Ep11. Coatue Conference Recap, Tesla & ISS Controversy | BG2 with 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 recap Coatue Conference and discuss Elon’s pay package, Tesla's shareholder vote, ISS controversy, AI market trends, OpenAI IPO, Delaware court case, and more. Enjoy another episode of BG2. Timestamps: (00:00) Overview of Coatue’s East Meets West Conference (5:05) AI and Market Trends (18:17) Insights on Venture Markets and IPOs (24:15) Challenges and Opportunities in Going Public (30:05) The Case for OpenAI Going Public (33:03) Challenges and Considerations for IPOs (35:55) SPECIAL GUEST: Coatue Founder Phillipe Laffont (39:27) AI Startups Staying Lean (42:31) AI Agents and the Future of Work (45:28) Tesla's Shareholder Vote and ISS Controversy (50:57) Delaware's Legal Precedent and Corporate Implications (58:27) Globalization and Competitive Advantage 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.

• 0:00Bill Gurley?

  He implied, you tell me if I got this wrong, he implied that in the modern era, you need to be $10 billion to go public.

• 0:07Brad Gerstner?

  Yeah.

• 0:08Bill Gurley?

  Market cap.

• 0:09Brad Gerstner?

  Yes.

• 0:10Bill Gurley?

  Which, if it's $10 billion or bust, that's a bitch, man.

• 0:28Brad Gerstner?

  Hey, man.

• 0:29Bill Gurley?

  How you doing, Brad?

• 0:30Brad Gerstner?

  It's good. It's good to be here. It's like a destination podcast here in Santa Barbara.

• 0:34Bill Gurley?

  This is our first destination podcast. We're coming to you live from COTU's East Meets West 2024 conference.

• 0:42Brad Gerstner?

  Indeed. Were you up or down last night?

• 0:44Bill Gurley?

  I did okay.

• 0:45Brad Gerstner?

  Okay, okay.

• 0:46Bill Gurley?

  And you?

• 0:47Brad Gerstner?

  Uh, it was a good night. It was a good night.

• 0:50Bill Gurley?

  Hopefully they don't think we were the ringers, you know.

• 0:53Brad Gerstner?

  Um, well, tell it, tell the audience a little bit about what is East Meets West. It's a really gracious invitation. You know, we've been doing this for years with COTU down here. Why don't you tell us a little bit about it?

• 1:05Bill Gurley?

  Yeah, so Philippe and Thomas LaFonte, who run COTU, started a conference, I'm gonna guess about eight or nine years ago. Title East Meets West. And at the time, it was really about bringing together entrepreneurs from Silicon Valley in the West with entrepreneurs from China. And some of my best relationships with some of the the smartest, coolest, tippest Chinese entrepreneurs came here and, and the access was just unbelievable. It's literally a once in a lifetime opportunity. And they've kept the conference up. It's on my list of must attends.

• 1:43Brad Gerstner?

  Yeah.

• 1:43Bill Gurley?

  You get a combination of incredible founders, some great CEOs, Satya Nadella is here, Dara's here, Andrew from EA is here. And it's one of those conferences, like when I entered the industry years ago at Agenda, the Agenda Conference with Stuart Ossoff ran, you know, Larry Ellison and Bill Gates and Scott McNeely would stay through the conference. So they're around.

• 2:08Brad Gerstner?

  Incredible.

• 2:08Bill Gurley?

  Today, most conferences. Conferences, the keynotes come in and go out.

• 2:12Brad Gerstner?

  Yeah.

• 2:12Bill Gurley?

  Um, here, everyone stays and so you, it's more intimate. You learn more, you get to talk to more people. They do a lot of these one on ones.

• 2:20Brad Gerstner?

  Right.

• 2:20Bill Gurley?

  Where they, they set it up so that you can maximize individual connection. Uh, it's just incredible. Anyway, I'm super, you know, thankful to them for, for having us down and for letting us.

• 2:32Brad Gerstner?

  It's a big investment. It's a bit, it, it, it's a big investment by them. And I think one of the things that's underappreciated outside of Silicon Valley is there's this view that, that, that this is all zero sum. Right? That I win, you lose.

• 2:44Bill Gurley?

  Yeah.

• 2:44Brad Gerstner?

  You know, we're all very competitive. We all like to win, whether we're playing poker, whether we're playing hoops, whether, whether we're doing this. But really I think it, like this is a demonstration of positive sum. The fact of the matter is we're all analysts. We're trying to figure out the future. And what I deeply appreciate, you know, with you, with the guys at All In, when you come to an event like this, it's a lot of conversation about this future, about the consequence on the economy. We're going to be talking to Larry Summers tonight about, you know, about that question, about the consequence on society from AI, which we're going to be talking about a little bit today. Um, you know, but when you really telescope out over the last 20 years that you and I've been doing this, technology's gone from 5% to 15% of global GDP.

• 3:29Brad Gerstner?

  Right? And, and we're going to talk about public markets and venture markets, but the reality is there's a very big pie. You know, and we can all participate in that together. And so, you know, to me, this is a reflection. I see a lot of old friends. You know, this place is full of GPs, it's full of venture capitalists. You know, a lot of people would think of Altimeter as a competitor to Kotou.

• 3:49Bill Gurley?

  Right.

• 3:49Brad Gerstner?

  But the fact of the matter is you and I collaborate with them on a ton of stuff.

• 3:52Bill Gurley?

  Yeah.

• 3:53Brad Gerstner?

  Um, some of it works, some of it doesn't work, but we trust each other. We have a shorthand with one another. So it's great to be back down here and, and like I said, thanks to, uh, you know, Philippe and Thomas for encouraging us to do the pod down here. I think it's, I think it's a, a perfect setting. But, you know, I thought one of the things we could do. Is set up for people like what goes on here and just kind of take them through it a little bit, right?

• 4:16Bill Gurley?

  Sounds great.

• 4:17Brad Gerstner?

  So as you said, there's a couple hundred founders, CEOs and GPs. You know, the first morning, which was this morning, we always telescope out and Philippe kind of takes us through, you know, the view of the public markets, if you will. And then Thomas takes us through this view of the venture markets. And so maybe we could just start.

• 4:35Bill Gurley?

  And then just to hear in a sense like, I mean, it's a, it's a, it's a presentation I look forward to every year. And I think they said they threw out a hundred slides. So they, they put, they didn't, it's not falling off a log. They're putting in an immense amount of work to put this together. And by the time this podcast is, is released, I believe their PowerPoints will be released. So perhaps people can follow along as we talk about what happened.

• 5:02Brad Gerstner?

  You know, they, they captured a little of that zeitgeist. Remember the old Meeker slides?

• 5:06Bill Gurley?

  Yes.

• 5:07Brad Gerstner?

  You know, that everybody, you know, waited to see Mary slides. And I think they do a lot of really great content.

• 5:12Bill Gurley?

  Yeah.

• 5:12Brad Gerstner?

  And Daniel sent also, you know, they gave thanks to him and his team for putting these things together. So a lot of great content, but they started, you know, I always like to get a read on, on where they are, both as, you know, we're co-conspirators in the public markets and the public markets really set the stage for the venture markets. And he said, you know, his, his first slide, you know, he put up this slide. He said, two big questions in 2024. Number one, are we in an AI bubble in the public markets? And then number two, we talked about last week, is software dead?

• 5:44Bill Gurley?

  Yeah.

• 5:44Brad Gerstner?

