AI’s next big test: the public market

Reid and Aria explore what the coming wave of AI IPOs could mean for the future of technology, investing, and the broader economy. They discuss why public ownership may become an important way for society to participate in AI’s upside, where Reid sees the strongest long-term opportunities across the AI landscape, and why the next generation of software engineers will be defined by managing AI agents. They end the episode examining the rise of AI-generated music, what it means for creativity and copyright, and why AI should be viewed as a tool that expands human expression rather than replaces it. To watch Reid’s Pi Day music video: https://www.instagram.com/reel/DV3-Pw8EZ7x/?hl=en

• 0:00Speaker 00

  Hey everyone, this is Aria. Just wanted to let you guys know that we recorded this episode before the SpaceX IPO, as there's some discussion of SpaceX in the show. Enjoy.

• 0:08Speaker 01

  Reed, it is great to be here. And for listeners, a quick heads up that today actually marks my last Reed Riffs until the fall. I am taking the summer off Reed Riffs, but Reed Riffs isn't going anywhere. It's just getting some new company. You're in excellent hands. And so I'll just say to people, get excited. We have some incredible guests coming this summer on Reed Riffs. All right, so jumping right in. Over the past month, it feels like the entire AI industry has essentially moved towards going public all at once. Alphabet pulled off the largest equity offering in corporate history, $85 billion with Warren Buffett's Berkshire Hathaway taking $10 billion of it. We saw that SpaceX, of course, priced its IPO.

• 0:53Speaker 01

  They're targeting a $75 billion raise at a $1.77 trillion valuation. And part of that pitch was actually AI data centers in orbit being a core part of their business. We saw that Anthropic officially filed with the SEC on June 1st, and OpenAI filed shortly thereafter on the 8th. And so this combined 2026 AI pipeline could exceed the total proceeds from every US public listing since 2022. So this is potentially massive. So my question for you is, when these frontier AI labs answer to public markets, does that change what they build, how fast they build it, and even what they'll be willing to say no to?

• 1:36Speaker 00

  It will, of course, be one of the marks that once the public infrastructure, public investments are all part of this, it'll change the dynamics around AI a lot. Your questions, of course, are one of the things, which is, you know, the incentive is if you're going to be... You know, kind of trillion dollar companies, you have to be kind of reflecting the kind of margin structure, revenue structure, growth structure that, you know, kind of call trillion dollar companies. And by the way, you're, you're, you're, the volatility, your swings to up and down will be much higher. You know, because, you know, back when we were talking about the significance of billion dollar companies or a hundred

• 2:21Speaker 00

  billion dollar companies. And you go, well, you know, today, you know, hyperscaler company number, you know, letter X, well, actually, now that we have SpaceX coming out, letter Z, you know, gained, you know, 10 billion or lost 10 billion today in the public markets. Now it's going to be even, you know, much more significant. And so that will, of course, drive a focus on business, on, you know, kind of revenue, on operating margin. That'll be important. Like, you only get these kind of numbers, you know, by being global companies.

• 3:01Speaker 00

  And what plays out to global and, and the kind of hostility of, you know, the current administration to globalism, you know, will be a problem here because actually, in fact, as you do trade wars and, you know, tariffs and all the rest, this will be a natural place where all of this will play out. You know, there'll be questions around, you know, kind of like, okay, so how much of this is the AI companies, you know, kind of providing AI infrastructure, like, you know, capabilities across whole industries? And how much of it is it, is it going in industries? And, you know, this is, you know, all the way

• 3:43Speaker 00

  back to in, you know, the year 2000, you know, Disney listed Microsoft as one of its top competitors because it's like, oh, God, there's, there's one big tech company back then. And, you know, I'd say a little bit of the prediction that I made a number of years ago, which As they said, oh, we're worried about, you know, kind of antitrust of the top tech companies. And I was like, look, if we were five top tech companies heading to three, I would be concerned. I think we're five to seven heading to 10 to 15. And I think that's what is clearly being shown. Nvidia has been added, OpenAI will be added, Anthropic will be added, SpaceX will be added.

• 4:26Speaker 00

  You know, and so more of these like large tech companies competing with each other is the zone, which creates space for entrepreneurship, you know, creates the questions of balancing out where you don't have, you know, kind of, because the key companies are competing with each other. You don't have the kind of antitrust considerations that is the base, the base of it. Like what enables entrepreneurship, what enables new industry, what enables, you know, kind of cheap pricing for consumers, what enables, you know, competition for providing services across industries? And I think that will all become part of these being businesses.

