Ep13. Silicon Valley’s Political 180, META AI, COVID Postmortem | 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 Silicon Valley’s Political 180, META’s Open AI disruption, the importance of a COVID Postmortem and Dr. Jay Bhattacharya, Wiz IPO, FSD 12.5, Crowdstrike, & more. Enjoy another episode of BG2. Timestamps: (00:00) Intro (01:38) The Perceived Political Realignment in Silicon Valley (18:02) Engagement Between Silicon Valley and Washington (27:21) Meta's Open Source Strategy (405b) (47:37) Post-Mortem on the COVID-19 Pandemic (58:37) Wiz IPO and Acquisitions (01:03:37) The Impact of AI on Self-Driving Cars (01:10:33) Lessons from the CrowdStrike Incident (01:16:11) Spotify's Success under Daniel Ek 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 **** Shownotes Open Source AI Is the Path Forward - Letter by Mark Zuckerberg https://anchor.fm/s/f06c2370/podcast/⁠https:/about.fb.com/news/2024/07/open-source-ai-is-the-path-forward/⁠ Misha Laskin on Training Data Podcast https://www.sequoiacap.com/podcast/misha-laskin-reflection/ Freda Duan tweet on self-driving cars in China https://x.com/FredaDuan/status/1807982122046484753 Dr. Jay Bhattacharya on Tetragrammaton with Rick Rubin https://open.spotify.com/episode/13BfrVQYfyoo6eyeJPhboe?si=a9b3dab60af44faf #BillGurley #BradGerstner #Bg2Pod

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

• 0:00Bill Gurley?

  And instead of a $250 marginal cost to implement a rural broadband, we're gonna get fucking bulldozers out and and drop fiber lines to a ranch in the middle of nowhere. Right. It's stupid.

• 0:26Brad Gerstner?

  Hey, man. Good to see you.

• 0:27Bill Gurley?

  Good to see you.

• 0:28Brad Gerstner?

  I mean, so much for sell and may and go away. The summer's been nuts. You've got a near assassination of the president. Um, the head of the Secret Service resigns. Biden withdraws under pressure from Pelosi. Kamala has all the delegates. Now she's the presumptive nominee. She raises 80 million bucks the day Biden drops out of the race. Um, it really seems to overshadow everything else. I mean, I don't know.

• 0:52Bill Gurley?

  So how's that inconsistent with sell and go away? Wouldn't that have been a good strategy? Or wasn't it a good strategy?

• 0:57Brad Gerstner?

  I don't know. The markets are actually doing pretty fine, given the background and the context here. But it's just trying to stay on top of the events. I mean, our group chat has been exploding. I I find myself 50 to 100 chats behind every time I open the app, just because of all the political activity going on. And of course, we don't talk a lot about politics on this pod. We want to talk about business. But, you know, we also look at kind of, uh, this debate going on about Silicon Valley. Like, um, the Washington Post reported Silicon Valley realignment, leading tech titans to back Trump.

• 1:33Bill Gurley?

  Yeah.

• 1:34Brad Gerstner?

  You've been here a long time.

• 1:35Bill Gurley?

  Yeah.

• 1:36Brad Gerstner?

  Silicon Valley's really been dominated by the Democratic Party. Uh, it's been perceived as pro-business and pro-tech enough. It's been perceived as fairly moderate on social policies. But just in the last few weeks, leading traditionally Democratic supporters, Ben Horowitz, Marc Andreessen, Elon, who's supported a lot of Democrats in the past, have come out in support of Trump. What's changed? Why all of a sudden have people that have in Silicon Valley that have traditionally supported Democrats, why are they moving to Trump?

• 2:07Bill Gurley?

  And I might even say, like, if I go back to when I joined, and I mentioned this a bit in the the talk I gave at All In on on regulatory capture. I think I might even describe Silicon Valley as apolitical back then. Like, there just wasn't sure that some people would say, yeah, I vote Democrat. But there wasn't. Any discussion of it within the ecosystem, within the industry while you're at a meeting Right. That relates to a startup, like it just didn't come up. And that was the, the title of my speech was 20251 miles, which is the distance. Right. Washington is from here. And ironically, it's about as far as way as you could possibly be in the United States, which I think was helpful, as I said.

• 2:50Bill Gurley?

  All of a sudden now, though, you know, you've, you've had those people you mentioned come out in a, in a way that's very provocative, like to, it's, I think it's provocative, not only that they're coming out in favor of Trump, but it's provocative that they stepped out in this way. Agreed. Now Ben and Mark foreshadowed this quite a bit, at least by 30 days or something. Sure, sure. They, obviously their firms have been getting bigger and bigger and bigger, multi-stage, multi-industry, like specialized funds. And as you move into things that they've been moving into crypto, defense tech. Yep. Like you're getting into heavily regulated industries.

• 3:35Bill Gurley?

  So you're going to bump up against this more and you're going to think about policy more. And if you listen to what they do on their podcast, and if you listen to what they write in their blog posts, that trend has been going on for a while. It's not like just, just came out of nowhere. Right. They've been talking about policy. And so, you know, they went through in their podcast, which I think is a must listen, you know. It was great on this issue. On this Trump's, but they didn't just throw down and walk away. They threw down and talked about it for 90 minutes. Exactly. And it's very clear, and this was in their foreshadowed piece as well, that they're looking after the interest of their constituents and their business. Yeah.

• 4:18Bill Gurley?

  I don't think there's anything wrong with that. Like, they have people they represent that are counting on them. All their LP base, their employee base, the entrepreneurs they've backed, and all, you know, the piece that Porch had, it said, "We're gonna get more involved in politics, and we're gonna look after..." They called it "little tech," which you might describe as entrepreneurs who want to break through and be disruptive.

• 4:42Brad Gerstner?

  Correct.

• 4:43Bill Gurley?

  They're looking after that constituency because that's endemic to everything that they do in work.

• 4:49Brad Gerstner?

  No, I think, I think, to be fair, they believe, like, both you and I believe, and I think most people in Silicon Valley believe, that, in fact, they talk about this triangle, which is, technology is the great source of American advantage. It drives our economy, which is the strongest in the world, which is a great source of advantage, which allows us to have a superior military, because both technology that we invent is leveraged by our military, and we have the financial resources to invest. So that leads to American global leadership. In their podcast, one of the things they lay out is what they believe was, by the Biden administration, an assault on business or technology.

• 5:30Bill Gurley?

  Yeah.

• 5:31Brad Gerstner?

  I think they go through a list of things, right?

• 5:33Bill Gurley?

  Yeah.

• 5:34Brad Gerstner?

  So one was an assault on business technology, being on the wrong side of crypto, which they believe the blockchain is very important, to have an open and permissionless network that people can build on. They talk about being on the wrong side of AI. Obviously, you and I have commented on, you know, the executive order that was wanting to limit the number of flops and, you know, model sizes and everything before the industry even gets started. And then this crazy idea to tax unrealized capital gains, and how that in and of itself is not only almost impossible to implement, but also would undermine the very incentive that entrepreneurs have to go create businesses.

• 6:18Bill Gurley?

  And let me just press pause on that one point, because I think when you hear, especially if anyone's listening to the podcast who's not deeply involved in... In a startup and knows what a cap table looks like, it'd be easy to miss this point or to look over it or to think maybe they're just talking about a nuance that doesn't matter. It would be catastrophic to the venture capital industry and to the startup industry to tax unrealized capital gains. It would be-

• 6:46Brad Gerstner?

  Tell us why.

• 6:47Bill Gurley?

  It would, well, first of all, there's no way to value a private company. So, so you start with this problem that, that how would you go about saying what it's worth? And for those of you that have been exposed to 49A, which is this god awful policy where we have to get a third party to pay them to create this analysis to say what the option price has to be. This is the most voodoo magic that I've ever seen in my life. Like if, if, and, and it's so crazy, they run these models and they produce a number that's like to two decimal points. And I've always said they should be, they should be forced to,

• 7:29Bill Gurley?

  they should be forced to give a confidence interval.

• 7:31Brad Gerstner?

  Right.

• 7:31Bill Gurley?

  Cause it would probably be like, you know, from five to 20, but they say 1149.

• 7:38Brad Gerstner?

  Right.

• 7:39Bill Gurley?

  And, and there's this other great piece of work that was written in, in finance literature, which was titled, "If You're So Smart, Why Aren't You Rich?" If these people are capable of calculating perfect stock prices to the, to the second decimal point, they should be in your business.

• 7:56Brad Gerstner?

  And there's just something even more basic. I mean, we just went through this period of 20 and 21, where companies were valued at 10 billion, 15 billion, 20 billion. You would have actually had to pay a tax. Somehow you have to come up with the money. The, the company, the, the employees of the company, the founders of the company have to come up with the money. There's no secondary market. There's no ability to get liquid on this. I don't even know how they would pay. But then the idea-

• 8:21Bill Gurley?

  And that's the second part. They, they, you would literally have to facilitate liquidity for them to pay a tax. And then the third point, which you just mentioned, it would, there would be numerous situations where you'd have people pay a tax and then the valuations would collapse.