  Okay. And what was interesting is we do these live polls. So I don't know, there may be a hundred, 150 seats out here. We do these live polls. They flashed up the poll we did this time last year. And this time last year, 56% of people here said, we're in an AI bubble in the public markets. Remember Nvidia had gone from $120 a share, maybe at that time to $250 a share. And people were already saying we're in a bubble. Now, since then Nvidia is up 200%, okay? And I was watching CNBC this morning. So far this year, Nvidia is responsible for five. percent of the S and P 500 returns. The other mag six are responsible for 5%.

• 6:28Brad Gerstner?

  And then the other 493 companies in the S and P 500 are responsible for 4% of the 14% year to date returns. If you looked at the S and P equal weighted, okay. So you just, everybody's in at the same amount. It's only up 4% this year. So that all led, I think Philippe to say, you know, we've got three, three trillion dollar companies now. Is this sustainable? Are we in a bubble? What was surprising to me was knowing Philippe the way we do is he, he showed a slide of the earnings growth of Nvidia, right? Comparing it to Cisco from, from the 99, 2000 period.

• 7:10Brad Gerstner?

  In the case of Cisco, the earnings multiple more than tripled during that period of time. But in this case, because of the earnings growth of Nvidia, the earnings multiple has been flat despite the fact that the stock is up nearly 10x. So he seemed to suggest, Bill, that we're not in an AI bubble. In fact, he showed an S curve saying Kotu's view is that it's going to be even bigger than people currently think. Was that convincing to you? Because I know you've been a, a, a voice of pragmatism.

• 7:41Bill Gurley?

  Certainly at the end of his presentation, it was hard not to be believed. I felt, I felt a little bit like I was at church. And, and he went on to, to say, I believe that, and, and I think they were somewhat liberal in tagging AI companies. But they said AI companies were responsible for 90%

• 7:59Brad Gerstner?

  Yeah.

• 8:00Bill Gurley?

  of the gains in the public markets. Um, I think they're including some energy stocks that

• 8:04Brad Gerstner?

  Yeah.

• 8:05Bill Gurley?

  have traded up as a result of this. But, um, yeah, he, he, he pointed out that if you go to the past and start to notice one to three companies just materially blowing out numbers above everyone's estimates over several quarters.

• 8:22Brad Gerstner?

  Right.

• 8:22Bill Gurley?

  That there may be something happening that you should pay attention to.

• 8:26Brad Gerstner?

  Right.

• 8:26Bill Gurley?

  Which is, you know, a valid argument, right?

• 8:29Brad Gerstner?

  And, and, and listen, he. I love, you know, the self-deprecating nature. He says in 2022, right? It was all about macro. What's happening with inflation? What's happening with interest rates? Right? Macro dominated 2022. We get ChatGPT at the end of 22. Okay, and we entered 2023. And so you have this post-traumatic stress. And he's saying that post-traumatic stress kept a lot of people out of the market despite all of our suspicion that this was an important phase shift. 2023, you have this liftoff. And what has happened is as more cards got turned over, by the end of the presentation, he said macro has shifted to the backseat. Right? That now he's kind of in the camp-

• 9:13Bill Gurley?

  Which I found a huge relief because you know I don't like talking.

• 9:17Brad Gerstner?

  Um, so you know, macro shifted to the backseat, you know, from his perspective, that we're kind of headed toward this no landing, soft landing, you know, that maybe inflation really was an anomaly of the COVID period. And if that's the case, then, you know, this new super cycle, um, which, you know, again, they described as transforming all these different parts of society, you know, uh, is allowed to shine. And so that to me was a significant change, I think by Code Two, in terms of the positioning of those two-

• 9:50Bill Gurley?

  I'd add one thing to it, just from dinner last night. You know, I get to see people that I may only see once or twice a year. There might be executives at some of the Mag Seven or other VCs at other firms. And one thing that was congruent across them all is they all feel a bit like a kid in a candy store with AI. It's like there's a new toy to go play with. And I think from a, from a intellectual curiosity standpoint, like I see smiles and excitement and like, so it's clear to me that, that the vast majority of people here, not just, not just the team at Code Two,

• 10:29Bill Gurley?

  believes this is a mega wave that is, is kind of where everyone's got to be all in on.

• 10:36Brad Gerstner?

  Yeah, that is, I mean, I think if there's one surprise, you know, one answer on that, I, you know, I'd love to get your reaction to. So on the question of how much would it, you know, and I hear this 200 billion of CapEx going into the ground this year, how much return do companies need to see? So we had Satya present to us one answer. We had Philippe give us another answer today. Philippe, what he called his monkey math was that it was going to take 1.8 trillion dollars in order to provide a 25% return on invested capital. Okay. And of that 1.8 trillion, he went and said, if we got a 5% improvement in the labor force. Right? So you, I, I think what he was saying is we effectively take 5% out of the labor force,

• 11:21Brad Gerstner?

  that that would be enough cost savings to justify the $200 billion investment. Satya tackled it from a slightly different way, you know, just here talking at lunch. He said, if, if we, we currently have a global GDP growing at one to 2%. He said, if we could get that up to three to 4%, the incremental gain, you know, coming from that would be enough to compensate again for this because it would more than double the amount of money spent on technology. Convincing or not convincing? Seems like it answers the question.

• 11:48Bill Gurley?

  The Satya one, I buy more than, than, than the first one. The, the, the problem I have with the first one is simply that, you know, my entire time in, in technology, like these tools are competitive weapons. But if I get armed with them and my competitor gets armed with them, it doesn't necessarily increase. It doesn't create like free net income. You might die if you don't do it, but you gotta keep. It's the Red Queen effect. You gotta keep running just to keep up.

• 12:17Brad Gerstner?

  Yes. So capitalism ultimately competes away margins.

• 12:19Bill Gurley?

  Yeah, yeah, yeah. Down, down at the level.

• 12:22Brad Gerstner?

  Right. Benefits humans.

• 12:23Bill Gurley?

  Yeah, yeah, yeah. That's why I buy the GDP argument better.

• 12:26Brad Gerstner?

  Right, right.

• 12:27Bill Gurley?

  But anyway, look, the, the other thing that I would say that reinforces the super cycle is now that all the VCs are convinced and all the big tech companies are convinced, they're all plowing money into LLM research. Now, LLM might not be the best tool for every problem, but we're going to find out, we're sure going to find out if all edge cases possible.

• 12:50Brad Gerstner?

  Yes.

• 12:50Bill Gurley?

  Cause they're just going, they're going to stack stuff on top of it. They're gonna prop it up.

• 12:55Brad Gerstner?

  Yeah.

• 12:55Bill Gurley?

  We're gonna go try. I should include the CIOs. I think all the CIOs are doing this.

• 13:00Brad Gerstner?

  Yeah.

• 13:01Bill Gurley?

  One thing he did mention was software stocks are down. And I do think that this wave is being promoted at such a level that it sucks air from other things.

• 13:11Brad Gerstner?

  Yeah, for sure.

• 13:11Bill Gurley?

  At the CIO level, at the purchasing level, even even at just the attention of the buy side level.

• 13:18Brad Gerstner?

  Yes, I think it's important to point out that I think both Philippe and Satya believe. Satya even talked about it. He said, we have to prepare the company that there's going to be a mismatch in timing here between investment and return. These are nonlinear events. And just like we saw on the internet, you may you may go like this, draw down 30% on your way to a higher high. But I think from an investment perspective, whether you're a venture capitalist, or whether you're a public market investor, or whether you're a founder, one of the founders in the audience, you have to assume that there is going to be an AI winter at some point in time. That zone of disillusionment you and I have talked about before, that doesn't mean that it's not going to be bigger than we all think.

• 13:59Brad Gerstner?

  But it does mean that resilience through that period is going to be really important. If you run out of money during that period, it's all over.

• 14:06Bill Gurley?

