AI, Middle East, China, Tariffs, Recon Bill, Invest America | BG2 w/ Bill Gurley & Brad Gerstner

Open Source bi-weekly convo w/ Bill Gurley and Brad Gerstner on all things tech, markets, investing & capitalism. This week, they discuss the overturning of the AI Diffusion Rule, Brad’s trip to the Middle East, Middle East Deals, China Tariffs, Reconciliation Bill, Invest America, Delaware Incorporation Rights, Momentum in Crypto, Open Source AI in China, & more. Enjoy another episode of BG2! Timestamps: (00:00) Intro (02:02) AI Diffusion Rule and Middle East Deals (20:31) China Tariff Deal (31:10) Reconciliation Bill (44:06) Invest America inclusion in the bill (49:09) Delaware Incorporation Rights (59:51) Major Momentum in Crypto (01:06:28) Open Source AI in China Show Notes: WSJ - The Tech Industry Is Huge–and Europe’s Share of It Is Very Small https://www.wsj.com/tech/europe-big-tech-ai-1f3f862c?gaa_at=eafs&gaa_n=AerBZYM2jk6vG6v8GDfPZfo46cTyZYuIO5sL8vqaVESNcGDpM13aWy4cSYRjHRgVYUg%3D&gaa_ts=682f4fff&gaa_sig=NpdAcZI8R6A1yo8LASf5Fn2x9DeqFuH2xxGHyNF-WO1Hd6w8KYBcngJtEov06QD9g2FjwIFkCAKyGP2rOpJTMg%3D%3D Welcome to the China Hawk Industrial Complex https://www.nonzero.org/p/welcome-to-the-china-hawk-industrial China's Baidu to make latest Ernie AI model open-source as competition heats up https://www.reuters.com/technology/artificial-intelligence/baidu-make-ernie-ai-model-open-source-end-june-2025-02-14/ Lodestar Multipliers in Delaware and Federal Attorney Fee Awards https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5237545 Produced by Benny Beausoleil Music by Yung Spielberg Available on Apple, Spotify, www.bg2pod.com http://www.bg2pod.com Follow: Brad Gerstner @altcap https://x.com/altcap Bill Gurley @bgurley https://x.com/bgurley BG2 Pod @bg2pod https://x.com/BG2Pod

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

• 0:00Brad Gerstner?

  Can you imagine if in the year 2000, Washington DC had said, oh my God, Google is so powerful that we're not going to allow any other country in the world to have access to this Google machine that might give them answers to questions unless Google comes to Washington and gets federal approval before it launches in any of these, any of these countries? That's what we were doing in AI and I think we've ripped the chains off of that. And I think now we're going to allow our companies to go compete and win.

• 0:43Brad Gerstner?

  Hey, Bill, it's great to see you. It's been a while.

• 0:45Bill Gurley?

  It has been a while. It's been, I think, three weeks since we did a podcast.

• 0:49Brad Gerstner?

  You know, honestly, and thanks as an aside to hundreds, if not thousands of listeners who are like, you know, remind us that they love the pod. It is hard to get it scheduled. Part of the reason it's been hard is I've been on the road. I've been in LA. I've been in Washington DC and then I spent 10 days in the Middle East. And I think about what's happened, Bill, over that period of time. We basically landed the plane on tariffs. We've had these huge deals announced in the Middle East. The reconciliation bill is on track to passing. And we have some talks of a ceasefire in Ukraine. The market, which was down 20% for the year, has now bounced 20% in the last 20 trading days.

• 1:31Brad Gerstner?

  So maybe today we could just unpack this fury of activity that's occurred over the last three weeks.

• 1:38Bill Gurley?

  That sounds great. So you were at the big event, the one that everyone's talking about in the Middle East. Why don't you, if you would, you know, give the listeners? I think at first, just kind of, what did it feel like? What was, what was different this time? You've been there before, but, but frame what happened, you know, just at first from, you know, what did this look like? And then I'd be interested in your takeaways.

• 2:02Brad Gerstner?

  Well, I have to say, the whole orientation, if you just think about it, toward the Middle East over the last few years, has been kind of about control. You know, we had Siphius that was blocking all these deals in the Middle East. We had the Biden diffusion rule that remember that in the final weeks of the Biden administration, they passed a rule known as the diffusion rule that really created this complicated regulatory framework for selling advanced chips and models. And it broadly restricted the ability of the US to sell chips to like 100 countries around the world. And so I think that, you know, we it felt like a massive 180 shift from what I would call the Washington approach

• 2:47Brad Gerstner?

  of control and preventing diffusion of American technologies to much more of a Silicon Valley approach to partnership and openness. And that was the language that I heard. You know, I was, I was happy to be part of an AI delegation with a lot of CEOs who were over there helping to craft these deals, but you know, and getting to ride shotgun on some meetings with with David Sacks, you know, who is obviously leading the AI initiatives for the administration. And I have to say, it just was incredibly well received in Riyadh, in Doha, in Abu Dhabi. And there was a spirit of partnership in every one of those places. And you saw the

• 3:27Brad Gerstner?

  fruits of that. Major announcements of investments in the United States and major deals getting struck about, you know, AI data centers, et cetera, that are opening in that part of the world.

• 3:38Bill Gurley?

  That's amazing. Of all those things, which one surprised you the most?

• 3:43Brad Gerstner?

  It's a really big change. I mean, you can't underscore enough what it means. You know, like, the Trump administration just repealed the Biden diffusion rule in May of 25, right? And so it literally is fresh off of that. And if you would have told me that in the first five months of this year, we would have gotten a trillion dollar deal signed with Saudi in terms of their investment in the United States, another trillion dollars with Qatar, another trillion dollars with the UAE, those are all investments into the United States. And then let me give you a sense of the scale of magnitude of the deal that was announced in Abu Dhabi.

• 4:24Brad Gerstner?

  So in Abu Dhabi, they announced a five gigawatt US AI, you know, it's a UAE US AI campus. It's an incredible architectural campus. It's in collaboration with Nvidia and OpenAI and Oracle. And think of it as almost like a global Stargate. So to put that in perspective, five gigs, every gig is about 500,000 GPUs. So that's about two and a half million GPUs worth of compute power to power the AI initiatives out of the UAE around the world. And so if you would have told me that that would have come together in this short a period of time, I wouldn't have believed it. Howard Lutnick played an incredibly important role.

• 5:07Brad Gerstner?

  Scott Besant was there with the president, and of course, David Sacks helping to put those deals together. You had CEOs, you know, you were asking how it looked and felt, you know, you had pretty much every major CEO.

• 5:19Bill Gurley?

  Elon.

• 5:20Brad Gerstner?

  In US technology. Correct. Jensen Huang was there, et cetera. And they were putting these deals together. So it, there were just a feeling of the, of the art of the deal, what is possible? Partnership and acceleration as opposed to the deceleration, you know, and the control that, that I think you and I have felt over the last few years. And frankly, you and I have been worried about.

• 5:43Bill Gurley?

  Yep.

• 5:43Brad Gerstner?

  Right? This idea that the US was going to somehow, you know, shut down our AI and not allow the rest of the world to have access to our AI. I think we, we not only thought that was bad policy from an economic perspective, but also just dangerous for the world. It was basically going to allow for this Huawei Belt and Road where Chinese full stack technologies would, would, would move into the Middle East.

• 6:07Bill Gurley?

  And I've read, I've, I've read that was basically underway prior to this big event. Literally underway.

• 6:14Brad Gerstner?

  In Saudi alone, Huawei's market share has gone up a lot over the last few years. Right? It's not as though the, these countries don't have, they don't have the ability to do nothing. And they felt a little frankly betrayed by the United States, I think, over the course of the last few years. Here they are. I mean, take Saudi Arabia as an example. You know, they've been our ally for 92 years. These are not new relationships. And all of a sudden, we have this technology that we're telling everybody in the world is existential to your national development. And yet, at the same time, we're saying, but we're not going to give you our best technologies. And so, uh, while I was in Saudi, I had the

• 6:58Brad Gerstner?

  opportunity to travel with, uh, His Excellency, the, the, the Minister of Technology, Al Suwaha. And I got to go to, you know, incubation labs and see what was happening there, see the data centers on the ground. You know, they have a huge AI project there called Humane that they launched in partnership with folks like Nvidia and Grok. And so there's just an incredible level of enthusiasm and investment that's going on because they know how important AI is. And I think frankly, the US was on the verge, right? If, if we had continued down the path that we were on, one year from now, this would have been largely, they would

• 7:39Brad Gerstner?

  have made commitments to build on Chinese AI stacks because they couldn't afford to do nothing. And so I think the timing of this change was critical. You could tell just the appreciation for the spirit of partnership. I saw that in every, every capital that we

• 7:54Bill Gurley?

