Is AI the new cigarettes? Our VC panel digs into Anthropic’s S-1 | E2356

This Week In Startups is made possible by: PayPal: https://paypal.com/business The Conservation Fund: https://www.conservationfund.org/ Hostinger: https://hostinger.com/twist Plaud: https://plaud.ai/twist Today’s show: Anthropic’s S-1 is here, and finally, we can start to develop a real understanding for the AI economy and whether the numbers add up. Anthropic shows an operating profit, a mostly non-cash $80.7 billion loss, and customers spending a shocking 9x what they were spending on intelligence just one year ago. Is this the greatest business in history? Is AI now as addictive to enterprises as cigarettes once were to impressionable teens? On this week’s VC Roundtable, Jason Calacanis is joined by D. A. Wallach (Time BioVentures), Dave McClure (Practical Venture Capital), and Ben Black (Akkadian Ventures / Powerlaw Corp.) to seek some answers. They dig into the numbers, including that wild 900% net revenue retention, and consider how retail investors will consider the convertible-note charge behind their $80B loss. Plus they’ll debate whether Anthropic’s founders are really true believers driven by religious fervor, and if so, whether they’re destined to be out-competed by “rabid capitalists.” Guests D. A. Wallach on X: https://x.com/dawallach Time BioVentures: https://www.timebioventures.com/ Dave McClure on X: https://x.com/davemcclure Practical Venture Capital: https://practicalvc.com/ Trading Places podcast: https://www.youtube.com/@PracticalVentureCapital Ben Black on LinkedIn: https://linkedin.com/in/benblack Akkadian Ventures: https://akkadian.vc/ Powerlaw Corp: https://pwrl.com Relevant Links Anthropic’s S-1, by the numbers (Fortune): https://fortune.com/2026/10/27/anthropic-s1-ipo-filing-financials-profits/ 900% NRR and an $80.7B loss that mostly ins’t (HackerNoon): https://hackernoon.com/anthropics-s-1-shows-163b-in-half-year-revenue-a-900percent-nrr-and-an-807b-loss-that-mostly-isnt Tickertrends: https://tickertrends.io/ Replit makes OpenAI its default (TechCrunch): https://techcrunch.com/2026/10/17/replit-is-no-longer-working-with-anthropic-ceo-says/ Dario Amodei warns that rivals’ spending could risk bankruptcy (Fortune): https://fortune.com/2026/02/14/anthropic-ceo-dario-amodei-spending-capex-risk-ai-revenue-forecasts-bankruptcy Machines of Loving Grace (Dario Amodei): https://www.darioamodei.com/essay/machines-of-loving-grace Palantir CTO Shyam Sankar says AI researchers are taking up smoking (Fortune): https://fortune.com/2026/10/13/palantir-cto-shyam-sankar-ai-researchers-smoking-cigarettes-cure-cancer-artificial-general-intelligence-silicon-valley-mass-psychosis-effective-altruism/ Microsoft offers its first-ever voluntary buyouts (TechSpot): https://www.techspot.com/news/112174-microsoft-offers-voluntary-buyouts-thousands-us-workers-ai.html Canva ranks among the top consumer AI apps (SmartCompany): https://www.smartcompany.com.au/artificial-intelligence/canva-new-ai-consumer-web-app-ranking-andreesen-horowitz/ SpaceX Q3: Musk says it could rent out its AI compute several times over (Constellation Research): https://www.constellationr.com/insights/news/spacexs-q3-musk-says-it-could-rent-out-its-ai-compute-several-times-over Jason’s 2026 “Bitcoin is Dead” post: https://x.com/Jason/status/2114956980674605075 Jason to Michael Saylor: "there are better places to invest your money”: https://x.com/Jason/status/2115274438979756346 Timestamps: 0:00 Anthropic files its public S-1 4:58 Anthropic vs. OpenAI revenue run rates 9:20 PayPal is built for all businesses. Get started at https://paypal.com/business 10:02 “The greatest business in the history of capitalism” 11:58 Is intelligence the new tobacco? 18:08 The “meat sack constraint” 20:36 Thanks to our partner, The Conservation Fund! Learn more at https://www.conservationfund.org/ 22:13 Plaud: If your work depends on conversations - interviews, meetings, calls - you need a Plaud NotePin S. You can check it out at https://plaud.ai/twist and use code TWIST for 10% off! 24:32 The Who Has the Most Subscribers Challenge 28:08 Is Apple waiting out the AI race on purpose 30:22 Hostinger: The all-in-one platform for domains, websites, email, and marketing. Go to https://hostinger.com/twist and use the code TWIST for an additional 10% off Black Friday and Cyber Monday 34:19 Is Canva an AI company? 39:08 True Believers who still want to make money 48:21 The $72.4B convertible-note charge, explained 51:03 How long does AI compute stay useful? 58:19 Jason’s monthly “Bitcoin is Dead” post 1:04:41 Alicorns are unicorns with pegasus wings 1:09:58 Subscribe to the TWiST Newsletter! Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com Check out the TWIST500: https://www.twist500.com Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp Follow Lon: X: https://x.com/lons Follow Jason: X: https://twitter.com/Jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis Thank you to our partners: PayPal is built for all businesses. Get started at https://paypal.com/business The Conservation Fund: Thanks to our partner, The Conservation Fund! Learn more at https://www.conservationfund.org/ Hostinger: The all-in-one platform for domains, websites, email, and marketing. Go to https://hostinger.com/twist and use the code TWIST for an additional 10% off Black Friday and Cyber Monday Plaud: If your work depends on conversations — interviews, meetings, calls — you need a Plaud NotePin S. You can check it out at https://plaud.ai/twist and use code TWIST for 10% off! Check out all our partner offers: https://partners.launch.co/ Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland Subscribe to our Substack Newsletters! 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Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Jason Calacanis?

  All right, everybody. Welcome back to This Week in Startups slash This Week in Venture Capital.

• 0:04Speaker 01

  It's a little of both.

• 0:05Jason Calacanis?

  Three shows, a little bit of both. We posted the This Week in Startups feed. That's been around the longest, but we do three distinct shows every week. This Week in AI, This Week in VC, and This Week in Startups. And they each have a corresponding newsletter that we're working on. We're hiring, looking for two or three great writers. So we have a big docket today and an incredible list of guests on. We obviously are going to get deep into Anthropic's S1, which dropped recently. Let's, from a venture capital perspective, of course, let's intro our amazing guests.

• 0:38Speaker 01

  Sure. First up, we've got DA Wallach. He's the co-founder and general partner of Time Bio Ventures. They're a life sciences and healthcare venture capital firm. We've also got our good friend Dave McClure, managing partner over at Practical Venture Capital. He's the managing partner over there. It's a firm focused on the venture secondary market. Finally, we've got Ben Black, the co-founder and managing director of Akkadian Ventures. They're a firm that invests in venture secondaries and they run SPVs, Jason.

• 1:08Jason Calacanis?

  Got it. All right, let's get started with our first story.

• 1:11Speaker 01

  We're going to talk about Anthropic, of course. They filed their public S1 on Monday for a NASDAQ listing as A N T, Ant, with the price range and share count left blank for now. Revenue for the first half of the year came in at 16.3 billion. That's up 14x from around 1.2 billion in the first half of 2025. Q2 this year saw an operating profit of 974 million. Net loss was 80.7 billion, but 72.4 billion of that was driven by a non-cash accounting charge on convertible notes, derivative liabilities, and safes, which were marked up as the company's valuation rises. The Wall Street Journal reports that Anthropic aims to go public the week of November 16th,

• 1:52Speaker 01

  raising 100 billion or more at a valuation of around 1.5 to 2 trillion. So TA, we've got five or six subsections here, many different ways to go. What stands out to you about the Anthropic S1 and this story?

• 2:07Speaker 02

  Well, I mean, I think like with everything that's happening in AI, the hard part is figuring out what's sales pitch and what's reality. And obviously, this was timed and positioned in such a way as to sort of comfort the market as to the company's, you know, profitability or potential profitability. So there's, of course, been this raging debate over, you know, whether inference is profitable, how much money they're losing. And I think the clear intention of the timing and the way this was all framed was to sort of put everyone at ease, say, look, we're sitting on a ton of cash and we're not spending as much as you think we might be, and it's all going to be okay.

• 2:49Jason Calacanis?

  Did they accomplish that task? Is everybody feeling a bit more calm?

• 2:54Speaker 02

  I don't know what the hell's going on. You know, it's like you're seeing these little fragmentary views of the elephant every week and every Gavin Baker interview and every All In podcast and whatever, but you still never get to see the whole elephant. So of course, that's what investing is. You got to make sense out of fragmented information and try to paint a picture of what's happening. But I still have no idea what's happening.

• 3:15Jason Calacanis?