  Yeah, and he made Satya made me think of something that I hadn't really considered before, but but because all AI tools are being delivered as a service in the cloud. There's just a massive amount of capex happening. And if you go back to the internet wave, you know, people were buying Cisco products, you know, maybe WorldCom, you know, was putting putting capex into the ground. Equinix was putting capex into the ground. But it wasn't like Microsoft or or Netscape or whoever, you know, the Yahoo, they weren't really plowing this into the ground. And I think the risk of the the type of things that could happen with a reset are higher.

• 14:47Bill Gurley?

  When you're putting all this into the ground and Satya very quickly said this is a supply driven wave. And I think up to date, that is true. We're building ahead of demand. A lot of the a lot of the startups and CIOs qualify the. Current AI work is experimental.

• 15:06Brad Gerstner?

  Right.

• 15:06Bill Gurley?

  Not all of it. I mean, the coding stuff, we've been through this. Like, there's a lot of it is real. But some of it is still experimental. So if there were any hesitancy or whatever, or if we get this, you know, if we build too much CapEx or whatever, it could be, you know, there could be, there could be costs.

• 15:21Brad Gerstner?

  You know, back to the GDP thing, you know, I thought it was really interesting. Satya, you know, said, think about how a global company had to do, you know, uh, simply had to be, do their annual planning, right? Pre-personal computer, pre spreadsheet, right? Pre-internet. And i- i- it's no wonder that massive productivity was unleashed in the eighties and nineties. I mean, the productivity gains in the nineties were so great that the US government ran a surplus, if you remember.

• 15:51Bill Gurley?

  I don't remember that.

• 15:52Brad Gerstner?

  You know, at the end of the nineties. Do you remember? Because it lasted about 10 seconds.

• 15:56Bill Gurley?

  Well, also because Clinton cut taxes in front of a, and the market was up 30%.

• 16:01Brad Gerstner?

  Sure, sure. But the, the productivity gains to come out of that are undeniable. And I think there's reason to believe that the productivity gains we're going to see here are at least as big. I think that's what these folks, you know, who are making these investments believe. But it was interesting that Satya said, here we are, I'm a, you know, I'm a software business, and I'm investing more in CapEx than industrial companies. And he spent a lot of time talking about what it meant to be a lean operator when you're investing at that level of CapEx.

• 16:31Bill Gurley?

  50 billion a year, I think.

• 16:33Brad Gerstner?

  Right.

• 16:33Bill Gurley?

  Yeah, that's a lot. One other thing that Philippe said that really caught my eye, and maybe he was trying to be provocative, but he implied, you tell me if I got this wrong, he implied that in the modern era, you need to be $10 billion to go public.

• 16:48Brad Gerstner?

  Yeah.

• 16:49Bill Gurley?

  Market cap.

• 16:49Brad Gerstner?

  Yes.

• 16:50Bill Gurley?

  Which, if it's 10 billion or bust, that's a bitch, man.

• 16:56Brad Gerstner?

  Well, so, so, so, so let's dig into that. I mean, you know, we went through the public market stuff. I think the punchline at the end of it was the market's up a lot in 23 and 24. You know, we haven't, multiples have not expanded that much, but it does assume that revenue continues to grow.

• 17:10Bill Gurley?

  Right. He said Nvidia is not expensive on an earnings basis. So if it's gonna miss, it's because either revenue growth is gonna stop or margins collapse and prices.

• 17:20Brad Gerstner?

  And the second, you know, it seemed to be that they were, we suggested last week, the smart money was beginning to nibble on software. The software is not dead. You know, he seemed to suggest it's just the last thing to benefit from AI. And so I've talked to a bunch of folks here, and I would say the number one thing that I hear people buying are not the semis stocks that have worked so well over the course of last year, but everybody's interested in buying software at five and a half times revenue, forward revenue, which is, as we've said, 20% below the 10-year average. They may be early, but I think people are really interested. They don't think software's dead, and they think that, you know, software starts to look interesting.

• 18:01Bill Gurley?

  I think, I think there's a, there, we'd have to dig in it later, but I think there are certain types of software companies that people think are more under threat from LLMs, more workflow than, than who's the data repository. There's questions about, you know, whether LLMs replace queries and, and who sits in the stack where. And so, and, and there are some people that still take, you know, I, I view the, the width of what people are willing to believe about AI is really wide. And the skeptics are like, LLMs are topping out, but the people on the opposite end are like, oh, this is just gonna replace all the software I have.

• 18:38Brad Gerstner?

  Right. And the truth is probably in the middle.

• 18:40Bill Gurley?

  I think it's probably.

• 18:40Brad Gerstner?

  And like, as analysts, our job is to figure out, you know, you know, exactly where that is. So you started to reference, you know, after we did the deep dive this morning on public markets, then we talked about venture markets. You know, Thomas took us through that and, you know, I'll, I'll lead up to the conversation on IPOs, which I think is really interesting. We've talked a lot. But he basically started by saying VC is normalizing. You know, if you look at 2021, he showed a slide. We had 715 billion of venture that went into the ground in 2021. We've talked a fair bit about that. This year, they're forecasting about 250 billion into the ground into venture. So that's about one third of the levels we were in 2024. However,

• 19:24Bill Gurley?

  I think venture, as they measure it, has become to mean non PE private investors.

• 19:31Brad Gerstner?

  Correct, correct. I think it's all technology investing that's not public and it's not private equity.

• 19:37Bill Gurley?

  Yeah.

• 19:38Brad Gerstner?

  And then they, they looked at the cul-de-sac of, of AI. Year to date, I think 200 deals, 22 billion of investment. Average valuation, wait for it, $1 billion, right? Average round size, 120 million.

• 19:53Bill Gurley?

  Yeah, the round size and the valuation were five to six X. The non-AI companies,

• 19:58Brad Gerstner?

  Correct.

• 19:59Bill Gurley?

  Five to six.

• 20:00Brad Gerstner?

  Correct. And that was, I thought what was so interesting about the way they teed up the presentation on venture, right, was he then took us through almost a bit of admonishment for some, or at least encouragement, strong encouragement for the founders in the crowd that may have raised money between 2020 and 2022. He took, he, he, here's a slide where he said, you know, outside of the AI unicorns, the other 1,400 unicorns are not raising any money, right? And he said, there's too many competing opportunities in the public market, risk-free rate of 5%.

• 20:40Bill Gurley?

  Bitcoin.

• 20:41Brad Gerstner?

  Yeah, Bitcoin, he said, we still have too many unicorns at 1,400. Here, he showed a slide of the LinkedIn employee growth within those 1,400 unicorns has gone from 75% to 10%.

• 20:55Bill Gurley?

  Mm-hmm.

• 20:56Brad Gerstner?

  And that the revenue growth has also decelerated dramatically. Now you and I have been talking about this.

• 21:01Bill Gurley?

  No, no left axis on that one, but

• 21:04Brad Gerstner?

  Correct.

• 21:04Bill Gurley?

  Down and to the right.

• 21:05Brad Gerstner?

  And shockingly, IPOs in 2, in 2024.

• 21:10Brad Gerstner?

  2021 through 2024 are fewer than during the great financial crisis in 2008.

• 21:16Bill Gurley?

  No IPOs, 1,400 private unicorns, most of which have not had a funding round since, the majority of which, and he has a slide on that, have not had a funding round since this quote "reset" in 2023. And so maybe hasn't, haven't faced the, uh, taken their medicine as to what their real valuation is. And then he showed a slide that, where they, I don't know how they, maybe it was in their own portfolio, but where secondaries are happening, and they're happening at the exact same multiple as the, the, the public companies. And so

• 21:50Brad Gerstner?