  Let me ask you a question. What do you think the competitive, I mean, I have, I have an answer, but I'm going to ask it naively first. What do you think the competitive advantages of these national data centers in the Middle East?

• 8:09Brad Gerstner?

  Yeah, I mean, first, you know, you and I talk about it all the time, a primitive to AI is power and they have cheap power. And, you know, eventually, the price of producing tokens, we're effectively converting electrons, right? They're cheap energy. And by the way, it's both solar and nuclear and, and, and natural gas, some of the largest natural gas fields in the world. Those things are being converted into intelligence. And to say more broadly, you know, for the last 50 years, this part of the world has been powering the industrial age by exporting oil. I think their view to the future is they want to power the, the, the age of AI through the production of tokens and the export of tokens.

• 8:51Brad Gerstner?

  And, um, you know, and that's just converting, you know, this power into tokens. And so that I believe is a critical element. But here's the other thing.

• 9:01Bill Gurley?

  By the way, let me, let me poke it down. I want to poke it down a little bit because I've been just out of curiosity, thinking about maybe trying to break down in my mind the percentage of cost, you know, if you're out buying a token on the open market that's tied to power. And I'll tell you what I discovered, but, but I was just really talking with AI and a few friends. So if anyone in the audience has better numbers, let, let me know. But what I, what, what I've seen is cooling and power might be 20% of COGS, which depending on your gross margin on your hosting, let's say maybe power is 15% of COGS or I don't know. And then that would equate to maybe 10% of revenues. So if you had, let's say,

• 9:45Bill Gurley?

  a two to one power advantage, you might pick up five percentage points of operating margin, something like that, or be able to price 5% lower. I, I'm just trying to frame that advantage.

• 9:56Brad Gerstner?

  I would, I would throw a few other things in there. Number one, right? You just have the issue of latency, right? So, uh, this part of the world needs, uh, local data centers. So whether it's for Africa, whether it's for Europe, whether it's for, uh, the Middle East itself, whether it's for India. And so I think there's just proximity that's, it's an important consideration here. And then of course, the of labor and they're building and investing in these robotic futures where they're building very futuristic data centers. So, you know, I think for a long time the US has viewed, for example, this part of the world as perhaps a bit of an industrial powerhouse when it comes to oil,

• 10:37Brad Gerstner?

  but not very technologically advanced. And I would, I would tell you, listening to Sheikh Takhnun, you know, in the UAE and their commitment, they are, they are as technology forward as anything here in Silicon Valley, right? Paying at G42, etc. And all three of these countries are going to invest aggressively at a level that really no other sovereign on a global basis is investing at to ensure that this, this part of the world becomes a center for technology and AI. And I think it's critical that the US was their partner in, in that regard. And so, you know,

• 11:17Brad Gerstner?

  Sacks I saw tweeted when we got back, something that I thought was important. He said, you know, this, this AI acceleration partnership is not just a single deal. It's a new framework for advancing American AI, both at home and abroad, you know, and positioning the US tech stack to be the partner of choice in this region for decades to come. And, and I think that's right. You know, this wasn't just a one-off deal. I think a lot of people who are hearing about these deals thought, oh, maybe Trump went over there, worked his art of the deal and got a deal done with the Saudis or the Qataris. But no, I think this is a framework that the world can depend upon, that in fact, they are going to have access to these technologies. Let me give you, let me give you a comparison,

• 12:01Brad Gerstner?

  Bill. Can you imagine if in the year 2000, Washington DC had said, oh my God, Google is so powerful, that we're not going to allow any other country in the world to have access to this Google machine that might give them answers to questions unless Google comes to Washington and gets federal approval before it launches in any of these, any of these countries? I mean, it would have, it would have prevented Google from From ever becoming the global powerhouse that it has become, which has been so advantageous to the United States. Hard power, soft power, economic power. And so that's what we were doing in AI. And I think we've ripped the, uh, ripped the, the chains

• 12:43Brad Gerstner?

  off of that. And I think now we're going to allow our companies to go compete and win.

• 12:47Bill Gurley?

  Well, and to frame that a little more, um, I just put on X earlier today, article in the Wall Street Journal that just came out that was talking about how far behind Europe is and broadly speaking in terms of, of business culture and tech. And the article goes into a lot of detail about how complex regulations have, have limited or stifled innovation, uh, both on the labor side and on the technology side. And the policies that were being considered, let's say three months ago, um, to me, all were mirror images of the ones that are listed out in this article.

• 13:29Bill Gurley?

  So I think we were a hundred percent on a path towards building a wall around America, not building a wall around China. And if we had continued on that path, I think I would have predicted, had we continued around that path, that, you know, if you look at the internet era, there really was the rest of the world using Americans internet and then China built their own internet.

• 13:55Brad Gerstner?

  Correct.

• 13:56Bill Gurley?

  And I think we were headed towards a path where we were going to have a wall around America and there was going to be America AI and then China AI was going to have the rest of the world, the opposite of the internet.

• 14:08Brad Gerstner?

  Bingo.

• 14:09Bill Gurley?

  And I think had we continued on that path, or if we go back towards that path, because I don't think this is over. I mean, I think some of the rhetoric coming out of the Hill and Valley Conference was more consistent with the wall around America. But, but it's a great sign that we're not, you know, holistically committed to that strategy.

• 14:28Brad Gerstner?

  Well, I think you said it incredibly well. It would be a disaster for this country if we embarked on a path that was the opposite of what we did in the age of the internet. The United States was the greatest beneficiary from the internet boom of the last 20 years. The AI boom is going to be even bigger than the internet boom. And we need to follow the pattern and the protocol and approach that has made the United States a global leader in technology. We do not want to be copying Europe. We do not want to be in the situation that China was in the age of internet. And so I think this was a major and important first step in that direction. But you're right, Bill.

• 15:07Brad Gerstner?

  I saw a headline this morning that said Trump's rush for AI deals in the Gulf opened up a rift with China hawks in the administration. Yeah. And you know that there are still these, you know, effective altruist types who are these decelerationists in Silicon Valley who don't want to see the diffusion of any of this AI. So it's creating this weird coalition of folks who have resisted the diffusion of American technology. And I am firmly in the camp that we are not only safer, we are more prosperous when the world runs on the American AI stack. And I thought last week was, I was celebratory because it was planting a major flag in this

• 15:51Brad Gerstner?

  incredibly important part of the world with world-class allies who have major resources and desire and commitment and passion to invest with America in this. You know, I also think, you know, one of the side benefits, Bill, this has been a part of the world that has been unstable for a long time. Right? We still have issues in Iran. In fact, I think we're, you know, perhaps on the precipice of a major fork in the road with Iran where they either signed the nuclear nonproliferation deal on the table or, you know, we could have a hot war situation with Iran. But I would say I expect that the president's lifting of the sanctions on Syria probably gives way to the Saudis signing the

• 16:38Brad Gerstner?

  Abraham Accords and other positive developments in this part of the world. So I don't think it was just a business deal. Had we alienated this part of the world in terms of business? I think it would have been a major setback for American diplomacy in this part of the world. I think it was a good day for American businesses. There's going to be a ton of business for companies like Nvidia, companies like AMD, folks who are suppliers to those companies. I think it's important for companies like OpenAI that want to build out capability there. You know, a major development.

• 17:10Bill Gurley?

  You know, two things I would mention on the end of this that relate to, you know, global AI, the global AI race, let's just call it that. First, this Hill and Valley Conference, which I watched a little bit online. I didn't go. You weren't there, were you?

• 17:26Brad Gerstner?