  Which is very similar, by the way, to poker. You are trying to make really good decisions with partial information, right? Like, I know my whole cards, but I don't know yours or the other seven people at the table. Maybe know three cards on the flop, but I still don't know the turn in the river to come. So I think that's actually a great way of framing it. Dave, when you saw the numbers drop and you start unpacking the hand, do you feel more bullish on the AI trade? Do you feel like this is making people more confident in what's being built out here and the sustainability of it? Or do you feel like you have more questions rather than answers?

• 3:54Speaker 03

  I feel like they did themselves a favor. You know, I think there's been a lot of concerns in the last quarter that revenue might have been plateauing. I think we still have those concerns. You know, questions about whether OpenAI is taking share, whether open weight models are taking share. Company looks like they are profitable. Looks like they've been, you know, on an operating basis profitable for the last two quarters. It looks like capex spend is crazy. That's, you know, over $500 billion of capex. I don't know over what period of time, but, you know, $100 billion plus commitments to both Google and Amazon, which are locked in.

• 4:30Jason Calacanis?

  Well, maybe unpack that for a minute then, Dave. Like, if that's where the first thing that came to your mind is crazy, how does one go from crazy to sustainable and connect the gap between capex spend and revenue and profitability? Take a moment there.

• 4:46Speaker 03

  If they had gone public last quarter, I think everybody would have liked been happy with putting a $2 to $3 trillion valuation on the company. But if you look at, I don't know if we can share the graph of ticker trends. This is Anthropic revenue. This is OpenAI revenue.

• 5:01Jason Calacanis?

  Okay, so when we're looking at the Anthropic revenue, this is company-wide annualized revenue run rate. We just did a story about this in our newsletter, actually. This is ARR, as in a pirate, A R R R. When you see that, which is not to be confused with ARR, ARR with three Rs, annualized run rate is typically done by taking the last month or the last quarter and times it either by that period of time, 12 or 4. And here, what we're seeing is it's flat at 76.8 billion in ARR.

• 5:42Jason Calacanis?

  And you see here, even on this website, they put ARR, which would lead you to believe it's annualized reoccurring revenue. Annualized reoccurring revenue is for subscription products like Netflix or your Verizon accounts. It's distinctly different than this. So what's your takeaway here? Obviously, we see flat, but what is that based on? Where did they get that number from?

• 6:03Speaker 03

  You looked at the growth from January to July, you'd be like, holy shit, that is crazy growth. Like, that's like almost hyperbolic. But then it tailed off a little bit and people were wondering, like, why did that tail off? Was that because of OpenAI releasing models that were more competitive and taking share? Replit recently announced they've been switching their default to OpenAI instead of Anthropic. Is it because open weight models are taking share? I would still say that Anthropic is growing.

• 6:31Jason Calacanis?

  Or maybe there's a data problem here. Like, maybe this website doesn't have, like, who knows where they're getting their data from here?

• 6:38Speaker 03

  Yeah, I think, you know, my partner just did a teardown of, you know, the Anthropic S1, and it still looks like they are growing. I think they added, you know, at least 5 billion of new revenue in the quarter. So I'm not concerned that Anthropic is not growing, but they're not growing as fast.

• 6:57Speaker 03

  And I think you'd kind of want to look at that and like compare that to the capex spend. Can they just, you know, keep up with the spend that they're doing? And is that revenue going to continue? They had previously been talking about 200, 300 billion dollar kind of run rates by the end of next year. I'm not sure. I'm still a believer that they're going to hit 300. I might guess it's going to be between 150 to 200 next year. We'll see.

• 7:18Jason Calacanis?

  Yeah.

• 7:19Speaker 03

  But they did kind of answer a lot of questions about profitability. That seemed like they had profitability under control.

• 7:27Speaker 03

  I think I'm still a believer in Anthropic, probably at one and a half trillion, not at two or two and a half trillion. That's just my, you know, hot take.

• 7:35Jason Calacanis?

  All right, Ben, your takeaway when you saw the S1 and the ensuing discussions?

• 7:41Speaker 04

  When I saw the S1, I really was so impressed with how much analysis could be done in such a short period of time with AI. There were so many analysis, I could barely keep up with them all. It was like an amount of analysis. But really, you know, when I, I read the S1 and said, you know, we need new measures. You know, this is really the first time we've had financials from a company that does what Anthropic does that are getting now to be torn down by public market analysts. And how the public market analysts, you always say with private companies, this is the moment where the rubber hits the road. And right now, we're just seeing literally like the first inkling of all the, you know, of the way that we're going to analyze these companies.

• 8:26Speaker 04

  We're still, just like what you did, we're trying to take SaaS analytical tools like ARR and slap them on a completely new type of business model. It's going to take a while before I think that the world of business analysts catch up with Anthropic and OpenAI, where essentially here you're selling compute at some sort of margin. And you're selling it across multiple models that have different values and different costs, all of which are falling. And I frankly, I'm not sure I understand this business yet. I think that's the biggest takeaway I have is that, you know, we have to have a whole new set of measures for these businesses that really help us understand what's going on.

• 9:06Speaker 04

  Because I think the S1 can be characterized in one way by one group of people, another way by another group of people. And who wins the framing in the next two weeks is going to determine whether or not 1.5 trillion is a good number or not.

• 9:20Speaker 01

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• 9:54Speaker 05

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• 10:02Jason Calacanis?

  Yeah, well, the framing is pretty obvious here. The revenue is surging.

• 10:07Speaker 04

  Absolutely.

• 10:08Jason Calacanis?

  That's, that's something we know. And they're profitable and they've got a mountain of cash. So if I look at those just three factors.

• 10:17Speaker 04

  Well, revenue, revenue is surging, but not as fast as it was earlier this year.

• 10:21Jason Calacanis?

  As the number gets bigger, it slows down a bit. So you can't expect a 10x on, you know, 16 billion. It's not possible. It has never happened in the history of it. So it's going to slow down. The revenue is extraordinary. It's the fastest growing company in the history of business. The cash position is extraordinary. They've barely touched their cash. And so I look at this and say,

• 10:44Jason Calacanis?

  We've got the greatest business in the history of capitalism ever built.

• 10:49Speaker 03

  Wait a second, Jason. The greatest business, I thought you were saying last month with SpaceX. Isn't that still the greatest business?

• 10:55Jason Calacanis?

  I don't know if I said that. I think it's the greatest entrepreneur across a series of different businesses. This is one business, selling tokens and one business selling tokens to be profitable in. But this company was formed, I believe, in 2021, revenue turned on in 2023. So to go from zero, you know, to whatever the annualized run rate will be after Q3 data comes out, 80, 100, et cetera. And to have a ton of cash and to be profitable at this point is just extraordinary. I thought they would have been losing a ton of money. So I think this is the greatest business created by humans on planet Earth ever.

• 11:38Speaker 03

  I wonder if we're underestimating some stuff here, though. I had dinner with my friend Aaron Battalion, who was formerly the CTO at Living Social. And he was saying, we're not even measuring the right stuff. He's saying with all the potential for like, you know, breakthroughs in mathematics and medical and a whole bunch of areas. There's potentially new lines of revenue that we're not even measuring. Like, what if, you know, either Anthropic or OpenAI solves cancer, like, reduces aging, figures out new breakthroughs in other areas? I think DA was actually suggesting there's some stuff coming that people are showing off their lack of concern.

• 12:13Speaker 02

  We can talk about the Anthropic AI releases later, maybe, or now. But I was saying to Dave before this, the craziest thing that's happening, you guys may have heard about, is the AI engineers are now taking up smoking. And this has become a way of smoking cigarettes.

• 12:29Jason Calacanis?

  This is a very positive, this is a very, if they're hitting darts, that's a very positive sign.

• 12:34Speaker 02

  Right. So they're smoking cigarettes and they are doing so as a way of signaling how confident they are that AI is going to cure cancer. So I would, I would view this as a very, a very toppy signal. You know, when people are willing to literally commit suicide because they believe so much in their religion. It's interesting. I'm not sure we've ever seen that in capitalism.

• 12:56Jason Calacanis?

  I think what this is, it's like, no, no, I, I think this is the buy sign. It's the ultimate buy sign. They're literally willing, yeah, to ski without a helmet. They're like, this is fine.

• 13:08Speaker 02

  It's all on the line. Now, Jason, and it didn't even occur to me, it didn't occur to me until you said this is the greatest business in the history of capitalism. The, the actual greatest business in the history of the stock market over the past 100 years, as you guys may know, was Altria, Philip Morris. And, you know, well, why was that such a great business? Well, enormous gross margins and an incredibly addictive product with virtually unlimited demand. So.

• 13:34Jason Calacanis?

  No churn.

• 13:35Speaker 02

  At least 10 years ago, the number I heard was still today, a billion cigarette six sold every day around the world. One billion. So I think the fundamental question for Anthropic and all the players in this market is basically, is intelligence the new cigarettes? Right? So far, a little free sample, the drug dealer's given a free sample to every company in the world. And everyone's trying it and they're trying to figure out, is this, is this something I'm going to be using for the rest of my life? And how many, how many packs a day? Right? And I thought the most interesting number in the, in the S1 was this 0.1% figure.