• 8:36Brad Gerstner?

  Right.

• 8:36Bill Gurley?

  And then they would just have this massive tax loss carry forward with nothing they could do with it. And they'd, they'd be wiped out by a tax and, and it's- Putting taxes on unrealized gains is just a nutty, nutty, nutty concept.

• 8:51Brad Gerstner?

  Right. And by the way, Democrats historically have not supported that, right? And so I think that that was to explain the 180 or the realignment as the Washington Post describes it. I think you have to understand that the Biden administration, at least perceived by these people in Silicon Valley, they did a 180, that it was they were, you know, introducing policies that were out of alignment with what has historically happened. Now, it's interesting, right? On the one hand, you have Vinod Khosla, you have Reid Hoffman, who have come out and said, listen, made this really a personality test about Trump. He's a liar, he's a cheat,

• 9:36Brad Gerstner?

  he's not good for America, he's an existential risk to democracy. On the other side, you really hear a lot of policy arguments, right, around whether or not they're pro-business, pro-tech, pro-AI, pro-crypto, et cetera. And that's really where you see the clash. I do think that Biden now stepping down and Kamala taking the position, right, I think the straw that broke the camel's back, frankly, for a lot of people, Elon, you know, came out and endorsed after this, was just the recognition that Biden was not in the mental state to lead on top of being on the wrong side of a lot of these issues.

• 10:14Bill Gurley?

  Yeah, you know, it makes me want to just back up to a super high level. Last pod we did, you were talking about how if you take out the MAG7, the S and P was down.

• 10:24Brad Gerstner?

  Right.

• 10:25Bill Gurley?

  You know, and you could take that to an extreme case and say, imagine if the MAG7 didn't exist. Like, what would our economy be like? What would America be like? And what you realize is that, you know, and not to, not to maybe pick on Europe too much, but it'd be a little bit like that, right? Like where the stewards of our industries would be Exxon or Delta or the, you know, JP Morgan or whatever. And those aren't companies that grow very fast.

• 10:55Brad Gerstner?

  Yeah, I mean, the vast majority of the economic wealth that's been created in the last 20 years has been on the back of technology. And I think fundamentally...

• 11:03Bill Gurley?

  Well, in venture-backed companies.

• 11:05Brad Gerstner?

  Right, right. And so... This is, and remember, you know, in a prior generation, you know, it was the Lockheed Martin's, it was the, you know, Henry Ford's, it was the Thomas Edison's that were those innovators. And I think the one thing that does pull people together in Silicon Valley is an attack or an assault on innovation, or on technology, or on entrepreneurship. And what's interesting is, you know, I was watching somebody who I actually quite like, Pete Buttigieg, and he said, you know, nobody should be surprised by what Silicon Valley is doing because it's just a bunch of rich white guys who are advocating for what's

• 11:46Brad Gerstner?

  in their best interest. And what's interesting, I think Pete got it wrong, right? And the reason I think he got it wrong is because I don't hear in any of our conversations that we need, you know, that we're supporting Trump because he's going to lower our tax rate, right? I do hear things around key policy areas that impact entrepreneurship that people care deeply about.

• 12:10Bill Gurley?

  Yeah.

• 12:10Brad Gerstner?

  I hope that the conversation around the realignment, and I see some movement around this, forces the next administration, you know, if it is a Democratic administration, back to engagement. I thought it was really odd that Ben and Mark said, you know, that they were stonewalled by Gensler. Stonewalled, by the way, I was like, there was not even a willingness to talk about the issues openly.

• 12:37Bill Gurley?

  Right. And admittedly, this other candidate is just starting to run, but they talked about Jared and Ivanka and Trump, and like, they asked for meetings and they got them right away. And, you know, their feeling responded to, to your point.

• 12:52Brad Gerstner?

  Right.

• 12:53Bill Gurley?

  And I think one of the things that happens anytime, and this may go back to where you started, that Silicon Valley has been a longtime supporter of the Democratic Party kind of writ large. Anytime you, you kind of unequivocally give someone your support for a long period of time, they may kind of forget that you're a constituent. They might take it for granted. And I look at the city of San Francisco, who has lost Suave and Stripe. And all these fintech companies because of the way they structured their homeless tax or grocery receipts thing. And it's just like, hey, like, you have a consequence if you don't keep this constituent happy. And you've benefited from this constituent being successful. And so,

• 13:36Bill Gurley?

  look, it's a part of part of being a democracy is that everyone's allowed to have a voice. And I do think that it's worth, I think it'd be helpful to the industry if the people that push back would say, and maybe they're saying this, but they say, I agree with you on all those issues, but I want to support the other candidate for this reason, rather than trying to buffoon or bully the people who are expressing their point of view. And, and look, at the high level, and I know that not everyone in the world will agree with me on this, but I've talked in the past about how, you know, the single human that's brought the most people out of poverty is Ding

• 14:18Bill Gurley?

  Xiaoping. By bringing entrepreneurism and capitalism to China, he brought 500 million people out of poverty. And I go back to those Matt Ridley books, like, the way you create an increase in prosperity is through growth. And the way you can get outpaced growth between the countries that exist on this planet is by being really good at innovation. And so I don't know a better way to help the populace.

• 14:45Brad Gerstner?

  Right. And I think it's something we should all be able to agree on, on both sides of the aisle. And by the way, I've spent a lot of time on Capitol Hill recently with Democrat, Republican senators, Democrat, Republican House members. And I will say, I'm really optimistic. I think they're incredibly smart people on both sides. I think that they both see the right issues on AI, on national defense, on issues related to China, on issues related to technology and innovation. I think that there is strong consensus in Washington that the greatest source of our national advantage is innovation. And I happen to agree with that. It just seems that

• 15:27Brad Gerstner?

  And and and we don't really know what was going on over the course of last six or nine months, but it kind of lost its way with with Silicon Valley, which was odd because Silicon Valley was a natural constituency of the Democratic Party. You know, Ben and Mark on their on their pod, they said they started to see some things 10 years ago in the 2010s that started to cause some concerns. And he pointed out, you know, this idea that Zuckerberg pledged to give 99% of his

• 15:55Bill Gurley?

  Right.

• 15:56Brad Gerstner?

  wealth away, and he was attacked for it. And like, starting to see some cracks in the wall. And you're like, hold on a second here. This should be a something that everybody gets excited about, not something that everybody everybody criticizes. But we here we find ourselves in 2024. And I think, you know, the pendulum had just swung too far. I do think that you're going to see a Democratic Party that, you know, looks in the mirror, comes back to, you know, Silicon Valley on a lot of these issues. Trump was listening and said, Listen, you think you ought to get a green card for people who've done taken a four year college degree? We're going to staple a green card to everybody graduates from colleges.

• 16:34Bill Gurley?

  That was amazing. I think that that most everyone in Silicon Valley agrees that that like, tripling, quadrupling, maybe even 5Xing, the size of legal skilled immigrants is huge for innovation, huge for everything that we want to do. And everyone's on the same page on that. And so it's ironic that no one's been able to get there. And for for for, I think, Trump said that on All In, right? Like, that's, that's amazing. Like, you're going to get a lot of support for saying that.

• 17:04Brad Gerstner?

  Right. And I, you know, again, it's not about taking political positions here, but the case we want to make is that if you attack innovation, entrepreneurship, and capitalism, it will be to the detriment of the United States, right? That's something both parties should support.

• 17:23Bill Gurley?

  That. And that's why, regardless of who you're going to vote for, I am, I am.

• 17:30Bill Gurley?

  I was, I think I was pleased that Ben and Mark brought the issues to the forefront, you know, by doing this.

• 17:37Brad Gerstner?

  Right.

• 17:37Bill Gurley?

  Like, like taking a stand because otherwise you just sit back and say, oh, I have to vote this way because that's what everyone does here. And it, like I said, I think it leads to being taken advantage of a little bit and not being paid attention to.

• 17:52Brad Gerstner?

  Well, and let's end this section with this, you know, over the 20 years, you know, 25 years that you've been here, you know, yes, we're a long way away from Washington, but today looks very different, right? AI policy runs through Washington, right? You mentioned American dynamism or national defense. All of that is running through Washington. The CHIPS Act, right? Whether or not we can export chips to certain country runs through Washington, right? I find myself after a 10-year hiatus in Washington, spending a lot of time over the course of the last five years. How do you feel, like, do you think that engagement with Washington is a good thing?

• 18:33Brad Gerstner?

  I know that, you know, top of mind for you is regulatory capture. You and I had a conversation about, you know, this rural broadband initiative.

• 18:42Bill Gurley?

  Oh, God.

• 18:43Brad Gerstner?

  You know, tell us a little bit about that.

• 18:45Bill Gurley?

  Yeah.

• 18:45Brad Gerstner?

  And how to balance engagement without falling into, you know, the abyss of regulatory capture.

• 18:53Bill Gurley?

  I, I'm going to just admit like that I'm very skeptical.

• 18:59Brad Gerstner?

  Yeah.

• 18:59Bill Gurley?