  So just to, just to put it, the secondary sales in the venture market are 50 to 75% off. The highs, just like the public markets, retraced

• 22:00Bill Gurley?

  The non-Mac-7 companies that are public.

• 22:03Brad Gerstner?

  Correct.

• 22:03Bill Gurley?

  And so I, I do think, I, I often hear people on a board say something like, "Well, good thing we, we didn't go public, or good thing we aren't public."

• 22:12Brad Gerstner?

  Exactly.

• 22:12Bill Gurley?

  But, but they're sitting on the board of a private company that's at 150 million in revenue and growing 10%.

• 22:19Brad Gerstner?

  Right, right.

• 22:20Bill Gurley?

  Like, you, you just have your head in, in a hole in the ground, like an ostrich. You're not better off. There's only one reason you might be better off. You might be able to persuade your employees that things aren't as bad. Whereas if you're public, you're looking at a $4 stock.

• 22:35Brad Gerstner?

  I could actually say, Bill, that you're worse off. And here's the argument.

• 22:38Bill Gurley?

  I, I agree with that.

• 22:40Brad Gerstner?

  For why you're worse off. I mean, when the public markets gives you a sign, right? Like it did Meta or Facebook in the fall of 2022, and the stock goes to $90 a share. Right? There's nowhere, there's nowhere to hide. You confront the brutal truth. You confront the reality. Public market investors, you know, it's the collective wisdom of that crowd. And I think it motivates the company to do the things they should do. And they do them faster than they would otherwise do. And Zuckerberg led the charge on this, and his stock has quintupled.

• 23:09Bill Gurley?

  I could not, I could not agree more.

• 23:12Brad Gerstner?

  And so I just see, I, I see, you know, the irony there is you have a company that went from 86,000 employees to 69,000 employees at a fast rate than I've watched most of these private unicorns move. You know, the private unicorns hid in the cocoon of the fact that they didn't have to get marked daily. And that's why I would, you know, I really don't like the stay private forever idea. It works for some companies where you have an Elon Musk running SpaceX and you know, the intrinsic motivation and experience will lead to a good outcome. It doesn't work well for 300 and 150, bless you, of the other unicorns that are out there.

• 23:49Bill Gurley?

  Yeah. And to play devil's advocate, I think some people are going to make the argument that you don't want to be a a micro cap public company and that no one will pay attention to you and no one will cover you.

• 24:00Brad Gerstner?

  Yeah.

• 24:01Bill Gurley?

  Um, I still say like, if you're liquid, you know, that's better off. You've, you've converted away your Lick pref stack. That's better off.

• 24:08Brad Gerstner?

  You want me to tell you why I don't believe that?

• 24:10Bill Gurley?

  Yeah.

• 24:11Brad Gerstner?

  Okay. Because investors are greedy.

• 24:13Bill Gurley?

  Right.

• 24:14Brad Gerstner?

  Greedy investors will find you if your company is growing really fast and has great margins. Look at Sam Serra, okay? Sam Serra went public and everybody said too small, not enough coverage, stock's not working. That, that company has been a grand slam home run in the public markets. Okay? The fact of the matter is if you're only growing 10% and you're marginally profitable or not profitable, I don't care if you're in the venture markets or you're in the public markets, you gotta fix your business model. Cause that's never going to fetch a big multiple, but let's get to the question on the table. IPOs, okay? So what to do about it? What to do about it, you know? And I think, um, there's this question that we've debated amongst ourselves with our friends,

• 24:58Brad Gerstner?

  with Thomas and Philippe about how big you need to be. Um, I think he was speaking at a conference in New York. Um, and he reiterated it here. He thought you needed to be $10 billion, okay? In total market cap in order to go public. Okay? You've been at this for 25 years.

• 25:15Bill Gurley?

  Yeah.

• 25:15Brad Gerstner?

  Tell me, tell, tell us your response to this question of whether or not, because that implies it, if you're a software company, you need to have like a billion in revenue to go public. Do you think that's true?

• 25:26Bill Gurley?

  Well, I don't, but, but let me tell you, let me take a quick aside and. Let's say that is true. If you have to, if you have to be at a billion in revenue and growing.

• 25:35Brad Gerstner?

  Yes.

• 25:36Bill Gurley?

  Like if you want a 10x multiple, you have to be growing 30, 35%.

• 25:39Brad Gerstner?

  30%.

• 25:40Bill Gurley?

  And, and if, if every company is going to raise 500 million to a billion dollars, and if that's the only way they succeed if they get to that level.

• 25:49Brad Gerstner?

  Yes.

• 25:50Bill Gurley?

  This game just got a lot harder.

• 25:52Brad Gerstner?

  Yeah.

• 25:52Bill Gurley?

  Like this is massive risk on, like, like, like, and I even wonder if part of the reason that you have this 1400 sitting there is we forced the, so much capital on these companies that, that they had to grow up so fast and they had to do things that weren't kind of the normal way that you would grow a company, right? Where you stay close to the unit economics and, and, and you learn as you go. Like if you have to just be all, and you know, we, we talked about it last week. There's four companies in the coding AI space that raised over 400 million each. You, you think there'll be another round behind that?

• 26:33Bill Gurley?

  Like they're, they're all going to pull out the, uh, the huge guns and point them at one another and you're going to execute in a way that's more risk on. And so if, if that's the new world order, it's, it's a form of capital competition and gamesmanship that is much different from classic venture capital. I hope it's not true, but if it is, this is a, this is a different game.

• 27:01Brad Gerstner?

  Yeah. I mean, uh, listen.

• 27:02Bill Gurley?

  It's like heavyweight fighting.

• 27:03Brad Gerstner?

  I think it's, I think it's a good provocation. Um, Thomas presented other paths to liquidity, M and A, uh, you know, PE partnerships, he, he, you know, he put up on the screen. But here's what, what, what I see. Okay. Um, we've recently sold two companies in our portfolio. Um, one was reported by the Wall Street Journal for a billion to $2 billion to Databricks called Tabular. We have companies that have gotten fit and that are re-accelerating, re-accelerating their growth rates. And then we have two companies in the IPO pipeline, right? Like I just think this has taken longer. than any of us think. Out of that 1,400, I suspect that 60 to 70% of those companies are never going to go public.

• 27:48Brad Gerstner?

  Okay, so these are companies that are either going to have to get sold off their, you know, they passed the peak in terms of their growth rates. They don't have enough revenue scale in order to get public. But I think that there are going to be 30 to 40% of those that certainly could get public. They may have to accept like Instacart did. By the way, look at Instacart. They accepted a big down round from their last private round. They went public. The stock traded down, didn't trade that well, and I think the stock is up well over 50% now because they've executed in the public markets. And so I can't, I can't, you know, I can't reinforce enough. Amazon, since they went public, I think they've had four periods where they were down over 60%.

• 28:31Bill Gurley?

  I understand.

• 28:31Brad Gerstner?

  And so.

• 28:32Bill Gurley?

  And a company I mentioned from the previous wave, Equinix, went, went from 200 down to 2. And today is at 778 and an $80 billion market cap. So it can happen. I thought we would see way more IPOs. I thought people would come public to, to kind of cleanse their cap chart and wipe out the Lick prep. Maybe we still will. The, I, I would, I would encourage the regulators to do anything they can to make sure we don't have a systematic problem that's causing being public to be too expensive.

• 29:07Brad Gerstner?

  Yeah.

• 29:07Bill Gurley?