• 14:15Speaker 02

  You know, they basically said, I don't know if it was their top customers or all of corporate America, but they said, basically, the users of our intelligence are spending, you know, roughly a 10th of a percent of their total operating expenditures on AI today. So you can think of that, I think, in two different ways. View number one, which is the one Anthropic was trying to present, was, you know, it barely scratched the surface. Think about how much headroom there is on that number. I mean, if you just double it or triple it, you can easily start to see how we get to a couple trillion dollars a year of spend. On the other hand, it, it does to me complicate this sort of Jevons paradox framing of this whole thing.

• 14:59Speaker 02

  Because I would ask, well, why aren't they already today spending 1% or a half percent? And, you know, is what's keeping them from spending at that level, that the cost is too high? Or is it still a utility question? And I guess my hypothesis would be it's mainly a utility question. And I'm going to say the thing that everyone has to say before they ever defame AI, which is, oh, but I use it all day and I love it. And it's so changed my life and my business. You have to say that so you don't sound like a Luddite. But why aren't they spending 2/10 of a percent today?

• 15:37Speaker 02

  Because it seems pretty obvious that this is something you have to be experimenting with extensively, no matter what your business is.

• 15:44Jason Calacanis?

  So wait, why aren't they spending 2% on?

• 15:47Speaker 02

  On, on, on Claude, on intelligence broadly, you know? I mean, if they're spending a 10th of a percent on Claude, you need the right people to implement, right? And then you need the right projects. So, and 2% of a company making, I don't know, sorry, sorry. Right now, they're saying 1/10 of a percent of total budget of going to AI.

• 16:12Jason Calacanis?

  Which companies? Fortune 500?

• 16:14Speaker 02

  Fortune, you know, whatever, corporate America.

• 16:15Jason Calacanis?

  Got it. So I think it's because there's a, I think the number is 2% AI spend at the top companies. So I think we, if we chop off the laggards and we say one or 2% is the right amount of spend for today. I just think it's probably the Fortune 100s, Fortune 500s are actually spending tens of millions. I would say hundreds of millions in tokens a year. That's like what we saw Uber was spending.

• 16:42Speaker 02

  Well, that, that's, yeah.

• 16:44Jason Calacanis?

  It's still, it's still a small number.

• 16:46Speaker 02

  It's, it's, I mean, I think there are a couple of questions. One, is the addressable market what they're spending on SaaS, right? Is this just going to eat their SaaS budget?

• 16:55Jason Calacanis?

  It's got to be double SaaS.

• 16:56Speaker 02

  So is it going to start by eating their SaaS budget and then eat, eat more? Or is it going to be incremental? I mean, I think, like, you know, you have this other major uncertainty here, which is that everyone involved here is doing the rational thing. So Anthropic's doing the rational thing to preorder all that compute, even though it might put them in a tough place. Every corporate CEO is doing the rational thing to do a bunch of pilots and spend a bunch on tokens and figure out what this can do. The question is going to be, are these rational actors who are both ramping up their AI activities going to be doing so at, at rates that lead them to meet at the same level, right?

• 17:39Speaker 02

  I mean, ultimately, what matters here is does the demand?

• 17:41Jason Calacanis?

  The load balancing of supply and demand. I got it. Yeah.

• 17:44Speaker 02

  And, and right now, everybody says, oh, that we can't meet the demand, the demand's too high. But then I go again, well, they're only spending 0.1%. The presumption in that comment is typically, if the price were lower, they'd be spending more. In other words, when you say this is, this is supply constrained, what it's suggesting is that the supply constraint is leading to a price.

• 18:07Jason Calacanis?

  I think it's meat, I think it's meat, it's, it's a meat sack constrained, DA. Is the people, the meat sacks at organizations are not able to deploy it. It's too heady for the average employee. The meat sacks are blocking this. And then if you look at a company like, say, Uber, which adopts the technology pretty fast, they burned all their tokens in the first quarter famously. And then we're like, oh, what do we do now? They just put all of their employees, I think it was 30,000, on OpenAI at once. So I think that this is the key issue. When are the meat sacks able, which organizations will put 100% of meat sacks on this?

• 18:45Jason Calacanis?

  And will they be able to not just be the, the meat bridge, the compiler between the output and the input of the AI? And actually orchestrate it? When could they be sophisticated enough to orchestrate this towards a business result? And I think Microsoft's and their 60,000 person buyout, one in four employees that are being offered a buyout, is a roadmap. I think another organization like them, they see it, the writing's on the wall. Dave, you've been wanting, oh, good, Lon and then Dave.

• 19:12Speaker 01

  Oh, I was just gonna say, on this week in AI, this week, Andy Berman of RunLayer addressed this exactly. That's what he was saying is that it's just the companies have yet to attach the AI to the data and the systems that would actually cause it to become more valuable. And so that's, we're just waiting for them to sort of make that switch.

• 19:29Jason Calacanis?

  And the why? Why are they not doing that?

• 19:31Speaker 01

  Exactly the reason that you said, that it's just like people being hesitant or not understanding or security concerns or the meat proxy.

• 19:38Jason Calacanis?

  Cyber concerns. Yeah. So I think, I think it's both. The meat sack doesn't know what to do.

• 19:42Speaker 01

  Right.

• 19:42Jason Calacanis?

  They're like, what do I do? I already summarized this article. I don't have any more articles to summarize. Like, but that's not what this technology is for. That was like the demo four years ago. And cyber has made everybody in these big corporations play on their heels. Go ahead, Dave.

• 19:58Speaker 03

  I think we're going to get there. I mean, this is early innings. I liken this to like, you know, teenagers in high school talking about sex. They, they want to talk about like, everybody's doing it, but not everybody's doing it. And eventually they do get there. So like, as we kind of move up the stack, I think you're going to see AI productivity gains hit not just tech companies, but normal companies. We're still in the early stages and, you know, a lot of people talk about AI, but most people are not really using, you know, the full potential of AI. Most people are still using it like, you know, Google prompts. A few people are starting to use it, you know, for agents, but we're, we're pretty early on.

• 20:36Jason Calacanis?

  A lot of people think there is a binary choice, be a capitalist who supports growth or care about the environment and the natural world. But these two ideas don't have to be in opposition. Our friends at the Conservation Fund believe that you can protect land, wildlife, and our shared access to the great outdoors while also providing important economic opportunities. For 40 years, the Conservation Fund has been acting quickly to protect at-risk land and important wildlife habitats while also actively supporting local communities and, this is key, creating new jobs. The Conservation Fund already protects over 9 million acres across all 50 states,

• 21:16Jason Calacanis?

  proving that we can watch out for the environment and keep our natural surroundings in balance without endless gridlock, debate, and politics. And this isn't just a land trust scooping up property and sitting on it. They're working alongside permanent stewards who will find practical uses for these important spaces without destroying them. Find out more about how the Conservation Fund is changing the playbook at conservationfund.org. All right. Just to put this in context, Ben, if we round up to 100 billion in yearly revenue, argh.

• 21:50Jason Calacanis?

  This puts Anthropic at a quarter of Alphabet's revenue, a third of Microsoft's annual revenue, and a quarter of Apple's annual revenue. In but, three or four years of charging for their product.

• 22:08Speaker 04

  Yeah.

• 22:08Jason Calacanis?

  That's why I'm sort of saying like, are we fully appreciating this number? Have we really taken $100 billion in revenue? And put it next to, you know, Alphabet's 400, or Microsoft's 350, or, you know, Apple's 400 and change, like, this is truly, truly nuts. And it's based upon one, but one business model. Subscribe slash buy token, so maybe arguably two different billing plans, consumption and subscription. But it's one thing, it's just like one little thing here, just buy this intelligence. What if they have other products?

• 22:47Speaker 01

  We're just getting started.

• 22:49Speaker 04

  This is the

• 22:49Jason Calacanis?

  Yeah, that's my point.

• 22:51Speaker 04

  The one number that I just couldn't get over was the 900% net revenue retention.

• 22:56Jason Calacanis?

  Well, unpack that and explain it, Ben, for somebody listening. What does it mean to have 900% retention?

• 23:03Speaker 04

  Basically, they took the same customer cohort from a three-month period a year ago, and looked at how much they were spending, that was their spending, and then looked at, and basically said that same three months this year, same customers, three, for the three months, 900, nine times more.

• 23:21Speaker 01

  Nine times as much.

• 23:22Speaker 04

  Nine times. I went and I tried to look through history, and, you know, I can't imagine another product, including smoking, because it'd kill you real fast. You know, where you use nine times as much of the product. And that goes to say that this is the most useful product, I think, that's ever been created. Now, what this says about the long-term ability to extract profits, when you compare it to Microsoft, right? And you're on desktops all over the world, you know, you have a pretty good, clear sense of product that they're going to be still charging for that 30 years later. Now, I think that what's really hard to understand here is how sustainable this incredible growth is and their ability to extract profits.