  I wasn't. I wasn't. But I, one of my, one of my partners was there and I went last year. And, you know, there's a lot of good that comes out of that conference.

• 17:33Bill Gurley?

  There may be, but the tone, the AI tone, I would say, was the opposite of everything we just talked about. In fact, there's a, there's an interesting write-up on it where this one blogger titled, "Welcome to the China Hawk Industrial Complex." So, so I, I'm not, I'm not, I'm not trying to pour cold water on everything we just talked about. I'm just saying there's still, there is, there's a large group of people in our community who have invested in either software that they sell to the military or now products and services they sell to the military that I think need to be China Hawks in order to justify the business they're in and in order to root for their companies.

• 18:18Bill Gurley?

  And I will tell you, after spending 25 years in venture capital, there's just this instinctive thing. It's like defending, defending your children. Once you invest in something, you just start to adopt the, the mouthpiece for it and make a lot of arguments that are central to that company's success. And I think that's happening now that we have a large number of VCs in the military space.

• 18:42Brad Gerstner?

  Well, I don't know. We're a big investors in Anduril. You know, we're big investors in ByteDance. I have an intellectual capacity to, you know, to understand these investments for what they are and these partnerships for what they are. But most importantly, I think everybody has to figure out what's best for Team America. Right? We need to put America first when it comes to thinking about our global diplomacy, rather than what's best for my investment, maybe in a ByteDance, or what's best for my investment in Anduril. But I do, I do think there is a valid disagreement here, right? And I've had this debate with Josh Wolf, you know, who's a good friend, and Josh is

• 19:22Brad Gerstner?

  much more skeptical when it comes to China and open and free trade on, on issues of American AI, I would say than I am. I think he has some thoughtful arguments on the issue, but you know, and some things we can just agree to disagree. As it pertains to the Middle East, and I'd welcome Josh's, Josh's view on this. I'm not sure what they are, but I think it's unquestionable. The US is better off having American AI in partnership with all of our allies in the Middle East. If we can't be in partnership with our allies, like India, like the Middle East, etc., then what are we doing?

• 19:57Bill Gurley?

  Yeah, no, I totally agree with that. I will agree to disagree on the other thing. I do think that once people start backing this stuff in a big way, that it's going to be naturally would take on that point of view.

• 20:10Brad Gerstner?

  We talked a little bit about the Middle East. Maybe, you know, the other big news events.

• 20:14Bill Gurley?

  I did want to finish with one thing. It appears the markets reacted positively, specifically to the Middle East talks and, and events, correct?

• 20:24Brad Gerstner?

  Well, I mean, you know, the, the Sunday that, you know, before the Middle East, so like the day before the Middle East visit began, you had Scott Besant, who had concluded the Chinese negotiations in Switzerland, and I think that was the bigger catalyst, right? So we had this huge bounce back in the markets, these two converging events. You know, you had the walking back of tariffs on China, and Besant said, you know, Goal is not to decouple from China, especially in non-strategic goods. Right. And remember with China, almost everything is non-strategic goods. But to open markets and restore balance, we will, he said in his tweet,

• 21:06Brad Gerstner?

  we will continue trading with China, especially in non-strategic goods and at lower tariff levels. At the same time, we're focused on reshoring critical industries like medicine, chips and steel to protect national security interests. So remember when we talked, Bill, three weeks ago, I was very vocal in saying there was, there were two paths being presented to this administration. There's what I described as the nuclear Navarro path, which was high structural tariffs on everybody in the world, generate 2 trillion of tariff revenue and get rid of the Internal Revenue Service. Right. That was door one, which the markets abhorred, right? That's what sent the markets down 20% because we knew

• 21:49Brad Gerstner?

  2 trillion dollars in tariffs is probably a 600 to 700 basis point headwind to GDP. And door two was what I described as the Bessent or the Hasset approach, which was more consistent with the fair trade argument the president had previous outlined, which was to reshore critical industries to have some tariffs on the rest of the world, but to be modest in the scope of the overall economy. And so it looks like, and I think what the market was reacting to, was that the president has leaned in the direction of the fair trade, the Bessent approach to China and to rest of world on tariffs and away from the Navarro approach. In fact, we haven't seen much of Navarro in the last three weeks.

• 22:33Brad Gerstner?

  And who's been in the lead, lead chair on everything? Who was on the talk shows again this weekend? It was Scott Bessent. And so.

• 22:40Bill Gurley?

  I think the, when the tariffs started, you and I talked about the fact that, that chaos is very difficult, both for investors, but also for executives, like committing to hiring programs, committing to CapEx, all these things. And there's no doubt that, that Bessent brings a notion of calmness, you know, to the table almost every time he talks. He just talks in a calm way.

• 23:06Brad Gerstner?

  In fact, the president, the president said, every time you go on television, the market goes up. I think the president agrees with you.

• 23:12Bill Gurley?

  Yeah. Yeah. So, so that's, that's all good. And, and just to, because this, I think. I think the markets appropriately recognize that the China tariff agreement is the biggest one and the most important, you know, more than any others. So as I understand it, we're in a 90 day suspension on drastic tariffs. We, we've, we have a 30% import on Chinese still though. So if you're, if you're importing 80% of your, you know, COGS from China, that's still a big deal. It's split, I've been told, 10% tariff and 20% this odd fentanyl tariff.

• 23:52Bill Gurley?

  And I guess the second part leaves open the door that if China agrees to something on fentanyl precursors, it immediately drops to 10. That's my interpretation. I do, I don't know if you know more than I do.

• 24:05Brad Gerstner?

  Well, so what I would say is going into this year, our tariffs on China were 15%.

• 24:11Bill Gurley?

  Okay.

• 24:12Brad Gerstner?

  Okay. And so my, you know, but look at the tweet that, that Besant sent. He said, especially in non-strategic goods and at lower tariff levels. So there is the possibility that on certain non-strategic goods, you could actually have be back to 15% or maybe even lower bill as you suggested. But I think on the strategic-

• 24:34Bill Gurley?

  And I'd have to believe textiles, home, home goods.

• 24:38Brad Gerstner?

  Correct.

• 24:38Bill Gurley?

  Toys would all fit in that.

• 24:40Brad Gerstner?

  Right. Backyard umbrellas. Yes. All the stuff that people want to buy on Amazon, you know, that is non-strategic. But when it comes to steel and aluminum and chips and items that we consider very strategic, certain medicines.

• 24:54Bill Gurley?

  Solar panels might be a borderline issue.

• 24:57Brad Gerstner?

  Right. They've said on those, they're going to be higher tariffs. So maybe those stay at 30% bill. When you blend it all out, I had my team rerun the math. So remember, I came on here on liberation day and I held up the list of tariffs that, that, that were on the poster board that Trump showed. And I said, if you just add all those up, it comes up to $800 billion in tariffs. Right? We have $3.3 trillion of goods that are imported every year into the country from abroad. And so 8.8 trillion dollars or 8.8- Eight hundred billion dollars of tariffs is pretty substantial. It now I had him rerun the math today, and if you put China at thirty percent on strategic,

• 25:39Brad Gerstner?

  at fifteen percent on non-strategic, and the rest of the world roughly at ten percent, you come up with about three hundred billion in tariffs. Okay, I just told you that last year tariffs were seventy seven billion. So that's still a four X increase in tariff revenue right to the United States. But it's three hundred billion on a twenty eight trillion dollar economy. Right. So I think what the market was saying is, okay, three hundred billion. Half of that will show up as increased prices and taxes on consumers and on businesses. Half of it will get eaten by the producer of the product in China, in India, wherever. You know, that's not that big a headwind to the US economy. And that's why I think you've seen the markets bounce. Now, remember, we're just back to where we started here.

• 26:23Brad Gerstner?

  The markets were down twenty percent. Now they're up twenty percent. And so I think this is about giving a path and giving some definition around the path forward, the flight path forward. And if you take these two things together, okay? We went to the Middle East and we landed the plane, did a bunch of deals, got trillions of dollars of investment into the United States. We unlocked hundreds of billions of exports to the Middle East. Then then you landed the plane on tariffs. Those two things together, Bill, are a very positive orientation toward the world. Right again, so you know, you were saying this is still not a settled issue within the administration on on the diffusion of technology.