• 5:09Speaker 00

  Now, I think there's a subtle point here that I think is particularly important, that I think no one's really commented on, which is part of the benefit of these companies becoming public is it means the public participates in the economic benefit. Pension funds, you know, buy in or as part of it, you know, 401k funds do this. And, and the public participation in the, in the equity side of it, then becomes one of the countervailing things about like, well, what is the success of the AI industry doing for the broader society, for, you know, kind of, you know, kind of everybody in society?

• 5:51Speaker 00

  And the answer is, well, everyone starts participating in the economic growth and benefit of these industries, which then becomes part of the narrative and direction on, well, what are the AI companies doing for society? In addition to providing, as you know, I say, look, actually, medical assistance. Assistance and legal assistance and educational tutors and you know better information systems for everybody and all the rest. What are they doing? Well, actually, in fact, as they become part of the infrastructure, they're also providing a distributed economic basis to you know, all of the different kind of infrastructure that does public market investing.

• 6:33Speaker 00

  And I think that will be an important also corollary to what's going on.

• 6:40Speaker 01

  Reed, I think that's so important because like when you look at the Google IPO, everyone was like, oh, my God, the Google IPO made so many employees, millionaires, and made investors so much money. But if you actually look at the arc of history, most of the wealth created by Google actually happened post IPO. And so to your point, it went to people's 401ks and pension funds and all of these things. And people are worried that as companies stay private longer, it's actually just the people who have access to the private markets who are getting rich instead. So but a sort of question on the flip side of that, a lot of people are talking about SpaceX and their S1 claims a $26 trillion total addressable market in AI. And they sort of need that to justify their sky high pricing on relatively

• 7:25Speaker 01

  low revenue. Even Ben Thompson called the numbers obviously absurd. Like, do you think the SpaceX capital story becomes its own kind of risk? And perhaps for people who you know, have money in index funds or 401ks or things like that for everyday Americans?

• 7:43Speaker 00

  Well, if you look at it and you say, hey, I look at the numbers of OpenAI, I look at the numbers of Anthropic, and I look at the numbers of SpaceX. How should you allocate money across it just as a comparison to be part of the AI future? And you know, SpaceX self describes that its that its XAI effort is essentially a three time failure catastrophe, that they're essentially selling their data centers, you know, the data center compute which they built to Anthropic and to Google because they're incapable of doing anything else. So it's just like kind of data center, you know, kind of provisioning. And you'd have to look at like, how does it, how does it, how does it compare to other data centers?

• 8:28Speaker 00

  And, you know, you know, my glance at it looks like it's like, you know, seventh or eighth in capability and competence in that list. So it's uninteresting. The, the profitable part of it's Starlink, which is amazing, but it's a tiny set of the whole thing. And so it's kind of trying to position itself as an AI company. Like if I had a hundred dollars to invest across those three, I'd probably put one into SpaceX and 99 in, in whatever balance you want into OpenAI and Anthropic. In terms of where I would be putting money, because you kind of look at the, the, the growth of revenue,

• 9:12Speaker 00

  the operating margin, the, the capabilities of, you know, kind of what's playing into, you know, kind of like, what is the AI growth versus a, hey, we're selling an old data center, you know, to, you know, is available, availability of compute to Anthropic and Google.

• 9:33Speaker 00

  You know, like, that's how I would allocate money across this, just speaking as looking at the financials. Right. And, you know, like it's, you know, obviously there's the whole magic of Elon. That's going to cause a bunch of people to, to, to put in money. But like, you know, ultimately, when you get to these kinds of numbers, it's not a question of, of, do you believe in the magician? It's a question of like, where is the AI future going? And so I think it's a, you know, the AI IPOs are, you know, kind of OpenAI and Anthropic, not really SpaceX.

• 10:13Speaker 01

  Well, the show isn't investment advice, but for those Americans who do have index funds and just do passive investing, I'm not going to lie, that makes me nervous that SpaceX is going to come crashing down, but we will see. So good to know where you would allocate your funds. All right, moving to the topic that always has to be at hand when we're talking about AI, which is jobs. So we've all seen that recently, you know, Meta, Amazon, Oracle, they're cutting tens of thousands of developer jobs. And Stanford's HAI, where you are on the advisory board, they found that developer employment for workers aged 22 to 25 has fallen nearly 20% since 2024. But then on the other side of it, it feels like small businesses

• 10:58Speaker 01

  who have sort of never been able to have in-house technical capability are gaining those jobs for the first time. And Fortune wrote that their argument was that AI is enabling custom-built software that's super close to the business. So these people understand the business and they can use AI to become these amazing developers. And so it's fit to a single company's workflows and data. And people were also saying that actually the reason for sort of job loss or job cuts or not hiring for 22 to 25 year olds, it had more to do actually from work from home than it had to do to AI. But regardless, we're clearly going to see like changes in the labor market. Is it going to be less developers? It's going to be more developers? Is it because of AI? Is it because of work

• 11:41Speaker 01

  from home? It's sort of hard to predict right now. Can you walk me through what you think is going to happen over the next five years, specifically for developers in this market?