  Like, like the, the way that legislation gets written is it gets written by the incumbents. We're already seeing, you know, this massive fight in AI. And we've pointed to these articles before, like the Politico article, but the, the leaders with their closed source AI models are spending more money than any startups ever spent, you know, in lobbying efforts. And they're drafting. The language that ends up in the EU doctrine, you know, and so they're gonna look at, I don't know why they wouldn't look after themselves. The thing that it would take, and I owe it to my, I've told some people that follow that I'm gonna fund some research to study best

• 19:43Bill Gurley?

  practices in other countries, but it would take putting people in agencies that are non-conflicted and smart enough about the subject matter. Very hard to do.

• 19:54Brad Gerstner?

  Right, right, right.

• 19:56Bill Gurley?

  That, that, that actually write the policy on behalf of the consumer or the citizen.

• 20:01Brad Gerstner?

  It also means, I think, that engagement by Silicon Valley to fight back against the incumbents who are trying to do the capture, right? So I mean, if, if, if you're sitting here on all of these issues sitting on your hands, you know, then that's a problem. But I will also stipulate that there are now large incumbents in Silicon Valley. You know, you referenced some of the leading AI companies that have closed models that may in fact want to engage in the capture themselves, you know, and, and, and prevent open source.

• 20:29Bill Gurley?

  Let's, let's go a little bit down the, the Elon case because I do think, I don't know who to blame it on. Maybe if you're a Democrat, I'll just pitch this as a, as someone that's on neither side. But like, if you're a Democrat, maybe you see a way that Elon picked the fight with Biden. I think if you're on the other, if you're on Elon's side, he kind of feels like Biden picked the fight. I mean, we, we do know there was an EV summit where he was not invited. And holding an EV summit without inviting Tesla, who has like 95% of the shipments in the US, is, I don't know how you even do it with a straight face.

• 21:11Brad Gerstner?

  Right.

• 21:11Bill Gurley?

  Like, it's theater. Like, that's.

• 21:13Brad Gerstner?

  And I don't even think they're hiding it, right? Like, when Biden was signing, was signing some bills in the Rose Garden, he's surrounded by six people in Union Jackets, right?

• 21:21Bill Gurley?

  And they tried, he tried to pass an EV credit that would only be, be eligible to a car built by a union worker.

• 21:28Brad Gerstner?

  Right, right.

• 21:29Bill Gurley?

  And, well, one, I just, I mean, it's certainly not pro-innovation.

• 21:34Brad Gerstner?

  Correct, correct.

• 21:35Bill Gurley?

  And so anyway, then, and then this other one, that's really bizarre. The FCC, for a long time, has looked over rural broadband initiatives.

• 21:46Brad Gerstner?

  Right.

• 21:46Bill Gurley?

  And there's immense regulatory capture in this. Most of these programs are funded cost plus. I happen to have some rural property in Texas and. If you ask for anything, they'll do it because they get to bill the government cost plus because you're in a rural location. So I could get a fourth phone line and they would dredge, they would, they would like dig a two mile trench in rock, just because they get to make 30% profit or whatever the activity is. So anyway, they decided they were going to spend 42 billion on rural broadband. And between 10 years ago and now, Starlink's been built. And there's just, I don't know a way to,

• 22:28Bill Gurley?

  better way to say this, but like, if you want broadband in the middle of nowhere in America, Starlink's perfection. Yeah, right. Like, it was, that's what this was designed for. In fact, because of the way Starlink works, if you're by yourself and isolated in an area, you'll get much better Starlink performance than if you were in a city. It couldn't be better. And, and you're going to get, like, you'd be shocked, you could get 200 megabits or 300 megabits. Now, the, the powers that be at the landline companies have written the laws that say, oh, well, you know, will you stay up during a rainstorm? Right.

• 23:12Bill Gurley?

  You know, and so they disqualify Starlink because it might not work if the, it's the heaviest rain like for five minutes a year. Right. And it's just so stupid. In, in this recent hurricane that went through Houston, I, I paid attention, but like, I was looking for this for this reason, but like, some of the landline broadband things went out. And guess what? They were out three days. Right. Because someone had, there was like a flooded cabinet. Someone had to go in and take that apart. So Starlink may not have worked during the, the worst hour of the storm. Yeah. But it worked the next day. Right. As soon as you could get power and plug in your antenna. So 40, for 42 billion, what did we get?

• 23:54Bill Gurley?

  Well, for, well, that's the other thing. So according to Brendan Carr, who is one of the four FCC commissioners, he says zero, zero people have been connected. So not only, but, but,

• 24:06Bill Gurley?

  Yeah, I mean, look, everyone knows governments not very successful in implementing things. But they disqualified the very best new solution that's perfect, perfect.

• 24:18Brad Gerstner?

  Where the marginal cost of implementing it is a Starlink antenna.

• 24:22Bill Gurley?

  The cost of the antenna.

• 24:23Brad Gerstner?

  Right.

• 24:24Bill Gurley?

  And you could strike a deal with Starlink and probably get that cost reduced or do it at at cost like the government could have, you know, gone in and done like a bomb analysis and say, let's build one for the.

• 24:35Brad Gerstner?

  And I think it's.

• 24:36Bill Gurley?

  You could have done any of those things. You could have probably got it down to $250. And instead of a $250 marginal cost to implement a rural broadband, we're going to get [bleep] bulldozers out and drop fiber lines to a ranch in the middle of nowhere.

• 24:52Brad Gerstner?

  Right.

• 24:52Bill Gurley?

  It's stupid.

• 24:53Brad Gerstner?

  Right, right.

• 24:54Bill Gurley?

  And I can only, I can only surmise that that happened for political reasons.

• 24:59Brad Gerstner?

  Well.

• 25:00Bill Gurley?

  Or regulatory capture, one of the two.

• 25:03Brad Gerstner?

  This is related to another topic you and I have talked about. And this all goes to like, why has there been this realignment or perceived realignment in Silicon Valley? I wonder if there's something else going on as well. You know, forever, we've had kind of this fourth estate in the media. It's called the fourth estate because, you know, we have three branches of government and you had, you know, the nightly news and the newspapers that worked very closely, you know, with those branches of government to report on what was going on. But really, over the course of the last five years, 10 years, we've had this explosion in the democratization of media, if you will, right? And you have all these citizen journalists.

• 25:46Brad Gerstner?

  And just over the last four years, let's think since COVID, really, right? You have people who feel like, you know, you have this libertarian streak in Silicon Valley, which I would agree is already slightly distrustful of government.

• 26:00Bill Gurley?

  Yeah.

• 26:01Brad Gerstner?

  Right? And now they feel like, based on this reporting, they were lied to about COVID. They were lied to about censorship in, in, in big online media.

• 26:12Bill Gurley?

  Yep.

• 26:12Brad Gerstner?

  They were lied to about Biden's health being the, the latest thing. And so I think there's something deeper going on here that you've kind of lit this fuse where people are looking around and saying, you know, this just doesn't feel like government is shooting us straight and that there's a real dialogue going on about what's best for America. So I think there's been a real breach of trust that also needs to be mended. And so again, I think there are people of goodwill on both sides, but you know, when I have people, when I hear people say, well, there's a realignment because you just have a bunch of rich, white billionaires in Silicon Valley that are doing what's in their best

• 26:55Brad Gerstner?

  interest. I think they need to really look in the mirror and take a deeper analysis as to the situation, right? And, and certainly there are problems that have been well documented about Trump. There have been, you know, problems on the other side.

• 27:10Bill Gurley?

  Yep.

• 27:11Brad Gerstner?

  But I think if Democrats want to win back this natural constituency in Silicon Valley, there needs to be a real realignment on some of these issues. Let's shift gears. We have open source going frontier today. Meta dropped a new model. It's 405 billion parameter model. It's the first open source, really frontier quality model. It now stands on top of the leaderboard for a lot of charts. Importantly, they updated their, their community policies, right? So now this can be open and permissively licensed, including for commercial use, synthetic data generation, distillation, fine tuning. You know, Zuck wrote a letter in defense of open source. I saw you.

• 27:53Bill Gurley?

  Beautiful letter.

• 27:54Brad Gerstner?

  You tweeted about it. Elon then responded to your tweet and said it was an impressive model. He said Zuck deserved a lot of credit for open sourcing it. So what did we learn today? Because there was some debate as to whether 405 was going to be open sourced or not, Bill?

• 28:09Bill Gurley?

  Yeah.

• 28:09Brad Gerstner?

  What have we learned today and why is this so important?

• 28:12Bill Gurley?

  Well, I think there's two things we could talk about. So you tell me which one you want to talk about first. There's the. The strategy between behind why would a company like Facebook Meta choose this methodology? And then there's the question of what's happening with the large language model competition? Which one did you want to?

• 28:31Brad Gerstner?

  Well, let's talk about just Meta's decision to do this.

• 28:35Bill Gurley?

  Yeah.

• 28:36Brad Gerstner?

  And the commitment to open source and why it's so important.

• 28:38Bill Gurley?