• 27:08Brad Gerstner?

  But these two things together are not an isolationist approach to the world. Right, these two things together are still. Somebody asked me on CNBC, I think in March, I was saying there are these two doors that we could two paths we could follow. And they said, Well, what do you think Trump is? And I said, At the end of the day, he wrote a book called The Art of the Deal. Right, this guy is he wants fair trade, but he's a dealmaker. On tariffs and on AI diffusion, he's been a dealmaker. And I think both of those things are positives for the economy. And that's why you've seen the market bounce back the way it has. Certainly has.

• 27:43Bill Gurley?

  Oh, by the way, one other thing I wanted to mention, just because we didn't mention it, but I know there was a lot of concern amongst some of the companies that use strategic inputs, the rare earth issues, the magnet issues, those restrictions were removed as part of this first 90 day pause.

• 28:05Brad Gerstner?

  Yeah, I think that's going to be a critical question. You know, remember, we still have.

• 28:09Bill Gurley?

  But we're not done. It's a 90 day pause. So it could come back if things, you know, were to go off the rails.

• 28:16Brad Gerstner?

  And remember, we still have a ban on the export of H20. So there are no chips currently being sold by Nvidia into China. Right? We have a complete ban on AI chips into China.

• 28:30Bill Gurley?

  And I think Jensen was on the social media again in the past two days, expressing dismay about that. And even he came up with some math that he would have sold 15 billion next year. And he said it would have created 3 billion in US tax revenue that the US won't.

• 28:48Brad Gerstner?

  Right. I mean, I think if you forecast out two or three years, they were on track to be a $50 billion business, I think in China. And if you just apply a normal margin and tax rate to that, you know, that's billions and billions of dollars lost to the US Treasury that Chinese consumers would have effectively been paying. It's probably another $10 billion of profits to Nvidia that were lost that they would have otherwise plowed into research and development to keep America at the forefront of chip technology. So I think that we could still see as part of the negotiation over the next 90 days, I would not be terribly surprised to see Nvidia allowed to sell some form of deprecated chip into China. And

• 29:31Brad Gerstner?

  I know, again, different people have different opinions on that. My opinion, and I think you share this, is China already has Frontier AI. Huawei is already there. We have demonstrable evidence of that. And their models are already there. Arguably, their open source models might even be in front of the United States at this point in time. And so there's no keeping China from Frontier AI. Tier AI. So the better question is, are we better off competing against them? Right? Are we better off selling to those countries, those companies, keeping companies like ByteDance and Tencent, et cetera, in the CUDA ecosystem, rather than allowing all of that data, all of those profits, to flow right into the Huawei ecosystem and benefit the Chinese AI stack?

• 30:16Brad Gerstner?

  I think, listen, I think that's a closer call than selling chips to the Middle East. But if you, when push comes to shove, I would sell chips into China, because I think it's a net benefit to the United States.

• 30:29Bill Gurley?

  And we've talked about that in the past, yes. And, and, and, and, and there are many, many, many people who now believe that, you know, restricting our technology into China just gives them more and more incentive to implement their own technology faster and to invest behind it, which has been happening.

• 30:48Brad Gerstner?

  Well, I mean, if you look at, if you look at autos, autos, robotics, et cetera, I mean, there's plenty, there's plenty of evidence about that. Well, another, I would say the third big thing that that's happened since you and I were last on, I can't believe, by the way, you step away for like 15 days, you know, and all of this stuff happens. It's really crazy.

• 31:06Bill Gurley?

  AI time has, has new data every day.

• 31:10Brad Gerstner?

  But the other big one here is underway is the reconciliation bill. And as a reminder to folks, we have to pass a budget for the United States. The reconciliation bill, it's a special type of legislation in the Congress designed to expedite, right, budget-related laws. And the way it does this bill is it basically suspends the filibuster. So, so long as you're complying with these budget rules in the Senate, known as the BIRD rules, which is the only things that can go in to this package have to be related to the budget. But if that is the case, then you only have to get to 50 votes in the Senate, rather than the 60 votes otherwise required to be filibuster-proof.

• 31:54Brad Gerstner?

  So you basically take all of these smaller pieces of legislation that might have otherwise touched the tax code or the budget, and you roll them up into this huge package called a reconciliation bill. Now, the reconciliation bill, it started in with a draft in the House. The Senate will then review that draft and the White House is weighing in on it. So it's, you know, the, the expected timeline, and I think that the president was at the, you know, spoke to the House caucus today, but it's expected to be passed out of the House this week. Then the Senate will weigh in on it for two to three weeks. It will amend some of the language in it. It will add things, it will subtract things, et cetera. It'll send it back to the House at the end of June.

• 32:37Brad Gerstner?

  And then the president is expected to sign it into law somewhere at the end of the month or around the, the first or second of July. So maybe we could break down a little bit what's in the, in, in the package bill. I think the biggest thing is it's the extension of the Trump tax cuts.

• 32:54Bill Gurley?

  Right?

• 32:55Brad Gerstner?

  And so remember, when those tax cuts were passed in 2017, they, they only had a 10 year life. So they're set to expire in about a year unless they're extended. And so that would be a major, like a $3 trillion, $4 trillion increase to taxes at the end of this year unless they're extended. So the first thing they do is just extend those tax cuts for another five to 10 years, whatever they agree on in the reconciliation package. But then you have all these additional tax cuts that he talked about on the campaign trail. No tax on tips, no tax on overtime, no taxes on social security, the immediate expensing of capital investment. This is huge for business.

• 33:40Brad Gerstner?

  So if you're buying capital equipment, if you're buying plants or equipment or software even, you will be able to immediately expense those items.

• 33:49Bill Gurley?

  From a tax perspective, not an accounting one. It's important that those are two separate things, but yes.

• 33:56Brad Gerstner?

  From a tax perspective, and so all of these things get pulled together in this bill. And there are a lot of, there's a lot of debate and questions out there as to what does this mean, you know, like you add those things up, that's probably a four or $500 billion annual stimulus to the economy.

• 34:14Bill Gurley?

  By the way, I know, I know a lot of people talk about this, but they gotta put a cap on this tax on tips thing, cause it's gonna leave a loophole that everybody and their brother will walk through. So it needs to just be some cap that won't hit.

• 34:28Brad Gerstner?

  I think it's de minimis tips. I think it's de minimis tips.

• 34:32Bill Gurley?

  Cause otherwise you just redefine your consulting company as all tips.

• 34:36Brad Gerstner?

  Correct, correct.

• 34:37Bill Gurley?

  So, yes.

• 34:38Brad Gerstner?

  I think they already have that in there. They've done a lot of work on this. So remember, the two people in the House that are relevant here, you have the Speaker, Mike Johnson, you have Jason Smith, the Chairman of the Ways and Means Committee. Obviously, everybody's relevant, but those are the two leaders. In the Senate, it's Senator, it's Leader Thune, and it's, it's Mike Crapo, who's the Chairman of the Senate Finance Committee. And then in the House, or in the White House, you have Kevin Hassett and Scott Bessett. So the six of them, think of them as the big six, they're putting together this package. They each have a list of their priorities, and then they get together and negotiate those priorities. We don't even know exactly what's gonna be in the House bill yet, let alone what's gonna

• 35:20Brad Gerstner?

  survive in the Senate. But we certainly, we certainly have the contours of what's going to be in it. And, you know, I saw this morning that the Council of Economic Advisers, which of course is in the White House, is saying, yes, although this will increase our spending, our CBO scoring, because the taxes cost money, the tax cuts cost money, it also will lead to much higher economic growth than we would have otherwise had. And so that's a normal argument that you see out of, of, of those who support tax cuts.

• 35:51Bill Gurley?

  And where do you stand?

• 35:52Brad Gerstner?

  Well, of course, we're, you know, higher taxes, lower economic growth, lower taxes, higher economic growth. I think I'm firmly in that camp. But I do worry that, you know, we had, just had a $2.2 trillion deficit. You know, we have a $38 trillion debt. We all got excited about Elon and Doge being able to cut a lot of costs out of government. But I suspect when you look at this package, right? And again, I'm just saying, based upon how the Congressional Budget Office will score it, and this is kind of arcane scoring, but it will probably increase the deficit.

