last thread on this vehicle. And I think, you know, it started with, boy, we're bringing back this icon. We do it wrong, we're going to get mocked. And we couldn't just throw a Scout label on a vehicle and say, hey, here's this.

• 1:17:00John Coogan?

  That's motivation.

• 1:17:00Speaker 05

  Because the OGs will honestly reject you.

• 1:17:05John Coogan?

  Yeah.

• 1:17:05Speaker 05

  We knew if they rejected us, we're dead. It's over.

• 1:17:08Jordi Hays?

  Yeah.

• 1:17:08Speaker 05

  Once we got them on board, well, then away we go. And that's why we're off to the races. But the reason it's so hard is you just get, you get stuck in this big company world.

• 1:17:16Jordi Hays?

  Yeah, the way that the, the way that the car market were, moves, it oftentimes feels like manufacturers don't listen to customers. But I have to imagine they do look at social media comments and they are, they are well aware of the feedback. But is it because of the planning cycle? Right? So I'll, I'll pick an example, right? So like the, the Ferrari, there, there's Ferrari community, Ferrari community, I'll say.

• 1:17:42Speaker 05

  Nice mainstream example. I like to know.

• 1:17:44Jordi Hays?

  And, and when I say Ferrari community, I mean, the group of people that care about the grant, brand, and then the group of people that care about the brand and are actual buyers. But both of the groups are, are oftentimes like confused with a lot of the, the, the actions of the brand. And I just, I just have to imagine it's like, it's, is it the kind of thing where like the actual response from the manufacturer is like somewhat delayed, where it's more like a, this sort of like, yeah, we, we've been aware of this issue for five to six years, and now these sort of newer iterations, they'll be responding to that? Is, is, is that just because of the supply chain? Or are they?

• 1:18:23Speaker 05

  It's, it's, look, the, the simplest thing is look, at the end of the day, let's say you want to make a change.

• 1:18:28Jordi Hays?

  Yeah.

• 1:18:29Speaker 05

  So the two big drivers of that change is, okay, what's going to cost CapEx wise to make that change? Because you're going to have to retool at the supplier, depending on how big it is, and that's a few million dollars, just for one slight little change.

• 1:18:40Jordi Hays?

  Yeah.

• 1:18:40Speaker 05

  Then you may have a material cost change on the bomb and on the bill of the car, and then you multiply that by 10, 20, 30, 100 changes. And all of a sudden, you're talking $100 million of CapEx and, I don't know, a couple hundred dollars of material cost on the vehicle. So every change is just brutal.

• 1:18:55Jordi Hays?

  Yeah.

• 1:18:56Speaker 05

  I think the other thing is they work in big cycles, right?

• 1:18:58Jordi Hays?

  Yeah.

• 1:18:59Speaker 05

  Of your classic launch of the car, then your product improvement, three, four years later, and then the thing. I think the other holy grail for us, and certainly Tesla has done this quite well, is can you get changes that don't impact the physical hardware of the vehicle, which is all of the OTAs and all the thing that we'll have capable on this vehicle as well. But why you don't see that is cost and cycle tooling and things. It's not like these people are asleep at the switch and aren't aware of it. They're certainly aware of it, but it's the cost, the time to go get that done. Period.

• 1:19:28Jordi Hays?

  Yeah.

• 1:19:29Speaker 05

  Which is why you want to get

• 1:19:29Jordi Hays?

  We know this is a problem, this, we know this is a problem, but fixing it now would cost a billion dollars. And if we just wait another cycle, we'll, we'll be able to address it, but in a much more cost efficient way.

• 1:19:41Speaker 05

  Exactly. And then potentially you can find 50 of them, or 40 of them, or 20, and do it all at once, cycle it up and get it through the one change.

• 1:19:47Jordi Hays?

  Yeah.

• 1:19:47Speaker 05

  Because of course, depending on how extensive the change, retooling the factory on top of whatever the supplier did, potentially change training within the factory, the knock on effects are massive. Retrain new dealers to sell it, depending on how big it is.

• 1:20:00Jordi Hays?

  Does Scout have any history in like off-road racing that you're aware of?

• 1:20:04John Coogan?

  You, you want to do Scout Challenge?

• 1:20:06Jordi Hays?

  I do want to do

• 1:20:07John Coogan?

  Truck only version of the

• 1:20:07Jordi Hays?

  No, no, I want to do like a bot, the Scout bot, the Baja Scout Expedition.

• 1:20:12John Coogan?

  The car?

• 1:20:13Speaker 05

  The car is another, another way to go. No, what I'm saying, it does, Scout raced back in the, the big off-road races back in the day. We've been doing something, there's a cool guy up in, up in Venturi here named Sean Barber, I don't know if you know him. And we sponsor him, and he's taken a couple of the vintage Scouts, and he's done some racing. And then we can't wait to get the real deal and go kick some serious

• 1:20:36Jordi Hays?

  No, it feels like you should try to put a hundred of them together and even get a pool of buyers that just is buying them even to, for, for just racing.

• 1:20:43John Coogan?

  Yeah, mod.

• 1:20:44Speaker 05

  Yeah, exactly. No, I'll have to show you some stuff, but Sean's got some cool things.

• 1:20:47Jordi Hays?

  Well, let's go check out the car.

• 1:20:48John Coogan?

  Cars outside.

• 1:20:49Speaker 05

  Let's do it.

• 1:20:49John Coogan?

  I'll let Jordy throw on that lab and we'll

• 1:20:51Speaker 05

  That's cool. Thank you.

• 1:20:52John Coogan?

  We'll walk outside. I think we have our cameras ready to rock. Let's go take a look at this vehicle outside. Here, come this way.

• 1:21:06Jordi Hays?

  The outside of

• 1:21:07John Coogan?

  Look. In Ultra Dome. Here, outside here, and we have our new sign up. Here it is. The Scout.

• 1:21:16Speaker 05

  Oh, look at this.

• 1:21:18John Coogan?

  Looks so good. So this is it. I love it.

• 1:21:21Speaker 05

  One of the first things you'll notice, we made this one the more urban version, if you will, right? So it doesn't have the, you know, the spare wire on the back. It doesn't have the off-road packages. We made this one more urban cool style. I think you'll still notice, you know, 35-inch wheels.

• 1:21:37Jordi Hays?

  Does that like a cork?

• 1:21:39Speaker 05

  Beautiful, recycled. It's walnut, but it's, you know, just super recycled stuff.

• 1:21:43Jordi Hays?

  Amazing.

• 1:21:44Speaker 05

  And then Jordy, you can see kind of what I was talking about here, just like get some real switches back.

• 1:21:50Jordi Hays?

  There we go.

• 1:21:51Speaker 05

  These are all for the accessories.

• 1:21:53Jordi Hays?

  Nice.

• 1:21:54Speaker 05

  These are all for the lockers that you can control. This is a lot of hardware mechanical functionality that kind of, you know, people let go a little bit on this front. I think the other thing-

• 1:22:04John Coogan?

  Can read from both of us.

• 1:22:05Jordi Hays?

  There we go. I love, I love the two-tone.

• 1:22:09Speaker 05

  Yeah, yeah, it's super, super well done.

• 1:22:11Jordi Hays?

  This is great.

• 1:22:13Speaker 05

  Yeah, it'll hang on the thing. And then what we didn't talk about is, you know, the magic of this vehicle is what's underneath. So it's body on frame, which means you have a frame. You put the hat on top of the vehicle. It's got a solid rear axle, which is super old-school technology. But we integrated the e-motor inside the axle. First time that's ever been done. Just to give you a sense of it, this is 1,000 pound-feet of torque, 800 horsepower. This vehicle's zero to 60 in four seconds, so it's gonna be like a serious, serious machine.

• 1:22:40John Coogan?

  And will you make a, like a non-performance version as well? Less power and torque?

• 1:22:45Speaker 05

  No, what we want to do is offer one platform, one foundation. We'll let your right foot, your right foot can control the power and torque.

• 1:22:54Jordi Hays?

  The pedals are amazing, too. Good to check those out.

• 1:22:56Speaker 05

  You see the, one of the other cool things, of course, is super short front overhang. Very hard to do with this type of vehicle, so you gotta get the crash, you gotta lap. But this gives you all of the approach angle on this, which is awesome. Another nice little touch the designers came up with, I think most brands, as you know, centers everything front and center. We want to make them much more like a piece of art. It's right time you see Scout, you see it off on the right-hand side, like the signature side. And this is another nice design element. This is the range extender, so this is where the gas goes in. Obviously, on the other side is where the battery charge will go in. This is what we call Earth's Plaid, so it takes us back to, you know, the original International Harvester. And super slick, uh, super slick.

• 1:23:41John Coogan?

  How does the range extender work?

• 1:23:42Jordi Hays?

  The texture on the, the fabric on the inside here is just amazing. It's sort of plaid. So great.

• 1:23:48Speaker 05

  So how the, how the range extender works, which we think this is a piece of technology America is basically looking for. Both of the axles are driven like a battery car. There's a e-engine right here, e-engine right there.

• 1:24:01John Coogan?

  Yep.

• 1:24:01Speaker 05

  And then that is driving the car. It gives you the torque, gives you the instant pop, instant response. And there's a generator in the back, which is basically a, a gas engine.

• 1:24:09John Coogan?

  One-cylinder.

• 1:24:10Speaker 05

  Four-cylinder, yeah, four-cylinder engine. And that, of course, is what gives you upwards of 500 miles of total range.

• 1:24:18John Coogan?

  So generates electricity that charges the battery, that then powers the car the same way. Yeah, so the reverse hybrid, you're flipping the hybrid system effectively. Uh, which is amazing, because there's no range anxiety. You can do the cross-country trip, two-minute stops for gas, and you'll be totally fine. Uh, yeah, I've seen, I've seen this pitched as the future before, and, uh, when I saw it, I was like, America needs that immediately. This is so logical and will satisfy the last remaining hurdle for so many EV buyers.

• 1:24:48Jordi Hays?

  The view, the view from on the back here is, is just incredible.

• 1:24:51John Coogan?

  Yeah, really good.

• 1:24:52Jordi Hays?

  It really makes you think like we perfected the car in the, you know, 60s and 70s. And then everything, everything since then has just been like, you know, we tried to do too much to change it. And then, and then we're just going back, back to the future.

• 1:25:05Speaker 05

  Exactly. And what we wanted to do is, you know, obviously this cool technology now, but put it behind the curtain.

• 1:25:10John Coogan?

  Yeah.

• 1:25:11Speaker 05

  As opposed to, like a good one, right? I just spent some time with door handles, things like that. It's like, no need to make a flush electronic door handle, right? Americans know how to open it. Just make it mechanical, put the thing away, you go.

• 1:25:22John Coogan?

  And everyone claims that like, oh, the range will double if you make them flush. And I'm like, I don't believe that. Maybe you're taking two miles off by giving me a normal door handle. But the security of actually being able to grab something and just open it like any other door is pretty, uh, hard to beat, hard to beat.

• 1:25:39Speaker 05

  And for a work vehicle that's gonna be out in bad weather, you're gonna have gloves on and everything else, you don't want to be mucking around with that type of thing.

• 1:25:45John Coogan?

  And I feel like the suburban configuration, I mean, this is, I, I can't exactly, it looks bigger than the images. But at the same time, this feels easy to park and, and parallel park in a city. I don't know.

• 1:25:55Speaker 05

  Two vehicles that you mentioned, right? You mentioned the, the Defenders, you mentioned the, you know, the Toyota Land Cruiser and things like that. So length-wise, it's in, it's in that zone. It's a little bit wider than those vehicles.

• 1:26:06John Coogan?

  Yeah.

• 1:26:06Speaker 05

  One of the things you don't see here-

• 1:26:08Jordi Hays?

  Yeah, it's that wide body that, that's so, that's so attractive. Yeah, the stance, it's so, the stance is incredible.

• 1:26:14Speaker 05

  Yeah. And that what you don't see here, of course, is we're making a pickup truck as well.

• 1:26:18John Coogan?

  Yeah.

• 1:26:18Speaker 05

  And I think the phenomenal thing about the pickup truck is basically the vehicle stays the same to here. So we can get almost 75% carryover, speaking to your question of, of scale and that. And then bed comes back, five-and-a-half-foot bed.

• 1:26:33John Coogan?

  Sure.

• 1:26:34Speaker 05

  Separate cab. And, uh, yeah, no, I think we've got the, um, we've got exactly what the market's, uh, it's looking for. It's fun.