  And I know that, that the reality we talked about on the last podcast, if that comes to be true, where just way fewer companies go public and all the growth is in the private markets, that the Ginsler types are going to come out and say, that's bad for the retail investor and they're going to want to fix it. I hope the way they try and fix it is to look through the cost of being public, all the cost of being public and say, what can we do as regulators to improve that situation? That's what I hope. The second thing I would like to do on, on this podcast, assuming that we have some, a really good set of listeners out there. If there is a banker out there that thinks like the Four Horsemen did, who says.

• 29:50Bill Gurley?

  I don't need you to be 10 billion to go public. I would love to take you public at 100 million in revenue. Come see me, call me, I will connect you to companies, I will promote you. I, we need someone willing to do that. I get the sense that the three big guys, JP Morgan, Morgan and Goldman just aren't that interested, you know, and so I, I think, I, I, I do think some percentage of the 1400 should go public and I don't think that waiting is, is helping them at all. And so I'd love to help find the people that can be their stewards.

• 30:28Brad Gerstner?

  Let me, let me crystallize a question for you, okay? So it was rumored last week that OpenAI is run rating three and a half, four billion dollars in revenue, which is, you and I, it's extraordinary, right? And I think it's pretty evenly split between a consumer business and an enterprise business. I think that's even more extraordinary.

• 30:49Bill Gurley?

  I have, I have some potential data on that.

• 30:51Brad Gerstner?

  Okay, and on, on top of that, I think that that team, right through the teeth of so much noise in the market, right, like has withstood incredible turbulence.

• 31:04Bill Gurley?

  They have.

• 31:04Brad Gerstner?

  To execute the way they have, okay, like faster than any other company I've ever seen, delivering great products in the market, right, they have Greg Brockman in the basement churning out product, no matter what happens in that business. They have the big announcement at WWDC at Apple last week, which I think was, you know, another masterclass in deal making and brand building by, by, by Sam and team, okay? So you got four billion in revenue, you're growing well over 100% a year.

• 31:33Bill Gurley?

  You just marked it up a little bit.

• 31:35Brad Gerstner?

  Three and a, three and a half billion, whatever you, whatever you want to call it. Would you go public if you were, i- i- if you could do a conversion to a for-profit company, would you take OpenAI?

• 31:44Bill Gurley?

  There's a lot, there's a lot in that second part. By the, by the way, just to, to fill in some of this, I would, and I, I could be wrong by math, but I went into one of these credit card survey things and I looked at, at OpenAI and assuming that people don't pay for the API with a credit card, so the credit card pool. Just represents, I compared it to a company where I knew the revenue. It would imply that they're about 2.1 of the 3, 4 is the consumer business.

• 32:09Brad Gerstner?

  Yeah.

• 32:10Bill Gurley?

  At $20 a pop.

• 32:11Brad Gerstner?

  Yeah.

• 32:11Bill Gurley?

  So 2/3 the consumer business.

• 32:13Brad Gerstner?

  Put me in it and I love it.

• 32:14Bill Gurley?

  Well, there's one other thing that I could look at in the, in the credit card data. At least for the cohorts that are old enough, the churn's about 65% annually. So they're only 35% retaining, which Saxon hinted at on all end. And, and maybe the reason that, I think Sam at one point said he didn't really see the $20 thing as his future.

• 32:37Brad Gerstner?

  Right, right.

• 32:38Bill Gurley?

  But would I encourage them to go public? I, I, um, well, they, they just hired a very reputable CFO, so maybe they're thinking about it. The reason I think they would do it is if they, they, first of all, they're very good at, at self-promotion and, and they're very good at promoting the company.

• 32:56Brad Gerstner?

  Yeah.

• 32:57Bill Gurley?

  They're very good at enterprise sales. They've convinced Apple, but many, many others.

• 33:01Brad Gerstner?

  Yeah.

• 33:02Bill Gurley?

  And so if they thought they'd get a premium multiple.

• 33:05Brad Gerstner?

  Right.

• 33:06Bill Gurley?

  And could get out there and have access to capital at a much cheaper price. Hand liquidity for the employees, which are now having to arrange, I, I could see it.

• 33:18Bill Gurley?

  I, I fear the, uh, I fear that the kind of current wisdom of the entrepreneurs to not do it.

• 33:25Brad Gerstner?

  Right. Well, this is my, we have an opportunity to make a case.

• 33:28Bill Gurley?

  Yeah.

• 33:28Brad Gerstner?

  To Sam and to Satya. And here's what, here's, here's a bit of the case that I would make for him. Number one, I think this is, you know, when you build AI, I think it's going to be about trust and safe, safety. And I think being a public company, right? Being exposed to public disclosures, uh, the scrutiny of the SEC, all the things that come with that from public market investors, um, you know, I think is a good thing for that business. I think it would force them to tighten everything up. Now, I'm not talking today, but if I were on that board, um, you know, and maybe we'll tell this to Larry tonight, I would say, you know, let's start moving the company in a direction as though we were public. Right? Let's do the conversion to a for-profit business enough. For this funky

• 34:10Bill Gurley?

  By the way, I don't think that's trivial.

• 34:12Brad Gerstner?

  Funky, I agree. I'm not, I'm just telling you, like, it's doable. And the second thing I would say

• 34:18Bill Gurley?

  I think it's only doable by putting a significant chunk of the company in the not

• 34:23Brad Gerstner?

  Yes.

• 34:24Bill Gurley?

  Like a share base in the nonprofit, not this thing where they get it at the end. And by the way, you can't take public that structure.

• 34:30Brad Gerstner?

  So here's, here's, here's what I don't like. I don't like the idea that you could have a company that could theoretically go to a trillion dollars in enterprise value. Could theoretically develop AGI and a retail investor never has a shot to invest in that company. I just don't think that's good for the structure of our markets. I think for

• 34:50Bill Gurley?

  I think

• 34:50Brad Gerstner?

  I think it's better for the company. I think it's better for the markets. And frankly, I think it solves one of Microsoft's problems as well. Um, and we've seen all of the, the corporate, uh, you know, uh, uh, some of the chaos around this business. I actually think it would be good for Sam and Greg and Brad and team, right, to do that. Now, of course, you got to put it on a path. It's probably takes a couple of years to get there. But I mean, to me, that is the iconic question. If four billion isn't enough, Bill, you know, with a $90 billion private market valuation, then what is? And I, I just don't think it's going to be looked on that well. If all of a sudden, all the best companies in the world, right, are only available to the guy, to the folks at this conference and not available to

• 35:34Bill Gurley?

  And they may want to do acquisitions and getting the cap chart in a more, um, traditional state would make that easier, public or private. So, so maybe, maybe, maybe we'll see that happen. I do think that the thing that may help us unlock this IPO, um, problem, if you will, is, is a couple of AI companies going out.

• 35:56Brad Gerstner?

  Yeah.

• 35:56Bill Gurley?

  So it, and, and maybe that will even make it easier on the others, just so that we start to prime the pump a little bit. So I think you'll start to hear chatter on who are going to be the first, you know, AI first companies to go public. There's rumors out there about CoreWeave. There's articles about, uh, Cerebras. So it'll be interesting to see. I think it would be very helpful for the ecosystem to get a Couple of those under our belt.

• 36:21Brad Gerstner?

  Well, there's talk that that, oh, Mr. Lefan himself, would you like to join us? I mean, just come on, come on up here, join us for a minute. We're live right now. Philippe, we're just, first, thank you.

• 36:33Bill Gurley?

  Yeah.

• 36:33Brad Gerstner?

  This is, you know, one of our favorite, if not our favorite, you know, conference in the investing business. And what I said to start is you are positive some, you have all your, the folks that most people would think of as your competitors. You know, you invite them here, you collaborate, you build partnership.