• 36:32Brad Gerstner?

  And at best, it would reduce it by 100 or 200 billion dollars, depending upon where our economic growth comes in, Bill. Right? Obviously, if you have higher economic growth, you'll have higher tax revenues. And so, there's a huge benefit to drive higher economic growth for the country. But there are no big areas where we're taking out 500 billion, or 700 billion, or a trillion dollars. And I think that when you look at the tariff revenue, a couple of things, a couple nuances here. We talked about the tariff revenue being 300 billion dollars. They don't count that in the budget. Okay? So, think of that as part of your cash flow, but it's not really in your P and L for the year.

• 37:15Brad Gerstner?

  And so, that's just one of these esoteric Washington things. You know, it is money to the federal government, to the US Treasury, but it's not included as part of our budget scoring. I think another thing is the Doge cuts. Those are real, there are a bunch of real cuts coming, you know, coming to fruition. I don't know what those will total, maybe 100 billion dollars, but they're not going to be counted in the budget bill unless there's an article of rescission. So, the White House basically has to get Congress to agree to rescind the monies. And so, that hasn't happened yet. So, those cuts are also not added into the budget, the budget math that we're seeing. But people should not get their hopes up that they're going to wake up next year and

• 37:59Brad Gerstner?

  that our budget deficit is going to magically be, you know, cut by 50%. I don't see that in the cards.

• 38:06Bill Gurley?

  You know, one thing I would reiterate, just because it would be such an amazing scenario, there was a moment in time in the past six months where Trump mentioned potentially discussing with China. And Russia, cutting all of our military budgets in half. If that were to happen, I think it's the biggest thing you could possibly deliver as president. If things calm down in the Middle East, if Ukraine, Russia can be taken care of, maybe that gets on the table and that could be a big cut that would meet this agenda. Our neo China hawk friends wouldn't like it, but I would like it quite a bit.

• 38:41Brad Gerstner?

  Well, I think the the Defense Department budget goes up by about $150 billion. This is part of this package and it's about a trillion dollars for the year. And so, you know, I don't, again, part of the reason

• 38:56Bill Gurley?

  Whistle thinking on my part. I'll just leave it at that.

• 38:58Brad Gerstner?

  Part of the reason we have this challenge is that, you know, you have, you have a lot of members of the House and a lot of members of the Senate. And, you know, it's just very difficult to cut our way, you know, out of this problem. And so I do think that, and you know, Friedberg had a good rant on this on the All In Pod. I give him a lot of credit for continuing to beat this drum. I've long supported a balanced budget amendment. I think we have to come up with some structural changes, right? That will allow us to get this under control. I would love to believe that we're going to grow our economy at four or 5% per year

• 39:40Brad Gerstner?

  instead of 2% per year, because that would grow our way out of the problem. So, but I think that that would be aggressive to forecast that kind of growth. We haven't seen that kind of growth in in a while.

• 39:54Bill Gurley?

  One data point that's kind of interesting, I listened to that same episode and and the team at All In was talking about potentially monetizing the balance sheet, right? The question is, are there assets that exist on the United States balance sheet that could be turned into offsets for the for the deficit? And one of the things that obviously comes up is land. You know, living here in Texas, you know, many people probably don't know this, but the university system here was granted as a gift years ago, 2.1 million acres in the in the Permian Basin.

• 40:34Bill Gurley?

  And wow, and that spits off, I believe I could, I could have this number wrong, but like 894 million dollars a year. Now the US has way more than 2.1 million acres, but that is an example, I guess, of an endowment like situation where land is monetized and creates cash flow. So, so maybe there is something to that.

• 40:58Brad Gerstner?

  Well, I would say, I would say one thing I was, I was happy to hear the president say over the course of the last couple of weeks. He said, if we do do anything like that, that rather than putting that money in a sovereign wealth fund, we're just going to use it to pay down the debt. And, you know, so now it sounds like the sovereign wealth fund is on the back burner, which I think is a good idea to put it on the back burner. And I do think that we ought to have a task force in this country, specifically coming up with ideas for how we achieve deficit reduction and debt reduction and monetizing the balance sheet should be one of the things on the list to be discussed, along with other mechanisms

• 41:40Brad Gerstner?

  to allow us to have permanent, you know, cuts, things like the defense stuff that you're talking about, Bill. I think everything has to be on the table. We have to come up with a plan that over a reasonable period of time, let's call it 10 years, even like a family, you know, you put them on a path, you start small and you work your way over a longer period of time toward deficit reduction. But I think it is morally unacceptable to saddle our kids with what will be over 50 trillion dollars in debt, that we, you know, we effectively increased our quality of living during our lifetimes. And it will only hurt theirs because we're saddling them with that big pile of debt. We got to get about to whittling away

• 42:25Brad Gerstner?

  at that debt and hopefully we can get it done in the next couple of years.

• 42:29Bill Gurley?

  Hot topic always on, on, in Silicon Valley is carried interest on the table here?

• 42:35Brad Gerstner?

  I think, I mean, the president has come out in support of eliminating

• 42:40Bill Gurley?

  Eliminating?

• 42:41Brad Gerstner?

  In support of eliminating carried interests, as well as you heard him come out in support of raising taxes on the highest earners. I don't know, the last I heard, neither of those provisions are in the House version of the reconciliation bill. They may get added in the Senate, but I think those are fairly controversial. Remember, Republicans generally in the House and Senate, they're against tariffs and they're against higher taxes and they're against all taxes, you know, all forms of higher taxes, whether on all these different brackets. And, you know, I heard somebody come out and say, you know, maybe it was Philippe on the All In Pod, he was saying in New York, all in, he pays 57% in taxes, which is I

• 43:25Brad Gerstner?

  think what I pay in the state of California. There is a tipping point, right? People are familiar with the Laffer curve. At some point, taxes go up to a point where your tax revenues actually go down, right? And so I would argue that at 57% all in for the highest earners, you're getting to that point where you disincentivize additional work, right? And, and, you know, we may not be there yet and, you know, you may be able to increase that tax bracket even more, but I would love to think that our country could come up with more creative solutions to solving our debt and fiscal crisis than just raising taxes. It seems like the easy way out. And I think there's a better way.

• 44:05Brad Gerstner?

  In fact, I, I, I'm happy to report that, you know, one of the things that got included in the House version of reconciliation bill was Invest America. And, you know, one of the purposes of taxes on high earners is redistribution. And I think there's a much better way to achieve redistribution and that's by getting everybody in the game from birth. So there was a, it was a huge breakthrough, Bill, that we got Invest America included in the House version of the bill.

• 44:34Bill Gurley?

  Well, congratulations, Brad. I will tell you, you know, I've talked to people that have, you know, pivoted later in life and dedicate themselves to philanthropy. And the, the number one thing I hear from all of them is how hard things are and how slow things move. And so for you to tilt at this and get it included.

• 44:58Bill Gurley?

  So quickly, in DC time, this is ultra quick, is a huge accomplishment. So.

• 45:05Brad Gerstner?

  Thanks for that. We're not, we're not done yet, but I would say, I would say this, maybe just a little behind the scenes on it, Bill. Because, listen, this is all new to me. And I learned a lot. As most people know, I started Invest America, the not-for-profit about two and a half years ago. The idea was very simple that we needed to attack the wealth gap. We needed everybody to feel like they were part of the system. And the way to do that was through the magic of compounding. So it's $1,000. Every child born in America, there are 3.7 million kids born a year, would get $1,000 in a seed investment account in the S and P 500. It would act like a 401k from birth. And then companies and parents and, you know, and others, church groups, whatever, could add to those accounts.

• 45:50Brad Gerstner?

  Such that by the age of 18, you could have about $50,000 in that account. At age 30, you could have about $150,000 in the account. You couldn't take the money out. You couldn't trade it. It would really just be that 401k from birth. And I will tell you, and you've heard me talk about this on the show. It had such high product market fit, bipartisan, from the left to the right. I thought to myself, maybe this could actually happen. So I was in Washington two weeks ago. I was at the White House. I was on the, on Capitol Hill, meeting with the Speaker, meeting with Jason Smith, the head of Ways and Means, and my friends Ted Cruz and, and Mike Crapo and others over in the, over in the Senate.