• 11:52Speaker 00

  Well, so the first is, you know, very clearly, within a small number of years, what the software engineering job is going to be is managing and working with a bunch of coding agents. And this is a lens into a lot of other kind of knowledge and production work in terms of how it's going to operate. Now, you know, there are some people who then think there won't be such a thing as software engineers and like AI will be all the software engineers and that, you know, like there was very fashionable a year or two ago to say, you know, like software engineers will all be out of, out of work and so forth. And You know, part of what I said then, and I, you know, triply say now is like, no, actually,

• 12:35Speaker 00

  in fact, there is essentially infinite demand for software engineering. And even with the software engineer tools, what it does is massively change what the job is of software engineering. So if you said, my capability was that I actually knew, you know, the language direction of Python, and I could do the, you know, the semantics of typing it out and making it work. And that was my unique ability. That ability is completely taken by AI in terms of how it operates. And by the way, that's today, right? Like, it's not, it's not distributed across the whole thing. The future is already here. It's just unevenly distributed. And so that job doesn't, doesn't exist in the future. But like, the mindset

• 13:20Speaker 00

  of how you do software engineering, how you build things, all the rest, that does exist. And by the way, that's a little bit like Jevon's paradox, which is, there's infinite demand for it at a certain price point. Now, I do think, you know, kind of like, kind of what is the economics of software jobs? And, you know, does the, the software engineering job now look paid like a lot of the people who are paid at Accenture and so forth, and it kind of accounting and so forth? There's a whole swath of that. But yeah, that's still a reasonable job. It's just no longer the, the, it's, it's paid somewhat less than it was paid before in all of these sort of things. But there's still infinite demand for it. And what's more, the people who are hiring this isn't just like the Accentures

• 14:04Speaker 00

  and the other folks. It's also like, small businesses and every other non-tech industry doing this, kind of saying, hey, I can now hire some software engineers who are managing the, you know, kind of the AI development for what I needed for, for software engineering for my business. And it isn't just like front end apps. It's like workflow management process. It's kind of collaborations, analysis of how our business is going. It's like all of this kind of thing. Just like, for example, the amplification of, hey, I want to do financial modeling with Excel micros, macros.

• 14:40Speaker 00

  Then those Excel macros now is like managing AI agents in doing all of that. And that becomes the thing versus the knowing the language of the Excel macros as a way of doing it and getting it constructed. And so I think that's what that that that is now meaning. And what the job transformation is, is, oh, I went and learned how to do Python. And now I'm no longer like they're not like hiring a whole bunch of Python code monkey, you know, jockeys. What you should be doing is here, I'm now diving into how I use AI to do this. I'm now much more productive. I now have a whole bunch of capabilities that I didn't have before.

• 15:23Speaker 00

  And it's that mindset of of of how I am essentially operating in terms of that. And that's the nature of it. And this kind of way fits into the prediction of, you know, how is your job going to be taken? It's with another human using AI and you should be that human. And I think this is where the coding improvement has now kind of rung the bell. First, because by the way, coding is is kind of most essential. And, you know, most developers are kind of like they're they like the kind of mode of thinking. And I've seen so many people being refreshed by, oh, my God, I've got these new superpowers

• 16:04Speaker 00

  with with Claude Code, with Codex, you know, kind of with Copilot. And these are the things that I'm getting into doing. And that's the thing to to to kind of make happen. And I think that's the that's the place where we are. And by the way, you know, when you get back to young people, part of the young people is this is your chance to say, I am AI native, right? Like, like, you've got this insanity of, oh, I'm booing people at an AI commencement. It's like, no, you're this is your opportunity. Your opportunity is I am AI native. I I should be helping like you need to have AI fresh, AI, open minded, AI engaged people in your work.

• 16:49Speaker 00

  I can be that person. This is literally the disruptive opportunity. And it's like, look, if you're like, hey, I'm refusing to use AI. In anything, then you're like saying, okay, I don't know, I, I'm, I'm essentially gonna go ride horses and, and, and be the horse taxi cab, you know, kind of person. And it's like, you know, that's up to you. You can decide to do that, but this is, this is the way that where the world is going.