• 36:49Speaker 02

  I'm thinking about changing my mind.

• 36:55Brad Gerstner?

  So we were just talking about the $10 billion to IPO, right? Which implies something around a billion dollars in revenue to go public, right? Like, and I was saying, I would encourage OpenAI to go public today, right? We think more, I think, and Bill agrees, more of these companies should go public. We think they can go public smaller. We understand if you're a micro cap and you don't have great margins and you're not growing fast, you can't go public. But aren't there a lot of companies that could be public today?

• 37:24Speaker 02

  Yeah, I mean, if you look at some of the big unicorns, they could definitely go public. But I think there's two criterias. One is can you get to a billion of revenue?

• 37:33Brad Gerstner?

  Yes.

• 37:33Speaker 02

  OpenAI would be check, check, check the box. But the second one is, do you have a sort of a break even or a path to break even? And the only thing, I don't know the specifics of OpenAI is, but what if you had a billion in revenue? But like an enormous cash burn? And by that cash burn is really smart. It helps them consolidate as a clear number one. But will the public markets be scared if the cash burn is disproportionate? But the private markets, the investors, they know that there's a bit of a winner take all and they might be more patient. Now, that's just on OpenAI. SpaceX, amazing company. It's a sort of quasi-public, but why don't you give retail investors a chance to invest in SpaceX? They should have that right.

• 38:18Bill Gurley?

  It's been rumored that it might happen. If you're right about the billion, though, like if you have to have a billion in revenue and be growing, right? You gotta be at, what, 30% growth, 25%? Like, if that's the hurdle rate, then how many?

• 38:34Bill Gurley?

  VC companies are ever going to make it to that level like like that'd be my question.

• 38:39Speaker 02

  Listen, I was speaking to your former colleague Eric. At Benchmark and he's like, this is a problem for the venture business. This is a problem for our portfolio. There's gonna be less exits and bigger exits. So it's gonna make the business that much more risky. And do we need to adapt in ways that maybe you have to reinvest behind your best companies? Because there's not gonna be as many of them. Do you need to provide companies the ability to win in other ways? What's weird to me is that the government, by trying to protect small companies and not allowing big companies to buy small companies, so big companies get bigger.

• 39:20Speaker 02

  I think it's got the reverse effect where now small companies have one less chance of winning and thus the public market is even less willing to hold a small company because it's less willing that it gets bought. And so why bother with small companies when you can just on big, guys, I love you and I hope you reinvent me, re-invite me on this amazing podcast, but I'm going to do it with some other people.

• 39:43Brad Gerstner?

  Thank you, brother. That's great.

• 39:45Bill Gurley?

  That's good timing.

• 39:46Brad Gerstner?

  By the way, he's also just one of a kind human.

• 39:49Bill Gurley?

  I agree with that.

• 39:50Brad Gerstner?

  And so it's, it's, it's fun to see him and glad he jumped in here. You know, Bill, I think it's a, you know, one of the things he was talking about got me thinking about something, you know, boards of directors, you know, they have influence over whether these companies go public. Okay. And it starts early, you know, in the boardroom about setting the conditions and building the company in a way it's built to go public. And I think one of the problems, you know, here we talk about it reflexively. I think we're gonna look back at this. I happen to be more optimistic on this. I think we're, I think we're gonna look at this period. It's going to be a byproduct of the age of excess. This is gonna be like all these companies raised too much money at too high evaluation

• 40:33Brad Gerstner?

  during the zerp period and therefore they couldn't go public. And frankly, too many boards bought into this stay private forever business. I think there is a whole new category of company. Coming that I hope that you lead the charge, I lead the charge and they lead the charge. There is no reason these companies, if we set the conditions early in the business, stay fit, get profitable. You know, you don't have to grow at all costs, don't raise too much capital, don't set the valuations too high. You know, they can get public. Um, but, uh, you know, it's going to be an interesting.

• 41:06Bill Gurley?

  Before we transition to our last topic, I would point out one irony. Um, from all that we heard today and what you just said, which is if the 1400 number of private unicorns that are the result of the age of access.

• 41:22Brad Gerstner?

  Yes.

• 41:22Bill Gurley?

  Is a problem. It's not clear to me that we're doing anything different in AI. Aren't we doing the exact same thing? So couldn't we end up with the exact same.

• 41:32Brad Gerstner?

  Ron, it's I, you know.

• 41:34Bill Gurley?

  We just said five X and six X higher valuation.

• 41:37Brad Gerstner?

  You said something to me a few weeks ago that I think is spot on, right? I think 15 years ago, not a lot of people talked about the power law. Right? Maybe there was a small cadre, a small membership, you know, on Sand Hill Road that talked about power law. But today, everybody knows about power law distributions and venture returns, right? And so if there is any sniff that a company in AI land.

• 41:59Bill Gurley?

  I agree.

• 41:59Brad Gerstner?

  Is going to be the winner.

• 42:01Bill Gurley?

  They get 400 million.

• 42:02Brad Gerstner?

  They, the amount of capital that chases it. So, um, you know, I, I think that's an interesting question. I think it's very difficult for founders to resist the urge to take the money. I think it's very difficult for founders to resist the urge to take the highest valuation. I encourage them to reverse engineer from the outcome, the liquidity outcome they hope to achieve. If you take a lot of money at a valuation well over a billion dollars, the probability of you getting sold or you getting public is just a lot harder. That's just the truth. Before we move off of the venture section, one of the things I love, there are a bunch of founders running around here. You and I, you know, uh, met with one or two of them earlier. And just a few of the anecdotes that I'm, you know, that I'm seeing and I'm hearing.

• 42:47Brad Gerstner?

  You know, um, I spent some time with Scott Wu. I'm an angel investor in cognition. And, you know, Scott is building, you know, Satya referenced Tim Wall on stage says, you know, Copilot is building effectively autocomplete, allowing engineers to become more productive. You know, cognition is building engineers. And I asked Scott, I said, how many employees do you have? Because I think he has tens of thousands of enterprise customers already. And he said 18. I said, how do you do all this work with only 18 people? He said, we have 100 Devens. We have 100 agentic engineers that are helping us write code. That's a theme I've heard from Glean, I heard from Distill, I heard from cognition, this idea that we're going to have, and Satya referenced it.

• 43:32Brad Gerstner?

  A workforce of people, right? In the not so distant future, that are going to be able to take these multi-step functions. Go build me a website, right? No longer just complete a line of code, but complete an entire task. You know, we were just with, you know, our friend from Glean. And who's building a great enterprise search product, but you know, you don't have to squint that hard to think that that could be your enterprise assistant. Right? That could go perform tasks on your behalf. So, put me in the camp again, I don't know the time series. But I do think that we're on a path toward human replacement, not just augmentation.

• 44:14Brad Gerstner?

  Now, I think those folks in this period of dislocation will get consumed in other tasks. So I don't think this is a negative for society. But I do think you'll have dislocation before you necessarily have that growth on the other side.

• 44:28Bill Gurley?

  I'll just say one thing real quick, was I gave a speech 20 years ago or so about how we evolve with our tools.

• 44:34Brad Gerstner?

  Yeah.

• 44:35Bill Gurley?

  You know, and you wouldn't, you wouldn't try and, you know, run a high production farm without a tractor, you wouldn't do it with a plow and an oxen. And that just always has been true in our society. And so, if you are a programmer who's worried about this, the best thing you can do is run at it. Like, go hang out.

• 44:57Brad Gerstner?

  Yes.

• 44:58Bill Gurley?

  Play with cognition. Get into GitHub Copilot, like that, and learn. You know, Satya said that the ordering of the workflow of writing code is changing as a result of this. You won't know that unless you're in it.

