ARM & SoftBank

We dive into the crazy, little-known story of how this small, former PC-maker in Cambridge, England dethroned Intel, saved Apple from bankruptcy, became the blueprint for the largest investment fund in history, and of course now powers just about every device you use today. From Issac Newton to the Apple Newton, the Vision Fund and beyond, ARM has had an impact on the technology industry that cannot be overstated! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Links: The Nokia 6110: https://en.wikipedia.org/wiki/Nokia_6110Fast Company on SoftBank and how the ARM acquisition happened: https://www.fastcompany.com/90285552/the-most-powerful-person-in-silicon-valley

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

• 0:00David Rosenthal?

  Because I mean, what's cool is like, it is literally the ARM 610 that was developed with Apple for the Apple Newton is the core of all the ARM processors.

• 0:23Ben Gilbert?

  Welcome to season four, episode two of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:31David Rosenthal?

  I'm David Rosenthal.

• 0:33Ben Gilbert?

  And we are your hosts. Today, we are going to explore a topic that has flown relatively under the radar despite being the primary component of every single one of our phones, SoftBank's $32 billion purchase of the British-based ARM Holdings. For folks that listened to the previous episode that we did on SoftBank, you know, they were once a Japanese telecom and multinational conglomerate now that has a close to $100 billion fund that they have created massive disruption in the startup landscape. And here we are diving into kind of the deal that that started it all and with just an essential piece of technology

• 1:15Ben Gilbert?

  that we all use every single day. Listeners, you know that a few months ago, we started our limited partner program for folks to go deeper on technology, startups, and VC topics with us. David, I wanted to say that I'm particularly pumped where we landed in our last episode on on investment theses on ambient computing and processing happening everywhere as sort of the next enormous technology wave. So I think it's super relevant to this episode, and we will find out why as we dig in. So if you're interested, or you just want to support the show and like what we do, you should click the link in the show notes to consider becoming a prestigious Acquired Limited Partner, or go to kimberlite.fm/acquired.

• 1:56Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you prove that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:15David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 2:36Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 2:58David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:16Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you. All right, David, I heard a rumor that you have one more thing for listeners.

• 3:48David Rosenthal?

  Indeed, one more thing. We passed a million downloads in the lifetime of Acquired.

• 3:54Ben Gilbert?

  Woo!

• 3:55David Rosenthal?

  Huge milestone. And to celebrate, we are going to do, you heard it here first, a worldwide virtual Acquired meetup. So we're going to host this In Zoom, Ben and I are going to be on video and we'll have everybody else in the Slack community. We've got a bot installed that's going to do aggregate AMA questions and we're all going to hang out. So we're going to do it on February 21st, 2019 at 5:30 PM Pacific Time. We thought that would give everybody, you know, at least in the US, be 8:30 East Coast, 5:30 Pacific, and it's 9:30 AM in China for our listeners in China. So be there, be on Slack and on Zoom and we will all hang out then.

• 4:39Ben Gilbert?

  David, it's time.

• 4:42David Rosenthal?

  It's time, indeed. Well, today, we're going to be talking about ARM Holdings and we're going to go literally from Isaac Newton to the Apple Newton to Masa and SoftBank and beyond.

• 4:56Ben Gilbert?

  It's quite the scope, man. The first thing for listeners to know before we even dig in here, this chip company manufactures a total of zero chips and in many cases, they don't even design them either.

• 5:08David Rosenthal?

  Yeah. Well, we head to the prestigious and well-known Silicon Fen in Cambridge, England, home of Isaac Newton, inventor of modern physics at Cambridge University. The time is 1980 and in 1980, in England, the BBC, the British Broadcasting Corporation, which controls, you know, the most popular radio and television stations across Britain and is a government entity, they've teamed up with the UK Department of Industry and Department for Education and they're launching a major initiative that they're calling the BBC Computer Literacy Project.

• 5:50David Rosenthal?

  And the goal is to educate the public and in particular, young people at this time about computers and train them for the coming personal computer revolution that everybody thinks is right around the corner. And indeed it is. So they create a nationwide television series that they call The Computer Program. Get it? The Computer Program.

• 6:09Ben Gilbert?

  Heyo.

• 6:09David Rosenthal?

  On television. Hey. Uh, that they show on, um, I think it was on BBC two, uh, to the whole country. It's a serialized program about how computers work. But the cornerstone and the really cool ambitious thing that they're doing is they want to put new micro computers, true like personal computers for the first time into schools all around the country for children to learn and play on. So this is like super similar. So this is like a government version of Apple's strategy in the U S at the time of getting Apple twos into schools so that kids can learn and play on computers with the idea that like eventually they'll grow up and then keep using Apple as they grow up.

• 6:47Ben Gilbert?

  Google strategy today with the Chromebooks.

• 6:49David Rosenthal?

  Indeed, that I think is working really well.

• 6:51Ben Gilbert?

  Yeah, I think so, too.

• 6:53David Rosenthal?

  The BBC, together with the government, puts out a call for bids across all UK technology companies at the time to create this computer that they're going to put into schools. And they end up awarding the contract to a little company in Cambridge called Acorn Computers. Now, if you're a real computer history buff, you probably know about Acorn Computers. But what, who were they? So they started life in Cambridge. I believe they were initially called the Cambridge Processing Company or something like that. They, they made CPUs. It was a play on CPU. They made processors for other companies. But by this time, they'd started making their own fully integrated systems, you know, like the Apple two.

• 7:34David Rosenthal?

  And supposedly they chose the name Acorn because it sounded like Apple, but it was ahead of it in the telephone dictionary and directory. So when people were looking up computer suppliers in the telephone directory, they would see Acorn before Apple.

• 7:49Ben Gilbert?

  Clever girl.

• 7:50David Rosenthal?

  Maybe that's how they won the bid.

• 7:55David Rosenthal?

  So, um, they win the, they win the contract and they're, uh, they get to work on the device. They're hard at work at it. They know this is like a huge opportunity for the company. In December of 1981, they start shipping it to schools around the country and it's branded as the BBC Micro. And this is like a legendary computer in computing history. Like literally a whole generation of British kids grow up.

• 8:21David Rosenthal?

  With this as their first, you know, exposure to computers. They end up selling over one and a half million units, almost all in the UK, which is like super good considering the Apple II was on sale for over 16 years and only sold 6 million units. So like, man, the power of like government sponsored programs, crazy. So another thing though, happened in 1981 that was pretty important. Turned out to be far, far more important than the BBC computer program, which was that IBM introduced their first IBM PC in the American market.

• 9:01David Rosenthal?

  And, and the IBM PC was the first like personal computer that was, you know, cause remember of computers before then, they were like in professional and business use. It was the whole client server model. You know, it was terminals, terminaling into the Mainframes. Mainframes, all that, like, think about like what NASA was designing, like the Apollo program on, you know, it wasn't personal computers. So when IBM introduces the PC and it's targeted at business and professional users, this is really like, everybody in the industry now is like, okay, wow. Like this is opening up this whole huge market where like, it's the beginning of like software is eating the world, right?

• 9:41David Rosenthal?

  Like now computers are going to be on every desk of every worker in every industry, you know, in the world at some point. With IBM, you know, the power of IBM behind this. So Acorn realizes this and they're like, okay, you know, like the BBC micro is great. This has been great for our company, but like it's an eight bit microcomputer. Like it's a personal computer, but it's nowhere near powerful enough to compete with the IBM PC. We need to, we need to create our professional computer. So they start a project, they call it the Archimedes Project. This must be like a legacy of, you know, Cambridge and academia and like having these, you know, scientists and mathematician names.

• 10:22David Rosenthal?

  They realized though, the processor that they'd been using in the BBC micro, they hadn't designed it. It was an off the shelf eight bit processor from a firm called Moss Technology. It was called the 6502.

• 10:35Ben Gilbert?

  This is when processors had really cool names like 6502.

• 10:39David Rosenthal?

  Yeah, super, super cool.

• 10:41Ben Gilbert?

  I miss that these days.

• 10:42David Rosenthal?

  Yeah, I know, I know. Although ARM's naming schemes are not really much better.

• 10:48Ben Gilbert?

  Yeah, but those don't end up becoming consumer brands the way that like, you know, A11X or something like that does. Although A11X, we've completely gone back, never mind. My point is completely destroyed by the fact that Apple is calling chips like, it made sense when it was like A5, A6.

• 11:03David Rosenthal?

  Bionic was a couple.

• 11:04Ben Gilbert?

  So Bionic actually means nothing. Yeah, well, I don't know, but they actually don't mean anything. It's a marketing brand that doesn't, it's not a modifier on the name of the chip, which is like A10 or A11. It is just a, it's kind of like, you know, macOS 10.4 Leopard, or I think that's wrong, but yeah. Anyway, too many digressions.

• 11:26David Rosenthal?