• 17:15Speaker 01

  Right. This, this is where we're going. You got to get on board. And, and one consequence of this, if more companies have more software developers and more people are writing code, and when I say more people are writing code, more people are organizing and orchestrating AI to write code, we might have the same consequence that we're having in content all over the internet. We've seen, you know, eBooks explode because people are using, you know, ChatGPT and Claude. We've seen AI music explode, like, content is exploding. But it also means that code will explode. Like, people are positing that most software will be written post 2026, and it'll be written by AI. Does that change things meaningfully in a world where all software is new and most of it is written by AI?

• 17:59Speaker 00

  So it'll change a lot. And yes, I think already today, you know, I think Jack Clark said, you know, 80% plus at Anthropic is written by, you know, Claude code. I think the same similar thing is at OpenAI with Codex. You know, I think we're seeing that grow in all tech companies at a pretty fast rate. And eventually it'll spread beyond. And the speed and intensity which it writes code will mean that very quickly, the highest percentage of all operating code will be, will be AI driven. And this enters into, you

• 18:40Speaker 00

  know, a whole bunch of new questions around like, okay, what is cybersecurity and safety look like? And, you know, it's one of the questions, obviously, it surrounds Mythos and other things like it. What is, you know, kind of enterprise provisioning? What does it mean in terms of the audibility of code? What does it mean in terms of, you know, like, okay, so, you know, how much of that code is your own, you know, kind of IP? You know, in terms of doing this, there's a whole bunch of questions, which, you know, it's part of partially being on the board of Microsoft that, you know, they started addressing last year much earlier than everyone else, because they have the best telemetry and knowledge about how to provide to large enterprises.

• 19:22Speaker 00

  And I think it's, you know, one of the places where Satya and the Microsoft people are being very smart. And by having that telemetry moving early on all those things, obviously, Greylock, we see a bunch of that kind of thing in terms of investing. But like the what happens when, you know, there is now, you know, call it a thousand X amount of software? And, and what does that all mean in terms of how the world operates? How industry operates, how society operates? That's literally where there's just tons of work going on.

• 19:53Speaker 01

  So let's think about, let's move from software to music. That's another place where we're seeing just an explosion of AI-generated songs, albums, lyrics, and you are someone who have experimented with AI music. And we saw just last week, Suno, which is an AI music company, they raised $400 million, valued at $5.4 billion. And that's double the valuation from seven months ago, more than double what it was seven months ago. And so we are seeing people generating seven million tracks a day of AI music. And Suno has been, you know, the top app in the app stores music category in multiple countries. We also saw that Warner Music Group settled its portion of a joint lawsuit

• 20:38Speaker 01

  filed by all three major labels against Suno. And I feel like we saw similar things with Spotify and Napster and sort of the evolution of online music. It was first the record labels were suing them and then they figured out what the partnership was and how we can all work together. And so Suno is really excited about this AI future. Some people are less excited and I feel like music, though, is getting less. Attention than some of the creative models, the image models, the video models. Why do you think it's getting less attention, maybe in the press? But that it's making it such a compelling frontier for everyday people who are creating this AI music on Suno every day.

• 21:15Speaker 00

  So I think, you know, part of it, like one of the things that's weird about music is it has its own kind of, you know, intellectual property regime and copyright and everything else. And it's, you know, kind of one of the things that kind of enshrines the, you know, recording industry, you know, legal association,

• 21:34Speaker 00

  um, of all this. And it's part of the reason why, like, there's relatively less innovation and invention. And, you know, congrats to Suno and all its progress, you know, we use Suno and, and some of the stuff we do, you know, made an alternative Christmas holiday album because it was kind of as an instance of this. And, you know, are working on other projects, as you know. And I think, so I think that's one of the reasons it's been, it's been,

• 22:02Speaker 00

  you know, kind of slow. It's also one of the things where, you know, kind of in the early days, you know, OpenAI was playing with it and then kind of went, okay.