• 1:26:41John Coogan?

  Uh, I assume no plans for two-door version?

• 1:26:45Speaker 05

  Not yet.

• 1:26:46John Coogan?

  I've heard that two-door SUVs, none of them have ever been large, like widely successful for the long term. They've all faced hurdles among customer adoption. People say they want them, they get in there, they think about their family, and they want four doors.

• 1:27:01Speaker 05

  Exactly right. Exactly. I mean, I, I think what we can execute far easier-

• 1:27:05John Coogan?

  It seems like the right decision.

• 1:27:06Speaker 05

  Would be a third row, right?

• 1:27:07John Coogan?

  Yeah, third row.

• 1:27:08Speaker 05

  You can easily extend the, uh, extend the frame and go out and put a third one there, which, which is something, uh-

• 1:27:13John Coogan?

  And even if it's a heavier and you lose a little bit of electricity on the range, you can make up for it with the range extender. Like, you're still in very functional territory, which is great.

• 1:27:22Speaker 05

  Yeah. And, and you mentioned a, a smart thing. I mean, the ability to upgrade the range extender is super easy, right? You can either add more power to the engine, you can tweak the chemistry, you can add a bigger gas tank if you really want to get super range on the thing. And so it's, uh, it's flexible. The other thing is in the factory, right? You don't have to completely retool and change the factory. This can be fully electric.

• 1:27:43Jordi Hays?

  Come back, come back here.

• 1:27:44Speaker 05

  Mix can hold.

• 1:27:45John Coogan?

  Very cool.

• 1:27:46Speaker 05

  Yeah.

• 1:27:46John Coogan?

  Congratulations.

• 1:27:47Speaker 05

  Yeah, thank you. We're doing some cool, you guys have to, uh-

• 1:27:50John Coogan?

  You have to come down if you get a change.

• 1:27:51Speaker 05

  Yeah, that'd be amazing.

• 1:27:52John Coogan?

  Yeah, we'd love to.

• 1:27:53Speaker 05

  I think everyone talks about industrializing America. This is-

• 1:27:56John Coogan?

  This is happening in the real world.

• 1:27:57Speaker 05

  Yeah.

• 1:27:58John Coogan?

  Remarkable.

• 1:27:59Jordi Hays?

  The presence is insane, insane for this, this size vehicle. It feels like you have like the, like the presence of like a Range Rover or Defender, but in this, in this form factor that's like just perfect with the size.

• 1:28:14Speaker 05

  Yeah. Yeah, obviously, we didn't talk pricing, but the vehicle's gonna start in the high 50s. And so a vehicle that's this capable is a phenomenal price. And I think that was one of the things, you know, that makes this work is the struggle that startups has. If the suppliers can never give them good cost, right? And so they get murdered on bomb cost. I think we can count on the Volkswagen Group to get good parts pricing, get good material costs, make a good margin on the car right off the start, which is huge.

• 1:28:43Jordi Hays?

  Yeah, this, this in the, in the high 50s compared to when, when I feel like people go chasing this style and silhouette. It's almost always in the high 70s that it starts.

• 1:28:54Speaker 05

  Uh, trends act at 88, 86.

• 1:28:57Jordi Hays?

  Yeah, yeah, yeah, exactly. And then, and then you end up with a car that doesn't feel as special from a interior standpoint or, or any of these things.

• 1:29:05John Coogan?

  Sounds great.

• 1:29:06Jordi Hays?

  I'm thinking of, uh, what's the, what's the chemi, that chemical company that brought back the legacy Defender?

• 1:29:13John Coogan?

  Oh, yeah, Ineos Grenadier.

• 1:29:14Jordi Hays?

  Ineos, like the Grenadier. I know, I know a lot of people that are going that, that'll buy, I, I think the project's incredible. The cars look great and everything. But, but people buying the Grenadier, they want it for that sort of silhouette and that sort of feeling and that lifestyle. But again, you're coming in much higher and it doesn't feel like it's necessarily as designed for everyday life. Which is why they're buying it as a daily driver, right?

• 1:29:38John Coogan?

  Yep.

• 1:29:39Jordi Hays?

  So you want the silhouette, but in a daily driver package.

• 1:29:41John Coogan?

  Yep.

• 1:29:42Jordi Hays?

  And, and at this price point, there's gonna be extremely, extremely competitive.

• 1:29:47Speaker 05

  No, you hit it exactly right, because a lot of people jump into the second, but then it becomes a fourth car in the drive or it becomes a beach car. So I'm like, no, no, we want this thing to be an everyday, you know, everyday killer.

• 1:29:58John Coogan?

  That's great. Well, thank you so much for showing it to us.

• 1:30:00Jordi Hays?

  Dude, amazing. Excited to drive it.

• 1:30:03Speaker 05

  Watch you guys all the time. Thank you.

• 1:30:04Jordi Hays?

  Come back, come back on as you get closer to lunch.

• 1:30:06Speaker 05

  Thank you. Yeah.

• 1:30:07Jordi Hays?

  Cheers.

• 1:30:08John Coogan?

  Cheers.

• 1:30:08Speaker 05

  We're going back in the studio. And we will be joined by Mitch.

• 1:30:17John Coogan?

  Talk to him about the latest with the SaaS apocalypse.

• 1:30:23Jordi Hays?

  Short everything.

• 1:30:24John Coogan?

  Short everything. Who knows? Who knows? We'll get

• 1:30:28John Coogan?

  we'll get his take on everything. But first, let me tell you.

• 1:30:32Jordi Hays?

  Price point.

• 1:30:33John Coogan?

  Yeah, really, really impressive.

• 1:30:35Jordi Hays?

  Extremely competitive.

• 1:30:36John Coogan?

  Let me tell you about Figma. Agents, meet the canvas. Your AI agents can now create and modify your Figma files with Design System context. And while we're bringing in our next guest, also tell you about CrowdStrike. Your business is AI, their business is securing it. CrowdStrike secures AI and stops breaches. And CrowdStrike founder and CEO George Kurtz had a very detailed thread on X today. I don't know if we have time to read through it all, but we should get to it. You should go read it because he talks a lot about what pacing the frontier means for cybersecurity. And all of the cybersecurity companies are up and to the right today in the stock market as people take the threat of botnets and AI malfeasance more seriously.

• 1:31:20John Coogan?

  People are more optimistic around around cybersecurity companies than ever.

• 1:31:27Jordi Hays?

  Yeah, CrowdStrike was, you know, up around 100% year to date. So nice to see them up another.

• 1:31:34John Coogan?

  Another 13% or something.

• 1:31:36Jordi Hays?

  Yeah.

• 1:31:37John Coogan?

  Yeah, great stuff. Yeah, Scout Motors, very, very fun. I'm really happy that Scott was able to come by and break that down for us. What a fun vehicle. And I'm and I think the thing that sticks out to me the most is the the gas extender. I saw Forest Auto Reviews demo a Chinese SUV that had that technology. And I was like, I don't want them to be ahead of us. We need this technology in America.

• 1:32:00Jordi Hays?

  I don't want them to be ahead of us in in anything to do with gasoline. That would just be very unamazing.

• 1:32:06John Coogan?

  Yeah, yeah, yeah. And so you, you know, you fill it up and then you get extra range. And so there's just no, oh, I can't drive to San Francisco in this EV. I'll have to stop for an hour and charge or whatever. That idea just melts away when you're just like, oh, yeah, I can just put some gas in it and I'm good to go. Anyway, I believe we have Mitchell Green in the waiting room. Let's bring in the founder and managing partner of Lead Edge Capital back on the show. Great to see him as always, Mitchell. Whoa, how are you doing?

• 1:32:35Jordi Hays?

  He is.

• 1:32:38Jordi Hays?

  What's going on?

• 1:32:39Mitchell Green?

  Nada, how are you?

• 1:32:42Jordi Hays?

  I'm a little tired. John had a rough weekend. I had a little too much time on my my new simulator.

• 1:32:48John Coogan?

  Oh, yeah.

• 1:32:49Jordi Hays?

  Late, late, late nights.

• 1:32:51Mitchell Green?

  By the way, be careful going on it like an hour or two hours before you go to bed. Because you'll like, when you you'll be like, oh, one more lap.

• 1:33:00Jordi Hays?

  No, that's it. That's it. Every single Friday, Friday, yeah, Friday and Saturday, kids go to bed. I'm like, great, I'll get on the sim. I look at the eventually I'm, you know, driving for a while. I look at the clock. It's like, you know, 10. I'm like, oh, great, I can I can do it, go another 30 minutes and go to sleep, get a good night's sleep. Next thing I know, it's past midnight. My wife's texting me being like, you're really like waking up basically in the middle of a night's sleep. Being like, are you seriously still on the simulator? But it's the most it's the most addictive.

• 1:33:33Mitchell Green?

  One more lap. No, it's a I can do, I got this, I can one more lap. Then you get like the second to last turn, you're like, oh, God darn it. Screw it up, gotta do like another lap. Yeah, I'm well aware. And then, by the way, you're probably like pouring sweat. So you then get into bed, take a shower and you're just like, then your brain has been fried with lights. So, yeah.

• 1:33:49Jordi Hays?

  Yeah, it's really

• 1:33:50John Coogan?

  People say, don't look at the small iPhone screen before bed. You're looking at a wraparound triple monitor setup. You're

• 1:33:56Jordi Hays?

  But John, so John, John, John built a track that that will all be on.

• 1:34:02John Coogan?

  Yeah, so we have a true evaluation for these AI models. We've debated a lot, how capable are they? Are they actually useful? I had GPT six Astra go and find satellite footage of thermal and try and create a track in Aseto Corsa.

• 1:34:20Mitchell Green?

  We should try to drive it then.

• 1:34:22John Coogan?

  Yes, I I took it for a spin yesterday. I don't have a full simulator, so I was driving with the keyboard. Not the best experience, but I'm sending it to Jordy. He's gonna demo it tonight. 2 AM, he's gonna be putting up hot laps and we'll see how good it is. I'll send it to you too.

• 1:34:35Mitchell Green?

  By the way, I joke that there needs to be like an AI racing. There needs to be like an AI racing league. So I've debated like some of the best GT3 drivers in the world, like pro drivers. I'd be like, oh, you realize that like AI could build like a better car that could go around the racetrack. Did you guys like, no, no, impossible. Like you do realize that Elon Musk can land like a can like take a missile and like land a rocket on a, you know, the same thing the size of my book, my like desk. Trust me, we could build one. And then I'm like, you know what we do? It's each of the model companies can then sponsor a team.

• 1:35:08John Coogan?

  Yeah.

• 1:35:08Jordi Hays?

  Yeah.

• 1:35:09John Coogan?

  Yeah, yeah, I Gemini is a big F1 sponsor. You got CrowdStrike sponsoring. I say get the big labs on there.

• 1:35:16Mitchell Green?

  You can get like Kimmy, you can have like a global, Mistral could have one. You could have a global, global AI racing league where all the all the companies have to like fund their own AI racing team.

• 1:35:26John Coogan?

  I think there might be There might be some backlash from the drivers.

• 1:35:30Jordi Hays?

  The real test is can you can you put a humanoid in a simulator? And actually get a competitor.

• 1:35:36John Coogan?

  We're in a real car.

• 1:35:37Jordi Hays?

  Lap time. Yeah, real car.

• 1:35:39John Coogan?

  Real car.

• 1:35:39Jordi Hays?

  Simulator first.

• 1:35:40Mitchell Green?

  A humanoid, that's pretty Yeah. Look, I think AI, I've talked about it with a bunch of like guys that are principals of F1 teams.

• 1:35:46John Coogan?

  Yeah.

• 1:35:48Mitchell Green?

  You could get like, it would be the, it's theoretically possible to get a, not a perfect lap, but you, yes, an AI, an AI could drive a lap. But like, I will tell you actually on the simulator, the AI and iRacing like for practice is actually pretty darn good. Like the AI cars.

• 1:36:05Jordi Hays?

  Yeah.

• 1:36:06Mitchell Green?

  Like, I do believe in real life, you could build an AI with enough money. Some billionaire, some company, if they wanted to build an AI, a car that would drive around the racetrack, I think it would be faster than any pro.

• 1:36:17John Coogan?

  Yeah.

• 1:36:17Mitchell Green?

  Than I guess.

• 1:36:18Jordi Hays?

  Yeah, but it's like, but it's gonna be like chess where like even once the AI is is like superhuman, you still want to watch, you know, Mitchell tearing it up.