  Too many digressions. Anyway, so Acorn hears that Intel, off in California, you know, their processor company, everybody knows about at this point, they are working on the perfect processor that they can use in their new Archimedes project. It's, it's going to be a 16-bit processor. It's getting a ton of buzz and it is, this is like a super famous in computer history. This is the 8286 processor, which would eventually become just the 286, which successors would be the 386, the 486, and then the Pentiums, and then every modern Intel chip that we know today. This was the first.

• 12:05Ben Gilbert?

  The x86 architecture, if you will.

• 12:07David Rosenthal?

  Indeed. This is the first of the x86. So Acorn's like, oh, cool. Like, hey, Intel, like, we want to, you know, be a customer to you guys. Can you like, you know, ship us over some so we can build some reference, you know, PCs and start working with you guys? And for some reason, and this is going to go down as like, one of, you know, there are a few of these moments unacquired of like, you know, history turns on like a knife point, you know, whether it's Blockbuster or here, Intel. Intel makes one of the worst business decisions in history, in all of business history, and says, no.

• 12:42David Rosenthal?

  You guys, you know, BBC, Micro, come on, you're some like little PC, you know, company in Cambridge, you know, England, not even Cambridge, Massachusetts, like, we don't care about you guys.

• 12:52Ben Gilbert?

  Surely, nobody will ever, you know, decide to do something on their own when we tell them no, and then eventually lead to our own demise.

• 13:00David Rosenthal?

  I mean, we're Intel, like, who else is gonna make, you know, high-performance computing microprocessors in the world, except us, Intel?

• 13:09Ben Gilbert?

  Well, I noticed you said high performance, so I think that probably is still true.

• 13:14David Rosenthal?

  Well, depends how you define high performance. So Acorn, they are, they're kind of out of options, and they're like, well, you know, what can we do? What do we have? The one thing they have that basically, you know, very few other computer companies in the world, even really Apple, at this point, have, they have a ton of super, super smart physicists and engineers and, and early in the burgeoning field of computer scientists, students from Cambridge University, where they're located, that they've employed, you know, either as interns or full-time staff, and these people are like, super talented, and they decide, you know what, maybe we can just build our own microprocessor, like

• 13:56David Rosenthal?

  we started as a microprocessor firm in another era, let's try it again. They decide, they give the task to a team of engineers on staff, and they say, okay, we need something super high-power that can essentially compete with this, with Intel's 286 chip, we need a, we need almost that good level of performance, but it has to be super low-cost, because like, we're making this ourselves, you know, we don't have the global resources of, of Intel behind us, what can we do? And so, this team, led by Sophie Wilson, who was and is an incredible computer scientist, you know, one of the most important, you know, contributions to

• 14:37David Rosenthal?

  all of computing, as we see that she implements here, she'd heard about a paper out of, ironically, back in the Bay Area in California, out of UC Berkeley, that has just come out, about detailing what a project would look like for a reduced instruction set computer.

• 14:54David Rosenthal?

  Now, this is, this is going to be a technical interlude, but it's super important to understanding, you know, again, what becomes probably one of, if not the most important underlying technology company for the whole industry right now. So what are instruction sets? Ben, do you want to talk about this?

• 15:10Ben Gilbert?

  I will. And I first off, want to take a step back here and make a disclaimer that we acknowledge that we are dramatically oversimplifying technical details in this episode. We do this with apologies to those who find this too basic, but also conversely, for those who find it to be esoteric on the other side of the spectrum, we are going to dust off the computer science degrees here and.

• 15:32David Rosenthal?

  Well, I would, I would say in, in true, you know, Apple fashion here, this show is, and really the whole technology industry is the intersection of, you know, engineering and the liberal, of technology and the liberal arts. And that's what this is here. You're about to get a dose of technology.

• 15:48Ben Gilbert?

  May we be so bold. So before we dive into what is a reduced instruction set architecture, it's worth diving in what came before it, the complex instruction set architecture. And even before that, like, what the heck is an instruction set architecture? Like, why are we, why? Okay. So the instruction set architecture, you can think about as sort of the language of a chip. So a CPU has a variety of components on it, places where you can store information, places that temporarily hold information, places that tick the clock and move all the information one step forward in the process. And the way that it does all of this, saying, hey, go store that over there in that register, or, hey, advance the whole clock, you know, one step so that we can move this thing out

• 16:33Ben Gilbert?

  of that register and, and push it off into, into memory, or something like that. All of this happens.

• 16:38David Rosenthal?

  This is all what's happening inside the CPU in, in your computer, whatever device you're using right now.

• 16:44Ben Gilbert?

  Yeah. And what at what speed? I don't know, like hundreds of thousands of times per second or millions of times per second. I mean, this happens incredibly fast, but it requires a language. It's sort of like its own programming language and it's the instructions or the instruction set that the chip itself speaks. And so originally, the way that this was done was with CISC. And this was really the complex instruction set computer where instructions were, well, first of all, there were a lot of them. They were very, very sort of malleable. So they could do things like take multiple clock cycles to achieve a complex instruction.

• 17:24David Rosenthal?

  And this is like multiplying numbers, dividing, transforming numbers, all sorts of stuff.

• 17:29Ben Gilbert?

  Right, right. It would sort of do as much as it possibly could using the hardware circuitry. So it was really about, hey, this is going to be powerful hardware. So we're going to write a language that leverages all the very unique and powerful components that are actually on this chip. It could have, without getting too complex on these things, variable length instructions. So you had to, you couldn't rely on a set of assumptions about how long each instruction was going to take time wise or was going to take up space wise. So while it provided the programmer with a lot of power, it required a tremendous amount of sort of tight coupling with the hardware and complexity.

• 18:11David Rosenthal?

  Yeah. And that translated to, at the time, everybody was thinking about number of transistors on the chip and associated memory that you needed to support the data that was going through all those transistors. Over time, and much more importantly, that would translate into power consumption. The CISC, C I S C, complex instruction set architecture computers, that is what Intel processors are. So Intel, like the set of instructions that is CISC comes from Intel and all Intel x86 processors are CISC complex instruction set computers. What Acorn, at this time, and Sophie Wilson, what they were picking up on out of academia was like, maybe there's a different approach to how you could build these processors.

• 18:54Ben Gilbert?

  I've actually never seen this written about as low end disruption, but this is almost like classic low end disruption where we say, you know, what if we punt on a lot of those things that everyone previously thought was important? And solve a problem with a very different set of constraints where it's got to be cheaper. It's going to be less sophisticated. So there's less components on the chips. There's going to be less instructions that are available for the programmer to use. And really, it's not the programmer. It's actually the compiler that translates what the programmer writes into the instruction set. But it's really rethinking it from the ground up and saying, what if every instruction could only take one clock cycle? It could work on sort of a variety of different components, but making this really hardcore set of assumptions.

• 19:38Ben Gilbert?

  It was this software centric design instead of a hardware centric design. So it was kind of portable. It could use a very limited number of addresses and limited number of registers. So in all aspects of it, it's sort of worse. It's you could sort of describe it as as worse in every way, but I'll turn it back to you, David. For so how does that actually end up being disruptive and better?

• 20:01David Rosenthal?

  What one of the team members, original team members who worked with Sophie on designing this would write later, you know, you could think of it as it's the 80 20 rule, right? Like these risk reduced instruction set architecture, the machines, processors that that Acorn designed. They were, they only could do about 80% of the instructions that Cisk could do. But they did those instructions. They executed them much, much faster, like on one clock cycle instead of multiple clock cycles per instruction. So when you needed to do those complex, you know, other instructions that were in the 20%, the chips would slow down hugely. But the thing was you just didn't do them that much.

• 20:42David Rosenthal?

  So like the 80% that you were doing most of the time, like they were really, really good at.

• 20:47Ben Gilbert?

  You're spending a lot of money to build this sort of sophisticated components onto the chips. So they could handle those things that you just weren't doing that often.

• 20:55David Rosenthal?

  To put some numbers on this, the 2286, the famous Intel processor that started the x86 line, the first one of those had about 130,000, 134,000 transistors on the chip. The Acorn processor, the RISC processor, when they finish it, has only about 30,000 transistors on the chip. And yet, because of this 8020 rule, it actually has better performance than the 2286. So it's like way cheaper to make, and it has actually better performance for most applications. This is like huge. This is a huge leap forward in engineering and computer science. So they do this. Sophie and the team create this like in a very short period of time. They decide that they're going to call this chip

• 21:38David Rosenthal?

  the Acorn Reduced Instruction Set Computer Machine, ARM, ARM. Boom. And the world changes. But not just yet.

• 21:49Ben Gilbert?

  The groundwork was laid for the world to change, but it wasn't yet. It's not like, you know, here we are in the 80s and Intel starts doing poorly. You know, these things take a long time. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 22:13David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 22:27Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 22:37David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 22:55Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 23:11David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 23:28Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 23:37David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. This is really interesting. We've just went deep technically on what's going on. There's this huge innovation. Why didn't the first ARM chip and the Archimedes that launched in 1987 with this chip, why didn't it blow the IBM PC and the IBM PC clones out of the water? Well, this is like a market forces thing. So by the time it launched, Microsoft was on the scene, right? And DOS was around and DOS ran on Intel x86 architecture. And then eventually,

• 24:19David Rosenthal?