• 24:07Speaker 04

  Because we know the prices keep falling the minute that, you know, the models get slightly out of date. Because there's this really interesting problem of being like, how long are people willing to pay for the frontier? As enterprises get better and better at consuming this product? And the meat sacks get in control of open router and start sending them to lower-cost, open-source models.

• 24:32Jason Calacanis?

  Okay, here's what we're gonna do. We're gonna look at the top subscription products of all time, or currently, and all time. And then we're gonna put OpenAI, and we're gonna put Anthropic into that table. And then we're gonna see if you guys can guess who has more subscribers, who has less. Don't cheat on this simple test. Before we do that, Lon, I just forgot, gosh, we're starting this incredible discussion, and I lost it. But now, I'm putting on my Plod pin, here we go.

• 25:06Speaker 01

  Please, yes.

• 25:07Jason Calacanis?

  Pause for the cause here, I got my Plod pin on, I just very gently pressed the button, you can barely see it there on my lapel, and I'm off to the races. Now I'm recording everything, I'm taking notes, and I can say, this would make a great blog post for my newsletter, J Cal on startups, to talk about subscriptions and how to grow subscriptions, and maybe we should do a tactical, practical one. And I could just mute myself on the podcast, say that, put it in there and say, hey, make sure this gets on my to-do list. Boom, Plod's gonna make sure. And I see you have your Plod as well, is that for your ever-increasing list of to-do items that you haven't gotten back to me on yet, Lon?

• 25:43Speaker 01

  That's exactly, that there would be no way for me to keep track of everything going on at the podcast and newsletter studio that we're running without the Plod pin. I keep it on me all day, I'm always hitting it just for little reminders, little notes, whatever I'm gonna need. And then I could check in at the end of the day, and the beginning of the next day, and get to all those checklist items that we did not get to the previous day. So if you want to check out a Plod pin for yourself, go to plaud.ai/twist and use the code TWIST, and they're gonna give you 10% off, plaud.ai/twist.

• 26:14Jason Calacanis?

  All right, now, we're back. I'm gonna play everybody's famous game. Who has more subscribers, DA? The name of the game is who has more subscribers? More subscribers, do you understand the name of the game?

• 26:29Speaker 02

  I love it.

• 26:29Jason Calacanis?

  Okay, you do understand.

• 26:32Speaker 01

  Which game show host was that?

• 26:34Jason Calacanis?

  I don't know, just my generic.

• 26:35Speaker 01

  And wink, wink, wink, Calacanis Dale, something like that.

• 26:39Jason Calacanis?

  Okay. In all seriousness, I don't know if everybody understands exactly how many subscribers these products have. Anthropic is undisclosed right now, unfortunately, so the game kind of doesn't work. Consumers, according to OpenAI and some reports, OpenAI has 50 million subscribers. 50 million subscribers in their consumer base out of their 900 million weekly users, about 6%. So the game is off. I was kind of goofing on it when I teased it, but let's talk about that as a concept,

• 27:22Jason Calacanis?

  because in all seriousness, the one I always go to is, and I'll just ask you to give me your best guess, your best, best guess, DA Wallach. How many subscribers does Microsoft 365 have? Microsoft Office, and this is obviously the most successful business subscription service, I'll give you a little clue there, most, that's the most successful one of all time.

• 27:47Speaker 02

  I'm gonna guess 200 million.

• 27:50Jason Calacanis?

  Very close, 110 million subscribers. It's extraordinary, when you think about that, it has over 10 billion in estimated annual revenue for consumers, but paid subscribers, 110 million is the best I can estimate here. And if these things are at 50, and these are consumers, prosumers, it's, this is an enormous subscription business. Do you think consumers will ultimately pay 20 bucks a month for this, like they do for their Netflix?

• 28:20Speaker 02

  You know, I think, I think

• 28:23Jason Calacanis?

  An agents, or do you think it's free?

• 28:24Speaker 02

  I think both Apple and Google haven't reached their steady-state offering yet, clearly. And, you know, insofar as the mobile phone remains the preeminent computing platform, it's theirs to lose. So my assumption is that at some point in the future, Apple Intelligence is going to be at parity with these things. I mean, it'd be a real screw-up for, I mean, it's already, they've already screwed up by not being there today, okay? But they're the biggest, you know, one of the biggest companies in the world, they're not hemorrhaging cash the way that all their competitors are right now on AI infrastructure.

• 29:07Speaker 02

  So they've got a big budget that they should be dedicating to ensuring that everyone who uses an iPhone is not paying a $20 a month Plod subscription, or OpenAI subscription.

• 29:17Speaker 04

  Do you think that's a [__] up, or do you think that's a good bet? Because I think they intentionally decided to wait it out.

• 29:22Speaker 02

  I think they're patient, I think they have the distribution, so they're in the pole position here. And, you know, I would be doing the same thing they're doing. I mean, I would assume that they're trying a lot of stuff in, inside the company. And once they get to a product that they feel is good enough, safe enough, user-friendly enough, that's just gonna be what's preloaded, right?

• 29:46Speaker 04

  If they [__] up, then they buy instinct.

• 29:50Speaker 02

  Exactly.

• 29:50Speaker 04

  For $10 billion.

• 29:51Speaker 02

  I mean, I think they can wait, they've got the distribution, and, you know, we'll see if Sam Altman's mobile device, whatever that ends up being, is gonna actually be the next platform. I don't think the Meta Glasses are likely to display cell phones. So as of yet, we have not found the successor to the iPhone. And the same can be said of Google, and, you know, obviously they're further ahead on AI than Apple is. So it's also theirs to lose when it comes to the people who are using Android phones.

• 30:22Jason Calacanis?

  Founders, here's a practical and tactical tip for you. Before you raise even a single dollar, before you even think about making that first or second hire, you need a real professional-looking website. Every investor, every recruit, and every customer is going to Google you, then they're gonna wind up at your website, and you need them to walk away feeling confident that you're an established, real company that cares about your image. And having a beautiful, stunning website, well, yeah, of course, that can sound expensive, time-consuming, maybe even a little intimidating if you don't have taste, or you don't think you have taste. But you don't need to start seeking out tons of developers and designers. Nope, you just sign up for HostingR. I checked out their AI website builder, and with a few clicks,

• 31:03Jason Calacanis?

  I was already working on a clean landing page and a waitless signup for a new startup idea I had, and we built it all in minutes. HostingR's help doesn't stop when you've launched your website, no. Their AI agents will walk you through the basics of SEO, writing crisp website copy, email marketing, and more. Go to hostinger.com/twist and use the code TWIST for an additional 10% off. They're already shockingly low Black Friday and Cyber Monday pricing. Here's your chart, before you go, Dave. Apple Services, obviously really huge, Anthropic, 65 billion run rate. I guess if they're all subscription, we don't know if Tokens is broken out there, OpenAI, 50 billion, Netflix, 49 billion, Salesforce, 40 billion, Adobe, 27 billion.

• 31:47Jason Calacanis?

  People have talked a lot about that one being at risk, and obviously Spotify's done pretty well.

• 31:51Speaker 02

  Can I just say one last thing, Dave, before I hand it over?

• 31:55Speaker 03

  Yeah.

• 31:55Speaker 02

  I have, I have not given access to my email to anything yet. Okay, that's my red line.

• 32:04Speaker 01

  Wow.

• 32:05Jason Calacanis?

  What's going on in your email?

• 32:06Speaker 02

  What's going on? Well, a lot, a lot of.

• 32:09Jason Calacanis?

  This is your Gmail from like 20 years ago?

• 32:11Speaker 02

  I'm not gonna say what, I'm not saying what platform I'm using. But I have not given the keys to any of these guys. And I'm, I'm, to me, that's the test. That's the test. Can you get, you know, can you get 100 million iPhone users to hand over all their data? To one of these new companies?

• 32:33Jason Calacanis?

  Absolutely.

• 32:34Speaker 02

  And, and Apple is much more likely. Well, there's something going on.

• 32:38Speaker 03

  I, I think maybe.

• 32:39Jason Calacanis?

  I have an idea for you, DA. All you gotta do is make a shadow email. Make a new one. DA new at. And then all your emails that come in from this point forward get sent there. Uh, and then your old account is human only and the new account is. Human plus machine and then.

• 32:55Speaker 02

  That's complicated.

• 32:56Jason Calacanis?

  It's a little complicated. It is complicated. It is complicated.

• 32:59Speaker 01

  Before we go on, we should, we should shout out harmonic.ai.

• 33:02Jason Calacanis?

  Oh, okay. Here we go.

• 33:03Speaker 02

  Another cause for the cause.

• 33:04Speaker 01

  For that note, for that amazing chart that you showed with comparing all the subscription services. Pulled that directly from our friends at Harmonic AI. Thanks to them.

• 33:11Jason Calacanis?

  Okay. And everybody go get Harmonic AI, especially if you're in the VC business. Basically imagine you had a database of every possible deal and a custom made LLM. Put together with it. Incredible for research.