  Yeah, so so Mark, Mark, first of all, everyone should go read what Mark wrote. It's not ultra long. It's about four or five pages, but he lays out a lot of it, you know, and he he talks about when Meta has run into other closed system companies, it's created a lot of frustration and limitation to, you know, what he perceives as innovation. And he mentioned the Apple world that he's kind of forced to live in.

• 29:02Brad Gerstner?

  Right.

• 29:04Bill Gurley?

  Something happened over the past, I'd say, 15 years where some of the smartest companies in Silicon Valley have developed a new strategic play where they use open source as a defensive weapon rather than as an offensive weapon. That's my terminal, Ozzy. One of the first to do it was Google with Android, and it's really hard for people to put themselves in the mindset when that iPhone shipped and when Apple had only let AT&T have it and it was on AT&T's terms. And Google convinced the rest of the world, all the handset manufacturers, the carriers to support this model by telling them it was going to be open.

• 29:48Brad Gerstner?

  Right, right.

• 29:48Bill Gurley?

  I think they backed up on that a little bit, but that worked like that got them to get behind this thing. And and I guess if you look at the China market, the the openness that that AT or that Verizon and Samsung thought they were getting into with Android did play out there. Like, there's no, there's no Google or Apple in the China China market. But then others started to do this, too. Google did it again with Kubernetes, which is a piece of technology that lets you move your workloads very easily between clouds. They were worried Amazon was running away with AWS. So they took a piece of technology that was inside their company, Kubernetes,

• 30:31Bill Gurley?

  and made it free. And they got the Linux Foundation to help organize, which the Linux Foundation is very good at. And they, they, they got IBM, they got, they got all these, you know, hundreds of players behind Kubernetes. And eventually, it became so successful that Amazon had to give up and support it. And that has allowed more fluid transfer of workloads, and it's leveled the playing field a bit. Facebook created this thing called Open Compute Project. And they basically said, if you want to sell computers into our data center, we're going to write a spec about the, or we're going to write a list of specifications that those things have to meet in order to go in there. Well, one of them is basically

• 31:16Bill Gurley?

  no proprietary technology. Right. So it's almost like a patent deflection move that says, we're only going to support open source things here. And by the very definition, if it qualifies to come in, it doesn't have any proprietary technology. Right. Which has been a huge, and, and by the way, people say, oh, well, who would agree to that? Well, Dell sells into there, Cisco sells, like, all these people end up kind of just agreeing and selling in. And so that, that is a remarkable move by Facebook to lower their cost of their infrastructure, and to keep it lower, and to keep themselves out of position where they can be held up. There's been a recent move in the map world to, to create an open source map project, because they're worried about Google having

• 32:00Bill Gurley?

  too much power. So this has become a kind of a new go to move by, you need a lot of resources to do this. You can't, like, obviously, there are startups that get behind open sources. But if you're going to play this defensive move, you need to be Right. a big player. You usually need to get the help of others. Here, Meta, I think, just became concerned, and you and I have talked about this, but I think some of the players in the AI world brought this upon themselves by claiming that they were going to change the world in so, such dramatic ways. You, you awaken the giants, right? If you, if you cause every Bodies, you know, investor call to be, what are you going to do about AI? You're going to wake up all the giants, right?

• 32:45Bill Gurley?

  And so in this case, Meta didn't want anyone to end up in an advantaged position to them because they were so much better in AI. Or they didn't want, they didn't want to become dependent on a third party for an AI tool that they needed and couldn't have.

• 33:06Brad Gerstner?

  I thought, I thought one of the most interesting parts of the letter and, and Mark's pod on it today is, you know, he said, it's become personal, you know, he, at first he points to Linux and Unix and i- is just being a great unlock by unleashing the power of

• 33:23Bill Gurley?

  You know, I'm a huge, huge fan of this idea.

• 33:26Brad Gerstner?

  The long tail of developers. But one of the things he said, he's like, he's like, this is personal to me. Right? Because he said with Apple, you know, where we saw ecosystem controlled by a single company that extracted most of the rents out of the mobile ecosystem. He said, it was bad enough that we had to pay a big tax, right? Because that tax hurts all the developers in the ecosystem. He's like, but you could tolerate the tax. He said, but it was absolutely soul crushing. He used that phrase, which I thought was interesting. When you develop, work really hard on a product improvement and then you have a company that says, no, you can't release that into your product for whatever reason. And so it seemed to me that this has become extraordinarily personal.

• 34:11Bill Gurley?

  Yep.

• 34:11Brad Gerstner?

  Right? Here you have a company that produces tens of billions of dollars of profit in the backroom. It can fund all of, you know, all of these models for as far as the eye can see. And they've made a decision to make it open. I think that has broad economic implications for the entire ecosystem. Right? If you're a closed model company, the question first is, okay, I'm going to have to compete and keep up with this frontier level competition. That's hard enough. It takes a lot of resources. But number two, Mark's going to give it away, you know, Meta's going to give it away for free. Now you have to develop a business model that can compete with free.

• 34:50Bill Gurley?

  Yep. And so this reminds me, and I will put a link to it in the notes, but years ago I wrote a blog post about Android and I said, it doesn't matter, this is so, so similar to what you just said. It doesn't matter if they can make money on Android. It turns out they figured out how to. But it creates a moat that's so wide around the castle. I think I drew a picture. I talked about like, okay, yes, you have the water moat, but now they're going to char the earth for five square miles outside, around the water. But you're not getting to our goddamn castle.

• 35:26Brad Gerstner?

  Exactly.

• 35:27Bill Gurley?

  And so it has, and you know, not every company can afford a multi-billion dollar

• 35:33Brad Gerstner?

  Right.

• 35:34Bill Gurley?

  moat extender.

• 35:35Brad Gerstner?

  Right.

• 35:36Bill Gurley?

  But, but it makes a lot of sense for these companies to do it. And, and there's no one today that is listening to Mark's podcast, playing with the new models. By the way, on Grok, they're like nutty fast and saying, oh, like that guy's stupid. Like no one's saying that. Like he looks like a genius today.

• 35:58Brad Gerstner?

  He also said today that they've already laid out the compute cluster for Llama 4. So this was Llama 3.1. It was a large 405B model, also distilled into an 80 and an 8B or 70 and an 8B version. But they said they've already laid out the compute cluster for Llama 4. They've already laid out the data architecture for it. They've run the research on it. So it seems to me, and our team's best guess, is that Llama 4 is going to come in the back half of the year, right? Maybe in November, December timeframe. They probably don't want to be more than a couple of months behind GPT-5. So they probably think you're going to get a new release right after 4.0 from, from OpenAI,

• 36:41Brad Gerstner?

  that they can then try to quickly leapfrog with Llama 4. But what was interesting, he said, not only have we laid out Llama 4, but he said, it's kind of fun and fascinating. We've laid out 5, 6, and 7. Okay. And he said, the models are all going to be bigger. They're all going to cost a lot more money, billions of dollars. And he kind of. Alluded to what Satya said a few weeks ago that you and I heard, which he said, this isn't going to be a straight line. He reminded folks of the internet bubble and said, you may have to go through a bubble here.

• 37:13Bill Gurley?

  Right.

• 37:13Brad Gerstner?

  So if you're a venture capitalist, Bill, and you're hearing this, okay? First, you got to go compete with free. Second, you're going to have to spend billions for a long time and these, you know, the incumbents are going to compete. Third, that we may in fact have to cross this chasm, you know, some bubble light chasm. I, I, I think what it does is it, you know, it's also a shot across the bow of those folks who might want to start closed model companies to go compete with that.

• 37:43Bill Gurley?

  No doubt. And, and, and one other thing I would highlight, like for, for, for the listening audience, like every startup, you know, whether you were an AI startup or whether you're a startup that's been around a while that wants to, you know, enhance their product with AI, this should make you tickled pink. Like you should be so happy that he made these decisions and went, because as you said, he not just, he didn't, he went further in terms of openness today than the model was, was before. More permissions and the hugging face team was clapping and celebrating on Twitter as well for, for this reason. And so for, as, as Mark and Ben like to call little tech, this is phenomenal.

• 38:26Brad Gerstner?

  Correct.

• 38:27Bill Gurley?

  Like phenomenal. It may not be for OpenAI, which I don't, I don't know Brad Galbraith, but I saw a funny tweet today where he said, is, is OpenAI the new Netscape? Which is somewhat provocative, but, but Mark created that question. And I would say this, I'm going to, I'm going to stop and let you go, but like the last thing, when I just don't think that, that Sam Altman realizes when he talks about things in such a grand fashion, how it makes people like Zuckerberg feel, or if Zuckerberg has to take a question, is AI gonna make you irrelevant? Like it gets under his skin a little bit.

• 39:11Brad Gerstner?

  I, I do, I do think about it this way, you know, if you're OpenAI, you got to go raise your next four or $5 billion. Right. Um. Remember Meta had allocated $20 billion a year to Reality Labs. And there was a report last week that they may, you know, tighten their belt on Reality Labs to the tune of 20%. Okay, so that's four or five billion dollars of savings on a research project that they have in Reality Labs that they can reallocate to AI.