• 1:36:27John Coogan?

  Yeah.

• 1:36:28Mitchell Green?

  That's true. I know, maybe not me, but

• 1:36:31Jordi Hays?

  Antonelli.

• 1:36:32Mitchell Green?

  Other people. Yeah.

• 1:36:34John Coogan?

  Yeah. Well, I mean, the the AI story is growing a ton online, all the debates over pacing the frontier. But I feel like in every moment, you've been you've been very solidly grounded on what's happening in the real business world, what's happening in these real companies. So what have you seen since we last talked over the last couple of months on on the development of just software companies, the real economy, overall health of the investing philosophy that you've had since you started Lead Edge? Like, what has changed? What has stuck out to you as particularly notable in the last couple of months?

• 1:37:10Mitchell Green?

  Yeah, that's a good question. I think software continues like the big enterprise, sticky software. I'll just, I'll talk software, then I'll talk everything and everything AI. And Frank, I think there's people that you have that are would know a lot more about the AI stuff than I would. Um, we have, but the best way to understand what's happening in software companies globally is watch public company software earnings. Public company software earnings have been pretty strong. You know, Workday, I think, had said, I think they said like 400, 600 million or something of of revenue was coming from AI now. It was some number and it was pretty large. Um, was coming from AI.

• 1:37:51Mitchell Green?

  I think big companies, you know, big enterprise companies want their vendors ideally to like create solutions for them and work with them versus trying to rip people out and use new vendors and things like that. I do think, though, that the pace of innovation, you know, because of of AI and agents and all this stuff is only going to increase. And so like every company has a risk of being disrupted. I don't, you know, if you're, if you're Stellantis and you got a ton of debt and Ford has no debt. Well, if you believe like robotics and humanoids and AI are gonna like dramatically change manufacturing,

• 1:38:33Mitchell Green?

  then Ford can invest and like Stellantis probably can't because they're paying their debt load down. Take, I think you can take that to every sector of the economy. And so the people that are not innovating are gonna get left behind. And it's, yes, it's easier to start companies now, but it's also easier for incumbents to be able to develop, you know, new products as well.

• 1:38:53John Coogan?

  And so, yeah. So when I look at like public company SaaS, I am typically keying in on something that's much more founder and or even just management team driven. Like if I see that there's a founder or a CEO who seems extremely locked in, aware of what's going on. They're early, but they're not exactly aping talking points. They're thinking about the capabilities in a rational way. That makes me more optimistic. Is is the actual capital structure and debt load of these companies maybe under discussed as as a

• 1:39:31Mitchell Green?

  I think I think it just depends on the I think I think private equity gets, unfortunately, people bucket, all private equity assets have to, you know, people bucket them as, oh, they have tons of leverage, they're all in trouble.

• 1:39:45John Coogan?

  Yeah.

• 1:39:46Mitchell Green?

  I don't think that's, by the way, it's like, oh, private equity owned software assets have tons of leverage or are in trouble. But again, if you're a private equity owned automotive company and you have lots of debt, or if you are a non-private equity owned asset and you have lots of debt, you can't innovate. I think the debate needs to be more on like companies that are very, very highly levered will find it harder to try to disrupt themselves and continue to innovate. And just because you're spending more and more money on on interest income. And by the way, I mean, rates are only going probably one way. Because the, and I think, I think one thing that's not appreciated, I don't, I don't think people are talking about it enough. And I'll actually talk about it from the car world.

• 1:40:27Mitchell Green?

  And like you could talk about it like the collector car, collector cars, collector cards, like memorabilia. Is like, you know, real estate in San Francisco, real estate in Aspen, real estate in Jackson Hole, Santa Barbara, LA. Like how strong parts of the US economy are right now compared to like a lot of parts of Europe? And you can just look at like, if you look at like the Ferrari world, the same car in Europe, like an SP.

• 1:40:54John Coogan?

  Yeah, they're half the price.

• 1:40:56Mitchell Green?

  Ferrari, just, you know, sold in Pebble Beach for like seventeen, twenty million, right?

• 1:41:00John Coogan?

  Yeah.

• 1:41:00Mitchell Green?

  Um, that car in Europe had never sold for more than like eight million euros or seven and a half million euros. It was in an auction like a month before. And I think it just speak, and by the way, you can't bring for the audience either is why, why you just bring the European car to the US? You can't for twenty-five years. So I, I think it just speaks to the strength of the economy, or at least some segment of the economy in the US versus anywhere else globally. Like the amount of wealth creation that's happening is just astonishing.

• 1:41:30John Coogan?

  Yeah. What, what is actually driving the wealth creation and the effects in the car market? Because uh, it, it, it feels like it's super easy to just be like, it's all tech and AI money. But I feel like there aren't that many tech and AI people that are actually into the particular cars that I see.

• 1:41:45Mitchell Green?

  Yeah, yeah, I know. Exactly. I mean, there's a guy, there's a guy who sold a big internet company. He's got a lot of Porsches.

• 1:41:50John Coogan?

  Yeah.

• 1:41:50Mitchell Green?

  But like, uh, he's got, he's done a lot and buying every color and every shape. But um, no. I think it's Americans, wealthy American, if you were wealthy three years ago and you were in America, you owned, and this applies not only to collector cars, it applies to probably not art, funny enough, because the art market actually hasn't gone crazy. But like, the collector card market's gone crazy for sure, like Michael Jordan's and stuff like that. But I think it is a function of, people were wealthy three years ago, living in America, and a lot of those people owned equities.

• 1:42:28John Coogan?

  Yeah.

• 1:42:28Mitchell Green?

  And so today, look at the stock market.

• 1:42:30John Coogan?

  Yep.

• 1:42:31Mitchell Green?

  They're exponentially more wealthy and they've since realized that they can't, that they can't die with, and they're not getting younger. They're only getting older. They can't take it with them. They're like, you know what? My, my son or my daughter is twenty-eight or thirty-two, or my grandson is fifteen and is into cars or into watches or into whatever. And I think it's the same reason, you know, and I think it's a combination of equity markets, AI, secondaries and venture. I think it's like, it's all, it's all of it, uh, conflated together. And people are not, are just spending money.

• 1:43:04John Coogan?

  Yeah. I heard another interesting.

• 1:43:06Mitchell Green?

  More concentrated here than anywhere else in the world, I think.

• 1:43:10John Coogan?

  I heard another interesting random thing that some family offices are allowing a portion of a trust to be invested in cars. And so sometimes the second or third generation might say, okay, great, like, we're going to allocate three percent of this massive fortune to cars. I get to go to Curated with a fifty million dollar shopping list and buy one of everything. And so there's, there's, there's more people sort of securitizing and seeing this as like a financial asset.

• 1:43:37Mitchell Green?

  I, I, it's not like, I think it's like planes too. Somebody told me that you can't even get a NetJets or Flexjet plane right now. Like you can't get one. Because if you're, if you try to go become like a new NetJets customer, they'll be like, we're sold out.

• 1:43:48John Coogan?

  Whoa.

• 1:43:49Mitchell Green?

  And I mean, it's only going to get worse. Like, somebody gave me the stat, you guys probably know it better than me, but like the number of people, if you believe that Anthropic is worth a trillion or a trillion and a half dollars and you believe OpenAI is worth that and where SpaceX trades, like, those three companies create more gains than the entire internet bubble. Like, those people are going to go spend money. And just like, if you want to know where to make money in collectibles or in cars or art or real estate, just figure out, sit outside Anthropic headquarters and be like, hey, what are you planning to do after the IPO? What are you planning to spend money on? Um, but I, I just think the amount of money that is, and by the way, if somebody's made a crazy amount of money very quickly, and you know, there's a, and they want to be in a house in Jackson Hole

• 1:44:34Mitchell Green?

  or Aspen or, or in downtown San Francisco and it's six block radius and there's three homes for sale.

• 1:44:41John Coogan?

  Yeah.

• 1:44:42Mitchell Green?

  Well, the, you know, then the buyer is, the buyer is kind of like price agnostic. He'll be like, oh, I really just want to live there. I just made a bunch of funny money. The seller knows there's no inventory. And actually, I think, I think the big problem in home and real estate right now is people are locked in the low rate mortgages from twenty twenty and twenty-one. There's like no incentive to sell.

• 1:45:00John Coogan?

  Yeah. Yeah. Yeah. Uh, hence a lot of the, like, the poster cars going up in value a ton. If somebody had it on their poster, uh, poster of the car on their wall when they were a teenager, they make money in their thirties or something. They gotta go get that car because that's the car they looked at every day when they were growing up.

• 1:45:17Jordi Hays?

  How many, uh, how many, uh, luxury car clubs do you think that Southern California can support? You have Thermal, Thermal right now. You have Elsinore Ring that's coming in. You have Willis Springs.

• 1:45:30Mitchell Green?

  Is that Willis Springs or is that?

• 1:45:31Jordi Hays?

  No, no. These are two, these are two new developments, track-focused driver communities, clubs, whatever you want to call them, that are springing up, that are bringing on hundred, hundreds of new homes online.

• 1:45:43Mitchell Green?

  My guess is, Tim, look, I'm a member of Thermal. Tim Rogers who runs it's a great guy. He's been at it for fifteen years. My, my guess is he's probably like, good luck. But yeah, I think, I think it's a lot harder than people think. You need to build, you build a track. You gotta get, you gotta get enough members there so you can have like member race weekends. You know, like who wants to be the first five houses? I think it's, I think it's tough. I think it's tough.

• 1:46:11John Coogan?

  It's a tough cold start problem. I, I like that the Elsinore Ring had a funny brand to it that, oh yeah, I know the Nürburgring. I'm never going to get to Germany. So if I can have that experience, but I looked at the length and it's like one-fifth as long as the Nürburgring. So it's not bringing that experience necessarily. It's like roughly the same length as, you know, the GT.

• 1:46:32Mitchell Green?

  I also think people need to, look, I, I, I truly believe that it is extremely dangerous to drive, um, street cars on a racetrack.

• 1:46:40John Coogan?

  Okay.

• 1:46:41Mitchell Green?

  I, I think, I think, I think the most dangerous is to drive street cars on a race, on a street crazy fast. Total insanity. Um, people do it. I mean, people also die, like, you know, Call of Duty, like, you know, the guy that died in LA.

• 1:46:54John Coogan?

  Yeah.

• 1:46:54Mitchell Green?

  Um, it's crazy dangerous. The next thing is driving a street car on a racetrack. And the, the thing that's crappy about America is, you know, in Europe at least, when you buy a fancy car, they can put four-point harness seat belts in them due to like, you know, European car regulation. In America, you can't do it. They don't do it. Um, driving a car down a racetrack at a hundred and seventy miles an hour with a lap belt, I think is totally insane. Like, when you can literally, and, and these are multimillion dollar cars, when you can literally go buy a hundred to three hundred thousand dollar proper race car that is very safe. Like, look at race accidents on Instagram or YouTube and look how people walk away from these things.

• 1:47:38John Coogan?

  Yeah.

• 1:47:38Mitchell Green?

  Um, versus you hit, you know, you hit the wall in a street car at a hundred miles an hour, you're dead. So I, I think that's something that people don't like appreciate enough. But like, I, I, I think a lot of these crack, these country club cracks should actually not even really allow street cars in the track. If you want to be a member here, you need, you need to get a race car.

• 1:47:56John Coogan?

  Yeah.

• 1:47:57Jordi Hays?

  It makes, it also just makes way more sense to use track-only cars on a track, like economically, you can get a way, like, if you're looking for like a specific style of car, the track-only version of the car will be half the price.

• 1:48:12Mitchell Green?

  Yes, correct. Exactly.

• 1:48:14Jordi Hays?

  Why would you not?

• 1:48:15Mitchell Green?

  So what are all your guests, what are all your guests telling you guys about like AI? What's going on? Like?

• 1:48:19Jordi Hays?

  Well, I think, I think the thing that was, I'd be curious to get your opinion, but this weekend was like the most amount of infighting that I've ever seen in tech. And, and I don't know, throughout your career, have you ever, has, has there ever been a moment where you felt like there was this much sort of like fighting and disagreement from within the same industry, right?

• 1:48:42Mitchell Green?

  I couldn't believe the three guys, the three guys that all run the companies actually all agreed though.

• 1:48:46John Coogan?

  Yeah, which is causing a lot of people to be like, oh, this is a conspiracy. They're colluding. They're trying to create a cartel or a monopoly. And so I think that's what people are debating there. They're, they're both debating like, is the risk real?