• 33:23Speaker 02

  If I, if I'm handing the keys over, I would much rather that that AI be predominantly local.

• 33:29Jason Calacanis?

  Yes, me too.

• 33:30Speaker 02

  So, you know, this, this edge stuff, I mean, I, you know, again, for the top enterprises doing really complicated workflows and multi agents, all that's probably all gonna be cloud. I get that. But like, I still find the argument persuasive that for the average consumer, 99% of what they're gonna wanna use AI to do will be doable on the edge, on their iPhone. You know, within a few years. So why wouldn't that be where we ultimately go?

• 33:55Speaker 03

  I think you were bringing up an interesting point about the consumer subscription. I, I think you were looking at customers, not necessarily users. I, I was, you know, doing a little research in the background here, so I, I didn't follow your rules. Um, so top three consumer AI platforms, who do you think is one, two, three?

• 34:13Jason Calacanis?

  It's gotta be, uh, OpenAI and Google are pretty similar. I'm gonna say Google on top, OpenAI, and then ChatGPT.

• 34:18Speaker 03

  Close. OpenAI is number one. Uh, Google Gemini is number two. Uh, guess who's number three? If you were not correct.

• 34:26Jason Calacanis?

  Wait, hold on. It's not, it's not. And so is it, yeah, is it Google?

• 34:33Speaker 03

  Canva. Canva is number three consumer AI usage platform right now.

• 34:39Jason Calacanis?

  Consumer AI, wait, wait. Usage or subscribers? Okay, that's a little bit.

• 34:44Speaker 03

  Usage. That's why I was pointing, I was saying.

• 34:46Jason Calacanis?

  That's an interesting interpretation of Canva as an AI product. Cause Canva obviously is a design product with AI features. I wouldn't say it's an AI first product yet. But maybe I'm wrong.

• 34:57Speaker 03

  They're, they're trying, they're trying. I mean, I think a lot of people were suggesting that Canva's, you know, business is getting eating, eaten up by Claude Design. You know, Figma certainly suffered from that perception in the market as well. And, and you know, Canva's growth on a revenue basis has slowed down a little bit, but there's still a pretty big platform for.

• 35:16Jason Calacanis?

  So wait, Ben, would you, if I told you like, hey, uh, you, you, you, you gotta put your money, your, your, your kids, uh, college education, whatever, your retirement. And you had four choices there. You, you got the Figma and the Canva. And then you got the OpenAI and you got the Anthropic. Go ahead and tell us what percentage you put into each.

• 35:41Speaker 04

  Oh man, I would definitely be all into OpenAI and Anthropic.

• 35:44Jason Calacanis?

  Anything, anything in Figma, anything in Canva and why?

• 35:48Speaker 04

  I think Dave shows it really well. The, the minute in this world, perception of loss of momentum is everything.

• 35:57Jason Calacanis?

  Yeah.

• 35:57Speaker 04

  And, and like perception, like I, I, I'm a secondary guy, right? We watched Canva. The second that article came out that said their growth went from 35% to 20 and the price dropped 25% in the secondary market.

• 36:11Speaker 03

  Only 25%? Dude, I.

• 36:12Speaker 04

  25%.

• 36:13Speaker 03

  I would say more like, you know, 30, 40, 50.

• 36:15Jason Calacanis?

  That's fascinating. Um, well, then there's a clearing price.

• 36:19Speaker 02

  Speaking as a Canva holder, as a Canva holder.

• 36:22Speaker 04

  But like, just think about the impact that momentum has on how well you attract, you know, people to hire. You know, just think about, you know, partnerships. Like it's, it, right now, those companies have no momentum, none. And they're just in a really hard spot.

• 36:39Speaker 02

  It's a tough story.

• 36:40Speaker 04

  They're gonna be nice, they're gonna be nice businesses, but they're not gonna change the world anymore.

• 36:44Jason Calacanis?

  Well, if they, if they get re-underwritten DA and they put them at a different multiple on sales, different multiple on price earnings, it's just kinda like Buffett says, you know, these things are voting mechanisms. And then it becomes a, a scale, right? Ultimately, the market, it's not a public company. So it's part of voting and not scaling.

• 37:04Speaker 02

  I, I agree, Jason, and I, I think, you know, look, I'm not trying to be some like bubble, so-called bubble boy AI hater here. But to me, venture capital, what, what made venture capital fun when I got into it, when you guys got into it, was we're supposed to be the guys who imagine what the world looks like in 10 years or 20 years. Okay? And, and the guys on Wall Street are supposed to be the ones thinking about what's hot right now and where's the money gonna go next month? So like, you know, short term, sure, like, what are you gonna do? Be the guy who bets against, um, Anthropic's IPO? Like, you're gonna look like an idiot. So I'm sure Jim Chanos or whoever else will be shorting all this stuff, but like, they're probably gonna have a lot of egg on their face.

• 37:43Speaker 02

  I think where it gets interesting is when you start asking these questions about long-term defensibility, about long-term profitability. And, you know, I look at something like Figma and I go, okay, everyone thought, you know, they were gonna have their lunch eaten by Claude Design six months ago. Well, it turns out they have network effects. Turns out graphic designers still do better graphics work for real companies than OpenAI or Gemini does. Now, they're amazing tools. They're gonna progressively eat more and more of that workflow. But like, you know, 10 designers at a company are all used to using Figma to collaborate with each other. It's what they've trained themselves up on over the last decade and they love it. That's a product people love.

• 38:25Speaker 02

  So, you know, I, I, I'm not counting anyone out yet. And I think the questions we were getting at earlier around the defensibility of, of Anthropic and the others, those are fascinating business questions, but they're gonna play out over a longer horizon. You know, I mean, the thing I don't like about being Anthropic right now is every person in the world has a huge financial incentive to figure out how to, how to compete with your product cheaper. Okay? Everybody, like, it's the biggest, biggest pot of gold in human history is to figure out how to offer intelligence for free right now. So, you know, I don't like the idea of having that target on my back. Now, would I trade places? Sure, because they're on top of the world right now. But it's not gonna be easy.

• 39:08Speaker 02

  And I think for those guys, one of the other interesting challenges is, and, and this is a credit to them, they're not commercial. You know, like, like Dario and the Anthropic co-founders in particular.

• 39:20Speaker 03

  They're not commercial?

• 39:21Speaker 02

  They're not in this for the money. Like, I, I really believe that. They, they are, they are full, everyone around.

• 39:28Jason Calacanis?

  Okay, hold on, this is good. DA finish, hold on, DA finish and then Dave. So finish your, finish your thought of why they're not commercial and then Dave, you get to counter, go.

• 39:37Speaker 02

  For, for all of us craven capitalists, it is, it is, it is, it's a, it's a, it is a reflection of our psychology that we cannot imagine that Dario is being genuine. Okay? It's, it's impossible for Chamath to listen to Dario and not see regulatory capture, venality, scam artistry. Okay?

• 40:00Speaker 03

  Chamath and Dario could be further opposed on this spectrum.

• 40:03Speaker 02

  My read.

• 40:04Speaker 03

  The opposite.

• 40:04Jason Calacanis?

  Hold on, Dave, let him finish, then you get your counter, please, sir.

• 40:08Speaker 02

  These guys, as they are chain smoking their cigarettes, are, are, are showing you that they are religious extremists. Okay? These are dyed-in-the-wool, legitimate religious extremists. And they might be right. And if they're right, we should, we should thank them because they're saving civilization. But if they're wrong, they're just religious extremists who happen to be engaged in the greatest business of this moment. But they will ultimately be beaten by people who are really good at business.

• 40:40Jason Calacanis?

  Right, which you don't see for religious and cult leaders often. I think Scientology had it for like a decade, maybe, where they were surging in growth and surging in revenue and they had the tech. And it, they couldn't sustain it, right? But this is a religion.

• 40:58Jason Calacanis?

  With performance, I mean, not since Christianity have we seen this. I mean, Jesus was on all cylinders, objectively.

• 41:06Speaker 02

  You know, by the way, they

• 41:07Jason Calacanis?

  Which is why they took him out.

• 41:10Speaker 02

  Jensen doing GPUs 15 years ago did not know he was going to end up in this position.

• 41:16Jason Calacanis?

  Right.

• 41:17Speaker 02

  In this revolution.

• 41:18Jason Calacanis?

  He didn't know he was GPU Jesus, no.

• 41:20Speaker 02

  You know, Dario studying physics at Caltech did not know he was going to be building the expertise that would put him in the middle of the great economic revolution of our time. So these guys, to a certain extent, are, they had prepared minds, but they're here accidentally almost. And the, the folks who are competing with them, the folks who are competing with them, Zuck, Satya, they are not here by accident.

• 41:44Jason Calacanis?

  No, those are rabid capitalists. Yes.

• 41:47Speaker 02

  They're here for the money and they're really good at the tech, too.

• 41:50Jason Calacanis?