• 46:32Brad Gerstner?

  I have to say, I was actually surprised that by the time I landed in the Middle East, I heard it had been included. Now, of course, they, they tinker with it, right? One of the, one of the things I learned is you lose ball control. So the, the name of this was Invest America. In the House version of the bill, they renamed it the MAGA account, which stood for Money Account for Growth and Advancement. But as you and I both know, MAGA account in the minds of many is deeply polarizing. So we'll see what happens. I think when it goes to the Senate, it may very well get amended and renamed back to Invest America accounts. I imagine some changes will occur there.

• 47:13Brad Gerstner?

  They'll agree on ultimately what the rules are around distribution of this. But the great news is this, whatever you call it. Whatever you call this, at the end of the day, if we do this and we launch this in 2026, a thousand bucks for every kid born in America, we get every kid from rural Texas to rural Indiana to inner-city Trenton to the east side of LA, you get them into the game, they can open up their phone and see that they own a little bit of Berkshire Hathaway, they own a little bit of Microsoft, a little bit of Apple, they feel like they have a shot at the American dream. I think it's a game changer for the country. And so the president weighed in here with the Speaker of the House, said he would like to see it in the bill.

• 47:57Brad Gerstner?

  That's what eventually broke the logjam and got it in there. And so we're working really closely. And I hope by the end of the day, I really, I deeply, deeply would love to see this be something that unites the country. Right? This disproportionately benefits the 60% to 70% of people who are left out and left behind. Right? And, and those are folks, it doesn't matter the color of their skin, it doesn't matter where they live, there are poor folks everywhere, people who will never have a shot at an account that compounds. This is an absolute game changer for those people and it unlocks their human potential. I think, you know, I know I have a ton of Democratic friends in the Senate and the House who support this.

• 48:39Brad Gerstner?

  I think if we, if everybody reaches across the aisle in the spirit of bipartisanship, you know, we, we can get it done in even a bigger unified fashion. But either way, we're thrilled it's in the House version. We hope the Senate will take it up, which we expect that they will. And, and we hope it's in the final version of the reconciliation bill. Be a game changer for the country. Awesome. Congratulations. Thanks, brother. Well, you know, a couple of speed round topics then. One is our good friend Kathleen McCormick, you know, that chancellor in, in the state of Delaware, Bill, who overturned the, the Elon pay package. Yes. Right? She, she caused this firestorm in Delaware

• 49:22Brad Gerstner?

  that literally is going to potentially bankrupt the state with every company in the state of Delaware now heading for the exits because they don't want to be. A part of, you know, this capricious decision making by the Delaware Court of Chancery. And I know that you have some updated thoughts based on some stuff you've been reading.

• 49:42Bill Gurley?

  Yeah, well, I, I was made aware of something that I want to share with all of the readers. And I would, we're going to put a pointer in the, in the show notes and I'd encourage them to go read it. So there's a professor at Stanford named Joe Grunfest, who I've known for many decades now. And Joe is a former commissioner at the SEC. He was appointed by Reagan. He is the creator of the Stanford Directors College, which I think most people consider to be the number one Directors College in the world. This is where, if you're an independent director, you go and you learn how to be a better director.

• 50:21Bill Gurley?

  He's considered to be one of the most knowledgeable people on the planet when it comes to corporate governance. And anytime I've ever had an issue and, and, and there've been, been some that I've really needed help on, I've always called Joe. And he's had me speak at some of his classes. He's just a wonderful individual. He recently, and I mean, May 14th recently, published a piece of research that I think is just super interesting and that everyone needs to understand. And what he highlights is that the award multiples and, and apparently there's a thing when in

• 51:01Bill Gurley?

  business litigation where the judge can decide what multiple of the standard hourly rate a lawyer should or is able to get. And, which is an interesting concept. I don't know that anyone else gets awards as a multiple, but I'm sure a lawyer wrote it. And the base rate's pretty high, right? So anyway, what he found was he compared a bunch of Delaware judgments with a bunch of judgments in the, in the federal courts. And he looked at, he looked at a bunch of different breakings, but, but one of the breaks was, you know, what's the frequency of awards seven times or higher? And what are the frequency of awards 10 times or higher?

• 51:43Bill Gurley?

  And what he found is in Delaware, seven times or higher is 23 times more likely than in a federal court. And 10 times or higher is 57 times or higher than in a federal court.

• 51:59Bill Gurley?

  You know, basically, if you would, you'd say there might be a tale of scenarios where a judgment deserves some kind of outlandish, you know, result, some level of fraud or whatever. But, but, but what he's showing is there's an activist mentality in the Delaware courts that they're, that they're giving out these super high payouts at a much more frequent, you know, 23 times and 57 times more than at the federal level. And so I, the, the, the big eye opener to me is, first of all, I would tell everyone to go read this, but if you're sitting on a board of a Delaware court and you're not

• 52:40Bill Gurley?

  aware that this, and this is new, this, these are all cases between 2009 and 2024. If you're not aware that this is going on, that the rewards that are being paid out to lawyers, you know, for cases in Delaware are increasing at this level and are being paid out much more frequently at very high payouts, you need to be aware of this. To me, this is, you know, more damning than just the one Tesla thing. It says that Delaware, Delaware was known as a place where you had, you know, we talked earlier about tariffs and chaos and calmness. Delaware was a place that was supposed to be business calm, where you didn't expect chaos, right?

• 53:25Bill Gurley?

  This shows that chaos is being built into the system and it's a recent, it's a recent development. One more thing that I want to highlight, it turns out that in the 20 cases where you have this, this super high multiplier, 55% of the cases are just two of the judges. And there's something else that, that I learned in reading this, which I didn't know. But the chancellor, who is one of the two, gets to pick who the cases are assigned to. And so the chancellor's creating these super high multiples and then the chancellor's in charge of handing cases and, and, and she could hand them to herself or to this

• 54:08Bill Gurley?

  other judge who's also doing the same thing. And so I, I just, I, I think eyes wide open. I mean, I, I read this and I think, you know, any company that I'm involved with, I'm going to encourage to leave. Because this is radically different than why I was told we were supposed to go to Delaware.

• 54:28Brad Gerstner?

  And Bill, these awards go to who? They go to the lawyers and they go to whoever the plaintiffs are?

• 54:34Bill Gurley?

  Well, get this. I mean, we've talked about this, so I don't need to like pound the table on it. But in the Tesla case, the plaintiff had nine shares. Like, the plaintiff made zero money on a relative basis.

• 54:46Brad Gerstner?

  Right, right.

• 54:47Bill Gurley?

  And the lawyers made 380 million, or 345, or something like that. And yet, you had a plaintiff that didn't get any recovery. Like, why should we have laws, any law in this country? Because PAGA works this way in California, where a lawyer gets to come in and make a huge... Like, shouldn't the lawyer fee be a small percentage of the plaintiff fee? Why should it be 99% of the fee? It makes no sense.

• 55:19Brad Gerstner?

  I mean, I think the significance here is that what you're arguing is... What tends to happen is people heard about the Elon case, they treat it as a one-off. They may not have made any changes. And what you're saying is that this was not a one-off in the state of Delaware. This is a structural problem that has emerged in the state of Delaware, which was the state that everybody went to incorporate it in because they thought it had the most predictability. And now you have a study that shows not only does it not have the most predictability, it actually has the greatest risk of long-tail adverse outcomes to, you know, to the company that are highly unpredictable.

• 55:59Bill Gurley?

  Correct. And I would encourage... We'll put the link in there. And I'll tweet it out after we post the podcast. But I would encourage everyone to go read that. And following on that, and trying to keep with what you just said about Speed Round. Last week, you know, the two states people say you should consider other than Delaware are Texas and Nevada. Well, last week, Texas State Legislature passed a bill, Senate Bill 29, trying to improve Texas's position, if you will, in this competition.

• 56:32Bill Gurley?