• 39:41Bill Gurley?

  Yeah.

• 39:42Brad Gerstner?

  Now, what I would say on the OpenAI front, I actually think that they're doing extraordinarily well. Um, and here's the interesting thing about OpenAI. In the face of all this, they're, you know, Zuckerberg said, I want to have the number one consumer application in AI by the fall. But if you look at ChatGPT 4.0, since it was released, web visits have gone from 1.8 billion to 2.6 billion visits per month. DAUs have gone from 60 million to 100 million. Um, and so, you know, as I say to my team, there's only one way, you know, to build a business. Either you got to get a consumer to pay you, or you got to get an enterprise to pay you.

• 40:23Brad Gerstner?

  And the only other company that's really shown traction with consumers paying, you know, at that scale is, is OpenAI. So the question is, can they build a consumer product that is durably better than the alternative, right, that Meta is going to put out there? And Mark mentioned that there are hundreds of millions of people using Meta AI, but they're not really paying a subscription and using a standalone product, right? It's embedded with, in all the other products. A lot of the time you're using it, you probably don't even know you're using it yet. But I do think that Meta has a history of grinding out good products, and I suspect it will get there.

• 41:02Brad Gerstner?

  But no doubt about it, this is going to put a lot of pressure on the closed source, uh, model companies.

• 41:11Bill Gurley?

  When you, and you, and I mean, I, I, I like those numbers you're, you're, um, referring to, I think, are, are just at a high level. They're not necessarily the paid, paid constituency.

• 41:21Brad Gerstner?

  No, no, those are, those are total users.

• 41:23Bill Gurley?

  Yeah. And, and I, playing around with credit card data, I think OpenAI is about 2 billion. Um, Anthropic's about 100 million and Perplexity is at like 25 million.

• 41:33Brad Gerstner?

  Yeah.

• 41:34Bill Gurley?

  Just, I'm guessing.

• 41:35Brad Gerstner?

  No, no, I think, I think that's directionally right.

• 41:37Bill Gurley?

  On, on the $20 thing, but at 12 months, the retention, um, even in OpenAI is like 35%. So I doubt. That anyone that is looking at that even at 2 billion feels great about that as a durable business model and you add to it, Mark saying, like, Mark's not going to charge.

• 42:00Brad Gerstner?

  It would feel really great if it didn't cost you $3 billion every year to build a new model in order to compete. I mean, like, ultimately, the cogs in these businesses, right, that you have to, because these are super quickly depreciating assets, right? You have to, you have to keep reinventing that model every single year.

• 42:18Bill Gurley?

  By the way, I pay for all of them. I play, because I love playing with them and they're so much fun and so fantastic. I would say, I think, one of the retention problems is simply all the substitutes that are available. And if Meta's gonna, and then, and then if speed's gonna matter, like, there were these old stories of Google made itself, like, 30 milliseconds faster, like, there were more searches, like, and that, play with the Lama Grok demo, like, it's a different experience. I don't know how much that will drive.

• 42:50Brad Gerstner?

  Yes.

• 42:51Bill Gurley?

  So anyway, I just think there's a lot of alternatives. If Mark, if we're right about Mark's intention to, he took it personally, he's playing defensively, he's gonna make his version free.

• 43:04Brad Gerstner?

  Yeah, there, there, there's no doubt about that.

• 43:06Bill Gurley?

  And he might run it for four years with no ads.

• 43:08Brad Gerstner?

  Right. And I think, you know, this fast inference and, you know, it's, it's Grok, it's Cerebrus's fast inference, you know, fireworks and other benchmark investment, I think, you know, is inference optimized on top of Nvidia, right? You're now getting to the point with these inference engines that they're going to be, you know, it's faster than you can read, certainly. You and I had a conversation about this. That doesn't really matter, because all of these interactions, you know, particularly when we think about multi-chained agent interactions, right, you may have 100 different interactions, computer to computer interactions, before you ever see an answer. And so, speed really matters,

• 43:52Brad Gerstner?

  because computers can talk to each other at, you know, the fastest speed you can possibly, you know, kind of contemplate. And so, reducing that latency unlocks a lot of innovation, you know, that will be good. And I think there's a lot of that coming. You know, I was really impressed today. With the um, the alliances that Meta had built. Um, you know, and Mark pointed that out, but really from, from AWS to Databricks, to Snowflake, to Accenture, um, you know, the Grox of the world, fireworks, et cetera. Everybody, you know, launched with optimized versions of this. They've been playing with it.

• 44:32Brad Gerstner?

  So, you know, in the case of Databricks or Snowflake, they can basically take these optimized models immediately to their companies. They can do fine tuning. They can do synthetic data generation, whatever their companies might want to do. So, um, part of the way that open source works is by running the field, right? Getting everybody into the, the pool.

• 44:56Bill Gurley?

  No doubt. While, while you were saying that, I went back to the Kubernetes Wikipedia page. So on launch, um, the principal competitors were VMware, um, Mesosphere, Docker, Azure. Um, and then, you know, a few months later, AWS came in. But yes, if you're a participant in the market who is looking for your own solution to be advantaged and there's someone who wants to make a piece of it free and open rather than closed and paid.

• 45:28Brad Gerstner?

  Right.

• 45:28Bill Gurley?

  That's awesome for you.

• 45:30Brad Gerstner?

  Yes.

• 45:30Bill Gurley?

  And so you're right. It becomes this attractor.

• 45:33Brad Gerstner?

  Yeah.

• 45:33Bill Gurley?

  That brings the other parties to the table to, to play.

• 45:36Brad Gerstner?

  Right.

• 45:37Bill Gurley?

  And, um, yeah, that's part of why it's so powerful in this defensive way, what I call a defensive strategic play. Um, you are able to bring the other people in.

• 45:47Brad Gerstner?

  Right, right.

• 45:48Bill Gurley?

  It's, it's, it's really fun. And, and once again, I think it's good for entrepreneurs. I think it's good for society.

• 45:55Brad Gerstner?

  Right.

• 45:55Bill Gurley?

  Like, like 15, 20 year patents on big pharma drugs is not good for society. This is the opposite. This is technology getting free or cheaper, more available.

• 46:05Brad Gerstner?

  You know, and, and I'll give you credit for this. In a lot of conversations I've had in Washington. Your work on regulatory capture has actually made its way into a lot of congresspeople's minds and offices, right? They're on the lookout for regulatory capture.

• 46:20Bill Gurley?

  Awesome.

• 46:21Brad Gerstner?

  Right? And so I think it's pretty wild. Zuck went from a few years ago, you know, having a bullseye on himself in Washington DC, and now, you know, he's somebody that people point to as a real asset against, against closed models.

• 46:36Bill Gurley?

  Yeah, I hadn't thought about this until you just said that. So, thank you for, for triggering this in my brain, but maybe there's a bit of a halo you get.

• 46:45Brad Gerstner?

  From all good sources, for sure.

• 46:46Bill Gurley?

  Yeah, so you, you look like, you know, you're the good guy and not the bad guy.

• 46:52Brad Gerstner?

  So, you know.

• 46:53Bill Gurley?

  By the way, by the way, I do think it's worth mentioning on, on the AWS thing. Just from talking to entrepreneurs in the AI space, Microsoft certainly is advantaged by being, or Azure is advantaged by being the hosting system that has access to OpenAI.

• 47:12Brad Gerstner?

  Oh, for sure.

• 47:13Bill Gurley?

  And Amazon doesn't. So, not surprised.

• 47:16Brad Gerstner?

  Yes.

• 47:17Bill Gurley?

  That, that.

• 47:17Brad Gerstner?

  AWS was in the, you know, kind of featured on launch day.

• 47:21Bill Gurley?

  It makes sense. That's, they, they want to, they need a response to that.

• 47:26Brad Gerstner?

  Yeah, and, you know, we could talk about this for a long time. Let, let's continue on. We have a few more topics we want to talk around. We'll, we'll make these a little bit more lightning round. But you had me listen to a podcast, you know, this week, excellent podcast with, with Dr. Jay Bhattacharya and Rick Rubin.

• 47:46Bill Gurley?

  Yeah.

• 47:47Brad Gerstner?

  You know, Jay's a Stanford kind of economic epidemiologist, was one of the senior authors on the Great Barrington Declaration in, in April of 2020. And that was really this, the seminal paper that showed that the COVID death rate was far lower than people thought, and that the virus had penetrated far deeper into the population by April of 2020 than people thought. Which then had broad implications on whether or not we should lock down. You know, we're now four years later. Tell us why, you know, you, you were telling all your friends to listen to this pod.

• 48:22Bill Gurley?

  Yeah.

• 48:23Brad Gerstner?

  You clearly are still agitated about the fact that there's been no postmortem here.

• 48:29Bill Gurley?

  No doubt.

• 48:29Brad Gerstner?

  Why is this so important for society that, you know, that we listen to this, that we come to terms with it, that we think about this?

• 48:37Bill Gurley?