  And Sam Altman would fall into that category. Dave, okay, now you've heard his position and you get to count. Go ahead.

• 41:56Speaker 03

  Um, all right. I, I think that DA was doing his best, uh, uh, uh, David Sacks impression there, channeling your bestie Jason and my former

• 42:05Jason Calacanis?

  No, I don't think I've ever heard Sacks take that position exactly.

• 42:09Speaker 03

  Hardly, hardly never, like

• 42:10Jason Calacanis?

  No, no, I think he, to, I think he thinks they are religious zealots, et cetera. Um, and they're going after regulatory capture. I think what DA is saying is they're not going after regulatory capture because they're business cutthroats. They believe what they're saying. They believe it to the same extent that they will cut themselves believing that they're going to naturally heal from AI. They'll, they'll rip darts, knowing that.

• 42:37Speaker 03

  You can be a believer in the benevolence and godhood deity of AI and also be interested in making money. I actually do agree that Dario maybe isn't in it for the money exclusively. Um, I, you know, machines of love and grace and all that other shit aside, I think he believes it. I really do think that he's trying to birth a deity that is a benevolent deity and will save humanity. I fully believe he believes that. He also probably is okay with making money. Now, he made a bunch of money at Google before he got to Anthropic. Um, but I, I think that Sam is in a different category. I, I think Sam is, you know,

• 43:17Speaker 03

  a venture capitalist and has a lot of ambition, probably more in the mold of Elon than, than Dario. But like all these people working at AI companies, yes, they may be there to change the world. They're also probably fine with making money. So those two things are not mutually exclusive in my book.

• 43:33Jason Calacanis?

  Okay, Ben, you want to get, you want to get in here, Russell Crowe?

• 43:37Jason Calacanis?

  Go ahead, Gladiator.

• 43:39Speaker 04

  I say like, I don't want to listen to what people say. I, I want to look, look what they do. All right.

• 43:44Jason Calacanis?

  How many darts did you rip before this show?

• 43:48Jason Calacanis?

  It's Russell Crowe smoking darts in between takes on Gladiator. Go ahead.

• 43:54Speaker 04

  Yeah, I, I remember, remember, one part of this business we haven't talked about at all is the cost of compute and all these long-term and how important that goes into the actual sort of fee, like long-term business model here. And yeah, I have to remember Dario giving a very public scolding to Sam Altman for being irresponsible about all of his compute deals.

• 44:15Jason Calacanis?

  Yes.

• 44:16Speaker 04

  Because Sam almost like

• 44:17Jason Calacanis?

  Pull up that cliff, guys. It's when he said you can run off a cliff. Uh, basically you buy too much compute, you go bankrupt.

• 44:23Speaker 02

  No love lost between those two folks at all.

• 44:26Jason Calacanis?

  No love lost. These guys left OpenAI because they didn't trust Sam. That was what they said.

• 44:33Speaker 04

  And then, but guess what? Sam was playing this game to win. And when it became clear that Sam was right, that you had to have compute locked up to win the business game, what did Dario go do?

• 44:44Jason Calacanis?

  I mean, he's a rationalist. He's a rationalist. I mean, he's definitely not dumb. If you built

• 44:49Speaker 02

  And by the way, that's why Elon is also winning too.

• 44:52Speaker 04

  He realized that he is behind the eight ball and that and had to catch up. And that, I don't want to hear to talk about him being a religious zealot because I mean

• 44:59Jason Calacanis?

  I mean, he listened. Jesus turned over the, uh, the, the, the tables at the bazaar. He was like, I'm, that's it. I'm taking over the bazaar where I'm going to be the marketplace.

• 45:09Speaker 04

  Just the same, he's, and he's competing hard and he's got a very softer veneer about him and you know.

• 45:15Jason Calacanis?

  It's really interesting. If you, if you do a, an alternate history, DA, uh, you're, I think you are, uh, you know, as an artist and somebody who appreciates art, like, uh, the alternate history genre, perhaps under recognized in its time. But if we did an alt history here, I got Lon's attention now by saying alt history. You do an alt history here. If Sam Altman was 20% less chaotic in his approach to business. I mean, it's like, he is a bit chaotic. You know, you remember he got fired. He came back, all this stuff. He probably would not have lost Dario and there might not be an Anthropic.

• 45:55Speaker 02

  I mean, by the way, he might not have lost Elon.

• 45:58Jason Calacanis?

  Right.

• 45:59Speaker 02

  You know, these, these are all Elon's children.

• 46:01Jason Calacanis?

  Wow.

• 46:02Speaker 02

  And, you know, and, and, and, and the Godfather is still looking like the Godfather right now because even though he got into this also out of his religious zealotry and, you know, Jason, you know, he, he believes this, right? He's been, he's been very public about it.

• 46:15Jason Calacanis?

  We have had this conversation many nights.

• 46:17Speaker 02

  Okay. So Elon's really good at business, but we've also stayed up all night talking with Elon for the past 10 years about how he believes this is going to take over the world. So, you know, it's like, he believes this too. So the, these guys were all one, like the father, the son and the holy spirit. They have now fractured.

• 46:37Jason Calacanis?

  It's a schizo.

• 46:37Speaker 02

  Okay. And, and, and, and, and basically what fractured them was that Sam had to be the guy, you know? But, but you know, you can't, you, you gotta respect the sensei, you know, the, the student can't overshadow the teacher. And then, and, and then Dario looked around, he said, oh, wait, these guys like money? I thought they were just here for the religious idolatry. And so I gotta go do my own thing. So the, the, the genealogy of this whole thing begins with this religious fanaticism.

• 47:08Jason Calacanis?

  Right.

• 47:09Speaker 02

  And, but, but my point is, it, it will not, unless, unless they are right that this is software Jesus. Hmm. This will not end with religious fanaticism. This will end with normal business. It will probably end with Microsoft and Google being much bigger. Maybe Oracle will even win. Maybe Larry Ellison's swan song

• 47:34Speaker 04

  That's a long shot.

• 47:35Speaker 02

  Will be the greatest, riskiest hand that's ever been played in American capitalism.

• 47:40Jason Calacanis?

  400 billion. That's a very good point there, DA. He's 400 billion into CapEx spending, uh, being essentially

• 47:48Speaker 02

  Balls out, dude.

• 47:49Jason Calacanis?

  And the guy's, he's 80?

• 47:51Speaker 04

  Shaky, man. Yeah.

• 47:53Speaker 02

  I mean, could we imagine taking that kind of risk when we're 80?

• 47:56Jason Calacanis?

  And by the way, spending another whatever, putting whatever tens of billions on the risk to buy every dying media asset and studio and giving it to your son. I mean,

• 48:06Speaker 04

  Son's doing the same shit.

• 48:08Jason Calacanis?

  They are spreading the treasury. There, it's, it's the treasury. This, I think a lot of empires spread the treasury a little too far and had too many conquests going on at once. Let's talk about who won here. Uh, Lon, we have to get two things before we wrap up. Number one, who won? Who won, uh, in the, in the, in the, in the old venture capital game here at this week in venture capital? Then number two, convertible notes

• 48:37Speaker 02

  Yes.

• 48:38Jason Calacanis?

  Hitting public markets for the first time in a, in a, in a significant way. Go ahead.

• 48:44Speaker 02

  Yeah. All right. Well, we'll start, we'll start with that one. So, uh, Anthropic, a lot of headlines were saying they burned $80.7 billion. That was the net loss for the first half of 2026. But 72.4 billion of that comes from just one line, quote, "Change in fair value of convertible notes, derivative liabilities and safes." In this case, it was mostly convertible notes plus derivative liabilities that were tied to the Amazon and Google note purchase agreements we were previously discussing. Anthropic elected to carry the notes at fair value instead of splitting them into debt and equity pieces. Uh, every reporting period, the company now re-measures these liabilities. If its value has gone up, the shares owed to investors are worth more, hence more liability. The increase is recorded as an expense

• 49:29Speaker 02

  on the income statement, then added back onto the cash flow statement as non-cash. So this is raising a lot of questions about which of these numbers matters, which doesn't? And how do you all think private markets are going to, or public markets are going to learn how to interpret these?

• 49:46Jason Calacanis?

  Go ahead, Dave. Yeah, this is your wheelhouse. You just net out that 72 billion?

• 49:51Speaker 03

  Uh, I think my partner did the analysis of this. And again, I think they're in fine shape on a profitability basis. There's some, you know, non-cash expenses here that people are, are looking at that are worried about too much, but on actual cash out the door, they're, they're doing fine.

• 50:06Speaker 04

  Yeah. I, I heard though, I mean, there, there is a negative kind of implication that, that those notes, a lot of the notes were due to their Amazon deals with AWS and were basically subsidizing their compute costs. They gave lower costs, they gave, they gave lower costs. So this goes back to the point of like, do we really understand cost of compute here? Because that's my understanding of it.

• 50:28Jason Calacanis?