  Windows would run on top of DOS and started getting so much market share and all the applications that all these business and professional users needed, they were all running on DOS. DOS didn't run on Archimedes or the RISC architecture computers. So for a long time, for the whole entire PC wave, everybody in the industry knew that other types of architecture, RISC-based architecture, which ARM pioneered, but you know, the Motorola Power PC, like what Apple was using at the time, it was fundamentally better technology. But because of the duopoly between, the WinTel duopoly between Microsoft and Intel, it's almost like nobody really cared.

• 25:01Ben Gilbert?

  It's important to understand what role a compiler plays in all this. So why is it that they couldn't just run the, run Windows, run DOS on, you know, these better chips? Until recently, and there's been a lot of really great advancements in really commercializing this sort of crossover technology recently, it was thought to be Basically impossible to make your programming language, which is, you know, written in C and using sort of the standard C compiler, work well across different chipsets, especially when, you know, you have so many layers of translation from the application to the operating system to the kernel, you know, eventually getting, getting, you know, actually executed on a chip.

• 25:44Ben Gilbert?

  And there's a lot of sort of assumptions that are baked into the programming language, to the compiler, to the chip, and sort of assumptions around those things being coupled together. And so it's sort of much more difficult than you would think to rip the layers apart and say, well, we're just going to run this on a completely different architecture. You know, Sophie and team did this amazing thing of coming up with, for a, you know, for a different scenario, a much better instruction set architecture. However, basically, nothing would run on it. And they needed to kind of think about the world in a whole different way and convince everyone else that they should think about the world in a whole different way in order to leverage that innovation they created.

• 26:25David Rosenthal?

  Which wasn't going to happen during the PC wave, because, you know, the network effect flywheel was like in full swing at this point. You know, you've got Lotus, you've got, you know, all these application providers writing for, as we talked about, writing for Microsoft, which only worked on Intel. So boom, there you go. Two, you know, multi hundred billion dollar companies come out of that wave and Acorn is left in the dust. So as you would think, they're, they're kind of in an oblique position here now. They've put a ton of resources into this new Archimedes project that they think is going to be, you know, they're going to ride this next PC wave. They're getting knocked off the wave. You know, this is probably the end of the company, right? And, and actually it is. Acorn itself ends up getting acquired by an Italian

• 27:10David Rosenthal?

  computer company called Olivetti around this time. And they end up just exiting the PC business altogether. But there was something also that we haven't talked about yet that was pretty interesting about these ARM processors that they were building. And this is another just like crazy thing of history that like nobody, they didn't expect it. So when they developed the ARM processors, when Sophie and the team developed it, the goal was Same level of performance ended up being slightly better for a lot less cost, like put fewer transistors on the chip because that's going to cost less. But what it turned out, they would put these these processors into the PCs into the Archimedes prototypes. It turned out they sometimes would

• 27:55David Rosenthal?

  function even without a power supply. And the team at first, they were like, this is like crazy. What is there like a ghost in this machine? Like, how is this? How is this processor working without a power supply?

• 28:06Ben Gilbert?

  Was it like, what residual?

• 28:09David Rosenthal?

  Well, it was it was without a dedicated power supply to the processor. And this is like crazy, because at the time, like, you know, CPUs were the most power hungry components of the whole, you know, PC. So like, there was power running into the machine, but just not a dedicated line into the CPU. And it turned out that because there were so many fewer transistors on the chip, it needed much less electricity and power to be able to run even at really high performance. And so it was actually just sucking power from the other components in the circuit on the chip. And it was still able to function. And they were like, whoa, this is crazy. So it turned out after Acorn gets acquired by Olivetti, one of the two original co-founders, this

• 28:52David Rosenthal?

  guy Herman Hauser, who also was a Cambridge physics PhD, he leaves and he's thinking, which a couple of people are thinking in technology at the time, you know, PCs are here, but what's the next wave going to be? This is like, you know, people thinking about VR right now, or a couple of years ago, like, we're in the middle of the mobile wave, but like, what's next?

• 29:12Ben Gilbert?

  And it's worth sort of like, simplifying what we have right now. We have a thing that uses a completely different architecture that's not really compatible with everything the rest of the world uses, but is much cheaper to make high performance and requires less power.

• 29:26David Rosenthal?

  Mm hmm. And so Herman's like, you know, I think. Mobile computing, like everybody's all about desktop PC computing right now. But like, think about everything you could do if you had a computer around in the world with you, like not tethered to a desktop. He goes and he starts a company to try and pursue this vision of computing. He calls it the Active Book Company, and he wants to focus on making PDAs, Personal Digital Assistants, which are mobile devices. And what's super important for mobile devices? Battery life. So

• 29:57Ben Gilbert?

  And this is 1988?

• 29:59David Rosenthal?

  This is 1988.

• 30:00Ben Gilbert?

  Yeah, so battery life is very important.

• 30:03David Rosenthal?

  Right, very important.

• 30:05Ben Gilbert?

  I think lithium ion batteries get like 15% better every year. So compound that back 30 years, like they were bad.

• 30:12David Rosenthal?

  Yeah, right. Like, how long does your iPhone last today? Like, not long enough, you know, imagine back then. But there are just not that many people in the world that are thinking like, 1988, shoot, I like, I think I got my first computer at that point. I was like four years old and it was a massive like, you know, hunk of metal that sat on my desk and probably used, you know, half of the house's power supply, like.

• 30:35Ben Gilbert?

  Well, it was an X86. What do you expect?

• 30:37David Rosenthal?

  Yeah, right. Exactly. So Herman, he's like, he's focusing on PDAs and he's like, you know what I think could make this happen is these processors we developed back at ARM. So he goes back to the chip team at ARM and to Sophie and he's like, hey, can you like rework this whole thing to really optimize for power consumption with while still maintaining this high performance? Sophie's like, yeah, we can do that. And they do, and it works. And they start producing these chips with their longtime silicon partner, VLSI. Because again, Acorn didn't have the resources to be manufacturing their own semiconductors at this point.

• 31:19David Rosenthal?

  So they used a fabricator, VLSI, to make their silicon. Well, at the same time, who else is thinking about PDAs out there? This is 1988. Apple. And this is where the other Newton, not Isaac, comes into play.

• 31:37David Rosenthal?

  So Apple, Apple's under, Steve Jobs has left at this point. He's gotten kicked out of the company. John Sculley is CEO and John Sculley's, you know, Great White Whale is the same thing as Herman Hauser. It's the personal digital assistant. You know, Sculley gets like such a bad rap, but like, he actually had, you know, a vision that like very few people in computing, you know, did at the time, not even Steve. I mean, Steve was off doing next, right? Like, he's trying to make a super powerful workstation.

• 32:04Ben Gilbert?

  Come on, what's the difference between being wrong and being too early?

• 32:07David Rosenthal?

  Nothing.

• 32:11David Rosenthal?

  But good for the world that he was wrong and too early because Sculley puts Larry Teszler at Apple on this Newton project, which is his, his pet project. And Larry is amazing. So Larry came from Xerox PARC. He was like an OG original computer guy. He invented copy paste. He's, he's like, leading the SWAT team within Apple that's gonna build this, you know, computing platform of the future. He knows he needs a low-power, high-performance chip. He first goes to AT&T, which was working on a, on a, you know, low-power chip called The Hobbit, which you can't make this stuff up. Just like you would expect from a chip

• 32:54David Rosenthal?

  from AT&T called The Hobbit in 1988. It sucked. Like, it was terrible on every dimension. And this is fun. I think one of my carve-outs a few episodes ago was Jerry Kaplan's book, Startup. And Jerry, he was the founder of the Go Corporation here in Silicon Valley, which was also trying to work on a PDA at the time. They had ended up getting acquired into AT&T and formed the backbone of The Hobbit. Anyway, Larry gets introduced, he's chatting with people in, in the silicon industry, trying to find better chips. He's chatting one day with someone at VLSI and they're like, hey, you know, we've got this partner, Acorn, over in the UK. And like, they're not doing too well. You know, they were trying

• 33:38David Rosenthal?

  to compete with you guys in the telephone directory. But one of their founders is doing something kind of interesting right now, also in mobile computing. And they have this chip that's working pretty well. You might want to check it out. And Larry's like, I need to have this right now. So he goes over, he meets with, with Sophie and the engineering team over there. And he's like, this is great. This is the chip we need here at Apple for the Newton. But I can't license this tech from Acorn and Olivetti. Like we're competitors. We need to, we need to create a structure that can work here. So they architect a deal with Olivetti and VLSI. They spin off the chip division of Acorn into a new separate company that they can then license

• 34:23David Rosenthal?

  this processor design from. They do it super fast. Within like six weeks of when, when they get together, they've spun out the company into a new division, a new, new totally separate company called ARM.

• 34:38Ben Gilbert?

  This blew my freaking mind that ARM was started as a JV with Apple on the Newton.

• 34:45David Rosenthal?