• 22:12Speaker 00

  It doesn't, doesn't seem to be on mission to how do we create, you know, kind of AGI for the benefit of humanity? It's a cool thing, but it's not absolutely essential. You have all these complications when it gets to the IP and copyright, um, you know, kind of material. Why engage in that battle? So they had some of the earliest music generation thing, which is basically, you know, kind of put on the shelf and then move past. And then other people have, have, have, you know, kind of developed it out. And that's part of the reason why,

• 22:46Speaker 00

  in order to do this. And I think it's really important because if you kind of look at, and it's part of the reason why we started doing this as kind of a, you know, kind of creative projects, is you kind of say, hey, we've got, you know, kind of writing as expression, you've got image generation as expression, you've got videos expression. Well, music as human expression is also really important. Now, obviously, this brings in all kinds of questions around, well, if you said, Hey, I would like to have a new Beatles song. Then you're like, okay, well, the Beatles, you know, kind of the IP is owned by the the kind of estate and there's all kinds of things that are kind of treasured and the kind of the build of it and there's reasons

• 23:27Speaker 00

  why, you know, we shouldn't have AI simply go and it's here's a new Beatles song. You know, kind of as a way of doing it, that that should be not, you know, kind of a a, um, you know, kind of a created thing and as an artifact and how do you navigate that? On the other hand, there's nothing that stops like a human band saying, hey, we're gonna do Beatles homage, we're gonna sound, we're gonna create a sound that's our own sound that sounds like the Beatles is kind of way we're doing it. And as long as we don't say it's a Beatles song, that's okay. And by the way, that band might have listened to all of Beatles music, might have

• 24:08Speaker 00

  played the Beatles music in various ways and venues and so forth. As ways of kind of going, hey, we're getting familiar and knowledgeable, but that's, that's all okay. So you go, okay, AI training regimes, AI listening regimes to doing this seems to be fine in terms of doing that in terms of it. It just needs to, you need to have a distinction between these two things. And I think it then creates a wide range of, you know, in our podcast, possibility for creativity and creation for doing all this, which I think is really important. And it's part of the reason why it's like, okay, let's go create, you know, kind of,

• 24:45Speaker 00

  um, uh, you know, kind of, uh, music that is, uh, Ian, that is unique and new, like, you know, new Christmas music that has never been created before, that helps, you know, kind of amplify human creativity, human expression, you know, that kind of thing. I think is super important. It doesn't take away from anything from how artists, you know, make their own, you know, kind of, uh, brand and career and, and money for music, which I think is really important. And I, by the way, I think AI music And amplify artists in various ways because it's like, oh, it becomes a new tool by which I can

• 25:27Speaker 00

  create new music for the thing I'm doing and all the rest for how this how this operates. It should be co-opted and owned by the various musicians of all types. But then it also enables people who are not like proficient at singing and piano and so forth. And so, as you know, we created this, you know, kind of Pi Day animated video that's using Read AI to sing. Sorry, it might be fun to include a little bit of the Read AI singing voice here, just so people can get a sense of it.

• 26:00Speaker 01

  Every day, eventually, that's what infinity can do.

• 26:08Speaker 01

  Every number you could ever need is in a number about circles you knew.

• 26:15Speaker 00

  But like, no one's ever, you know, created a, you know, kind of a, you know, like a holiday video celebrating March 14th and Pi Day and the mathematical concepts and all the rest of it. It expands all that. And I think that's what we want for humanity in addition to things for the artist and things for the industry and all the rest. And I think that's what's amazing about this. So I think that the, you know, I think part of the reason why, you know, kind of this is important for society, important for humanity, important for humanity and important for industry is all of these things that I've just said.

• 26:57Speaker 01

  All right. Well, we will definitely put the link to your Pi Day song in the show notes. So everyone can see for themselves what they think about some of our AI music creations. Reid, thank you so much.

• 27:09Speaker 00

  Pleasure.

• 27:10Speaker 01

  Last but not least, today Stripe and Frontier announced $1 billion in new carbon removal commitments backed by Stripe, Google, Shopify, Salesforce, H and M Group and Anthropic. When Frontier started, there were barely a dozen companies in this space. Now there are hundreds. Removals are doubling every year and over 350 other corporate buyers have followed their lead. Next week on Possible, Reid and I sit down with Nan Ransohoff, head of climate at Stripe and founder of Frontier. So the timing couldn't be better. So subscribe and stay tuned.

• 27:46Speaker 00

  Possible is produced by Palette Media. It's hosted by Ari Finger and me, Reid Hoffman. Our showrunner is Sean Young. Possible is produced by Tenasi Delos, Katie Sanders, Spencer Strasmore, Imo Zoo, Amon Suri, Lexi Kevin, Danny Garrison, Trent Barboza, and Tafadzwa Nimerundwe.

• 28:04Speaker 01

  Special thanks to Surya, Yala Monchili, Sayida Sabieva, Ian Alice, Greg Beato, Parth Patel, and Ben Ralas.