  Yeah, I would encourage anybody and everybody to listen to this. It's on Rick's podcast called Techna. I can't pronounce it. Tech.

• 48:45Brad Gerstner?

  Yes.

• 48:45Bill Gurley?

  I give up.

• 48:49Bill Gurley?

  Rick, obviously, is, is one of the most interesting Americans on the planet. An incredible record producer. He wrote this great book on kind of design and how he thinks about creation that came out last year. And his podcast has this breadth of, of, of guests that's just phenomenal. So I listened to it quite a bit and I'm a huge Rick Rubin fan, even though I can't pronounce the name of his podcast. And yeah, so he had Jay on and they talked for two hours, kind of about, and they covered, I think, maybe like a good two, three, four year period of COVID and everything Jay went through.

• 49:30Bill Gurley?

  And, you know, you were talking earlier about like the media just kind of blocking and not doing research. I, I think if everything from the origin of COVID to the responsiveness to COVID, for whatever reason, we were in this weird place. And some of this came out in the, in the Twitter files where if you said anything that wasn't a hundred percent consistent with what Fauci and Collins were saying, it was labeled misinformation, conspiracy theory. And I was, I did a bunch of research at the time, but I, I, I looked and found this incredible New York Times piece about the tower collapse in Miami. And maybe we'll put it in the show notes because it's just so amazing.

• 50:14Bill Gurley?

  So someone spent, you know, six months, probably thousands of hours of investigative journalism to figure out exactly what happened.

• 50:23Brad Gerstner?

  Yeah.

• 50:24Bill Gurley?

  And they had these infographics, they had all, it was like amazing. And You look at the origin of COVID, we have, I don't know, 20 million people dead, probably the worst catastrophe since World War II, and no one was looking. Like, no one was looking. No one was doing the work that these New York Times journalists did for this collapse of this building, yet the consequences were 1,000x, like 10,000x bigger. And I don't know if it was Trump derangement syndrome, I don't know if, you know, I don't know why. I mean, and the Twitter files, once again, had a lot of this, where people tried to talk up, and so, to me, one thing should be obvious to everyone. We don't want to go through this again.

• 51:07Brad Gerstner?

  Right.

• 51:08Bill Gurley?

  Yet, you look at how people talk, and if you hadn't listened to Jay, I would be, I would say, if this happens again, are we any smarter? Are we going to make any better decisions?

• 51:22Brad Gerstner?

  His concern is that we're not.

• 51:24Bill Gurley?

  Yeah.

• 51:24Brad Gerstner?

  Right? And so I would argue that the reason to do the postmortem.

• 51:27Bill Gurley?

  Yes.

• 51:28Brad Gerstner?

  Is that, you know, you had three prominent senior authors on this paper, 60,000 signatories, and it basically was early in the pandemic and at odds with the conventional wisdom. Okay? The conventional wisdom was that you needed to lock down, keep people separated, that it wasn't that deeply penetrated, you know, of disease, and we could prevent it from spreading. He was basically making the case because they-

• 51:57Bill Gurley?

  And by the way, he had instincts-

• 51:59Brad Gerstner?

  He had the data.

• 51:59Bill Gurley?

  He also had instincts that lockdowns would have massive consequences, which they did.

• 52:05Brad Gerstner?

  Right, right.

• 52:06Bill Gurley?

  But he wasn't given a voice, and Francis Collins called him a fringe epidemiologist. And this is a celebrated, in fact, his area of study is economic epidemiology.

• 52:21Brad Gerstner?

  Yeah.

• 52:22Bill Gurley?

  And so he's actually thinking about how these things interact with our global economic system. He's like the perfect person to listen to.

• 52:29Brad Gerstner?

  Exactly.

• 52:30Bill Gurley?

  And he got attacked. And I think anytime, and I might include this in how some of the people responded to- Ben and Mark and and and I remember I triggered on Kevin Scott. When people questioning LLM scaling called them trolls like anytime your reaction is not to react to the argument, but to throw this label, this negative label out of the other side. My brain says you don't have the goods.

• 52:58Brad Gerstner?

  Right, right. And that's what he said. What was interesting here is, you know, it was all ad hominem attacks. They wanted to be, you know, it was like excommunicating them from science, you know, because you had the head of the NIH and you had Fauci who were calling them fringe players. They didn't deal with any of the facts, right? The science was that they had the sewage data from Santa Clara County and from LA County. They knew the the the penetration and they of course knew the death rate, you know, that they could calculate. They knew among younger people that there was almost zero deaths and among older people, you needed to take a different sort

• 53:39Brad Gerstner?

  of of precaution. Now, Jay, what makes him interesting is, you know, he actually had two relatives in India who died from COVID. It wasn't like this guy didn't care about COVID.

• 53:51Bill Gurley?

  Yeah.

• 53:51Brad Gerstner?

  It wasn't like he was, you know, some cookie. He was one of the most celebrated scientists who actually looked at data, did the research, put together, you know, a very important paper. Now, this is a person who was celebrated by the NIH. He was on NIH review panels. He had written.

• 54:08Bill Gurley?

  Right. Until he said something they didn't like.

• 54:10Brad Gerstner?

  A hundred different papers, et cetera. And the reason, you know, so when you said, I need to listen to this, I'm thinking to myself, that's been four years ago.

• 54:19Bill Gurley?

  Yep.

• 54:19Brad Gerstner?

  But he says something at the end of the podcast where he said, the problem is, we're no better prepared today than we were then. And the exact same rush to judgment, right? Lock everything down. We're prone to do it again the next time because we haven't done the proper postmortem here. And the proper postmortem is that we need to do the science and the research.

• 54:43Bill Gurley?

  And one, one thing, obviously, I hope everyone goes and listens to it. But one thing that he uncovers, they've gone back through and looked at excess deaths at a number of different countries and lockdowns achieved nothing like and and.

• 54:58Bill Gurley?

  I think he makes a solid argument. I think most people believe there were consequences to lockdowns, definitely with kids.

• 55:03Brad Gerstner?

  Yes.

• 55:04Bill Gurley?

  Lost generations of kids from.

• 55:06Brad Gerstner?

  Increased suicide rates, you know, lost education.

• 55:09Bill Gurley?

  And, and all of my kids were in high school and it was horrific.

• 55:12Brad Gerstner?

  Yeah.

• 55:12Bill Gurley?

  For them not to have the experience that so many of us cherish from those moments in time. It actually, I get a little, little upset thinking about it, but, but there's more than that really, because we need to go back through and look at everything. There were, you know, there were, there, there's a lot of questions about the origin of COVID. If you look at what's, what's being discussed with, in Congress with, and what they're uncovering, it, it's really, really needs more, more work to be done. And I think Catherine Bach and Alina Chan, there's people that you should follow on Twitter, they're uncovering that finally. There were these incentive systems pushed through hospitals where like, you could charge 30% more if a patient had COVID.

• 55:54Brad Gerstner?

  Yes.

• 55:55Bill Gurley?

  Like, has anyone gone back through and seen if that was really a good idea to that? Or did people take advantage of it? And then they over select? They probably did. There were, there were questions about how, that I brought up during my regulatory capture speech about the different types of tests that could be done and their cost and which was more accurate than that. And all that stuff, while we don't have a pandemic, this would be a great time to go in depth. And I hope that whoever is our next president will put together a panel, and I hope Jay's in charge of it. I have no idea if Jay has that kind of time in his life to, to go review everything that happens so that we can be better prepared next time.

• 56:35Brad Gerstner?

  Well said, well said. Let's talk about Wiz. This deal, Google was rumored to be buying Wiz for 23 billion bucks. This is the second hope, high profile deal. The first was HubSpot that seems to, you know, have kind of blown up that Google was supposedly going to do. Asaf, the CEO of Wiz, came out and said, not to worry, you know, we're going to get to a billion dollars in revenues and then we'll go public. You know, any, anything to take away here? I mean, my read on it, just at a, a quick level is, you know, if this were to go public, it would probably trade at 13 or 14 times forward. That would be like 13 or 14 billion, not 23 billion. Are these things blowing up because people

• 57:16Brad Gerstner?

  all of a sudden get cold feet about antitrust? Do we think that a Trump administration is going to loosen up M and A? Anything to see here?

• 57:26Bill Gurley?

  Well, I mean, one thing I would say is that these are, if you're lucky enough to be involved in a situation where one of these deals comes down, it's, it's, it's hard to know what to do. Yeah. You know, and I, I mean, it's not nearly this number, but I remember when Instagram, you know, got their offer of, I think it was 1.1, 1.2 billion, and they had like 20, 20 employees. Mm-hmm. And, and we had funded the 14th photo sharing site, and Matt comes in and says, should we do this? Right. And like, um, like, it's easy to want to be on the yes side in these situations. Yeah.

• 58:08Bill Gurley?