• 1:48:58Mitchell Green?

  I don't know. Although, I don't know all three of them. I honestly, I've heard Sam, by the way, is in the cars. I don't, I do not know Sam. I do not know Dario and I don't know Elon Musk. Never met him.

• 1:49:09John Coogan?

  Yeah.

• 1:49:09Mitchell Green?

  So, um, but I would bet, I would bet that those guys are like genuinely concerned that if this stuff advances too fast, like it's just the unknown. I don't think they say, they would say like, we definitely know this is going to happen.

• 1:49:25John Coogan?

  Yeah.

• 1:49:26Mitchell Green?

  But this stuff needs to be regulated. And by the way, I also think it's valuable that we have open source models. Because I don't think all the power should sit in the world of three companies either.

• 1:49:34Jordi Hays?

  Um, but let's, let's bring it back to racing. I mean, pacing the frontier to me, you can, you can, there is a racing analogy, which is, you know, you can be, you can be going extremely quick without risking at all, right?

• 1:49:48Mitchell Green?

  Correct.

• 1:49:48Jordi Hays?

  And I've been on the, I've been on the track with you and, and, and you're driving at, at what you feel like is a very, you know, comfortable pace. And I might feel like, uh, you know, we're going to go into the wall, but for you, that's, you're, you're, you're fully in control. You're still, you're, you're, you're quick, uh, but, but you're not, you're not going to risk it every corner.

• 1:50:09Mitchell Green?

  And what I, what I do find interesting though, is when the quickest guys are then telling you the car is too fast.

• 1:50:15John Coogan?

  Sure.

• 1:50:15Mitchell Green?

  We should slow it down a little bit. You probably might want to.

• 1:50:18John Coogan?

  I mean, the halo in F1, the halo in F1 does slow the car down. It is extra weight and yet it saves so many lives. You could see the video of Lewis Hamilton almost taking a wheel and it hits the halo and he's fine. And, uh, yeah, that's an example of like the trade-off.

• 1:50:33Mitchell Green?

  I, I, look, I, I think what this really means, and I, we've said this for a while, this stuff is going to be regulated. It is not, it is, I think if anything, the one fear is government over-regulate things.

• 1:50:47John Coogan?

  Yeah.

• 1:50:47Mitchell Green?

  But like, when you have the best equivalent, you know, if you have, if you had, if you had Lando Norris, Kimi Antonelli. And Max Verstappen and Lewis Hamilton and Charles Leclerc.

• 1:51:00John Coogan?

  Yeah.

• 1:51:00Mitchell Green?

  And Piastri, all saying, hey, guys, we need, we need to do some of this stuff.

• 1:51:07John Coogan?

  Yep.

• 1:51:07Mitchell Green?

  It may, it may slow the race down a little bit, but we wanna like, we think it's important. You probably should listen to them.

• 1:51:14John Coogan?

  Yep.

• 1:51:14Mitchell Green?

  Cause you effectively have the same thing now happening with these, with these three, with these three companies.

• 1:51:19John Coogan?

  Yeah.

• 1:51:20Mitchell Green?

  And like, you probably should listen to them. Now again, it probably just means, it doesn't mean that AI is not gonna be important, that it's not gonna change the world and all this stuff. I think they're just saying like, hey, we probably need some regulatory frameworks. And by the way, I think the Chinese, I, I credit these guys for saying this actually, because I think China is already thinking about this stuff. And I think they've been talking, thinking about this stuff for a while on how to put in place proper, proper regulatory frameworks around AI.

• 1:51:46John Coogan?

  Yeah. Deep, deep sea.

• 1:51:47Jordi Hays?

  Well, yeah, and even, even the AI, the, the sell off today, I didn't understand because, I mean, I actually understand why it's happening. But if you read into their messages, it's not saying, it's not saying we don't wanna still go fast and still continue to innovate. It's just that, you know, we don't wanna hurdle off of a cliff.

• 1:52:05Mitchell Green?

  Correct. I, I think that they're just like, we wanna work as an industry to, but we wanna work as an industry to make sure the proper frameworks are put in place. Like, I mean, it's, it's kinda crazy. I mean, that we read that, like, you know, you read that, it was funny, like a month or two ago, whenever the OpenAI hacked.

• 1:52:28John Coogan?

  Mm hmm.

• 1:52:28Mitchell Green?

  Whenever the OpenAI model hacked, hugging face. Like, can you imagine if you read like, oh, sorry, like JP Morgan accidentally hacked Goldman Sachs?

• 1:52:37John Coogan?

  Yeah. It's crazy, crazy storyline.

• 1:52:40Mitchell Green?

  Crazy.

• 1:52:40John Coogan?

  Sci fi.

• 1:52:41Mitchell Green?

  Um, yes. And so like, I think that these guys, these guys, guys on these companies are like, so, some of them are probably like genuinely concerned. Like, and they're, listen, I'm not, we're not saying we gotta stop, we're not saying we have to pause, just like, let's make sure we're all on the same page. And like, and where things are going, um, you know, and by the way, there will be people that use these nefarously for sure. Um, it'll probably increase, but like, look, I mean, I've talked about it for a long time. I, I, it's still shocking to me that nobody's built in like the security world. Like, I think voice fraud is going to explode.

• 1:53:18John Coogan?

  Yeah.

• 1:53:19Mitchell Green?

  Like, if you can recreate somebody's voice very easily, then think about what you can do by using somebody's voice to, you know, to commit all types of fraud. And I.

• 1:53:30Jordi Hays?

  Well, yeah, Apple still hasn't fixed the, um, Ryan Peterson was talking about this this morning or yesterday. Apple hasn't fixed the phone call spoofing. So you'll get a call from Google.

• 1:53:40John Coogan?

  Oh, really?

• 1:53:40Jordi Hays?

  And it says on your iPhone, Google.

• 1:53:42John Coogan?

  No way.

• 1:53:43Jordi Hays?

  But it's, it's, it's a scammer that's trying to get you to reset. And if I wasn't, if I wasn't aware that that was a thing, I would, I would be much more likely to engage with somebody that's just calling from Google saying, hey, there's an issue with your account. We gotta, we gotta reset the password. Um, so there's, there's so many of those.

• 1:54:04Mitchell Green?

  I, I, I'm not, we, we've, we've made a couple of very successful cybersecurity investments. We backed Doug Song at Doos Security. He built a huge business, uh, Andrew Peterson and that's the sciences. And literally like, I think that like the biggest risk today might actually be a cybersecurity attack, like the biggest global risk. I mean, think about it. People get mad when for a day or for like three hours, they can't buy an airplane ticket on Delta. Because, you know, the, the CrowdStrike Microsoft update. Now imagine the internet goes down for like three days.

• 1:54:36John Coogan?

  Yeah. It would be a big, big deal. And that was, and that was actually Dario's biggest shift was, uh, you know, in the past, he's, he's talked about like existential risk. And there's a lot of people in Anthropic who have talked about like, you know, wiping out of all humanity, which is such an extreme scenario. You wind up having to deal with like, well, what about people that aren't on earth? Cause they're in space. Or what about people that are on remote islands and then the Amish? But, uh, but, but, but he actually grounded it a lot more reasonably, just saying like, like, I think that there is a small possibility that in the next year, you could have a massive internet outage via a botnet that takes over the internet.

• 1:55:14Mitchell Green?

  Yeah.

• 1:55:15John Coogan?

  And that would be bad. And, and, and that's much more tractable to get through. It's like, oh, okay. Like, yeah, you just get something that's misaligned and it just gums up all the systems of everything. And that's really annoying to everyone. And you don't have to jump straight to like the most extreme sci fi doomsday scenario. Uh, to be like, yeah, let's avoid that.

• 1:55:33Jordi Hays?

  Here's a question for you. When do you think American venture capitalists band together to create a, an American, uh, bending spoons? Because you gotta, you gotta imagine that there's some frustration of like, well, we invest, you know, hundreds to billions of dollars in these companies. And then Mr. Ferrari comes in and buys them for pennies on the dollar. It'd be nice if we were also the buyer of our bets that don't actually achieve the, you know, tremendous outcome.

• 1:56:01Mitchell Green?

  Joel Lamont, I, I don't know him, I know of him. Joel Lamont ran a business called Trilogy Software that did. Like back in the nineties and two thousands, like, and by the way, he tried to start his internet, probably failed. And he's built a giant, I don't know what's happening. I mean, I know it's still a huge business, but like, somebody's gonna do it in the States. It's like, probably some of these are good businesses or just to over capitalize. They were over.

• 1:56:23Jordi Hays?

  Well, and part of, in my view, part of the reason why, like, I think that bending spoons is gonna print on a lot of these deals is, is that there aren't a lot of buyers. Like, there aren't a lot of people that are willing to say, yeah, I'm gonna spend a billion dollars for this company that's not growing anymore.

• 1:56:39John Coogan?

  Yep.

• 1:56:40Jordi Hays?

  Uh, but when you're paying three, three times revenue and you, and you, and you can get a lot of efficiencies out of it.

• 1:56:45Mitchell Green?

  When you're paying, when you're paying, look, if you, if, when you're, if you're basically about a business where you pay three times revenues and you think you can run it for, you know, see by a hundred million dollar business, but three hundred million dollar business. And you think you can run it with like 70 million of EBITDA or 60 million of EBITDA? Well, then you basically paid yourself back. I mean, that's an amazing free cash flow yield.

• 1:57:08John Coogan?

  Yeah.

• 1:57:08Mitchell Green?

  Um, on it. So yeah, these people are gonna, by the way, they build like factories. It, somebody else, if you're gonna, I think you'll, I'm actually surprised you haven't seen more of them. Um, so like, you know, private equity back once happened, but there's, there's a lot of investors.

• 1:57:26Mitchell Green?

  Private equity, venture capitalists, buyout, everybody, like, they just can't let go. And sometimes it's just like, hey, guys, we've been in this thing for 15 years.

• 1:57:37John Coogan?

  Yep.

• 1:57:38Mitchell Green?

  Just sell.

• 1:57:39John Coogan?

  Yep.

• 1:57:39Mitchell Green?

  Who cares? Just get out of this stupid thing.

• 1:57:41John Coogan?

  Yep.

• 1:57:42Mitchell Green?

  And I think, I think, um, I think that, I think people struggle with that.

• 1:57:45John Coogan?

  Yeah. I think people have been surprised by bending spoons because they're buying like not household names, but household names in tech. As opposed to Trilogy bought a lot of companies, but a lot of smaller businesses that were not high flying, venture backed. The, the founder's been on podcasts and now bending spoons is going and saying, let's get, you know, these companies that you know. And we're hot and we're backed by tier one VCs. And so it's just a different sort of flavor and narrative to it, but I agree. Uh, uh, someone in the chat, John Exley's calling out Octave Capital.

• 1:58:18Jordi Hays?

  Their friend Jerry.

• 1:58:20John Coogan?

  Uh, potentially working on that. And I think there's other people too. Yeah. Interesting stuff.

• 1:58:24Mitchell Green?

  There's a lot of assets. They get to pick. I can say that. There's gonna be a lot more too. Um, there's gonna be a lot more. I think, look, there's gonna be some of the world's greatest companies created over the next 20 years.

• 1:58:36John Coogan?

  Yeah.

• 1:58:37Mitchell Green?

  Um, who knows if they're even the Anthropic and OpenAI's of the worlds. Like, there might be companies that never even existed. I use this analogy, but like, had we sit here in 99, we wouldn't have talked about ByteDancer, Facebook or Snapchat or any of these things. Any of these, the five trillion, social media is a five trillion dollar market today. Like, I think the, and then, you know, like a huge amount of people that are building new companies will fail. I mean, it's just like the failure rate will be high and you'll have a few, but like the prize is, is gigantic for the guys that win. And so, um, but yeah, you know, there's a lot of companies from 2012 and 2015 and 2018 sitting around in 2022, and there will be 25 in a few years that people don't know what to do with.

• 1:59:18John Coogan?

  Yeah. I think a lot of the founders wanna move on, start a new company, do something that's with a fresh team. And we actually saw it with Beddings. One of the companies that they acquired was able to spin out their AI products, experimentation division. Take the founders, some key employees who wanted to go on that journey. Other folks were able to stay with the business. And there's a whole different, uh, story and chapter emerging.

• 1:59:39Mitchell Green?

  Yeah.

• 1:59:39John Coogan?

  Always great to catch up. Thanks so much for hopping on the show.