  Well, here's the great news. Sunlight, uh, will figure this all out and we're about to have essentially two of the three, the, the father, son and holy, holy ghost here, we're about to figure this out. Once they're public, then we just have to somehow pencil in one hand of poker at the table, which is what cards are Sam Altman holding. We know what cards Elon's holding. We understand his compute costs. We understand what he's building. We have perfect insight into that. We know what Amazon's doing. We know what Oracle's doing. So really it's just gonna, and we know what Nvidia is doing. And when we get these two companies public, we're gonna know the answer to all these questions. So we'll keep at it there. And then let's talk about the winners.

• 51:10Speaker 02

  Sure.

• 51:10Jason Calacanis?

  I mean, Dave, you were kind of rolling your eyes there. I'm assuming because off balance sheet loans and stuff like that?

• 51:17Speaker 03

  Yeah, yeah, yeah. I think what we're not able to clearly understand right now is the amortization of that cost of capital. Like, you're putting a shit ton of money out there on CapEx, and the question is, though, how quickly or how not quickly does that CapEx amortize, you know, depreciate over time? If you're talking about chips, you know, people are saying, hey, these chips are gonna make money for us for four, five, maybe even six years. For the NeoClouds, I don't know if that's like completely true. I think they're spending a lot of money and those, you know, things that they're leasing and buying may be making money in the future, may not be making money in the future. I think we saw from SpaceX Q3 earnings, SpaceX is in great shape. Like Elon's, you know,

• 52:01Speaker 03

  payback is less than 12 months. He thinks he can get to six months. And, you know, I think Chamath made some analysis about like all the other NeoClouds in trouble because their payback was not, you know, anywhere close to that. It was two or three years, maybe not even.

• 52:15Jason Calacanis?

  Yeah, but I mean, two or three years seems completely reasonable as well, DA. And when we look at the history of compute and the amortization of computers, we see a couple of observations here. I want your comment on DA. If you're Google or you're Amazon, at a certain, you have new technologies emerge and optimized software. So what was used as a frontline computer eventually becomes used for, I don't know, cold storage, background jobs. And then eventually, the equation is, in a data center, is this providing enough value in year eight, nine, or 10 of serving webpages or Gmail? Is it worth sending a

• 52:55Jason Calacanis?

  human to pull this out of the rack? Or should we just let it keep grinding? And the average lifespan of compute at like other data centers, you know, we're talking about seven, eight, nine, 10 years for some of these servers. And it's only the human cost of swapping it out that becomes the cost. I think these machines are gonna be doing reasonable things in year seven, eight, and nine with optimized software, you know, to move them to inference, to move them to storage jobs, background jobs, et cetera. What's your take on how long this compute has a lifespan for?

• 53:34Speaker 02

  Look, I, I, I am relatively confident that the hyperscalers are behaving rationally. They can get money at six or 7%. And if they can earn 10 to 14% returns on it, it's a great financial decision. They create value for the shareholders. So I don't, and by the way, if this whole thing blows up, they just stop spending the money and it was a bad couple of years and whatever, they move on. So they're fine. This entire circular economy of the labs, the cloud providers, the hardware providers, I'm convinced that it makes sense within itself as one organism. But the only question that matters over the

• 54:18Speaker 02

  next decade is whether that organism can find enough nutrients in its environment. And the challenge here in parsing all of these financials is that, yes, sunlight's the best disinfectant. As these companies go public, we're gonna see a lot about where they're spending money. But they are not gonna tell us all that much about who's giving them money, what their customers are doing, who their customers are. And unfortunately, our best source of information for that is probably gonna remain the investment banks who have this capacity to integrate the financials of every other company in the economy. So what we need to do is stop looking at the AI guys so intently and spend more energy

• 55:01Speaker 02

  looking at everybody who's supplying their revenue.

• 55:05Jason Calacanis?

  Right.

• 55:05Speaker 02

  That's where we're gonna see how this story evolves. And as long, as long as that demand's growing like gangbusters, the organism's gonna be fine.

• 55:15Jason Calacanis?

  Yes. You might get some people who get ahead on their skis, who maybe act irrationally, and then they have to cancel or postpone, or, you know, one of their real estate providers says, hey, I'm not letting you off the hook. You gotta give me money. And they say, I don't have money. And then that company goes out of business and somebody buys their assets. And the question is, does it become a dark fiber-like situation where there's no buyers in your analysis as a biotech investor? The nutrients are just not there. You don't have people, you know, providing those. Yeah.

• 55:46Speaker 03

  I'd love to hear Ben's position on this because he's, you know, sort of a retired secondary investor. Now he's managing a public, you know, traded portfolio of, you know, private companies about to go public.

• 55:58Jason Calacanis?

  What are the top three holdings in there, Ben? Top three holdings in your public, private? What do they call this? Is this a closed-end fund or something? What do you call them?

• 56:05Speaker 04

  Yeah, closed-end fund called Powerlot, SpaceX, OpenAI, and Calci.

• 56:10Jason Calacanis?

  SpaceX, OpenAI, and Calci. Okay. But SpaceX is already out, so do you?

• 56:15Speaker 04

  Yeah, we're, we're in the process, we're in the process of, of selling that down.

• 56:21Jason Calacanis?

  Got it. When did you buy your SpaceX? How many years before it went public?

• 56:25Speaker 04

  It wasn't that long ago. It was like early 25.

• 56:29Jason Calacanis?

  So you got a 50% lift on that, something to that effect?

• 56:32Speaker 04

  Yeah.

• 56:33Jason Calacanis?

  50%?

• 56:33Speaker 04

  No, more than that. I got more than that. We got about, we got about a 3X.

• 56:36Jason Calacanis?

  Oh, 3X, fantastic. 3X in two years is great. Awesome.

• 56:39Speaker 04

  Yeah. I looked at all of the, all the private, you know, NeoClouds. And, yeah, I mean, I think the hyperscalers are totally fine. I think they're so dominant, they're, they can always adjust. They have, they have so much negotiating leverage in, in all their deals that, you know, I'm not, I'm not worried about them. You know, I, I don't love companies as an investor where there's just a lot of factors out of your control. And with all the NeoLabs, your cost of capital is out of your control. And also, how long it takes you to implement, your projects is out of, is out of your control. And when you put that, those two things together, I've stayed away from all of them. I'm sure that maybe

• 57:21Speaker 04

  I, I certainly missed CoreWeave for that reason. And, you know, that's on me because that was a great deal if I had done it. I missed a big one. But I, I just, I like to sleep at night. That's why I do growth stage instead of early stage. And I can't take businesses that are, that are built like that. So.

• 57:39Speaker 03

  So I think what you're talking about is a lot of dead capital. And I think Ben Herb.

• 57:43Speaker 04

  Well, debt. It's debt and its timing.

• 57:45Speaker 03

  Right, right.

• 57:46Speaker 04

  Like, you know, your ability to build, you know, your, your ability to build. Oh, and by the way, if Jensen gets mad at you, forget it. They're all sorts of trouble. There's just so many things out of these companies' control. And I don't like that as an investor.

• 58:02Speaker 02

  And it's like, it's, it's, I mean, look, no, no fault on anyone who's doing it, but it's, it's, you know, fast momentum chasing, kind of, you know, these guys were all Bitcoin miners two years ago. And, you know, this is the hot thing right now. So you run after that. And next week, they'll be in Miami buying Ferraris. So.

• 58:19Jason Calacanis?

  Oh, my God. Did you see my, did you see my Bitcoin post? My monthly Bitcoin post?

• 58:24Speaker 04

  Yes.

• 58:24Speaker 02

  Oh, my God.

• 58:25Speaker 04

  Stablecoin.

• 58:26Jason Calacanis?

  Every month.

• 58:27Speaker 02

  Oh, you want us to sell?

• 58:28Jason Calacanis?

  Every month, I do my Bitcoin is dead post. But I'm bored. But I, I keep working the thesis because I do in fact think that it's run its course. And if Lon goes through, he can do a little research here on the previous two. Go on, go find the previous two as well. And, and so this is like a good one for us to, to discuss. I say, hey, listen.

• 58:52Speaker 03

  Jason, have you checked with Naval or Biology on this perspective?

• 58:55Jason Calacanis?

  Uh, I, I, I think they left Bitcoin for Xcash. I think other people have left Bitcoin for Tau. I have a small bet, like maybe 750K on Tau. And we have millions in Bitcoin, but, and we're holders. You know, it's a very small percentage of the overall family office, but, you know, you need to have some, right? Because you never know.

• 59:16Speaker 02

  You got a family office, Jason? That's.

• 59:17Jason Calacanis?

  I micro a family office. My, you know, just me and my wife.

• 59:20Speaker 02

  Don't say that. Don't, don't, don't say it.

• 59:22Jason Calacanis?

  Well, whatever. I mean, it's like the first stage of a family office because, you know, when you start having a couple of real, you have disparate assets, you need to do coordination. And so Jade is running it with me and my wife. And she's awesome. So here's what I wrote. Brutal year for Bitcoin is just getting started. Give me three minutes to explain why you should dump it now. See, that's the hook. That second line there, DA, that's the hook. You know, you as a musician, understand a good hook.