• 45:13Brad Gerstner?

  Hundred percent, hundred percent. And a lot of the talk here is not just about who the winners are. It's who the losers are. Right, the losers in the public market, you know, companies that are slow. Think about, if you were a company slow to adopt the internet in 2000, if you were a retail enterprise, you said, I don't need any commerce capability, right? Right? You were, that was a very bad decision. I think in 2024, if you're any company and you say, I'm going to be, you know, I don't need to do all this AI stuff. I don't need, you need to be there even if you choose not to adopt it because I think failure to learn how to reinvent your business. I don't think you have to worry about this. I think most of them are there. They're on it. They're on it. Well, another topic I think that, you know, we've talked

• 45:58Brad Gerstner?

  about on this pod, we had some developments on this week, you know, and I wanted to dig deeper in, and this is to the shareholder vote as it pertains to Tesla. So we know now that Elon has won the vote for a second time. Retail investors, I think, voted 90, 10 in favor. Institutional investors, something like 70, 30 in favor. I mean, even the passive ETF Vanguard voted in favor of the package. Okay. But there was a big reveal here this week. I think, I think some tectonic plates started moving on something that you and I have identified as an issue for a long time, and it relates to ISS, Institutional Shareholder Services, and Glass Lewis. So both of those organizations recommended

• 46:43Brad Gerstner?

  a no vote or a vote against the shareholder package. Okay. Now, that in and of itself is not that unusual, although I don't think it made sense because it was clearly in the best interest of shareholders, right? Stock would go up. It did go up. Right. And, you know, so I started looking in again, and I know you and I started talking about the background of ISS. And just as a reminder, you know, ISS was founded in 1985, and the mission of the company was to provide advisory services to institutional investors, supposedly to do research and governance on their performance and to help shareholders make informed decisions as to what would maximize their own value in the

• 47:25Brad Gerstner?

  business. And while all this sounds benign enough, many of us have argued over the That ISS veered off course, right? And this started becoming kind of this cudgel to, you know, to coerce board behavior into ways that they deemed, right? In maybe societal best interest or in their perceived best interest as opposed to the corporate best interest. You and I have both served on boards where board members have said, well, I can't do this or I can't do that because of ISS. We know some of the best boards in the world, like Netflix, takes it on the chin from ISS all the time because they don't do the things that ISS sanctions as worthy.

• 48:07Brad Gerstner?

  In fact, this got so bad that at the end of, or at the beginning of 2023, 21 state attorney generals, right? Wrote a letter to ISS demanding that they explain, and Glass Lewis, to explain their advocacy objectives, right? So in this instance, I think the fact that Vanguard, right? Which is passive, these are not active investors, that they came out and they voted in the opposite direction of Glass Lewis and ISS. I think it just laid bare some of the nonsense associated with these recommendations. And I really wonder whether this is going to cause a ripple effect,

• 48:49Brad Gerstner?

  right, where people start pushing back now on ISS and Glass Lewis, right? Because if a passive investor can do it, certainly. And the active investors from retail institutional, they rejected ISS and Glass Lewis straight out. So what do you, any thoughts?

• 49:03Bill Gurley?

  Yeah, well, a couple of things. So one, I actually spoke to some people at ISS in their research group prior to our SBC conversation. And it became clear to me from talking to them that they're mostly backward looking. They talk to investors after the fact and say, do they appreciate this particular thing or not? And they're not doing first principles thinking around shareholder alignment. And, you know, and you said it lost their way. I mean, it became a network effect, right? They, they, they charge both the company and the shareholder and like it certainly.

• 49:37Brad Gerstner?

  I mean, if there's a duopoly we should worry about in this country is probably ISS and Glass Lewis. We're seeing every board to follow their marching.

• 49:44Bill Gurley?

  And the number, and the number one, the number one reason I hear, very valid reason for companies to have super voting is so they don't get.

• 49:55Bill Gurley?

  Held up by these companies in their attempt to do the right thing and implement a compensation package that is aligned with shareholders. Correct. And as I said to you back then, and I believe even more today, and I've seen more copycats of it, the Elon package is the most shareholder-aligned CEO compensation package I've ever seen. I would be thrilled if all of my hired CEOs had a very similar package. Right. I'd be thrilled. Yeah. I think most of them wouldn't take it. Yes. Um, because it requires, um, outsized performance. Uh, I think it's excellent.

• 50:34Bill Gurley?

  I think that it's ridiculous that Netflix would ever get a no vote on anything because they've had incredible stock performance and, and industry-leading low dilution. Yes. With their very innovative. Right. Approach to compensation. It would, it would be fun to look at the distribution. I actually had a chance to talk with the co-CEOs recently and, and they were still getting pushed back and, cause I was applauding them on their structure and one of their board members says, "Well, they're, they are even considering change because ISF won't leave them alone." And it's just, it's horrific. But anyways, there's one other thing, you know, that I would highlight about this, um, that relates more to the Delaware situation.

• 51:16Bill Gurley?

  So it's my belief that the, um, that many of the attorneys and lawyers that live in the Delaware ecosystem, um, were very eager for Tesla to appeal this thing and push it to the Delaware Supreme Court. Um, has been wildly discussed here and other places. Um, the reason that people chose Delaware is a hundred years, I went back and looked up today. Got it. Um, over a hundred years of practice of being business-friendly. Obviously all these companies aren't located in Delaware, right? They're just choosing this, this, and they're, they're choosing this, this place because of its history of precedent and its history of, of, of how they adjudicate.

• 52:04Bill Gurley?

  Different things and people felt that it was in the company's best interest. Here today with the Tesla situation, we have a company whose stock performed incredibly well. And was brought to heel by a lawyer and a law firm with a contingent. You know, derivative lawsuit, their, their one um customer had nine shares of stock.

• 52:32Brad Gerstner?

  Nine shares.

• 52:33Bill Gurley?

  That went up.

• 52:34Brad Gerstner?

  Yes.

• 52:34Bill Gurley?

  So if you consider the fact that, oh, I could be a public company in Delaware, my stock could go up.

• 52:40Brad Gerstner?

  Yes.

• 52:40Bill Gurley?

  I can be, and then they asked for $5 billion in compensation, the lawyer.

• 52:45Brad Gerstner?

  They're still asking for it.

• 52:46Bill Gurley?

  And, and, and they had one customer in nine shares. Like, how do you ask for 5 billion? If, I will, I will say this, um, first of all, I think that these, these people that live in Delaware are very fearful that there won't actually um, be an appeal because then this thing just stands out there.

• 53:05Brad Gerstner?

  Yes.

• 53:05Bill Gurley?

  And I think it's horrible for the entire Delaware because if I were the governor of Delaware.

• 53:11Brad Gerstner?

  Yes.

• 53:11Bill Gurley?

  I would be scared shitless.

• 53:12Brad Gerstner?

  Yes, yes.

• 53:13Bill Gurley?

  Scared shitless about what might be happen. If this judge hands out any penalty anywhere close.

• 53:22Brad Gerstner?

  Yes.

• 53:22Bill Gurley?

  That has, that, that has this over 100 million even.

• 53:26Brad Gerstner?

  Yes.

• 53:27Bill Gurley?

  Um, I think companies need to consider leaving Delaware as fast as possible.

• 53:32Brad Gerstner?

  I mean, it, it, it, first, it's such a bad, you know, case law, right? In the state of Delaware, I mean, to your point.

• 53:41Bill Gurley?

  It would lead to vigilante lawyers chasing any company with high performance or a big market cap. And just trying to get them on a gotcha.

• 53:50Brad Gerstner?

  For sure.