  Because it's, it's like, wow, this might, and, and I can remember very famous situations where people walked away from these deals and never got close to that number again. So the consequences are high. Yeah. It's like a really intense poker moment, like where you're making a gut call. And so, and, and there's the, also the famous, you know, Google didn't sell to Yahoo for a billion and then became one of the most powerful companies of all time. Microsoft, Facebook for 15. Turning down 23, or whatever the number was, it's a higher number. It makes me talk with a higher voice. Right, right, right. Because as we've often discussed, like, it gets exponentially thin at the top. The number of people that make it to a billion is a fraction of the number that make it to 100 million. Yes.

• 58:53Bill Gurley?

  And the number that make it to 10 billion is a fraction, like, like, it's, the, the air's thin as you climb the mountains. Yes. Kudos to them if they're just that confident in the business. There's some rumors today that it may be, that the CrowdStrike situation makes them feel that, that they may have more running room. Um, I, I, I wouldn't, I, I have a hard time believing this one was a concern about, um, the, uh, antitrust because Google doesn't have a huge security business. That's right. And, and there, there's actually concern about consolidation around Palo Alto and, and Microsoft and Cisco in the, in the industries, or in CrowdStrike. So, so I would think they'd be supportive of it.

• 59:35Bill Gurley?

  And if you thought Trump were coming in, I think there'd be less reason even to worry about it. So I don't see that.

• 59:41Brad Gerstner?

  Yeah, that's probably the one thing I would press on is, you know, the betting markets, I think, are now sixty forty with Kamala in the race of, you know, of Trump winning the election. You know, we've been in this period in Silicon Valley for four years where companies just stopped. They may have sent their M and A teams to the beach for all I know. There just has not been a lot of activity, certainly among the hyperscalers relative to what had existed before. It seems to me they did three things instead. They bought back their own stock, they all started issuing dividends and they bought Nvidia chips, right? They, they, you know, they tighten their belts on people, they weren't spending more money on people.

• 1:00:23Brad Gerstner?

  All the companies became a lot more profitable and there just was a real lack of M and A, which is a problem for Silicon Valley.

• 1:00:29Bill Gurley?

  Right, and I, and I would say, like, having been in these situations before, usually the partner that's involved in the company, the one that's on the board or that led the investment, they're usually pretty, they tend to be overly confident.

• 1:00:44Brad Gerstner?

  Yeah.

• 1:00:44Bill Gurley?

  And that's often balanced by the other partners back at home.

• 1:00:49Brad Gerstner?

  Right.

• 1:00:49Bill Gurley?

  So when you circle around the table and have these discussions, they're like, really? Are you sure you don't?

• 1:00:55Brad Gerstner?

  Right.

• 1:00:55Bill Gurley?

  And if we've been in an environment where liquidity's been scarce, the odds that they were sitting there pushing, hey, hey, maybe we should do this, maybe we should do this, I would think would be high. We saw this unusual Sequoia event where they actually recycled Stripe out of their own dollars, right? Which speaks to the fact that the LPs feel a need.

• 1:01:18Brad Gerstner?

  Having to come up with alternative liquidity in a world where M and A can't get done. I mean, M and A was not on Mark and Ben's list, but it could have been.

• 1:01:25Bill Gurley?

  Yes, yeah.

• 1:01:25Brad Gerstner?

  But it could have been.

• 1:01:26Bill Gurley?

  It could have been.

• 1:01:27Brad Gerstner?

  As another, you know, another problem that we face in Silicon Valley, part of the vibrancy of this ecosystem relies on the, you know, not just the IPO market, but also the M and A market.

• 1:01:39Bill Gurley?

  Yeah, and so, you know, I think there's always been a peer pressure.

• 1:01:45Bill Gurley?

  To appear particularly confident and to play the long ball game amongst venture capitalists. And they almost fall, they almost fall over each other trying to express this bravado. So kudos to Index and Sequoia and, and others that have, have turned down Greylock. I'm just looking at the list, Andreessen Thrive that, that said, no, and the team, obviously. But, but boy, you know, we, we talk about evaluations being discounted future expectations. Nothing smells like that when you walk away from 23 billion.

• 1:02:22Brad Gerstner?

  Hey, you know, I, I, I think it would be less in the public markets today, but they've clearly built a terrific business.

• 1:02:27Bill Gurley?

  No doubt. I've heard nothing but good things. I don't, I don't. And by the way, one thing that could be very positive that comes up out of this is if they turn and run at the IPO markets very quickly.

• 1:02:37Brad Gerstner?

  Yes.

• 1:02:38Bill Gurley?

  Um, because I would love for the list of, I, I, I think we have a bit of constipation here.

• 1:02:44Brad Gerstner?

  Yeah.

• 1:02:44Bill Gurley?

  And we talked about this at the Code Two event. I think people have gotten overly

• 1:02:51Bill Gurley?

  conservative about what they need to be a public company. So I hope they run as fast as humanly possible. And we, we've had talk about these, you know, potential AI IPOs coming. I would, I'd love for you and I to, on this call to be talking about IPOs more than we are.

• 1:03:07Brad Gerstner?

  Yeah. You know, I, I'm, I just got off a, a board call with a company we're, we're mutual investors in. That's, that's going to come public in September, October. And, you know, it's, it's, it's exciting to be talking about companies coming to the public market again.

• 1:03:22Bill Gurley?

  No doubt.

• 1:03:23Brad Gerstner?

  And, um, I think, I think it's best days and, and it's maximum innovation is still in front of it. Right. And I, I was just reminding them, like, all of that can occur post going public. Right. And so I think for Wiz as well. So today, um, you know, Tesla reported tonight. They missed their numbers a little bit on, on, on margins. The stock's down seven or eight percent. But interestingly enough, Elon said on the call, if you don't believe that Tesla is going to solve autonomy, sell our stock. Okay, so he's like, this is not just about the number of cars we sold in the quarter gross margin. Like, the reason you're in this stock is because of autonomy. And so I want to talk

• 1:04:06Brad Gerstner?

  a little bit, you know, you and I spent a whole pod talking basically about 12.3. But, you know, now they are on to 12.5. He mentioned 12.5 and 12.6 on the call today. You know, what we've been able to discern is these models are much bigger, right? They're running like 5x larger models on the edge on the car. So rather than a billion parameter model, maybe something like four or five billion parameter model, the rates of improvement continue to accelerate. And so here's how it manifests itself, Bill. You know, and we went and did some testing of our own on this. In 12.3, you know, you could take your hands

• 1:04:47Brad Gerstner?

  off the wheel for like 40 seconds before it told you to reengage. By 12.4, you could take your hands off the wheel for up to four minutes, right? A lot longer period of time. And it has eye tracking. And so you could look away a little bit before, you know, it was telling you to take control of the wheel. On 12.5 and 12.6, we think it'd get to the point where they're 100% hands-free. So it doesn't constantly ding you to grab the wheel. And you can really start looking away from the road for longer periods of time. Now, of course, you won't have to do that, but I'm just saying it will do it before it kicking in its warning systems, because they're confident in the efficacy of the

• 1:05:30Brad Gerstner?

  model. In order to bet, you know, Elon said because the 12.5 and 12.6 are so good, they're going to look for approvals in China and Europe around, you know,

• 1:05:42Bill Gurley?

  I was wondering when that was coming, because the Waymos of the world, they have to apply for licenses for the car to run independently. And so I always knew that would be a step before they were live.

• 1:05:57Brad Gerstner?

  Interestingly, one of our analysts who covers

• 1:05:59Bill Gurley?

  But they said Europe and they didn't

• 1:06:01Brad Gerstner?

  And China.

• 1:06:01Bill Gurley?

  And not US.

• 1:06:03Brad Gerstner?

  Um, well, in the U. S. They are ready can can run full self-driving in states like Texas.

• 1:06:08Bill Gurley?

  But not without a driver. They have to apply.

• 1:06:10Brad Gerstner?

  No, no, the driver's in the car. The driver, the driver's in the car. So one of our analysts went to China to test all the L2 and L4s. You've read, you've read some.

• 1:06:20Bill Gurley?

  I've watched all the videos.

• 1:06:21Brad Gerstner?

  You've read the headlines of like deploying 10,000 cars in Wuhan overnight, etc. And here's what she, you know, came back and she came back and reported. She said, you know, they're still catching up to FSD 11. Now, remember, FSD 11 was. So they're like three years behind on full self-driving. Those were still the deterministic models before the big breakthrough of 12.3. She said, but here's what's crazy. Although they're far inferior models, that Chinese consumers seem very receptive to being hands off the wheel, eyes off the road. And everybody's at this Huawei, Zhao, Zhao Peng, Neo, all these different companies.

• 1:07:05Brad Gerstner?

  And so she was in them and she said she had some really lousy experiences in the cars, but she was blown away at the Chinese consumers' willingness to adopt the technology.

• 1:07:17Bill Gurley?

  Keep in mind, I mean, you, you, you, you've heard a similar story about like leapfrogging technology. So in Africa, there, you know, there are no landline. They went straight to mobile. And so everything, you know, changes in a different way. Car ownership in China was relatively low.

• 1:07:32Brad Gerstner?

  Exactly.

• 1:07:33Bill Gurley?

  Like five or 10%. So most people are either bicyclists or commuters. And, um, and so that would be one reason why your expectations would be in a very different place than if you were an American who loves your car.