  With Nevada on where you should go to. And I just wanted to mention a couple of things that they put in there to to to hopefully, you know, make Texas better, which would make everyone better if they choose to incorporate there. The the first thing was they codified the business judgment rule there. In some of these states, you can hop around the business judgment rule. This put a hard line and said, no, you're not supposed to. You can't hop around the business judgment rule. And and people that know what that means, that's a that's a positive for businesses. The second thing they did was the lit they they put a limit on opportunistic legal claims. Some of that has to do with with the multiple point that we talked about. But the big thing

• 57:13Bill Gurley?

  they did was in you can in your corporate docs, put up, put a minimum threshold of up to 3% on what's needed to bring a derivative action. So you can basically say, in order to bring a derivative action, you need 3% of the shareholders outstanding. So this Tesla situation where you basically, you know, just called around and found someone that held nine shares, which is just like ridiculous at face value, right? Did someone brought a whole case on a plaintiff with nine shares makes no effing sense whatsoever. And this gets rid of that. And so I think that's

• 57:52Brad Gerstner?

  huge. So so so so basically, you're flying the Texas flag and saying, not only is is Delaware more capricious than we otherwise thought, more activist than we otherwise thought, but that in fact, it's leading to new laws in states like Texas and Nevada that are going the further distance to try to encourage companies to come there. And they're giving them predictability, not in the courtroom, but they're giving them predictability in the code.

• 58:20Bill Gurley?

  Yes. And and there's a few more quick things you can in in your documents, you can make it very clear that the new Texas Business Courts are the only place that you'll have to appear. You can waive jury trials. There's some limitations on on book and record request. If you've ever been deposed, sometimes they grab everything, and this will limit that, too. So there's other. Things, but those first two things are the big things and and you know, I I'm I'm I'm really trying to look after everybody and and all the startups out there, all the venture backed companies. You know, if if if Nevada wants to raise the bar and and wants to send us some information, I'd be glad to share that as well. Um, I think the important thing is to get out of Delaware.

• 59:04Brad Gerstner?

  Well, the the the truth is, Bill, after this case, I will bet you that inertia kicked in. And 90 plus percent of companies and lawyers and, you know, went back to incorporating the state of Delaware, because that's just the way that momentum and inertia works.

• 59:19Bill Gurley?

  No doubt.

• 59:20Brad Gerstner?

  And I think that it's important that you continue to beat the drum, that people understand and, you know, we're gonna, we're gonna put a link to this study. That people understand that this was not a one off, and I think the onus, the burden is on the state of Delaware. Like, we're not trying to unfairly attack the state of Delaware, but the onus and burden is on the state of Delaware. To explain and make the case as to how they're going to change their system to provide the predictability and the protection that people thought they were getting that clearly they're not getting there. Maybe to continue on, Bill, in in the speed round here, um, there's been a ton of momentum, um, recently in in crypto. And you you sent me a paper that was recently written.

• 1:00:05Bill Gurley?

  Yes.

• 1:00:06Brad Gerstner?

  You know, in this regard, why don't you tell us about it? And then I want to talk for a second about the Genius Act and the stablecoin legislation that, uh, took a major step forward last night.

• 1:00:16Bill Gurley?

  I was told to read something and I'm I'm holding it right here. There there there's a, there's a, um, member of the SEC, Hester Pierce, who all the the the crypto people love dearly because she's been very outspoken in her support of crypto. She's actually the longest serving member of the SEC at this point in time. But but she put out a paper on May 8th called a Creative and Cooperative Balancing Act. And I was surprised, you know, and it's not that long. Everyone should go read it. It's five pages. But she makes a very strong argument that there's a, that that crypto and blockchain specifically may be a better mechanism for.

• 1:00:59Bill Gurley?

  Tracking securities, including the securitization of companies. She goes on to say that, you know, you can have regulatory capture that can unfairly protect people. Those, that regulatory capture may lead to market fragility because you end up with a single player or just two players. And she even suggests maybe there should be a regulatory sandbox, which would mean let some people play around with this before you jump on top of them and kill them. I've been this huge DL proponent and I, and I do believe that, you know, the number of public companies, she also brings that up, the number of public companies is way down from its peak. That could relate to regulation, but I also think it relates to inefficiency in our markets and our IPO process.

• 1:01:45Bill Gurley?

  So I haven't, I haven't been a big crypto bull, but I'm, I'm going to pay attention to this. This is interesting to me.

• 1:01:51Brad Gerstner?

  Well, I mean, in that regard, I think it may be time for you to revisit your crypto bullishness, bearishness thesis.

• 1:02:00Bill Gurley?

  Yes.

• 1:02:00Brad Gerstner?

  Because the genius bill, the genius act, as it's called, which is pretty historic legislation, which effectively crossed a hurdle in the Senate last night that I think now puts it on a fast track to being signed into law. It was led by my friend, Senator Bill Hagerty in the Senate. He's just done an unbelievable job, you know, waging this battle to basically say, you know, we, we've been persecuting now for the last four years, everybody involved in crypto. And rather than doing that, why don't we just bring it under the federal regulatory auspices? And whatever we need in terms of protections, put the protections into place and then allow this innovation to occur in the United States.

• 1:02:44Brad Gerstner?

  So in the case of stable coins, we know that this could be the next generation of, of, of, of, of money management, right? Of, of, of financial transfers, of updating the rails on which our financial system has been built over the course of the last 40 years. And it was beginning to develop in other parts of the country or other parts of the world because we had not developed a system that people felt comfortable innovating. So what is, what is the legislation requires? Number one, it requires specific reserve backing. So it requires stablecoin issuers to maintain reserves equal to the value of their issued tokens. Number two, it provides regulatory oversight. So now you can't have this patchwork of people, you know,

• 1:03:28Brad Gerstner?

  attacking folks who are trying to innovate in this area. It gives them real certainty as, as it regards there. Puts in place a bunch of consumer protections, but fundamentally it allows this innovation to occur because it provides certainty and predictability as to the form of regulation. I give a lot of credit to Mark and Ben and Chris Dixon and Andreessen. You know, I've spent a lot of time on Capitol Hill working on Invest America and other things. And every time I'm there, I see those guys on Capitol Hill working hard on this, on the Genius Act. I think this is a significant step forward for our financial system. It's a significant step forward for crypto. But really, we ought not think about this as,

• 1:04:11Brad Gerstner?

  right, as crypto in the form of speculation. This is really about something that's fundamental to innovating in how money transfers in the world. In fact, I heard somebody say that in five to 10 years, stablecoin issuers will become the biggest holders of US debt on the planet because they have to own that debt to back, right, the stablecoins, the tokens that they're issuing. And so think about this, Bill. People today pay ridiculous fees to move money around.

• 1:04:44Bill Gurley?

  Yes.

• 1:04:45Brad Gerstner?

  Right? Between businesses, I was having this conversation over dinner the other night with John Collison. He's super bullish on this. They're getting into this fast growing part of their business at Stripe. Because the reality is if you have two businesses, maybe one in Mexico, right, small business that's a scuba business, providing some tourism attraction, and you have somebody in the United States who wants to purchase that, rather than having to do, you know, jump through a bunch of hoops and pay a bunch of fees to a bunch of intermediaries, you can just issue stablecoins back and forth. Provide seamless providers in the middle of that. So it reduces the overall tax burden on the economy. Probably leads to higher growth because we're reducing that friction.

• 1:05:28Brad Gerstner?

  And moves us into the 21st century. I think that this is just the start, you know. You mentioned something else, the tokenization of IPOs. I think you're going to see the tokenization of stocks, maybe of real assets. So a lot of the promises, honestly, that we heard about Bill in 2019 and 2020 in crypto. They got me so excited, but then they all stalled out. And frankly, they stalled out because again, the compresiveness of regulators. They just wanted to attack and shut this down rather than coming up with a regulatory framework. That was safe for innovation to occur in. We're all in the middle of this AI super cycle. But if we look at the way that money is transferred on the internet, not much has changed in 25, 30 years.

• 1:06:13Brad Gerstner?

  I think this is a massive breakthrough that is super important. And I think it's going to lead to a lot of unlocks, a lot of business opportunities. And it's going to be good for consumers. So credit goes to all the people who've been working on this for so long. Okay, we have a couple more on the list, but one I wanted to ask you about was all this open source development in China. Tell me a little bit about what you see in terms of open source there versus some of the activities you see going on here.