  It's crazy. So Apple invests 1.5 million into the company. So Acorn and Olivetti are bringing the engineering group. They assign 12 engineers to the new company. VLSI is the silicon fabricator partner. They get an equity stake. Apple brings the money. They get 43% of the company for one and a half million dollars. Again, talk about a dilutive seed round.

• 35:11Ben Gilbert?

  To blow out the irony of this, I'm going to jump forward just to foreshadow, like all of the A series chips are ARM processors. Like the thing that is so differentiating about the iPhone, and there's a lot of things, but one of the things that they're just years ahead on is being able to have some of the best processors in the world, all based on the ARM instruction set architecture. We will get to how these companies have sort of parted ways over time, but oh my God, they were actually involved in the founding of it.

• 35:38David Rosenthal?

  It is no overstatement at all to say that without the Newton project within Apple, ARM as a company would not exist. The phones, you know, whatever device you're listening to this on right now would look very different. You might have it plugged into a wall, which you almost assuredly don't. It's crazy. It's crazy. So these 12 engineers, they do the spin off. Get the one and a half million from Apple. These 12 engineers go down the street in Cambridge. They set up shop in a converted barn.

• 36:12David Rosenthal?

  And they bring in this guy, Robin Sacksby, who had been an executive at Motorola, to be the CEO of the new company. And they get to work with Apple. They're working super closely. They're taking the core risk processor technology that they own, but it needs to be super customized and fit into a chipset that's going to work within this small device, the Newton. So they're working hand in hand with Apple to create it. And they make the processor. It's the ARM 610. And that goes into the Newton. And every Newton, the first Newtons that shipped, all had the ARM 610 processor in them. And then it would get upgraded over time, but it would power every Newton. Now ironically, remember Herman Hauser, the original Acorn co-founder, who had started Active Book and kind of set all these wheels in motion?

• 36:56David Rosenthal?

  He ends up selling Active Book to AT&T of all people in 1991. And AT&T demands, merges it in with the assets of Go that it had acquired, which is now EO within AT&T. Only they could do something like this. They forced it to start using the Hobbit processor. And of course, I don't know. I think, I think these, these PDAs did end up shipping, but like they were so bad and it completely fails in the market.

• 37:25Ben Gilbert?

  David, the rabbit holes that you went down for this episode, I believe, achieved new heights.

• 37:30David Rosenthal?

  Oh, man. This is so much fun. Speaking of failure, though, I mean, AT&T was like, obviously stupid with the Hobbit processor. And go read the book Startup. Like, it's so good about all the ridiculousness that went on around this. The Newton also, of course, famously fails, even though they have the ARM processor. And it's just too early. Like, the world isn't ready for this.

• 37:52Ben Gilbert?

  So catch me up. Like, I didn't research this part at all. How does, what happens to ARM post-Newton failure?

• 37:58David Rosenthal?

  So when the Newton actually gets around to shipping in 1993, it's now been over two years that ARM's working exclusively with Apple. The Newton ships and like, it's clear pretty early, like, there aren't going to be enough unit sales here that like... The project's gonna be viable.

• 38:16Ben Gilbert?

  It's like the home pod of PDAs.

• 38:17David Rosenthal?

  Yeah, it's the home pod of PDAs. So this is where Robin, the CEO from Motorola who came in, this is where he makes a couple really, really brilliant decisions. And we've talked about in previous episodes that like, one of my tech themes has been recently that like, when you can marry a huge technology wave with a key business model innovation, like we talked about in the Tencent episode, like that's when something magical happens. And so what did Robin do? He was like, okay, well, we need to work with other partners here. We can't be dependent on just Apple and just Newton to buy a lot of chips from us because they're not gonna, they're not gonna pay us a lot in licensing fees here. But he's also realized that like part of the magic of what made this processor really work

• 39:01David Rosenthal?

  wasn't just that like ARM designed this chip and like handed it over whole cloth to Apple. It was that they really embedded with the engineering teams on the Newton and made something like pretty customized that worked specifically for this device. And so he's like, you know, I bet we could do this with lots of people. And we give them this core processor, this core risk processor technology. We could embed within their teams and we can help them develop essentially custom silicon for their use cases. And you know what is really interesting here? Like if we could create a business model that aligns with this,

• 39:45David Rosenthal?

  what if we say like, okay, when we do this, you pay us an upfront licensing fee for the rights to our core risk technology. And you pay us for, you know, our engineering time for embedding with you, and we'll make money on that. But let's align, get aligned on like actually shipping units to the end market. We want you to ship a bunch of units. So how about we take a small royalty on every device you ship that has our technology in it? And then to the time, like this is like, okay, somewhat interesting. Like how many devices could potentially ship that are like mobile computing devices?

• 40:21Ben Gilbert?

  So ARM gets gets paid three times. Like they they get the license fee from, hey, you know, you get to use the ARM technology, you know, our our this instruction set architecture is one that you have the privilege of using on your chip. And there's sort of two ways that that can work. Either they design the chip for that that manufacturer, or they say, here, you you feel like you're a good designer, and this is sort of how Apple's relationship works today. You use our instruction set and and you do it. So then they get paid the second time for actually embedding with them. That's their sort of software and services line of business. And then they get that third time, which is every every unit sold, you know, they get a tiny little piece of the cost of of each CPU that shipped out.

• 41:02David Rosenthal?

  Yeah. Well, you know, it turns out, I mean, this is one of the things that makes the technology industry magical. A very, very tiny piece of a pie that is literally almost 100 times bigger than every person in the world combined, which the number of devices in the world is at this point. Turns out to be a very, very large slice of pie.

• 41:26Ben Gilbert?

  Do you know how many ARM chips have shipped to date?

• 41:30David Rosenthal?

  I do. But why don't you go for it?

• 41:33Ben Gilbert?

  130 billion.

• 41:34David Rosenthal?

  Yeah, that's billion with a B.

• 41:36Ben Gilbert?

  And that's a lot of pennies.

• 41:38David Rosenthal?

  And and think about that. Those are ARM chips, each of which is the core processor in a device. So that is 130 billion devices.

• 41:50Ben Gilbert?

  Not necessarily true. Lots of devices have.

• 41:53David Rosenthal?

  Well, many devices have multiple chips within them. Yes. But still, like, you know, it's a, okay, reduce that by, you know, a factor of four or five or whatever. Like, that's still like way more than there are people on Earth.

• 42:06Ben Gilbert?

  Yeah, that was a thoughtful first contract to sign that they get some upside on units shipped.

• 42:11David Rosenthal?

  Yeah. And what's also cool. So again, like, I think this is such a cool example, ARM is, of technology and business model playing together and and like making each other better. So like, obviously, there's the financial aspect of this. What's interesting on the technology side, too, because ARM now, like, all the other Chip companies take Intel, for example, they're like, use our, you know, Atom seven, whatever chip or Core I, blah, blah, blah. I am going to give you this chip. You are going to put it in your device. Because ARM is like, no, no, we're aligned with you. We want you to make the best products and ship the best devices. And we'll embed our technology and our teams with you. We can collaborate on designing it however you want.

• 42:55David Rosenthal?

  So this is what really it's ARM and this model that starts to enable systems on a chip to be really take off. So what is a system on a chip? Like back in the PC days when that we were talking about earlier, you know, a system, a PC, you had a motherboard. You had a processor, you had a graphics card, you had a sound card, you had a, I remember plugging all this stuff in and building my own PCs back in the day.

• 43:19Ben Gilbert?

  Yeah, man, put it all in your PCIe slots and call it a day.

• 43:21David Rosenthal?

  Exactly. Oh, man. Incredible. Is that PCI Express, right?

• 43:27Ben Gilbert?

  Yeah, that was the, that was a latter generation.

• 43:29David Rosenthal?

  Yeah, that was like, oh, man, crazy. So people start to realize, especially in a mobile environment, like, well, what if you could just put all of that just on one chip? Instead of having separate chips and buses and motherboards and whatnot. ARM's like, yeah, cool. Like, put our processor in one chip as part of it. Like, we'll, we'll help you with that. And so Apple, now with the core, you know, the A, A 57, you know, bionic Superman chip. That's what this is. All the Samsung chips, Qualcomm chips, TI chips, like every, you know, chip. Your phones have multiple chips, but like at the core, most of the technology is being done on one actual piece of silicon.

• 44:10Ben Gilbert?

  This was the transition from the era of sort of the just discrete CPU to, to system on a chip, which is, you know, where we are today.

• 44:17David Rosenthal?

  Yep. And so actually that same year in 1993, and like, again, so much kudos to ARM, the company and to, to Robin, the CEO for turning this around. The same year that the Newton chips and they realized this isn't going to work. They sign a landmark deal with Texas Instruments to provide the core of a processor that Nokia has contracted with TI to go into the Nokia.

• 44:40David Rosenthal?

  Six ten or sixty one ten. We'll try and put a link to this in the show notes. Once you see this phone, you are going to remember this phone. This is like, I think the first cell phone I had was like a variant on this. Yeah, this is the candy bar phone. This is the first major consumer GSM phone that is sold certainly in America and all over the world. And this is what starts, you know, the kink in the curve of cell phone shipments that ends up, you know, with smartphones and where we are today.