• 1:07:47Brad Gerstner?

  Right, right.

• 1:07:48Bill Gurley?

  And I mean, we, this is, this is for another pod, but we spent, I don't know, 100 years, 70 to 100 years maximizing America's structure and layout and topology for that damn car.

• 1:08:05Brad Gerstner?

  One of the things you and I have debated back and forth on this pod is just the impact that AI is going to have and the timeline against which it's going to have the impact. And you've called into question, right, the magnitude of the impact perhaps from the LLM. But we've been in lockstep that this is having a major impact on full self-driving autonomy and, you know, likely on robo-taxi. And so it does feel to me like this is one of those places where, you know, now if you're in San Francisco, it's not surprising to see two or three Waymos around you. I think you're going to see a lot of people driving down the streets in their Teslas in the not-too-distant future, right?

• 1:08:48Brad Gerstner?

  They're going to be reading a book, they're going to be looking away, their hands are not going to be on the wheels. And, you know, and obviously the robo-taxi is reported to pull the steering wheel out of the car altogether.

• 1:09:00Bill Gurley?

  By the way, on that last thing, I'm going to put one more podcast in the list that I was, that I found super interesting, which was, um, Mish Alaskan, um, who is an entrepreneur, um, that runs an AI company here in Silicon Valley, he went on the Sequoia podcast, but he was at, he was at Google DeepMind and he talks about AlphaGo. And he has some different perspectives on AlphaGo and, and, but, but when, when problems are finite, and there's this great book about infinite and finite games, like chess, the ability for these models to compete and innovate is so much higher than when you have open-ended problems.

• 1:09:43Bill Gurley?

  And one of the things about self-driving is, I think you can define it in a way where it's a finite game, which is no rec. Like, no rec becomes the finite game. And so they're able to These models are able to go a lot farther.

• 1:09:57Brad Gerstner?

  Right.

• 1:09:58Bill Gurley?

  When there's a finite game that can be played.

• 1:10:00Brad Gerstner?

  Yes.

• 1:10:01Bill Gurley?

  And anyway, his, his talk is super interesting and, and it, it makes me think about the areas where AI is going to accelerate faster. Um, because you can do those kinds of things. The open-ended AGI thing is actually, in my mind, is going to take the longest because it's the hardest problem.

• 1:10:19Brad Gerstner?

  Yeah, I think there are a bunch of discrete things you can define as finite games. You know, customer service being an example of that. But, um.

• 1:10:27Bill Gurley?

  Conversion on a website could potentially be done that way.

• 1:10:31Brad Gerstner?

  For sure. Um, so what, what the heck happened with CrowdStrike this week? Right? Not only did it lose 30% of its value, um, all my friends were complaining that they couldn't fly, you know, get from point A to point B. Airlines ground to a halt. What do you think this reveals to us about, um, kind of the nature of systems that are being built in the cloud today? And what are the things we ought to be looking out for or concerned about as a result?

• 1:10:58Bill Gurley?

  A whole bunch of things went through my mind. Um, one, the one that actually I think J. Cal brought it up first, but that, that is just so like, such a strong argument is why didn't you stage gate how this is rolled out?

• 1:11:12Brad Gerstner?

  Yeah.

• 1:11:13Bill Gurley?

  Like, how could you let it have this big an impact? Like, if you did increasingly large groups every two hours.

• 1:11:20Brad Gerstner?

  Right.

• 1:11:21Bill Gurley?

  You'd, you wouldn't have never had this impact on the world.

• 1:11:23Brad Gerstner?

  Deployment engineer that needed to go on vacation.

• 1:11:26Bill Gurley?

  I don't know, like someone like, so crowd, and I think that's on CrowdStrike. So the, and, and I, there were other people, there's, there, there's a Twitter account that's really good at kind of analyzing crisis PR, who went through his stuff. I think they could have talked about things like that, why that failed, rather than like, they, they gave a technical description of what happened and say, oh, we uncovered it. But that doesn't really.

• 1:11:51Brad Gerstner?

  Right.

• 1:11:51Bill Gurley?

  Help, that didn't say why this isn't going to happen again. Cause there was a policy process failure, you know, on top of this. The other thing that, that, um, if you read Matthew Prince, who wrote a large analysis of this, and keep in mind, Matthew runs a different company, CloudFlare, in the security space. And he's very worried about a very specific thing here.

• 1:12:16Bill Gurley?

  I just went and read a whole bunch, so I didn't know this ahead of time. But apparently, Microsoft will argue the reason that these security companies have access to the kernel is because they were forced to let them have access because of an EU ruling.

• 1:12:30Brad Gerstner?

  Okay.

• 1:12:31Bill Gurley?

  That related to how big and powerful Microsoft is. Now, there were no non-Microsoft boxes that failed. And if, and people will say, oh, well, you know, Apple doesn't allow you to have access to the kernel. And so what, what Matthew's worried about is that Microsoft's able to use this to reverse the EU initiative and then push these players out. And a lot of people don't know this, but Microsoft's now one of the top four security companies in the world and may want to do that. And so that's a new kind of dimension of competition that I think people need to pay attention to. I, I'm also struck like, I, I, I, there was a funny article that said Southwest was

• 1:13:16Bill Gurley?

  spared by this because they weren't on Windows 95 yet, or they weren't on Windows. Like some, they were on really, really old Windows machines. And I'm, and I just don't understand why anyone that has a terminal that matters is, is running Windows at all.

• 1:13:35Brad Gerstner?

  Right.

• 1:13:36Bill Gurley?

  Like, and maybe it's a testament to just the, the power of the network effect of Windows and all this stuff. But, but you would think there'd be a hardened Linux thing that would be so much less susceptible to this kind of risk.

• 1:13:52Brad Gerstner?

  You know, we have these esoteric conversations all the time. We're investing in these startup companies. But, you know, the world has become software. And, you know, we take for granted every day, the amount of software that's running around us.

• 1:14:06Bill Gurley?

  That's true.

• 1:14:07Brad Gerstner?

  That's getting us from point A to point B, soon to be driving our cars for us, et cetera. And, you know, with it, I think, you know, comes significant responsibility. And again, circling back to where we started the conversation, you start taking down airlines. That really makes people in Washington unhappy.

• 1:14:27Bill Gurley?

  Oh, I believe that.

• 1:14:28Brad Gerstner?

  Right. And so, um, part of the reason I think that. You know, the nature of the relationship between DC and Silicon Valley is changing, is forever change, is also as simple as this. Our lives today are so, you know, twisted around all of these technologies, whether it's the phone we carry in our pocket, or the software that's getting us from point A to point B, to the AI we're going to be using in the future. And so I think that this symbiotic relationship, this, you know, figuring out how to make sure that we're managing the relationship between Washington and Silicon Valley is

• 1:15:11Brad Gerstner?

  in the most productive way possible for this country is, is, is going to be super important. No longer acceptable for us just to stick our head in the sand and say we're 2,851 miles away. You know, engagement, I think is going to be the new course. And in that regard, I think policies are going to matter. Like, I don't think anybody, any party can take Silicon Valley.

• 1:15:36Bill Gurley?

  One of the articles said that people were forced to implement CrowdStrike because of regulatory reasons. So they had it implemented because someone had told them they had to.

• 1:15:48Brad Gerstner?

  Right.

• 1:15:49Bill Gurley?

  So that's another interesting dimension to this whole thing. Hey, before we wrap, I have two things I need to do super quick. One, I'm going to try and pronounce Tetra Grammaton, which is the name of Rick Rubin's podcast. And apparently it's an important Hebrew symbol from way back before Christ. So I want to do him justice there. And then second, I would like to call out with respect, Mr. Daniel Ek at Spotify, who just printed amazing numbers and took his stock to an all-time high. He's been grinding away at Spotify for a very long time. It's a great product that I love to use, super innovative. A lot of people thought he couldn't make positive cash flow because of the, the way

• 1:16:33Bill Gurley?

  that the music label deals are structured, but he's, he's after it. He did, he had a fun social media post before he did his earnings call, which is.

• 1:16:43Brad Gerstner?

  I think I think it I love how he does this.

• 1:16:45Bill Gurley?

  And he's just he's so thoughtful. He's so wonderful. He's so available. He gives back to other entrepreneurs. He cares about especially about Europe where he came from and and the company. And I anyway, I wanted to.

• 1:16:58Brad Gerstner?

  Well, the stock's up 12% today. It's up 100% over the course of last year, 120% over the course of last five years.

• 1:17:05Bill Gurley?

  Up like six, seven billion today.

• 1:17:06Brad Gerstner?

  Yeah, so he's built an amazing business, but more importantly, again, getting back to what we just talked about. It makes our lives better every day. For all those who use the product, our lives are just happier every day. So kudos to him on a great quarter.

• 1:17:19Bill Gurley?

  All right, man.

• 1:17:20Brad Gerstner?

  All right. Great to see you.

• 1:17:20Bill Gurley?

  Let's wrap.

• 1:17:32Brad Gerstner?

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