• 53:51Bill Gurley?

  See if they can get a judge to give them this time.

• 53:53Brad Gerstner?

  Corporate, the corporate code that exists in various states around this country is very similar. There's a model corporate code and most of them adopt it that's predicated on Delaware's corporate code. What makes Delaware so different is 100 years of precedent of case law,

• 54:07Bill Gurley?

  No doubt.

• 54:07Brad Gerstner?

  Which is very supportive of a lot of issues which were important to companies. That predictability led companies to incorporate there. Now, we've thrown predictability out the window, right? And now we're talking about despite two shareholder votes that both voted in favor of giving Elon this package, both before and contemporaneous and now, that they're gonna go back if they award, I'm not $100 million, Bill. If they award $1, right? I think you're gonna see companies in the state of Delaware that leave the state of Delaware. And by the way, I think we should be encouraging them to leave the state of Delaware if that's the case. Because I would like to see a lot more jurisdictions develop a lot more friendly corporate codes, friendly precedent, you know, for these companies.

• 54:52Brad Gerstner?

  The reality is if we can't support a performance-based compensation package for a company, then what are we doing? Look at the garbage packages that people get paid tens of millions of dollars on. Stock goes down, companies are terrible, ISS is cheering that that's a good compensation package.

• 55:09Bill Gurley?

  And I mean, not to pick on one person. Not to pick on one person, but people have highlighted that the CEO of GM has made tens and tens of millions of dollars, stock hasn't gone anywhere. That's who, if they want to chase somebody, it's me chasing that situation. But I couldn't agree with you more. I think this is a very serious topic. I think that the, you know, even I think like the Wall Street Journal and New York Times, they missed this point. And as you said, if it's not about shareholder alignment, what's the point?

• 55:39Brad Gerstner?

  Right.

• 55:39Bill Gurley?

  And then the last thing I would say is we started by talking about the dirt of IPOs and why aren't companies going public? If this is the type of thing you expose yourself to by being public, then I understand why there are less public companies. And I actually think in addition to the fact that everyone in Delaware should be afraid of this, I think the SEC should be afraid of it. Like you shouldn't want this type of activity, this type of derivative suit to come to the table. Because with nine shareholders and it asks for $4 billion. It's clearly a shakedown.

• 56:16Brad Gerstner?

  Yeah.

• 56:16Bill Gurley?

  You you wouldn't want that in your public market.

• 56:19Brad Gerstner?

  Right. How do how do we give assurances to other companies that are reincorporating in Nevada, reincorporating in Texas, you know, Tesla's moved to, you know, was approved to move to Texas. How do we give them comfort, you know, that they're going to be protected there against these types?

• 56:36Bill Gurley?

  I I I have work to do. I need to go learn more.

• 56:39Brad Gerstner?

  Yeah.

• 56:39Bill Gurley?

  And I, you know, as much as I would say that the governor of Delaware should be afraid, the governor of Nevada and the governor of Texas should be putting together a task force to take advantage of this and to answer the question that you posed, like what needs to be in place? Can you borrow some of the precedent case law? I don't I don't know how it works, but like, it's a it's a I I'm shocked based on everything I've been told my whole life about why, you know, you say, why are all these companies incorporating Delaware? Oh, it's the most business friendly state from a from a judicial standpoint. This blows that up.

• 57:17Brad Gerstner?

  Well, I mean, one of the things I again, I'll go, you know, call my corporate law buddies up as well. Why can't the state of Texas say, you know, because you can't just make precedent up. Precedent has to be the byproduct of somebody bringing in a lawsuit. That just takes time. But you can draft it into your corporate code provision. Like you could simply say that, you know, we're not going to allow these type of derivative lawsuits with, you know, that that are totally, you know, a farce with nine shares to be brought in $5 billion of, you know, of awards.

• 57:46Bill Gurley?

  I suspect I suspect you could take a industry leading L L M and scan through the case precedent and help codify.

• 57:54Brad Gerstner?

  Yeah, you know, for sure. So tonight you and I and Philippe have the, you know, we're going to do a panel with Larry Summers and we're going to talk a little bit about, you know, what the world looks like in 10 to 15 years as a byproduct of AI and some of the consequences, you know, that we may see. And when you abstract away the next five years, you know, because who knows how long this is going to take and whether we bump up against scaling laws and and all these other things, when you look out 10 To fifteen, what you know, any thoughts about, you know, what you want to hear? Maybe from Larry or, or, you know, big picture thoughts that that you have? Do you think the world is over its skis again, Bill? Or do you think this is, is this, is this 2000?

• 58:37Brad Gerstner?

  Where we're going to go through perhaps a little bit of a rough patch here. But when we look back 10 or 15 years, it's going to be way bigger and way more consequential than we thought.

• 58:45Bill Gurley?

  I didn't know you were going to ask me this question, but I'll tell you the one thing that that's on my mind. Um, and then I'll ask you the same question, but I, I really don't believe in the deglobalization push that's coming from either of these presidential. And I just don't believe in it. I believe in Ricardo's comparative advantage. I believe in lifting all people out of poverty, not just people that happen to be born in the same country as you are. And that happens through globalization. And I just think more people are like, the most people that are ever been made better off by one person was in China when Deng Xiaoping brought half a billion people out of poverty. And that happened by introducing capitalism.

• 59:27Bill Gurley?

  And I, I just hope we can find a way to stop vilifying China and to stop thinking that you're going to re onshore a whole bunch of manufact. I don't think we'll be competitive globally.

• 59:39Brad Gerstner?

  Yeah.

• 59:40Bill Gurley?

  Anyway, that's what's on my.

• 59:41Brad Gerstner?

  I mean, it's, it, it's an interesting question. If you, if you flipped it back around, I'm really interested in the productivity gains. Um, you know, that I think we can achieve, like the big unlock here. I'm interested in if he sees those same level of productivity gains that perhaps we saw in the eighties and nineties. I'm really interested in how he thinks about our national competitive advantage. Right? Like the United States, if you just look at the performance over the last, right? The last 10 years has been a byproduct of a lot of this globalization. Um, but I also see the flywheel spinning. Like you just look around here, we have a system of risk capital that's better than any, anywhere in the world. We have a system of risk taking and entrepreneurship that's better than anywhere in the world.

• 1:00:25Brad Gerstner?

  The rate of innovation, better than anywhere in the world. And so to me, um, it also.

• 1:00:31Bill Gurley?

  Well, let's open up that skilled immigration gap.

• 1:00:33Brad Gerstner?

  Yeah, no, I mean, like, that's, you know, absolutely one. And I was, not to go, you know, off piece here, but I was talking with, um, you know, the president of a major, you know, fintech company last night, public company, who was at the business roundtable, uh, you know, with Trump. And he said, you know, they were all shocked, their jaws were on the ground. Trump walks into the room, starts talking about immigration, you know, and while he, he says, we got an illegal immigrant problem, we gotta, you know, we gotta tighten the borders. They said it was the first time they ever heard him say, and I gotta solve the problem for everybody in this room, how I get you more talented workers. And he proposed something, apparently at the roundtable. He said, anybody who comes here for a four year education, completes their degree in the United States, we're gonna give them a green card. I liked it.

• 1:01:18Brad Gerstner?

  Okay. Like, if that's true, this is one of our huge issues, right? This is the best place on the planet to start these businesses, uh, you know, because of ecosystems like this. But ultimately, you look at, you know, Elon came here, right? Larry and Sergey. You don't have to sell me. You know, so, um, great to be with you. Yeah, good to see you. I look forward to chatting more tonight, and, uh, thanks for having us. Yeah.

• 1:01:51Brad Gerstner?

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