• 45:09Ben Gilbert?

  David was talking earlier about why, you know, these, these ARM chips were, you know, even though they were better in a lot of ways, they couldn't penetrate the duopoly of, of Microsoft and Intel and Windows running there. You can start to see now, you know, the software that ran on that Nokia phone that I'm sure everyone played Snake on is nothing like the software that ran on Macs or on, on Windows.

• 45:33David Rosenthal?

  Snake was like the killer app because, because ARM processors were literally like before the, the Nokia sixty one ten, the processors in cell phones weren't good enough to even run Snake. But now you have this low power, high performance processor that can run games, right? And you can like draw a direct line from there to, you know, Farmville to Clash, you know, Clash of Clans to everything.

• 45:56Ben Gilbert?

  Right. The bridge that hasn't gotten crossed yet is how we went from that, which really, I mean, that phone felt more like an embedded device than really like phones as we know today. And phones today are, are effectively PCs. And if you think about the work that was done to create the first version of iOS, it was really to strip down Mac OS. And people always harp a lot on this like stripped down Mac OS to, to create iOS. And it still uses the same Darwin kernel and all that stuff. But the other crazy piece of work that had to be done to bring a computer operating system to, um, to these mobile phones was adapting it for the ARM chipset, like to bring PC operating systems to something that would operate on these chips

• 46:39Ben Gilbert?

  that like weren't getting a lot of power and had, you know, completely different instruction set. The fact that iOS and Android works the way it does today on this chip that was nothing like what they were originally architected for is mind blowing.

• 46:52David Rosenthal?

  You know, it's interesting. I didn't, I didn't put two and two together till right now, but I, I strongly suspect, you know, if you think about like, why did Microsoft miss mobile? There are lots of reasons, right? Like cultural, you know, what have you, technology, you know? But actually, like, this specific technology reason, I think, could be, could be one of the major points that, you know, Microsoft had Windows Mobile, right? And Microsoft had Windows CE and embedded Windows and whatnot, right? But like, those were-

• 47:23Ben Gilbert?

  Completely different codebase.

• 47:24David Rosenthal?

  Completely different codebase, right? That wasn't Microsoft Windows because Microsoft Windows and DOS only ran on complex instruction set architectures, right? They're not going to re-architect that whole thing to run on RISC architecture.

• 47:37Ben Gilbert?

  Yeah, I mean, they do, they do now.

• 47:39David Rosenthal?

  Yeah, they do now, but at the time, right?

• 47:40Ben Gilbert?

  Last couple of years.

• 47:41David Rosenthal?

  At the, you know, as smartphones were taking off, why could Apple do this? Apple had always been much more open about their, you know, about their architectures that macOS ran on, that OS X ran on, right? And like-

• 47:56Ben Gilbert?

  Oh, did they already do the transition from the Motorola processors, the Motorola Power PCs to, uh-

• 48:03David Rosenthal?

  Well, they had, yeah, they had to port into the x86 Intel with, with OS X, right? So they were much less wedded to, you know, and open to porting their macOS and OS X into different architectures. And indeed, they had this Newton DNA as well.

• 48:23Ben Gilbert?

  For folks who don't know specifically what we're talking about, so the iPhone came out in 2007, which, holy God, they put macOS on ARM chip. Two years before that, the thing that we're referencing here is, in a very Jobsian keynote that continues to go down in history as just an amazing piece of showmanship. Steve Jobs came out and said, "So we're changing the chips that are in all the new Macs away from the Power PC that we've been using to using Intel," which of course was so dramatized. And Paul Ottilie walked out on stage and, "Oh, my God, you know, Apple is using Intel and, you know, look at all the old wars that are still, the ground is burning from all the carnage and wreckage of those old wars, and here's what's happening now."

• 49:08Ben Gilbert?

  And Steve, of course, says, "And the crazy thing is that you guys don't even realize it's been that way for a year." And all the operating systems dating back, you know, a year or two years ago-

• 49:18David Rosenthal?

  I didn't know it was multiple years, yeah.

• 49:19Ben Gilbert?

  Yeah, have been capable of doing this, and you guys just didn't know it. So go buy yourself a new computer and all your old stuff will work on it. David, you're right. I think that that did give them sort of the confidence to say like, "Well, you know, I guess, I guess we could start." Re-architecting our operating system to work on yet another chipset.

• 49:38David Rosenthal?

  When, of course, at that point in time, the iPhone project was well underway, but probably getting close to shipping because I think it was 2006, right? When that happened.

• 49:46Ben Gilbert?

  I wonder how similar those efforts were.

• 49:48David Rosenthal?

  Yeah, interesting. Well, anyway, to rewind back to ARM. So this is happening. They do this TI deal. The Nokia 6110 launches. Things are all basically up into the rate indefinitely from then for ARM. So at the end of 1997, ARM is doing over 25 million pounds in revenue and they're profitable. They do a dual IPO, both on the London Stock Exchange and the NASDAQ. Because remember, they have British shareholders, Italian shareholders and in Apple, American shareholders. On April 17th, 1998, they priced the IPO at five pounds and 75 pence per share, which translates to a market cap of 264 million pounds.

• 50:32David Rosenthal?

  Now, the exchange rate was stronger back then, but still, my God, I wish I could have invested at the IPO. It grows hugely throughout the tech bubble especially. And this is, this is so awesome. I can't believe this is going to be like a footnote in this episode, but like, I want to highlight here, this saves Apple. The ARM IPO, had it not happened, very likely, Apple would have gone bankrupt because this is 1998. Steve Jobs had just come back into Apple. Scully was ousted. The company is bleeding cash. Like they are like seriously facing bankruptcy.

• 51:08Ben Gilbert?

  And what, it's a decade later, but they still own that share of ARM?

• 51:12David Rosenthal?

  No, no, no, no. They start liquidating the ARM shares and thankfully, they don't liquidate all at the IPO. They start selling slowly over a couple of years as the ARM stock price is going crazy. Apple, remember, they invested one and a half million. They make $792 million in profit from selling their ARM stock over the next couple of years. And literally that is what saves the company. Like it would have gone bankrupt without that.

• 51:37Ben Gilbert?

  Imagine being an analyst, like now there's an army of Apple analysts, but like then, you know, imagine being an Apple analyst and you're like, uh, okay, yet another quarter where all of their, it wouldn't even be operating income, but all of their profit is coming from liquidating this thing that's going to run out.

• 51:54David Rosenthal?

  I mean, that was literally what kept the company afloat. Kind of amazing while while Steve was, you know, preparing what would become the IMAC and consolidating the product lines and ironically killing the Newton. So when the tech bubble bursts, when the internet bubble bursts and the telecom bubble bursts in 2001, ARM, of course, you know, takes a blip and shipments basically like plateau for, you know, a year, maybe not even. But again, like this is such a huge wave, like by 2002, they pick back up to the point where in 2010, ARM is now ARM partners are now shipping over 5 billion devices every year. Again, so almost as many people as there are on the planet, ARM's partners are shipping devices.

• 52:39David Rosenthal?

  So like, you know, these are, these are, aren't just, of course, cell phones. These are, you know, microwaves, these are refrigerators, these are cars, like cars have a lot of ARM chips in them. These are sensors and devices, anything that needs a low power, high performance embedded processor.

• 52:55Ben Gilbert?

  All right, listeners, now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 53:08David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 53:25Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 53:40David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting, since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 54:04Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 54:23David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 54:53Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you.

• 55:18David Rosenthal?

  So typically, this would be where we would, you know, wrap up our history and facts.

• 55:23Ben Gilbert?

  Company's just growing nicely. It's post-IPO, you know.

• 55:27David Rosenthal?

  Yeah, you know, we'd, we'd, we'd grade the IPO. We'd say like, man, you know, if only Apple had held on to their shares and didn't need to liquidate, like.

• 55:38Ben Gilbert?

  It's kind of crazy. I'm not sure we would be doing this episode if SoftBank hadn't bought them because it is sort of like, if you've bared with us this long in this episode, you probably agree, it's this sort of obscure technology company that has an absolutely inane business model. Before moving forward, David, it is, it is worth putting a fine point on the business model where they don't manufacture chips. About half of their business, or a little bit less, I think, comes from designing the chips and then licensing those out. And then, you know, they have this, this large component of their business that is just licensing the instructions and architecture. Like, they have now managed through the value they've, they've created through

• 56:20Ben Gilbert?

  the intellectual property, but also the lock-in they've created by building an ecosystem around their instruction set. They just license their instruction set and it means they get a cut of all chips that are manufactured using their IP. And that, that sort of continues to blow my mind

• 56:39Ben Gilbert?

  Somebody doesn't say like, sorry, that's not your lunch. Like, and this isn't like a trivial amount of money. I think it's something like, if you look at the iPhone, I think they make like 35 cents per unit. It's something like 1 to 2% of the chip selling price, depending on which of their business models it was manufactured under. But like 35 cents of every, you know, A series chip. Why is it that they've managed to hold on and actually get a cut of every single chip manufactured?