• 1:59:42Mitchell Green?

  Yeah.

• 1:59:43John Coogan?

  Talk to you soon, Mitchell.

• 1:59:43Jordi Hays?

  You're the best.

• 1:59:45John Coogan?

  Goodbye. Let me tell you about public.com. Investing for those that take it seriously. They got stocks, options, bonds, crypto, treasuries and more with great customer service. And I'm also gonna tell you about MongoDB. What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI, own the data platform that powers it. And we have some very special guests joining us right now. We have Dick Rosenfeld and Gilbert from the, from Acquired. I'm not even gonna call it the acquired podcast. I think it's just acquired. Uh, we need to adjust the cameras a little bit, but thanks so much for being here. Congratulations on all the progress. What's the latest in your world?

• 2:00:21Speaker 07

  You know, talking about home improvement.

• 2:00:23John Coogan?

  Yes.

• 2:00:25Speaker 07

  David and I have spent a lot of time.

• 2:00:26John Coogan?

  You knew, you knew what was going to be viral this weekend and you were like, everyone's going to want to get away from AI psychosis.

• 2:00:32Speaker 08

  Palette.

• 2:00:33John Coogan?

  Touch graphs and go to Home Depot.

• 2:00:35Speaker 08

  We actually have already gotten a comment on our Home Depot episode. It just came out. It was, thank God, something took my mind off AI.

• 2:00:44John Coogan?

  How did you pick, how did you pick Home Depot? What stuck out to you about the company? Was it just the next one in the queue? Or was there something that drew you to this company in particular that got your wheels turning? I know you found a lot of interesting stuff during the process, but what was the inciting element?

• 2:01:01Speaker 07

  So it's like a top five listener requested episode. There's probably a lot of people thinking that's a boring company. I don't know why they did it, but we would get emails every week, David, for the last

• 2:01:13Speaker 08

  Yeah.

• 2:01:13Speaker 07

  two, three years saying, when are you going to do Home Depot?

• 2:01:16John Coogan?

  Okay. And where did you start? What was the initial research process?

• 2:01:21Speaker 07

  Well, the most curious thing is how large it is.

• 2:01:25John Coogan?

  Yeah.

• 2:01:25Speaker 07

  I mean, every giant retailer does everything. Walmart, Costco, Amazon, these are general retailers. Home Depot is a specialty retailer, but somehow is worth, you know, fluctuating between 300 billion and 350 billion. Because home improvement is just an absolutely enormous category. And they own, depending on how you sort of frame the market, like 50% of the market.

• 2:01:53John Coogan?

  Yeah.

• 2:01:53Speaker 07

  And so they, they sort of, they, they picked the most interesting category to be in, and then they built a business that had scale economies so they could negotiate the best prices, do the most volume. And so they're this giant business in a giant category.

• 2:02:09John Coogan?

  Is the, yeah, yeah. Is the only source of strength, scale economies? Has that been the, the story the whole time? Or is the brand also important? Like what else plays into?

• 2:02:20Speaker 08

  College game day, baby.

• 2:02:21John Coogan?

  College game day. Okay.

• 2:02:24Speaker 08

  Uh, no, brand has been very important. Uh, lots of things. I mean, the, uh, come back to that in a sec, but we picked it for the reasons Ben said.

• 2:02:31John Coogan?

  Yeah.

• 2:02:31Speaker 08

  But then when we got into researching, we realized Home Depot is actually the greatest total returning stock, public, US public stock since the day it went public. So like, you could have bought any other stock, Apple, Nvidia, Microsoft, whatever, on any other day.

• 2:02:50Speaker 07

  Since 1981.

• 2:02:52Speaker 08

  Since 1981, when Home Depot went public, you would not make as much money as you would have if you had bought Home Depot on the day of its IPO.

• 2:02:59John Coogan?

  They beat Domino's.

• 2:03:00Speaker 08

  Isn't that nuts?

• 2:03:01John Coogan?

  I thought Domino's was the best performing stock.

• 2:03:03Speaker 08

  Domino's, Monsters is up there too.

• 2:03:05John Coogan?

  Monsters good.

• 2:03:05Speaker 08

  Yep, yep, yep. Monsters number two.

• 2:03:07Speaker 07

  Even if you bought Nvidia on IPO day in 1998, nothing will exceed your total return with dividends reinvested.

• 2:03:15John Coogan?

  Oh.

• 2:03:16Speaker 07

  Compared against buying Home Depot on IPO day in 1981.

• 2:03:20John Coogan?

  So there were people that put in a thousand dollars and what do they have now?

• 2:03:24Speaker 07

  Seventeen million.

• 2:03:25John Coogan?

  Seventeen million dollars for a thousand dollar investment. Uh, and, and it feels like, is, is Home Depot, because it has a consumerish brand, does it actually attract a different, different cohort of investors? Like, is it, is it, uh, is the, is the actual investor base more diversified? Are there more employees who, who participated in that?

• 2:03:49Speaker 07

  Yeah. Um, so they had this strategy that one of the unique things they did early on was instead of recruiting employees that you would for any retailer, you know, Walmart employees, they recruited former tradespeople. So plumbers, electricians, people that could actually help you with your home project. And the goal is, hey, if, if you buy, you know, a, a successful toilet and you manage to install it yourself, you're probably going to get interested in redoing a bathroom or building a shed or, you know, an ADU or something. Um, and they, their goal was to kind of level you up and they were in a category where they could take someone who was originally in to buy a 10 cent washer and eventually turn them into a hundred thousand dollar customer.

• 2:04:33Speaker 07

  That doesn't really exist anywhere else in retail.

• 2:04:36John Coogan?

  Yeah.

• 2:04:36Speaker 07

  And because they could do that, they kind of bet the company on being able to do it. And so they built this whole engine around this like shoot the moon strategy of, we're going to get really big. We're going to get big fast and we're going to motivate our entire employee base to do so. So even back in 1980, uh, they were giving out, uh, compensation to employees, like retail employees on the floor in the form of stock.

• 2:05:03Speaker 08

  Wow. Which these people became like multimillionaires.

• 2:05:06John Coogan?

  It's awesome.

• 2:05:06Speaker 07

  Yes.

• 2:05:07John Coogan?

  Uh, how important are the founders to the story? How singular is the founding story versus uh, potentially a violation of the great man theory of history? Take me through the role of the founders and that journey. Because, uh, yeah, basically till today.

• 2:05:24Speaker 08

  Yeah. I mean, Home Depot is crazy because Bernie Marcus was the CEO and sort of the, the primary person, but it was this team and they all had different superpowers. So it was Bernie Marcus, Arthur Blank, who owns the Atlanta Falcons today. Uh, a guy named Pat Farah, who was the merchandiser. And then Ken Langone, some folks listening might know who Ken Langone is.

• 2:05:47John Coogan?

  Yeah.

• 2:05:47Speaker 08

  He was an investment banker, but he was one of the co-founders and like, it was all part of this strategy, right? So like, Ken took the company public when it was basically a year old, two years old at this tiny valuation because he could. And then he helped architect.

• 2:06:03Speaker 07

  Million dollars. There's a 32 million dollar market cap at IPO.

• 2:06:07John Coogan?

  Wow. And is that just like, uh, is that just his, uh, his unique ability as an investment banker to get that deal done? Because we've seen smaller IPOs happen through like SPACs and there's some, there's some oddities out there in the market where I could see, you know, oh, if this company thousand X is, it could be a crazy story, but.

• 2:06:24Jordi Hays?

  I've actually been surprised that we haven't seen a, a super subscale company do an IPO in this.

• 2:06:31John Coogan?

  Yeah.

• 2:06:32Jordi Hays?

  In this market, right? Cause you could imagine if, if you just took, for example, three decently smart AI, you know, uh, researchers and you put them in a vehicle and took, and took it public.

• 2:06:45John Coogan?

  Yeah, but it would go public at 10 billion already. So you don't have the upside. You can't, like, there's no, there's no scenario. I'm saying, but like. 32 million dollar IPO.

• 2:06:53Jordi Hays?

  Well, okay. Yeah. Yeah. That, that's correct. But, but at least the bankers would be able to price it much, much lower than that. And then it would trade up to, you know, some, some insane, and it would, right now there's too much incentive for venture capitalists to say, don't, don't do that. That'd be crazy. Let me give you 500 million dollars and you can take some secondary or whatever. Um, there's a lot of reasons not to do it.

• 2:07:14Speaker 07

  Private market financing, especially not for a retail concept. I mean, the retail concepts that they're, they're capped, right? How big could it possibly get? But they sort of invented this like giant category and then took half of it.

• 2:07:27Speaker 08

  And it almost happened with the, the VC dynamic almost happened with Home Depot because Ken Langone got famous because he took Ross Perot's company public, like EDS. And so when he and Bernie and Arthur were starting Home Depot, Ken took them to Ross and was like, oh, we'll just get my buddy Ross to finance this thing. And Ross, there was a deal on the table. Ross Perot was going to own 70% of Home Depot and bankroll the whole thing. At 70%, uh, which today would be worth about 230 billion dollars.

• 2:07:58John Coogan?

  Yeah.

• 2:07:59Speaker 08

  And the whole thing blew up because Ross tried to dictate the type of car that Bernie and Arthur were going to drive. They drove Cadillacs and Ross Perot, this is, you can't make this shit up. Ross was like, uh, it was like, my guys don't drive Cadillacs, they drive Chevrolets. If you're going to drive a Cadillac, that's going to be a problem for me.

• 2:08:21John Coogan?

  Okay.

• 2:08:22Speaker 08

  And so the Home Depot guys walked away.

• 2:08:23Jordi Hays?

  It is sort of seemingly kind of random to be Cadillac guy building.

• 2:08:29John Coogan?

  You have to remember that back then, like a Cadillac was like a Mercedes G-Wagon and a Chevy was like a Ford Taurus. Like, like the, the brands have now coalesced to the point where Chevy and Cadillac are similar.

• 2:08:41Jordi Hays?

  It doesn't, I don't think of Cadillac as like the.

• 2:08:45John Coogan?

  It was like, oh, you're spending money.

• 2:08:46Jordi Hays?

  Of, yeah, but you're, you're, you're running a home, home improvement, you know, contractor, supply business, like.

• 2:08:53John Coogan?

  No, Cadillac was what you'd get around on Wall Street on. It's a limousine company.

• 2:08:57Jordi Hays?

  No, but I just think that's notable. They're not driving like an F-150 or whatever.

• 2:09:01Speaker 08

  Cause they didn't, because the founders, including Ken, they weren't home improvement guys. They, they were retail guys who saw the opportunity in this category, had gotten into it in another company in the past and then started Home Depot. Home Depot was basically their prior company mashed up with Costco. They knew Saul Price, who had started Costco. They saw what Saul was doing with Costco in San Diego and they were like, oh, we can do the same thing with home improvement and it'll crush.

• 2:09:27Jordi Hays?

  What was their rotisserie chicken?

• 2:09:29John Coogan?

  You want my money? You got to LARP. You have to LARP his blue collar. Uh, so.

• 2:09:33Jordi Hays?

  What was their rotisserie chicken?

• 2:09:34John Coogan?

  Did they ever think doing a membership model like Costco? Did they ever pull anything else from Costco?

• 2:09:40Speaker 07

  They pulled a lot from Walmart, interestingly. I mean, the, the obvious stuff they pulled from Costco. So it's going to be a giant warehouse. We're not going to face the labels out. You're going to have to go up to the pallet and, you know, just grab it off yourself. However, it shows up in the pallet.

• 2:09:52John Coogan?

  Yeah.

• 2:09:53Speaker 07

  There, there's those obvious parallels. Interestingly, they got a lot from Walmart. Uh, the employee compensation stuff.

• 2:09:59John Coogan?

  Sure.

• 2:09:59Speaker 07

  They got from Walmart and then the, um, uh,

• 2:10:04Speaker 07

  what was the other thing they got? Oh, everyday low prices.

• 2:10:06John Coogan?

  Okay.

• 2:10:07Speaker 07

  Walmart sort of invented that idea of like, things don't go on sale.

• 2:10:10John Coogan?

  Sure.

• 2:10:10Speaker 07

  It's just everyday low prices. And obviously they, they've moved away from that now, but that was Home Depot's ethos for a while too.

• 2:10:15John Coogan?

  Yeah, but no clear.

• 2:10:16Jordi Hays?

  What was it up, was it up only? Was it up only or was there some dark days? Like what, what was the?