• 1:06:41Bill Gurley?

  Yeah, well, I'll put an article in the show notes. The one that really caught my eye was there's an article that was about Baidu. And so Baidu is scheduled to release the latest version of their model on June 30th. They've pre-announced it for one reason or another. And they've switched to open source. And when they talked to Robin Lee, who's been the longtime Baidu founder, I met him back in 2005, 21 years ago. He had originally been a proponent of closed models. He had spoken out publicly against that. And people are like, well, why are you going open now?

• 1:07:20Bill Gurley?

  And it turns out, you know, DeepSeek led to Quinn, led to Xiaomi has their own model as well. They've all gone open source. And so this will be the fourth. Deep pocket funded model in China that are all open source. And when you consider, I mean, this is a competitive dynamic, right? That leads to that. And when you consider that we, it's already been proven here in the U.S. That different models can help improve other models. Having four simultaneous models out there all open source. I think is pretty damn interesting and will be tough to keep up with.

• 1:08:03Bill Gurley?

  And I don't know what America should do about it. I mean, I guess I would love it if everyone, OpenAI and Anthropic and Google followed suit and chased Meta. But I don't see that happening yet. And so just from a country versus country standpoint. Boy, I think that's powerful for innovation, for speed, for speed of innovation. Yeah, I think it's super interesting.

• 1:08:30Brad Gerstner?

  I mean, I, you know, I do think you're going to see the OpenAI open source model. I mean, Sam's talked about it many times. I think you're going to see that in the next 30 days or so, certainly by the end of summer. But I would guess sooner rather than later. He's indicated he wants it to be even more open, that he wants to be the leading open source model in the U.S. You and I both read about some of the challenges maybe going on at, at, at Meta. I have no idea if any of those things are, are true, but there's, but there's definitely been some blowback about Lama four in terms of, you know, its capability. So it does, it, it appears that everybody in China is dedicated to open source.

• 1:09:12Brad Gerstner?

  And in the U.S., I certainly hope that we have a open source model that leads the world. I suspect that we're going to see more of these out of our leading labs. Elon has also said that they're going to open source a model. So I think this is one where we have to stay tuned. But the early leadership here probably does go to China.

• 1:09:31Bill Gurley?

  Yeah, and I wouldn't be surprised if the people with proprietary models will use these to train them because they're available. And, and for everyone that, that wants to outlaw deep seek, guess what? You're playing whack a mole because there's four, not one.

• 1:09:48Brad Gerstner?

  Bill, one thing I wanted to ask you about, you know, feel free to comment on it or not. I saw some attacks that I thought were somewhat unfair on you around Manus. You know, because I, you know, I know I've talked with you about a bit about Manus and the background associated with that. So would you share with us a little bit, you know, your perspectives on Manus and maybe Benchmark's decisions to address?

• 1:10:14Bill Gurley?

  Yeah, so, yeah, I was surprised a bunch of people came after me on the socials, as they say, and they implied a bunch of deep-seated planning and whatnot. And I think part of it just comes from, I think in not being a China Hawk, people accuse you of being a scenophile, and there's a lot of room in between those things. But one thing I think these people don't know is that I'm no longer a GP on the new funds at Benchmark, which means I'm not involved in new investment decisions. So I didn't, I wasn't part of the decision to invest in Manus, and I, you know, found out about it after the fact.

• 1:10:56Bill Gurley?

  I'm obviously a big LP at Benchmark, and I'm a GP in the older funds, and I believe Benchmark, so I do support the firm, but some of the theories involve scenarios that just didn't happen. But after the fact, I went deep on it, and I think there are a few things that it would just be good for people to understand about Manus. So first of all, they've only operated on US models. They're a wrapper company. They don't have a foundational model, and they've only operated on top of US models. So they've actually never operated on top of DeepSeek or any of the other models we were just talking about. The second thing is they have offices around the world. They're in Singapore, they're in Japan, they're in the US.

• 1:11:41Bill Gurley?

  Third, they host all of these on US hosting services, and so they're not, they're not actually operating any of their customers' workloads in China at all, at all. And the data is all resident on those US hosting. Company servers. And so there's no customer data in China either. And so I think people rush to judgment. I've already spoken about why I think they rush to judgment. I think I think there's a China hawk tilt among a lot of these people. But but things aren't always as they seem. And so, you know, the company has some leading agentic technology. I think they have some leading browserless, you know, headless browser technology.

• 1:12:24Bill Gurley?

  And they've got a long list of customers that are excited about what they're doing. But I just think it's important for people to understand the facts.

• 1:12:31Brad Gerstner?

  Well, I think another thing is, you know, I I saw a stat the other day. I think 50% of researchers, AI researchers in the United States of America are Chinese. Right? Like, we, we, there is a danger here. Like, what bothers bothers me about this is I think there's a real danger here in a drift. Right? That is very xenophobic, right? Very anti-China, that is not healthy for our own relationship in terms of desirability to work in America. If you are, if you have a Chinese background. I think American investors should be free to invest, you know, in companies like Manus. It can weigh into their decision making.

• 1:13:13Brad Gerstner?

  Everybody's free to choose not to invest in a company like Manus. But I think attacking firms simply because they're investing in this without full information about what it's about. I don't know. It struck me as, as, you know, jumping the gun a bit. And I just think, like you said, there's a lot of daylight between being a xenophile and, you know, being a China hawk. And I think that we, people are entitled to having differences of opinion about the best way forward for Team America. You know, Jensen Huang thinks the United States should be engaged in competing in China.

• 1:13:47Bill Gurley?

  And I've said, you know, for a long time, the number one thing we could do would be to open up our border for skilled immigration from China as wide as we possibly can.

• 1:13:59Brad Gerstner?

  Right. And recruiting, recruiting the best and the brightest. I've talked about an AI visa for our Chinese researchers and their families so they feel comfortable and safe. And and and desired to stay in the United States. I don't see people attacking Elon for having Tesla in China or Tim Cook for having Apple in China. Right. The US has benefited greatly from having our companies compete in China. In fact, if you ask me, what's more desirable is to have China open back up to our markets. I would love to see our internet companies allowed in China. I would love to see our AI companies allowed in China. I would love to see, you know, so that form of reciprocity, right? In a perfect world, I'd love to see tariffs come down on both sides and competition allowed more vigorously on both sides.

• 1:14:43Brad Gerstner?

  But either either way, I saw that I wanted to, I wanted to give you the

• 1:14:47Bill Gurley?

  By the way, I mean, what you just, what you basically just outlined was, hey, we should be doing with China. What would just happen in the Middle East, right? And try and get, try and try and get our differences on the table. Try and get the things that matter to us on the table. But on the other side of that, get everything else in a point of collaboration.

• 1:15:09Brad Gerstner?

  Right. Listen, I don't think we should be naive. China, we are in a great power struggle with China. There's no doubt about that. There is, you know, there are things that we're going to compete like hell on, things that we're going to disagree on, things where we're going to be strategic adversaries on, and things where we say, we're not going to give it to you and you're not going to give it to us. That's fine. But, you know, listen, I'm on the side of Scott Besson. He said, we're not decoupling from China.

• 1:15:33Bill Gurley?

  Right.

• 1:15:33Brad Gerstner?

  So, so like, we need to figure out where we want to engage. And on that playing field, we ought to be all in. On non-strategic trading with China, we ought to be all in. And we ought to find ways to reduce tariffs and to find more ways, certainly to recruit their best and brightest, not only here to be educated, but here to stay and and and help us build great technologies.

• 1:15:54Bill Gurley?

  So thanks. By the way, I've been wearing this altimeter hat for over an hour and you haven't commented on it yet. I did, obviously did this just for you.

• 1:16:02Brad Gerstner?

  You know, a little team altimeter today. I love seeing it. Love seeing it. Well, thanks and good seeing you and and I look forward to seeing you in person next time.

• 1:16:11Bill Gurley?

  All right, man. Take care.

• 1:16:12Brad Gerstner?

  All right. Take care.

• 1:16:23Brad Gerstner?

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