• 57:08David Rosenthal?

  I think it's probably two things. One, they continue to have truly excellent processor and chip engineering and design talent. Right? So they truly are one of the world-class, you know, best processor design companies in the world at a time where advances in both performance and power consumption for processors are more important than ever. But I think also it's the same reason why the Windtel duopoly existed. Right? Like even though Apple is more flexible about moving architectures than, you know, Microsoft was back in the day, Android and iOS run on risk architecture chipsets. Are they really going to re-architect them for something else?

• 57:53David Rosenthal?

  There even is, there is no other thing to re-architect to.

• 57:56Ben Gilbert?

  Yeah, that's true. They would, you would have to come up with your own instruction set, build your own.

• 58:02David Rosenthal?

  Set of compilers to enable operating systems.

• 58:05Ben Gilbert?

  So Apple does a lot of this anyway. Like, Apple's one of the companies that actually could probably uniquely do it. Cause they could write their own instruction set. I mean, this is like way bleeding into tech themes and random future forecasting. But like, they could write a new compiler, build it into Xcode, make it so that every app that's, that's compiled just works on their new chipset that's not ARM-based that they launch.

• 58:28David Rosenthal?

  Just like they did with Intel back in 2006.

• 58:31Ben Gilbert?

  Right. And it wouldn't surprise me because they've, they've taken over not only their own, I mean, they don't manufacture their chips, but they designed their own chips. They of course licensed the ISA from, from ARM. But like, it does just seem like it would be one more expanding of their vertical integration to say, actually, it's going to be based on our own architecture now, too. So color me in for that prediction in the next three years.

• 58:52David Rosenthal?

  Interesting. And, and also, Apple's uniquely positioned to be the only company to do it because Google's not going to do it with Android because Android is a diverse ecosystem. You need ARM to be, the architecture to be the standard across the chip, you know, TI, Qualcomm, whoever, Broadcom, all the partners you need, plus Google, plus, you know, what have, what have you?

• 59:11Ben Gilbert?

  Google with Android is kind of the Microsoft. It's actually a little bit worse of a position than Microsoft because you can't guarantee that it's an Intel chip. It's probably a Qualcomm chip, but it could be a bunch of things.

• 59:22David Rosenthal?

  Mm hmm. Well,

• 59:24Ben Gilbert?

  All right. So

• 59:25David Rosenthal?

  To pull back from tech themes, back to our story.

• 59:26Ben Gilbert?

  Let's talk about the actual acquisition because that's the name of the podcast.

• 59:30David Rosenthal?

  This is like such a, such a schizophrenic episode because until now, like

• 59:35Ben Gilbert?

  Well, I keep pulling us into the future.

• 59:37David Rosenthal?

  This is so important, this company and this technology. And I hope we've done a, a good enough job communicating that. But this is like a hardcore technology episode. But now we're going to shift, grab the wheel and shift back to like crazy, you know, James Bond style, SoftBank and Masa. Okay. So this brings us to 2016. All is well in the world. ARM is winning, you know, based in Cambridge, doing great engineering, working with partners, got their great business model.

• 1:00:12Ben Gilbert?

  Did about 1.6 billion in revenue the previous year.

• 1:00:16David Rosenthal?

  Yep. The stock price is, is having a huge run because the financial community is starting to wake up to this fact that like, oh, hey, if I want to ride the mobile wave and I want exposure to this, ARM is like a really good way to do it.

• 1:00:28Ben Gilbert?

  Yep. We shipped 15 billion units in 2015. Like it's a, things are happening.

• 1:00:34David Rosenthal?

  Yep. So thanks to Fast Company and Katrina Booker and friend of the show, David Lidsky, and their great piece on Masa and SoftBank that just came out. We know what happens here. So it's summer of 2016 and Masa is hosting a dinner for tech industry luminaries at his amazing nine acre estate in Woodside, California, which is like a super tony community, you know, right outside Palo Alto, right, right over 280. This is where Steve Jobs mansion was that he never built out. This is where Larry Ellison's whole compound is. And Masa has like an equally amazing compound there. He's hosting a dinner. One of the attendees

• 1:01:19David Rosenthal?

  at the dinner is Simon Sagars, who had joined ARM back in 1991, right after the spin out. He was an engineer and he was the 16th employee. At this point, he's risen through the ranks over the years. He's become the CEO and he's kind of like, you know, his job is like steward of this ecosystem and like, obviously everyone uses ARM, but like SoftBank is an important partner because they're one of the world's biggest telecom operators. And so like, he wants SoftBank to, you know, make sure that they understand how important ARM is in the chipset of the phones that they're selling. It's like, okay, great. I'll go to this dinner. I'll, you know, hang out with Masa. So they're sitting there at dinner and, and Masa starts like focusing on, on Simon and

• 1:02:03David Rosenthal?

  he starts asking him a bunch of questions about, you know, what ARM does, what the business model is, you know, all the various devices that ARM chips end up being used in. So Masa's like, so what, what exactly do you guys power? And he's like, well, we power everything, you know, we're not just in phones, like we're in cars, we're in coffee makers, we're in refrigerators, wearables. We're starting to get into servers, like actually because of this power consumption issue, like supercomputers, like power is a limiting factor on performance. So they're starting to use us. Masa's like, hmm, interesting. So then Masa asked him what, you know, now has famously

• 1:02:46David Rosenthal?

  become the, the question that he asks every vision fund investment, which is, what would you do if money were no constraint?

• 1:02:57David Rosenthal?

  And Simon's just sitting there at dinner and he's like, um, well, I guess we'd probably keep doing everything, but, but faster.

• 1:03:08David Rosenthal?

  And Mas is like, hmm, okay.

• 1:03:12David Rosenthal?

  So Simon goes back to Cambridge, back to the UK to ARM, very different from the environment he was just in. He's sitting there a couple of days later, back in Cambridge, and he gets a call from Masa in Tokyo. And in typical Masa fashion, he's like, I need to see you right away. And not just you, but I also need to see ARM Chairman Stuart Chambers, Chairman of the Board.

• 1:03:34Ben Gilbert?

  And this, this is the best part of David's, David's reporting here.

• 1:03:37David Rosenthal?

  This is, this is great. Well, it's, it's, uh, we, we alluded to this, uh, in the carve out on, on the last show. So there's one problem, which is that Stuart is on vacation and he's on a yacht in the Turkish Mediterranean. But like Masa doesn't like yachts in the Turkish Med, like that's, that's his ballgame. Like that doesn't faze him. He's like, okay, well, you know, uh, hang on, I'm going to call him. He calls him and he's like, uh, I need you to dock your boat in Marmay, Turkey, which is like a resort town on the Mediterranean coast in Turkey. Masa then sends a private jet to Cambridge, picks up Simon, he jumps on his own jet, they all converge in Marmay.

• 1:04:19David Rosenthal?

  Uh, I think, I don't know if it's Marmay, French pronunciation or Marmes in Turkey. Masa buys out an entire restaurant with like a view overlooking the marina. So there's nobody else in there. They all converge, the three of them in the restaurant. And they sit down and Mas is like, I want to buy you guys and I'm going to offer you $32 billion, which was a, almost a 50% premium to where they were trading at that moment in time. And I want to do it now.

• 1:04:46Ben Gilbert?

  You know, like when there's a public to public acquisition, it sometimes is like 20, 25%. We've seen up to 30% and, and, and, you know, more typical situations, but like, uh, I think it's a 43% premium.

• 1:04:59David Rosenthal?

  Yep. Typically with, you know, public to public acquisitions too, there's a lot of back and forth and there's investment bankers involved and like, you know, it's very rare that you get an Instagram style like done.

• 1:05:11Ben Gilbert?

  They closed it in two weeks?

• 1:05:12David Rosenthal?

  Yep. They closed into, they announced, they got board approval and they announced within two weeks, ARM to remain an independent division within SoftBank. SoftBank's going to pay $32 billion to buy the whole thing. The market loves it. It gets shareholder approval and, and it's done. This, as we alluded to at the top of the show, it was this model. I'm sure Masa was already starting to think about the Vision Fund, but this deal and this vision of computing everywhere and what it'll enable becomes really the prototype for what SoftBank is now doing with the Vision Fund. So much so that the next year in 2017, when

• 1:05:54David Rosenthal?

  they actually get the fund set up, SoftBank Corporate sells a 25% stake in ARM at cost to the Vision Fund. So the Vision Fund takes $8 billion right off the bat and buys 25% of ARM from SoftBank Corporate.

• 1:06:08Ben Gilbert?

  So what do you think went on with that? Why?

• 1:06:12David Rosenthal?

  Well, I think Masa was always thinking about this as an investment. It was just that before the Vision Fund, the only way you had to invest was through SoftBank balance sheet. Yeah.

• 1:06:22Ben Gilbert?