• 2:10:22Speaker 07

  There was, the company almost completely died in 2006, seven, going into the housing crisis.

• 2:10:29John Coogan?

  Oh, yeah.

• 2:10:29Speaker 07

  But not for the reason you think. You would think like, oh, home improvement company is probably falling apart because the, the macro is changing and actually housing is at the root of it. They had brought in leadership, a new CEO in 2000, who was just, the, the first few years were good, but then just absolutely the wrong person for the job. And the, the, the culture got kind of messed up. Uh, the whole value proposition to customers became like less and less clear. And they really tried to focus, it was, it was a GE guy that came in, really tried to focus on Six Sigma. We're going to be as efficient as possible. We're going to have as few employees on the floor as we can. Uh, we're not going to hire expensive specialized employees. We're going to try to get more general retail staff.

• 2:11:14Speaker 07

  And it, it really watered down the whole value proposition. And actually Frank Blake, who became CEO in January 2007, is credited with saving the company. If you ask Ken Langone, he said Frank absolutely saved the company.

• 2:11:26John Coogan?

  Wow. What was COVID like for Home Depot?

• 2:11:30Speaker 07

  Crazy.

• 2:11:30Speaker 08

  The greatest thing that ever happened to them.

• 2:11:32Speaker 07

  They, they grew.

• 2:11:34Jordi Hays?

  So you're saying they may have been.

• 2:11:35John Coogan?

  Behind it.

• 2:11:36Jordi Hays?

  Behind it.

• 2:11:37John Coogan?

  You're pointing fingers.

• 2:11:40Speaker 08

  That would really be a conspiracy.

• 2:11:42Speaker 07

  They built up an astonishing amount of supply chain and e-commerce readiness in the like three, four years leading up to it. And I mean, they just had so much capacity for everyone who was trapped at home, wanted to improve that space in their home, but also didn't really want to go to the store to get all of this stuff. It was this like ridiculous, perfect thing that fell into their lap.

• 2:12:05John Coogan?

  How, how do you square the fact that Home Depot's been on this tear? America seems to be very into these DIY projects, into building things. There's been this, you know, centuries-long build-out of the American home. And yet, there's so many talking points about, we can't build things in America, there's a housing crisis, there's not enough housing. How can these two things coexist at the same time? What's actually going on here?

• 2:12:31Speaker 08

  Home Depot is the perfect end around this, at least in the early days, because it's DIY. You don't need permits when you're just doing this yourself. You don't need permission. That was the whole ethos of the company. Contractors and pros now are half the business. Even still, it's mostly residential. And a lot of that just skirts around all this bureaucracy.

• 2:12:51Speaker 07

  And I completely agree with you that America's not building enough housing, especially single-family homes. We're building a lot of condos and townhomes, but people want to live not necessarily in cities, but near cities and in single-family homes. And we aren't building many of those. Home Depot is experiencing like the most ridiculously awesome secular tailwind from that ever, because America has a giant housing base that gets older every year.

• 2:13:20John Coogan?

  Oh, yeah.

• 2:13:21Speaker 07

  The median age of a home is up like 15 to 20 years versus when they were getting founded. And so, for them, it's just this like, almost an annuity, that people need be working on these old houses.

• 2:13:36John Coogan?

  So, new homes don't need as many trips to Home Depot? So, you think Home Depot might secretly be behind the housing crisis?

• 2:13:42Speaker 07

  Look, you're the conspiracy theorist. You keep trying to put words in her mouth.

• 2:13:46John Coogan?

  Behind COVID.

• 2:13:48Speaker 08

  Wow, this goes way deeper than I thought.

• 2:13:50John Coogan?

  It's the most powerful company in the world. Forget the AI companies.

• 2:13:53Speaker 08

  This is why you would have made more money investing in Home Depot than in Nvidia.

• 2:13:57John Coogan?

  You know, you need to apply the skepticism that you apply to every AI leader's blog post to the Home Depot team, for sure. Every move they make.

• 2:14:07Jordi Hays?

  Did you guys do any, did you guys do any projects to, as part of your research process? Did you like, try to?

• 2:14:13John Coogan?

  Did you add a fourth bedroom or something in your house personally?

• 2:14:16Speaker 07

  I did some shopping trips. I didn't do a major project.

• 2:14:18John Coogan?

  Every time I go, I'm back seven times. Like, that retention, it's sort of like anti-churn. Like, you can't get out with just one trip, because you go and you're, oh, I need a different nail, I need a different screw, and then you're back there a couple times.

• 2:14:30Speaker 08

  There's so many beautiful dynamics to it. This is it. Like, you know, at least for the DIYs and for the pros, jobs can't stop. You know, if you're trying to get something done on a weekend yourself, or if you're a pro, it's your job during, you run out of nails, you gotta go to the Home Depot.

• 2:14:45John Coogan?

  Yeah. What is the retail footprint strategy? Have they been just growing the number of locations continuously? Have they been consolidating?

• 2:14:55Speaker 07

  Is this a leading question? Do you know the answer? It's nuts.

• 2:14:59John Coogan?

  Okay.

• 2:15:00Speaker 07

  Home Depot grew stores like crazy. I mean, seriously, it was like the original blitzscaling company from 1979 until 2006.

• 2:15:11John Coogan?

  And we're not talking like McDonald's scale, but we're talking thousands of stores?

• 2:15:15Speaker 08

  2,300 stores.

• 2:15:16John Coogan?

  2,300 stores, okay.

• 2:15:18Speaker 07

  And then, they stopped. Dead stop in 2007, and they essentially didn't build another store until two years ago.

• 2:15:26John Coogan?

  Whoa.

• 2:15:27Jordi Hays?

  Wow.

• 2:15:28John Coogan?

  That's crazy. And was that just because they were?

• 2:15:30Jordi Hays?

  That had to have driven so much of the performance, because you have like, you know, one of your primary costs of, you know, all this capex, and then suddenly you're like, no, we're pretty much good, we have our storefronts.

• 2:15:41Speaker 07

  And they just focused on e-commerce build-out, and building more fulfillment centers, and specialized fulfillment centers for e-commerce. And it was this like, okay, we already have most of the good real estate, we're just going to focus on store efficiency and building all of this fulfillment, supply chain stuff. And now, they've started building again. They're like, okay, we took, what was it, a decade and a half off, and time to build.

• 2:16:07John Coogan?

  It's like, they went to all the other leaders in the space, told them, let's just stop the expensive capex right now, make sure the margins are in a good place, so we can get out, perform in the public markets, you know?

• 2:16:18Speaker 07

  Yeah, they wanted to pace the frontier.

• 2:16:21John Coogan?

  Pace the frontier. Pace the frontier of their retail expansion. Is there, but on the structure of their actual retail footprint, is there a similar, you know how people will McDonald's, and I think you've illuminated this a lot on like, is McDonald's just a real estate play? Like, they own all the real estate. What is that dynamic with McDonald's? And then, is that, is it the same with Home Depot? Like, is there a value to a company of just like, getting a lot of retail space, or like, owning a lot of buildings? Or is that always just like a sideshow that people put too much, too much focus on?

• 2:16:53Speaker 07

  I actually don't know for McDonald's. The thing I do know for Home Depot is, it's not like you just look at their real estate portfolio and say like, oh, that's half the market cap right there. But it does benefit them in that, when they build a Home Depot somewhere, all this other stuff gets built around them, and then they don't have to go renegotiate the lease in 10 years or risk losing it to their competitor. So, they now do own all or most of the stores, because it's sort of a durability thing.

• 2:17:22John Coogan?

  What, what are some examples of things that get built up around them? Like a HVAC repair shop or something? Like, what are you, what are you referring to there?

• 2:17:30Jordi Hays?

  Food, beverage, you know?

• 2:17:32Speaker 07

  They anchor shopping centers.

• 2:17:34John Coogan?

  Oh, okay, okay. Like, whole, like, there might be a Best Buy across the street or something.

• 2:17:37Jordi Hays?

  Or Target, yeah.

• 2:17:38John Coogan?

  Okay, okay, got it.

• 2:17:39Jordi Hays?

  Grocery stores, yeah.

• 2:17:40John Coogan?

  It's not specific to what you need to do a home, home project.

• 2:17:43Speaker 07

  They actually don't want you going anywhere else. The whole strategy is, if this should be your one-stop shop, we're going to stock an insane amount of stuff, and you shouldn't have to go anywhere else for your project.

• 2:17:53Jordi Hays?

  I, I, I think that robotics are going to be another tailwind for them, because if you assume that, if you assume that a humanoid in, let's say like, you know, let's be generous with the timeline, a humanoid in like?

• 2:18:05John Coogan?

  A thousand years.

• 2:18:07Jordi Hays?

  200 years.

• 2:18:09Speaker 08

  Depends how much we pace the frontier.

• 2:18:11Jordi Hays?

  10 years, 10 years, 10 years. Assuming you're, you're walking out of your house in the morning, and you can tell your humanoid, like, hey, I actually want a fence there. They'll just spend the day building a fence, right? And it sounds crazy, but today, we do a lot of digital work like this. We're like, hey, I want to understand, I want to build this piece of software, I want to do this. This is going to transition into the real world, and it's just not that hard to imagine doing a lot more, because you have this sort of like latent labor capacity that you already have as like, an individual, somebody, you know, with a house or whatever. And you, you're going to probably want to do a lot more than if you have to coordinate with somebody, and then there's someone else's fee and all this stuff. So, I think that's interesting.

• 2:18:52Speaker 08

  I think you're even more right than maybe you're thinking about, because the logistics for getting this stuff to your house is quite unique. Like, imagine trying to put, you know, 3,000 pounds of lumber through the Amazon logistics system. You know, and Amazon has built out some side channels to be able to do this, but this is all that Home Depot has been investing in for the last 20 years, when they haven't been building stores, is this. Like, you can get 3,000 pounds of lumber in two hours at your house.

• 2:19:24John Coogan?

  Have there been any like misadventures where?

• 2:19:26Jordi Hays?

  I actually need lumber.

• 2:19:28John Coogan?

  Where they've considered like going upmarket, or going into potentially like home decoration, furniture? There's a whole bunch of adjacencies that could be opportunities, but also risks.

• 2:19:40Speaker 07

  Yeah, so the biggest one is HD Supply. In the early 2000s, they bought a bunch of companies and tried to sort of squish them together, and then make this distribution business, like a different way to distribute to pros, pro contractor, outside of, using our physical store footprint. That ended up being this like, big distraction, they needed to spin it off. Hilariously, a decade later, they ended up buying the most valuable part of it back, and it actually is part of the business now, that they're sort of ready to do that expansion.

• 2:20:11John Coogan?

  Interesting.

• 2:20:12Speaker 08

  The other one is China and international. Just the culture around DIY and home improvement is not the same in most places in the world, and definitely not the same in China.

• 2:20:24John Coogan?

  So, they tried to expand their footprint there, and were basically unsuccessful?

• 2:20:28Speaker 07

  They opened a dozen-plus stores, maybe dozens of stores. And, yeah, interestingly, in China, it's not cool to be working on your house on your own. Like, why can't you hire someone to do that for you? The wealthy people want to live in cities, which don't really need much DIY.

• 2:20:47John Coogan?

  A lot of the buildings are new.

• 2:20:49Speaker 07

  Yeah.

• 2:20:50John Coogan?

  Seems very un-American over there. I don't get it. Potentially a completely different country.

• 2:20:56Jordi Hays?

  Lowe's is roughly, has like roughly a third of the market cap. Was there ever a period where, where they were more neck and neck? Obviously, yeah, break, break down maybe that, like the most kind of competitive period before they seemingly kind of ran away with it.

• 2:21:13Speaker 07

  So Lowe's is over a century old. It was Lowe's market for the longest time and Home Depot started, you know, many decades into Lowe's existence and then just went, and basically discovered this new business model of giant warehouse store, five times the amount of square footage that Lowe's or any of these other sort of regional chains at the time, essentially hardware stores had. And it turned out that your ROI on a giant store that had everything was much higher than your ROI on a bunch of little stores that had a limited number of things. And so Lowe's, to their credit, when Home Depot passed them in 1989, Lowe's really woke up to this and said,

• 2:21:56Speaker 07

  okay, we're completely changing our whole business. And so they started shutting down the old store concepts and building basically Home Depot clones at first. And then they, they kind of developed their own twist on them. But that's why they're so similar today.

• 2:22:09Jordi Hays?

  Interesting.

• 2:22:10John Coogan?

  Do you have an idea for how Home Depot's e-commerce penetration maps to other physical stores like a Walmart? Like, it just, it feels like the, the urge to, I need this particular nail, I'm going there right now, the project must go on. I would assume that Home Depot, even if they've been successful in e-commerce, they haven't been as successful as at shifting the revenue there as other, other retailers. But what's, what's actually happened?

• 2:22:40Speaker 07

  So the sleight of hand there that you did unintentionally is, for most people, most retailers, e-commerce equals delivery.

• 2:22:51John Coogan?

  Yeah.

• 2:22:52Speaker 07

  And that is not true at Home Depot. An enormous amount of their e-commerce is in-store pickup, because in your case, you know, you're home, you're doing the project, you have the wrong size nails, but like, you have four hours to finish this project. You got a family, you gotta go do TBPN stuff. And so you're not really willing to wait the extra hour to have it delivered to you. You're just getting in the car, but you want to know that when you get there, it's going to be ready for you. It's going to be super easy to pick up. So, I don't remember the exact stat, but it might be like half of their e-commerce is actually pickup.

• 2:23:23John Coogan?

  Yeah. I wonder where all this goes because I, I recently doordashed something from Best Buy, and it was an amazing experience because it was faster than me driving to Best Buy and back because they found a local driver who was able to just pick it up. So there was like no way that I could ever outperform it because.

• 2:23:42Jordi Hays?

  Was the first time you ordered like local delivery or?

• 2:23:45John Coogan?

  I mean, it was just, it was the first time I ordered delivery that wasn't like.

• 2:23:48Jordi Hays?

  John discovers.

• 2:23:51John Coogan?

  I'm wondering if they're more optimistic on that or drone delivery or anything else? Like, do you have any idea of where the current management team is seeing the future of Home Depot? Like, what are they actually excited about? Because sometimes it's just e-commerce, sometimes it's basic AI stuff, sometimes it's new delivery trends. Like, every management team always has like a stump speech for like where they think things are going. And maybe it takes a couple of years to get there, but what are they excited about?

• 2:24:15Speaker 08

  Well, huge focus of the company and, and most of their growth for the past decade or so, COVID excluded, has been from pros, from contractors, and getting bigger and bigger contractors and builders, more deep into their supply workflows. So, and e-commerce is actually a big part of this, too. You know, a lot of the smaller contractors, residential GCs, they're already, Home Depot is their primary just-in-time supply and increasingly like their main supplier. But if you think about like really big builders, multifamily, commercial,

• 2:24:55Speaker 08

  you know, cranes, all, big stuff. Historically, Home Depot has not been penetrated into that. They've been penetrating a lot more into that. So now, now you need like corporate relationships. You need like, orders aren't just like coming to the store, you need to be able to deliver it or, or go to the store, but it all needs to be in a very different enterprise kind of system.

• 2:25:14John Coogan?

  Yeah.

• 2:25:14Speaker 07

  But it's not drones. Like, it's not any of the thing you were just saying. It's AI a little bit. They, they talk a lot in their annual report about the ways they're using AI to better help people find the right products that they want and use the website and build their IT systems and all that. But they sell big, heavy stuff.

• 2:25:31John Coogan?

  Yeah.

• 2:25:33Jordi Hays?

  Yeah, I'd be a little worried if they were like, we're getting into drone delivery. It's like, oh, I'm happy to hear you're gonna be flying. Yeah, you're last.

• 2:25:41Speaker 08

  On that though, rentals is a big part of their business. So when you think about, you need a concrete mixer, you need some kind of specialized tool, you need a backhoe.

• 2:25:51Jordi Hays?

  Yeah. Okay, so I needed this episode to happen, I needed this episode to happen like two weeks ago because I, I got a bunch of.

• 2:25:59John Coogan?

  Dirt delivered.

• 2:26:00Jordi Hays?

  I wanted my, my, my oldest has like an electric dirt bike thing. And I was like, well, he's got an electric dirt bike, he needs a track. So I got all this dirt delivered thinking, oh, it's gonna, I'm just gonna, you know, use a shovel or whatever. I started getting out there with a shovel. And it's like, okay, now I'm basically doing kettlebell exercises for four hours straight, like moving dirt around. I even had Nick on our team stop by to hang out. And I was like, get ready to shovel some dirt. Felt, felt bad about that one, but I was not even aware that I could just get, get, get that equipment delivered. Question from the chat, is the, is the smell natural or is it engineered? Like, like, have they, because

• 2:26:43Jordi Hays?

  that feels like it's a part of the brand now. And so it's something they need to, like, if they lose that, like, they lose all the nostalgia and all, all the memories that kind of come flooding back when, when you walk in.

• 2:26:53John Coogan?

  Is the smell mostly sawdust? Is that what it is? I don't know. Anyway, what do you think?

• 2:26:57Speaker 07

  Want to tell the store opening?

• 2:26:59Speaker 08

  Yeah, yeah. So I don't know about the smell today. I assume it is intentional, if not engineered. But in the early days, there's a famous story about the first two store openings. The store managers thought they were going to surprise everybody and like do a really fun thing for the store opening. They hired a cleaning crew to come in and polish the floors the night before. And then the founders come in at like four in the morning and they lose their tops. And they're like, what are you doing? These need to be action places. We can't have polished floors. And so they grabbed a bunch of forklifts and started like skidding them around the floors and they sprinkled sawdust all over the place.

• 2:27:39John Coogan?

  Wow. Yeah, that's super thoughtful. Last question for me. What, I feel like you guys are fantastic at finding archival images, just odd documents. Was there anything from this process that stuck out as like your favorite piece of Home Depot lore or fun fact or obscure image or document or something like that?

• 2:28:05Speaker 07

  Yes. So we, we launched a new website this year and we've been working with this fantastic designer. And she, she found this, she launched this thing called Artifacts. So if you go to acquired.fm/artifacts, you can see the artifacts we discovered from any given episode. She found the Moody's manual from 1977 and 1978 that Ken Langone referenced when he looked at the original share price of Handy Dan, which is where the founders worked before they started Home Depot. And it became interested in their company. So I, like, I thought we were pretty good at this, but what Elliot has found is nuts in terms of some of the, the old stuff

• 2:28:50Speaker 07

  he's doing for our artifacts page.

• 2:28:52John Coogan?

  Some of these annual reports are, are super, super cool. The, the visual design of the first annual report, so much imagery there. I feel like, I don't know, this would be like dunked on in the modern era, being like, too many images, not enough facts. But I, I think it tells the story really, really clearly. This is acquired.fm/artifacts/HomeDepot. The team's showing it on screen right now.

• 2:29:15Jordi Hays?

  What acquired episode should people go listen or re-listen to, to have some historical?

• 2:29:24John Coogan?

  What's the companion piece?

• 2:29:25Jordi Hays?

  No, no, no. No, I was gonna say historical context for this moment in AI where, in tech, where there's like extreme tension, extreme infighting, you know, people that are generally aligned on a bunch of things are suddenly deeply misaligned and have different interests. Anything that stands out?

• 2:29:48Speaker 07

  This was before acquired episodes were good, so I always hesitate to recommend this one. We were still warming up, but Standard Oil.

• 2:29:56John Coogan?

  Oh, yeah.

• 2:29:57Speaker 07

  In like 2017, 18, we did.

• 2:30:00Jordi Hays?

  I had a feeling, yeah.

• 2:30:01John Coogan?

  Yeah, that's good.

• 2:30:03Speaker 08

  The other one I throw out is Lockheed. Lockheed Martin.

• 2:30:08Speaker 08

  Obviously, coming out of the wars, World War II.

• 2:30:12Speaker 07

  Or the Last Supper. There's this famous moment in the history of the defense industry, yeah, where the Secretary of Defense gathers all the prime contractors around at the end of the Cold War and says, "We are shrinking our procurement budget and expected to shrink basically every year for at least the next decade, and so there's gonna have to be less of you. I don't have any say over antitrust, so I'm not really advising you to do anything anti-competitive, but you need to figure out how we have less mouths to feed."

• 2:30:42Speaker 08

  Wow. And then sort of the punchline of the whole episode, which we didn't know going in, but discovered is Lockheed and the military industrial complex created Silicon Valley. Like, literally, Lockheed created the town of Sunnyvale.

• 2:30:55John Coogan?

  Yeah, that's crazy.

• 2:30:57Speaker 07

  And I think there were something like 10 times more employees working in the secret Lockheed, Lockheed missiles in space in Sunnyvale than the rest of the tech industry combined at the time. I mean, it's like they, they literally brought everyone here and started it all.

• 2:31:11Speaker 08

  All those early Silicon Valley startups selling chips, who do you think they were selling to? They were selling to Lockheed and the military.

• 2:31:17John Coogan?

  Yeah.

• 2:31:18Jordi Hays?

  Amazing. Well, we'll listen to those. Great to see you both. Let's hang out soon.

• 2:31:23John Coogan?

  Let's hang out soon.

• 2:31:23Speaker 08

  Great to see you guys.

• 2:31:25Jordi Hays?

  Yeah, congrats.

• 2:31:25John Coogan?

  Have a good rest of your week. We'll talk to you soon. Goodbye.

• 2:31:28Jordi Hays?

  Cheers, guys.

• 2:31:29John Coogan?

  Let me tell you about console.com. Console builds AI agents that automate 70% of IT, HR and finance support, giving employees instant resolution for access requests and password resets. Our next guest is with us in the waiting room. We'll bring in Farage from Cognitiv, the founder and CEO. Welcome to the show.

• 2:31:48Speaker 09

  What's going on? Great to be here. Thank you so much for having me.

• 2:31:53John Coogan?

  Thanks for hopping on. Since it's the first time on the show, I'd love for you to kick us off with an introduction on yourself and the company.

• 2:32:00Speaker 09

  Sure. Thank you for so often the opportunity. My name is Farage Ali. I'm founder and CEO of Cognitiv. I've been in this industry for over 40 years, the last 30 of it in semiconductor business. Yeah, I started when I was only two years old, guys.

• 2:32:19Speaker 09

  So.

• 2:32:20Jordi Hays?

  Straight out of the crib.

• 2:32:22Speaker 09

  Exactly, yeah. Prior to founding this company, I founded a semiconductor company back in the late 90s to the public on NASDAQ. Then I took another startup, built it up and took it public in NYAC in 2017, sold it in 2019 to Marvel, Semiconductors. I went on for two, three years and did investing, you know, helping other entrepreneurs get their ship off the ground. And that's when I learned enough about AI to, to kind of have the light go on and see, realize that perhaps with AI, I could actually solve some of the issues that I had as an entrepreneur

• 2:33:03Speaker 09

  building two semiconductor companies. And that's really like, it's been a mission for me now in the last two and a half years.

• 2:33:10John Coogan?

  Yeah. What is your process for finding opportunity and how has it changed? Because are you looking at the applications of how people are using chips, where there's demand, where the bottleneck is, and then going and working backwards to design a chip that improves things? Like, you've been doing this for, for so long that it's clear that there's not a one-size-fits-all solution. So what is your process for actually discovering opportunity?

• 2:33:37Speaker 09

  So, you know, a lot, a lot of times, you know, ideas that, you know, you pursue in life come from your own experiences, right? So building these companies, over time, I started to realize that the cost of developing any kind of chip is just getting, you know, bigger and bigger. I, when I started my first semiconductor company, I raised 50 million. When I took it public, I had 17 left in the bank still. The second one, I raised 200 million and frankly, I took it public because I didn't want to do another private round. I wanted to just go public and raise public money. And now it takes several hundred million dollars to do a chip. Chip, cost of developing chips is skyrocketed.

• 2:34:19Speaker 09

  Complexity has gone up. Time it takes to build a chip, to design a chip, it's two to three years. And, you know, then it takes another year or so to get your customers up and running. Whether you have five years, six, you start to make some money. And the problem is, is that the software is moving so fast that leaves chips behind by almost six years, right? And so we need to close that gap. And the third problem in our industry has been that we have diminishing number of electrical engineering students graduating to keep up the good work as the industry grows. So we have, you know, diminishing resources, more complexity on the chips, higher costs and longer time, and we're completely getting out of sync with software.