  I mean, now there's a ticking time clock because the Vision Fund has a 12-year fund lifetime. So it's not like he can hold it indefinitely now. Like at some point, they have to either sell that back to SoftBank, which I'm sure Masa doesn't want to do as someone who controls both entities, probably wants to in the next, you know, five to seven years, get a nice return on ARM and sell it to someone else. So we haven't seen the last of this yet.

• 1:06:45David Rosenthal?

  Well, I think most likely, and this is what people started talking about after the, the transfer, the 25% transfer, yep, into the Vision Fund is re-IPO it. I think that's the most likely outcome. But what's interesting, and this also speaks to the Vision Fund strategy, so.

• 1:07:01David Rosenthal?

  In 2016, when SoftBank acquired the company, there were only about 4,000 people working at the company, which on the one hand is a lot of people. On the other hand, like, that's a lot less than Uber, that's a lot less than, you know, I think less than Airbnb at this point. Like, for a company that old and that was like, literally the foundation of, you know, all technology at that point. I mean, I think they have a 96% market share of all smartphone and embedded devices, embedded devices. That's not a lot of people. In the, you know, two plus two and a half years since then, ARM has hired over 2,000 people. So they've grown by more than 50% headcount, since they couldn't have done that if they were a public company, because they're now losing money, they're now net

• 1:07:45David Rosenthal?

  income negative. But Masa, again, like, you know, it's his question, what would you do if money were no object?

• 1:07:51Ben Gilbert?

  Are they net income negative? So here's, here's what I was looking at at that. They, their operating margin was 52%. Their, their operating margin at, at the time of acquisition, their operating margin now is 24%. Even though they've grown from 1.6 billion in revenue to 1.8 billion in revenue, their EBITDA dropped 40% despite the revenue increase. So I'm not sure if they're losing money, but they, it's interesting, they're selling a lot more devices that only make a little bit more money, and their profits significantly dropped.

• 1:08:24David Rosenthal?

  Hmm, interesting.

• 1:08:25Ben Gilbert?

  And their margin dropped.

• 1:08:27David Rosenthal?

  I just pulled it up again. I said, there's an article that they posted a loss of 200 million in, I believe, 2018, which could be for lots of reasons. And obviously, that's not operating margin, that's net income.

• 1:08:42Ben Gilbert?

  The drum that they're beating in telling investors right now is, hold on, guys, we are way investing in growth and it will pay off. And then we're going to do something about it when it does.

• 1:08:51David Rosenthal?

  And what's interesting, you know, they, they still do quarterly presentations on company results. What they're talking about now is how they're investing heavily into the next computing waves. So ARM has started now making designs and devices, chips that are Dedicated for AI use cases, but also for like autonomous vehicle use cases. So you think about, you know, Intel bought Mobileye for, I think, $17 billion. And Mobileye makes chipsets for cars and in particular for computer vision for driver assistance and eventually fully autonomous use cases. ARM is getting heavily into that market as well, as well as all sorts of, you know, embedded computing.

• 1:09:37Ben Gilbert?

  Yeah, it's interesting because the stated reason at the time of purchase, and at some point here, we'll breeze through the other sections of the show. But at the time of purchase, the drum they were beating was its IoT, that the Internet of Things is blowing up. And because, you know, there's going to be an ARM device and much more than your phone, it's going to be in all these other things that are communicating with the Internet around you. That's why we believe that the growth is, it's like Masah believed that there was some growth that was not priced in, that he believed was going to expand. The market for IoT devices was going to expand even greater than the, the public market investors who owned ARM believed, or at least that there would be some reason to believe that it would be generating more, more future cash flows. And it was IoT, IoT, IoT.

• 1:10:20Ben Gilbert?

  And it's interesting to see, you know, two years later now on some of their investor relation stuff, so that it really is more about the connected car and AI chips. So certainly their, their devices shipped has, has continued to be a really great story. They went from, I think, 2015, they were in, they were 15 billion. And now in, in, I think at the end of 20, when was this?

• 1:10:45David Rosenthal?

  2017, they did over 21 billion.

• 1:10:48Ben Gilbert?

  Yeah, that's what I'm looking at too. Their exponential growth continues to be really excellent. But it is interesting, it's like on, on what thesis? Do you have to believe in a specific thesis about where there will be more CPUs, specifically low-power ARM CPUs? Or do you just say, look, I don't have to believe anything in particular. I'm just pretty sure that these things are going to continue to be more and more everywhere.

• 1:11:13David Rosenthal?

  Yeah, it's funny, I'm in the latter camp, but should we jump to acquisition category?

• 1:11:19Ben Gilbert?

  Yeah.

• 1:11:20David Rosenthal?

  It's so funny, you know, we were setting this up all along for an IPO narrative, but boom, acquisition.

• 1:11:24Ben Gilbert?

  Because we've done so many recently.

• 1:11:26David Rosenthal?

  I know.

• 1:11:27Ben Gilbert?

  Business line.

• 1:11:28David Rosenthal?

  For sure. Not even a

• 1:11:30Ben Gilbert?

  Yeah, no, no.

• 1:11:31David Rosenthal?

  No.

• 1:11:32Ben Gilbert?

  Yeah.

• 1:11:33David Rosenthal?

  I don't think SoftBank does anything else quite like ARM. So business line and it's fully independent. Okay, what would have happened otherwise? Like, you know, this is an interesting one. I feel like this is the first interesting one in a while.

• 1:11:44Ben Gilbert?

  I have two interesting points to make on this one. So do you know how Masa got the cash to buy ARM?

• 1:11:51David Rosenthal?

  Oh, interesting. I did not.

• 1:11:55Ben Gilbert?

  So it was interesting. The time when he bought it was actually at a currency fluctuation due to Brexit, where the pound was not doing well. So he got a lot of blowback that, you know, you're taking advantage of a distressed asset here. And he's pounding the table, saying, no, I'm not taking advantage of a distressed asset. I really believe in this and I was just waiting for the cash to come in. Where the cash came in from was they sold $10 billion of Alibaba shares and $7 billion of Supercell shares, plus they took a $9 billion loan. And SoftBank does this pretty often. I think they, they, they take out these big, big credit lines to do, do deals like this, which makes a lot of sense why you would switch to, you know, having a freaking huge fund if you're used to these multi-billion dollar loans to finance acquisitions.

• 1:12:39David Rosenthal?

  It's like, wait a minute, you pay me for using your money instead of me paying you?

• 1:12:44Ben Gilbert?

  I like this arrangement. It's kind of like the ESPN deal.

• 1:12:48David Rosenthal?

  It is business model innovation all over the place here at Acquired.

• 1:12:52Ben Gilbert?

  Yeah. So the, my sort of theme of this section is interesting to look at the conditions upon which the deal got done. So that's condition one, which is interesting to look at. The second condition is they were a nice, deep pocketed Switzerland that this company could actually sell to, that could finance aggressive future growth. And if you think about other people they could have sold to, it, it would have been value destructive because if you sold to Apple, then, you know, Qualcomm's freaking out that they're not going to have access to, to their core technology anymore. And same thing in, in, you know, the other direction. And so the number of possible purchasers who have $30 billion

• 1:13:35Ben Gilbert?

  or who can raise $30 billion that are Willing to plow a bunch of future investment into your business that aren't strategically, or I guess structurally sort of corruptive to where you want to operate in the market and in a value destructive way, pretty limited. I would say it's fortunate and and value creating for the world that it landed where it did.

• 1:14:00David Rosenthal?

  Mm hmm. Well, yeah, I mean, think about like, we referenced at the top of the show that in many ways, this became the model for the Vision Fund. And, you know, look, say what you will about the Vision Fund, and there are certainly, you know, like anything, there's a balance sheet, right, of like, it's their positives and negatives to the ecosystem of it. You know, this is a major positive, right? Like ARM is a public company, right? It had been a profitably operating public company for, at that point, close to 20 years. It was the most arguably, the most important foundational computing company out there. But like, if they were to say to Wall Street, hey, you know, we're going to massively invest in growth

• 1:14:43David Rosenthal?

  right now, we're going to turn net income negative, you should expect losses for the next few years while we lay the groundwork for the next waves of computing. What would happen, right? Like, their stock would crash? Like, they were like, going to be prevented from doing that. And I think this is the core of, you know, in some ways, it's like hilariously funny, Mas's question of like, what would you do if, you know, money were no object? But this is like, this is what he means, right? Like, and I think in a lot of ways, like SoftBank is a great home for this company for the time being.

• 1:15:13Ben Gilbert?

  David and I have gotten a lot of feedback on, and listeners, we appreciate all this feedback, that we do a lot of talking about the value that accrues to the acquirer, but we do very little talking about the value created in the world by a transaction happening. This, I think, is value creating to the world if you believe that those 4,000, you know, really brilliant physicists and PhDs and chip designers and computer scientists and technologists, if you believe that funding them, they'll continue to produce IP that will enable us to to have continued innovation and do things that we previously didn't think possible because it would produce too much heat, or, you know, consume too much energy

• 1:15:55Ben Gilbert?

  or anything like that, then yeah, I think this is incredibly value creative, both for the ARM ecosystem and for sort of anybody who uses any of their products, which is all of us.