• 2:35:04Speaker 09

  So my thought process was, as I was learning more about AI by investing in AI companies and learning from other entrepreneurs in that field, that there was a great intersection of these two really awesome technologies to be able to solve all that problem, collapse that time by a large factor, reduce the cost it takes to do a chip. And then we can do these chips a lot faster and that gets the software going faster, right? So you get this, essentially this flywheel working. And, and so it led to, to the idea of building a frontier model lab that focuses only on

• 2:35:44Speaker 09

  semiconductors. So unless other large frontier labs that are working on general intelligence, I set out to build artificial intelligence for chips. So we call it ACI, artificial chip intelligence. And giving that focus and that particular sliver of the world knowledge required really to bring together, you know, scientists from math and physics and pair them up with people who have 20, 30 years experience actually designing chips. You know, people in this company on the chip side have done hundreds of tape outs, which is the process of completing a chip

• 2:36:25Speaker 09

  and sending it to a fabrication facility, and then bring in other software people that can kind of encapsulate all of that knowledge and capability in an enterprise class product that then chip designers can use to make the chip design a lot faster. What a lot of people don't realize is that 90% of the time in the chip business, our engineers are spending doing things that can be done by these models now, right? And so what we need to do is to get those folks, instead of wasting their time, to be on the creative side where they can think about new products, new markets, new capabilities, and then use this, essentially these digital designers to help them get the project through. So that's been really a passion of mine for the last two and a half years.

• 2:37:11Jordi Hays?

  How, you know, we've had a bunch of new chip startups on the show, and you were kind of mentioning this earlier, just like how significant the timeline is to get from concept to tape out to, to, you know, powered and, and actually, you know, doing workloads.

• 2:37:30Jordi Hays?

  How much, like, the, the startups are taking some amount of technical risk, obviously execution risk, but then there's the other technical risk of like, is the architecture still going to be relevant by the time? And can I scale up my production enough? We had a founder on the team yesterday that pretty much all the labs and the hyperscalers are saying like, I don't just need to know that this is going to work and be relevant when, when you're ready. I need to know that you can hit, you know, gigawatt scale. So how much, right now, it feels like there's just demand everywhere. And so these companies are getting funded and they're getting kind of pilots and stuff like that. But how much do you worry about the sort of technical risk that these teams are

• 2:38:13Jordi Hays?

  taking on, knowing that every, there's so many different players that are going to be innovating over the next five years, that by the time they actually are ramped up, will there be, will there be a real market for them?

• 2:38:24Speaker 09

  And honestly, you put your finger on one of the toughest jobs for people in the industry.

• 2:38:32Speaker 09

  When we start a brand new project, whether you're in a small company or in a startup, when you start a new project and you know that this chip is not going to go in production for another five years. I mean, nobody on the planet has that kind of clarity five years from now, what is needed, right? Because the world is changing and, you know, we're all limited as human beings about how far in advance we can see and analyze. And so the risk you're taking on acceptability of this device in the market is one of the overriding things. And the way we deal with it in the chip business, we've used to deal with it, is recognizing it's going to take five, six years to get there, is we pack these devices with a lot of things that may or may not be necessary.

• 2:39:16Speaker 09

  But it's sort of like our insurance policy and essentially hedging against what might change in the industry, right? And so it's a very, very tough place to be because the chips get blowed, their power consumption goes up, their cost is unnecessarily high. And even with all of that, you don't really know whether you're going to get there and there's going to be a, you know, your hunt is not, whether a hunter is going to, the dog is going to hunt or not. So with, by collapsing the time in the time, you know, the collapsing time that it makes to do a chip, you're actually getting rid of all of those unknowns. You're increasing the probability of you hitting the market dynamics that you want at the time you want it with the right kind of power and performance.

• 2:39:59Speaker 09

  And that we have not had in semiconductor industry for a very, very long time as shifts have gotten more complex. And what I, my, my vision is, and what I love to do is to be able to return our industry back to a point where, like I did with my first company, you know, four or five of us went to Sand Hill Road, raised a reasonable amount of money and were able to bring a chip to the market and, and, you know, and, and get it, get it deployed and take the company public. That possibility needs to return back to our industry to bring the innovation back and frankly, keep up with the world that is now woken up with the chip thing and they want to, you know, we're going to have a lot more competition in the world scale, right? And, and so we need these kinds of innovations to get us there.

• 2:40:42Jordi Hays?

  In some, there's been a variety of teams working on math-specific models. And it's been interesting over the last, you know, month or so, as we've seen generalist models actually go out and solve some of the most, you know, important open problems. And, you know, we saw Navier-Stokes and everything. Why do you think that semiconductor design is going to work out differently than, than, you know, and, and why is somebody going to be able to go zero to one with a new chip, with a cognit chip and, and not with a more generalist model? Is that because of having the right, you know, data sources, you know, what, how, how,

• 2:41:25Jordi Hays?

  how do you sort of compete over time, assuming that, you know, the frontier will just continue to advance?

• 2:41:31Speaker 09

  So the models are as good as the data that you use to train them. If they've never seen enough of the examples, then they actually don't know, you know, how, how to get it done. And so neural model reasoning is going to get you to something you've never seen.

• 2:41:47Jordi Hays?

  Yeah.

• 2:41:47Speaker 09

  Right? So it's very fundamental that you use the data from your industry to train these models. The reason large scales L L M's are not good in chip design is because chip design data as an open source is actually not available, very little of it available. And what's available is not very useful, frankly. So what you need to do is to start from ground zero and build data sets that can be used to train a model. And then you train that model with that data. So the knowledge is inside the model, the reasoning is inside the model.

• 2:42:25Speaker 09

  And in that way, a specific model trained on a specific technology becomes very, very powerful, right? So the reason, for example, software, these L L M's do a good job in software, because for the last 30 some odd years, software has had a history of having open source data widely available. And that's why a lot of these large, you know, frontier models do pretty well in software because they're all essentially consuming the same data. That doesn't exist for semiconductors. And we're the first company that actually took that on. And for the last two and a half years has been building a data mode that we think today

• 2:43:09Speaker 09

  is the largest data set in the industry for semiconductors. So if you train them on the right data, then they get the right intelligence. But that's also kind of not frankly enough because semiconductor industry is the process of getting a chip from idea formation to architectural, you know, innovation, all the way out to something physical that, you know, is going to have the transistors that are physics items, right? All put together and working well requires complete understanding of the workflow that a mature semiconductor industry goes through to ensure that everything works. You know, when we talk about putting hundreds of billions of transistors on a piece of silicon

• 2:43:53Speaker 09

  and they work, they work because not one of them can be misplaced, right? So you can't, you know, make things up. It's not like poetry. It's not like, you know, talking about some trip planning, right? It needs to be, you need to bring that precision and that precision of workflow really can come from people who've done it and putting alongside the mathematicians who can use to train. And that's, that's sort of like how we built this company out. We wanted to do the hard work because we think this is going to be, for a long run, a fundamental way that we're going to design chips. Our industry cannot go on taking four years to design a chip and cost hundreds of millions of dollars and not know whether there's going to be a good market for it or not. That's not sustainable. That's not investable.

• 2:44:38Jordi Hays?

  Yeah, it feels, it feels like we're, we're going to have like biotech style or pharma style mechanics where you have this massive, massive investment and then it's like almost a coin flip on whether or not, or, or worse, on whether or not there will actually be a market there and it'll, it'll function and, and scale. You said you raised $50 million for your first company. That was, it's still a lot of money, but it was definitely a lot more money back then. What was the prehistory? Why, why did, why were you so successful on Sand Hill?

• 2:45:11Speaker 09

  Yeah, so, so this, this goes back to, to the days when people were using dial-up modems, right? And, and we were inventing this new way of building a chip that was D S L technology. It's, it's the way broadband has served to many of our homes today. And we had a, you know, a good, solid approach, a great team. It was one of the funnest times of my life when we were building that company. And we went from opening the door to having a chip in hand that we were selling and generating revenue. And we took the company public almost three, three years to the day we opened the door. That still holds the fastest record that semiconductor company has gone from inception

• 2:45:56Speaker 09

  to, to go on public. But, you know, in, in these kinds of things, you need to have a good idea, you need to have a great team, you need to have good timing, you need to have good luck. All of those came together for us, fortunately, in the first company. And, and it just kind of all clicked and it was, we had a hell of a time doing it. And, and, and so that's, that's how, how it came about. On the second company, we built a product for data centers. So data centers at the time were transitioning from one gig to 10 gig. And we built those world's first 10 gig chips. And that was, you know, the success there. So this time I'm not building a chip, but I'm building a system that helps everybody else build chips faster.

• 2:46:42Jordi Hays?

  Amazing.

• 2:46:43John Coogan?

  Makes sense.

• 2:46:44Jordi Hays?

  Very, very cool. Well, we'd love to have you back on.

• 2:46:46John Coogan?

  Yeah.

• 2:46:47Jordi Hays?

  As you continue to make progress and it's amazing to meet you.

• 2:46:50John Coogan?

  Yeah, thanks so much for helping out the show.

• 2:46:52Speaker 09

  Thank you.

• 2:46:53Jordi Hays?

  Right, also, well, give us, what's the, what's the art on the wall that the chat was asking about? Is that Tom, Tom Brady?

• 2:47:00Speaker 09

  That's Tom Brady. I'm a big Patriots fan and, so, yeah, Tom Brady all the way and the Pats. Go Pats.

• 2:47:09Jordi Hays?

  There you go. I bet you could get Tom in, in the next round.

• 2:47:12John Coogan?

  Yeah, you might be, it's going to be fun.

• 2:47:15Jordi Hays?

  Make it happen. Awesome. Great to meet you.

• 2:47:17John Coogan?

  I'll talk to you soon.

• 2:47:18Speaker 09

  Thanks.

• 2:47:19John Coogan?

  Let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents, whether you're writing code, analyzing data, creating content or automating business workflows. Codex helps you move projects forward from start to finish.

• 2:47:31Jordi Hays?

  We got some breaking news.

• 2:47:32John Coogan?

  What's the breaking news?

• 2:47:33Jordi Hays?

  The president just phoned Jensen live on stage at the All In Summit.

• 2:47:37John Coogan?

  Whoa. Wait, Jensen was on stage?

• 2:47:40Jordi Hays?

  Yeah.

• 2:47:41John Coogan?

  Or the president was on stage. Jensen was on stage and he gets a call from Donald Trump.

• 2:47:44Jordi Hays?

  Trump says the great thing about Jensen is that he can create the best AI chip in the world, but can't figure out how to put me on speakerphone.

• 2:47:52John Coogan?

  What?

• 2:47:54John Coogan?

  That's a wild, wild thing.

• 2:47:56Jordi Hays?

  Very, uh, big, big moment. So anyways, that's, that's crazy. Apparently, yeah, Mike Isaac says, okay, wow, per folks there, Trump called Jensen in the middle of his interview. He was on stage and Jensen put the phone on speakerphone.

• 2:48:14John Coogan?

  Whoa, okay.

• 2:48:16Jordi Hays?

  Jensen thanked Trump for his social media post this morning pouring cold water on alarmism.

• 2:48:22John Coogan?

  Yeah, Jensen's been anti-doom for this entire cycle. We'll see, we'll see where it all goes. I'm sure there'll be more. Brad Gersner chimed in. Is he having you? Oh, there's a video. Do we want to play the video? Trump calling Jensen live on, during the All In Pod interview.

• 2:48:40John Coogan?

  And, I mean, we just read it out, so I think you know what's going to happen, but this is a wild moment.

• 2:48:48Speaker 02

  The great thing about life is that Jensen can develop the most complex computer chip in the world that nobody can copy for ten years, but he can't figure out how to put me on speakerphone.

• 2:48:58John Coogan?

  He is on speakerphone. He is on speakerphone.

• 2:49:03Jordi Hays?

  I think he must have had a hard time getting it set up.

• 2:49:04John Coogan?

  Okay.

• 2:49:07John Coogan?

  You're now talking to the planet.

• 2:49:10Speaker 02

  The great thing about life is that Jensen can develop the most complex

• 2:49:14John Coogan?

  Oh, it's the joke again.

• 2:49:22John Coogan?

  Odd joke.

• 2:49:25John Coogan?

  Okay, well, anything substantive come out of it? I'm sure we'll know more tomorrow.

• 2:49:29Jordi Hays?

  We'll be back.

• 2:49:30John Coogan?

  We'll be back at 11 a.m. Pacific. Thank you for tuning in. Leave us five stars on Apple Podcasts and Spotify. I'm off to go get some rest and we'll see you tomorrow.

• 2:49:40Jordi Hays?

  We love you.

• 2:49:40John Coogan?

  Check out our newsletter, tbpn.com.