• 1:16:06David Rosenthal?

  Mm hmm, mm hmm. Totally.

• 1:16:09Ben Gilbert?

  It's very much a you get the investors you you ask for. There's a very reasonable chance that the public market was not a good place to, you know, to go stand on that hill and say, we're going to be, we're going to be bad for a while, but it'll be great eventually. It's like you need someone else to sign up for that.

• 1:16:24David Rosenthal?

  Right, right. It's very hard to ask, you know, once you have a certain set of investors, it's very hard to ask them something different from what you have been asking them without a, without a change of control like this.

• 1:16:37Ben Gilbert?

  Yep.

• 1:16:39David Rosenthal?

  Should we move into tech themes officially?

• 1:16:42Ben Gilbert?

  Yeah, let's do it.

• 1:16:43David Rosenthal?

  Finally. I've got two, which I know I've been beating this drum for a while. One is just like this alignment that I talked about earlier of like, technology model and business model. Like, if you can really innovate on both of those, then like that is when really, really, really powerful things happen. You know, maybe in the theme of this episode and and Apple and and its involvement here, you know, it is the the marriage of technology and the liberal arts when you can do that. So that's one. The other one that I feel like I've been talking about more on the LP show, I can't remember how much I've talked about this on the on the main show,

• 1:17:22David Rosenthal?

  I think this really illustrates very well is when it comes to startups and investing, it's so easy. People make the mistake of focusing on what your TAM is today versus the much more important question of what your TAM is tomorrow. And this is such a great case study because like when ARM, the spin off was was getting started and and they were developing the risk processor, you could have looked at it and been like, this is so stupid. Like the TAM, you know, the market today is for IBM PCs and it's the the Microsoft, you know, Intel, Intel duopoly is getting started. Like this company is dead in the water. Like this is so stupid, right?

• 1:18:06David Rosenthal?

  But it was the TAM tomorrow of the coming mobile wave that that was the opportunity and that was what mattered. Now, of course, that means that getting the timing right is super important. But if you can time correctly when the TAM tomorrow is going to start to realize and you can get out in front of that and be building the technology, you know, a couple of years in advance so that it's ready, like that's that's magical.

• 1:18:34Ben Gilbert?

  I am looking at a graph here with about 10 years where it looks like there's no growth in revenue. It's timing, timing, timing.

• 1:18:43David Rosenthal?

  But it wasn't that long until, from the time of the spin out, they got that TI contract for the Nokia 6110 within three years of the spin out. So like, the devices weren't shipping yet, but they were, they knew it was coming.

• 1:18:58Ben Gilbert?

  Yep. It's a great point. I have no tech themes. I have said all of mine.

• 1:19:03David Rosenthal?

  Love it. Love it. Love it. For grading, what do you think about, we've talked about for grading more recent events, and I think this still qualifies as a recent event, the SoftBank acquisition. Let's, let's paint the, the A+ scenario and the C or C- scenario over the next five years.

• 1:19:25Ben Gilbert?

  All right. So I'll, I'll start with the A+. If you believe in the thesis that David and I chatted about on the LP show, that, that ambient computing is the next computing wave. So to sort of review, the, there was PC, that there was a trillion dollars in that ecosystem of value created. Then there was the, the internet and then mobile. And sort of what is that next thing? And what is that next wave of computing upon which it, platforms will be built that, you know, that enable entirely new use cases, new companies, and, you know, a new way that people interact with technology. And ambient computing is that thing. They're probably all going to have ARM chips in them. Be it the AirPods

• 1:20:08Ben Gilbert?

  that David and I are both wearing now, or the watches that I think we're both wearing now. Or, as, as our friends in the, the team that work there say, the lady in a tube that will respond to my voice when I get home. All the way down to sort of the litany of things that used to, you know, just be dumb embedded devices, like the little oven timer, or the little oven clock. There's a very reasonable chance that we have hundreds of, of ARM chips that we're interacting with over the course of the day. That makes us look like a pretty smart buy, assuming that that was not already priced in. So. When we just like, let's, let's review that real quick. The 32 billion was bought for 18x earnings and 29x EBITDA.

• 1:20:52Ben Gilbert?

  So already a, you know, fairly expensive stock. But yeah, still, still feels like a good buy if you believe that we're going to transition from sort of somewhere between one and a dozen that we regularly interact with to hundreds.

• 1:21:07David Rosenthal?

  Yep. And it's funny, I'm just pulling up here because of course ARM still reports their, their results.

• 1:21:15Ben Gilbert?

  It's awesome that they do that.

• 1:21:16David Rosenthal?

  I know. It's so awesome that they do that. Okay. So totally agree. That's the A, A plus case. The C, C minus case, I think I fall in the A camp, but just to paint the bear picture here. So currently for the most current results, we have total revenue for ARM over the last four quarters. So the trailing year of revenue was 1.8 billion. So they bought the company for SoftBank bought the company for 32 billion, two and a half years ago. For a company that is still doing less than 2 billion in revenue.

• 1:21:59David Rosenthal?

  That's a pretty big gap to fill, right? Like if you're anticipating like, you know, significant returns on, on your acquisition from, you know, already two and a half years in the past. You need some of these new markets to start hitting and start hitting big real soon. From, from an IRR perspective and, you know, the royalty portion of the company's revenue, which is the, the alignment with, with partners.

• 1:22:27Ben Gilbert?

  So that's, that's the one that's dependent on number of units shipped.

• 1:22:29David Rosenthal?

  The one that's dependent on number of units shipped. And that's really what, you know, I think the investment thesis is about that like number of units of shipped is going to, going to grow exponentially. Like it is the largest revenue stream in the company, but it's actually not growing that fast in terms of how much revenue they're getting. And I think that must be because they're just getting such a small amount from every device shipped. And as the devices proliferate and cheaper and more basic devices, you know, like sensors and the like, become the vast majority of number of units, I bet they're getting fewer actual dollars from those.

• 1:23:10Ben Gilbert?

  Yeah, it's interesting. And this is an area, one other bear case is something that I'm not technical enough to evaluate, but what ARM was to mobile and Intel was to the desktop, is there going to be something else to the proliferation of devices and make ARM sort of look like the old grandpa technology? Like, is there some significantly lower power thing that, you know, literally just needs the vibrations of the EM spectrum in the air to power it or something really crazy?

• 1:23:39David Rosenthal?

  Now, that's why I think like this is in the full length of time. Like, I don't see anything else on the horizon that can actually really replace ARM and the RISC architecture. But again, if you look at their financial results, like, the fastest growing portion is software and services, right? This sounds like the Apple narrative, right, of like, you know, all is well, even though our, you know, core business is flat to declining, like, we're making it up in services. Like, that's not as defensible. So, you know, I think that's this, this, this bear case is the company, while a great company and a foundational technology company, actually can't command that much of the value creation

• 1:24:24David Rosenthal?

  going forward from computing and doesn't end up being as good an investment as they expect it to be.

• 1:24:30Ben Gilbert?

  From the academic side of things, it depends how much ARM is the point of integration. If they're just a component that ships in phones and the real value is created, and the phone is the point of integration of hardware, software, services, and components, then most of that value accrues to the phone manufacturer, which is why Apple's worth over half a trillion dollars. But to the extent that ARM actually has ecosystem lock-in and commands a lot of value for doing that, and in some way, they're the point of integration, bringing, you know, the software developers who are able to write software that gets compiled to run on ARM processors with the actual device manufacturers, which they

• 1:25:14Ben Gilbert?

  aren't, that that explains why they, you know, command so much less of the value.

• 1:25:18David Rosenthal?

  There you have it.

• 1:25:20Ben Gilbert?

  We shall see.

• 1:25:21David Rosenthal?

  We shall see. Man, this is a fun one. Thank you, listeners, for bearing with us. I hope we did justice and communicated, you know, a little bit about the technology, a little bit about the business model, hopefully a lot about the story, but also, you know, why this is, no matter what corner of the technology ecosystem you live in, this is an important one to understand.

• 1:25:46Ben Gilbert?

  Yeah, and I don't think I really got that until digging in. I mean, it was always kind of mysterious to me of like, I just didn't understand why it got bought for so much when...

• 1:25:56David Rosenthal?

  They don't make anything?

• 1:25:57Ben Gilbert?

  They weren't making the chips. Yeah. And it's, you know, it's been nice to have an hour and a half to understand that a little bit better.

• 1:26:05David Rosenthal?

  All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 1:26:11Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:26:22David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:26:42Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system, so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:26:54David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:27:05Ben Gilbert?

  Well, folks, if you aren't subscribed and you want to hear more, you can subscribe from your favorite podcast client. If you like what we're talking about, about kind of the future of computing and ambient computing, you should consider becoming a limited partner. So kimberlite.fm/acquired or click the link in the show notes and we'll have some pretty fun guests coming up on the LP show pretty soon that we're excited about. So we will see you all soon.

• 1:27:29David Rosenthal?

  Indeed. See you next time.