• 59:46Speaker 02

  Yeah.

• 59:46Jason Calacanis?

  And now I'm just, I'm asking for but three minutes of your time. Outflows from ETFs are signaling will continue. We're gonna test the low again. Why? Because there are far too many dynamic places to put your money that are creating much more value. Why put your resources into a dead network? That's a trigger right there. That offers nothing beyond a store of value. That invites the reader and the holder to, to challenge those two things. What's the point of the BTC's Ponzi scheme? Nature has gone away. I have a little typo in there. Leave that.

• 1:00:21Speaker 04

  Ponzi scheme.

• 1:00:22Jason Calacanis?

  Well, and I think that was actually its biggest value, Dave, was that if you owned Bitcoin, your moral obligation was to shame people who didn't. But people do not do it anymore. There is no more have fun being poor and put laser eyes in because it's embarrassing to do that when the thing is sideways for so long. And I just say, listen, no one is trying to convince people to buy it anymore. And no one is saying BTC can change the world because it won't and because AI has. Just sell and shift from Bitcoin to superintelligence because one provides little to no value, the other provides unlimited upside for humanity. This should be obvious to everyone right now. Bitcoin will never break its all-time highs again. So another hook at the end.

• 1:01:07Speaker 03

  Drop the mic.

• 1:01:08Jason Calacanis?

  2 million views.

• 1:01:11Speaker 03

  Wow.

• 1:01:11Jason Calacanis?

  Two points. The number of retweets is great.

• 1:01:14Speaker 03

  Lot of haters. Lot of haters.

• 1:01:16Jason Calacanis?

  It's so great. It's so great. And I just literally do this every month. And the amount of engagement I get on this is crazy. Now there's three people who want to bet me a million dollars that it's going to hit an all time high.

• 1:01:29Speaker 02

  And J Cal, is this trolling? Is this trolling? Or you believe this?

• 1:01:33Jason Calacanis?

  Yes. Yes.

• 1:01:34Speaker 03

  Yes.

• 1:01:35Jason Calacanis?

  Answer is yes.

• 1:01:35Speaker 02

  Both. All of the above.

• 1:01:37Jason Calacanis?

  Yes.

• 1:01:37Speaker 02

  Yeah, I mean, look, I will say, you know, we alluded to the debt situation a minute ago and the cost of financing for these Neo clouds and stuff. That is the other thing that's happening right now is just this macro context, right? And we may be now for the next couple decades in a sort of inflationary, rising rate environment. It's a very different place to be doing business. So the bull case for crypto at this point probably does fall away from this speculative Ponzi scheme thesis and is merely a debasement trade thesis. And I think the question then, Jason, is like, has Bitcoin after, you know, 15 years

• 1:02:21Speaker 02

  earned its place next to gold and the other debasement trade assets? And will it be durable in that regard? I mean, one interesting thing, past six months, gold's gone down. Right? So this has been an environment that hasn't been favorable to assets that are focused on debasement. And, you know, the question is whether the secular outlook is such that, you know, that that has the wind at its back over the longer run.

• 1:02:47Jason Calacanis?

  Yeah, there's only a certain amount of money in the world. It seems, I mean, we keep printing some more here, but yeah, it is.

• 1:02:55Jason Calacanis?

  Where does money go? Right? I guess is the question. Rational money, irrational money. And I think this is the last thing on people's mind that I, because if Bitcoin just keeps hovering in this range and it never makes new all time highs. This concept, Dave, of the million dollar Bitcoin is seeming improbable now.

• 1:03:18Speaker 03

  I think you're on target that stablecoin has a really solid use case. And that's clearly, you know, going to be something that people are putting money into. I think, you know, we're already seeing that. I think another area that's possibly not bullshit is tokenizing real world assets. And, you know, having something that maps to real.

• 1:03:38Jason Calacanis?

  Yeah.

• 1:03:39Speaker 03

  I think even DeFi in the long run is not crazy. I think, you know, lending makes sense. But I do think a lot of the other speculative stuff, there's just, you know, hard to understand what is driving the value of those assets. There's no underlying asset to underwrite in many cases, except, you know, belief and hype.

• 1:03:56Jason Calacanis?

  Which makes giving a loan to a Neo cloud seem like a better option because you have the, you have the, you have the assets, you have the data center and you have the chips and you have the memory chips and you have the GPUs. It's worth something. All right, let's rational, folks.

• 1:04:11Speaker 03

  Can I have one more thing that I want to like talk about that Ben and I were arguing about before is I think that we're.

• 1:04:17Jason Calacanis?

  This isn't a backdoor promo, is it? It's not a backdoor promo.

• 1:04:20Speaker 03

  Oh, absolutely. I would never try and do that.

• 1:04:22Jason Calacanis?

  That's okay. We'll cut it. I think I'll cut it in post, guys.

• 1:04:25Speaker 03

  I think there's a big issue.

• 1:04:26Speaker 01

  I have a new financial product, DA.

• 1:04:29Speaker 03

  Okay, so at the top of the market, there's 10 VC firms, maybe 20, that are taking down 75% of all the capital. We're seeing huge amounts of capital going. Small funds are under pressure. A lot of emerging managers, Ben runs the Raise Conference, which just happened, are having trouble. Maybe not Ben's precious, you know, top 100. Maybe they don't have trouble, but a lot of other emerging managers are having trouble raising funds. And they're shifting to SPVs. And I think, this was my tweet from just yesterday, is SPVs are killing the VC radio star. A little bit of music connection for DA here.

• 1:05:05Jason Calacanis?

  God, when is this commercial at? Keep going.

• 1:05:08Speaker 03

  That's it. That's it. Well.

• 1:05:10Jason Calacanis?

  That's it. Oh, okay.

• 1:05:10Speaker 03

  I think we'll have more to announce about this in the future. Ben and I.

• 1:05:13Jason Calacanis?

  Okay.

• 1:05:13Speaker 02

  Well, there's a plug, folks. I got a comment on this, Jason. I got a comment.

• 1:05:17Jason Calacanis?

  Please, get in there.

• 1:05:18Speaker 02

  I understand the incentives that drive asset managers. Those indeed have led to secondary funds, you know, closed end funds in the public market with private stuff. Big late stage Megatrons. But let's again zoom out to the 10 year, 20 year view as venture capitalist guys.

• 1:05:40Jason Calacanis?

  20 year.

• 1:05:41Speaker 02

  Here's what the AI is doing, man. The AI is making it so cheap and high leverage to be an entrepreneur. Okay? The best entrepreneurs of the next few years are going to raise less money than the best startup founders have ever raised. Okay? Because they don't need it. And the, and so, you know, the pendulum of history is going to swing right back in the other direction. The people who are going to make the money off the next anthropics are going to be these people who are running small funds, writing small checks to entrepreneurs who don't need $100 million seed.

• 1:06:20Jason Calacanis?

  Love it.

• 1:06:20Speaker 03

  I'm not saying the emerging managers are out of business. I just think a lot of their money is going to SPVs, not funds. I think that was my.

• 1:06:26Jason Calacanis?

  I think, DA, I'm going to go with you on this because here's the thing. The game on the field was, you know, hey, if you do an SPV in SpaceX, you know, it's, it always goes up and to the right. And that was true. And Elon's amazing. There was money to be made there. Right? But now if everybody's doing it, is there money to be made there? And is your little five or $10 million allocation any different than the other person's? And is it a race to the bottom? And when you go talk to family offices with your $10 million allocation and you're trying to get 2% a year in fees and you're 20% carry, they're just going to grind you down because they have other places to buy it from. And it's becoming a bit of a fluid market there, which means it's going to be commoditized.

• 1:07:10Jason Calacanis?

  Now you go to the early stage and nobody wants to do that work. When I talk to young founders, it is so hard for them to raise that first round that they're willing to do a $10 million valuation, a $5 million valuation, a $20 million valuation, get the right people on, and they are now becoming alicorns. Alicorns are the next unicorns. And alicorn is a unicorn with wings, the Pegasus wings. And this is the future. The future is alicorns. Because they become unicorns because they get to a billion dollars. This is it. It's the future is alicorns. They get to a billion in revenue by flying over funding rounds.

• 1:07:50Jason Calacanis?

  They are more capital efficient and they use their Pegasus wings to fly over a funding round. They skip their Series B. They skip their second pre-seed, post-seed, pre-Series A nonsense convertible because they have revenue. The ability to get to revenue, DA, which you left out of your thesis, but is implied in it. They get to revenue quicker. And then they, when they go talk to VCs, they're like, I don't need to raise around. I have now had to go to three or four of my alicorns and say, your valuation is going up very fast. Can you please just take 10, 20 million off the table? So we just have a rainy day fund at a 250 million, a billion dollar valuation.

• 1:08:32Jason Calacanis?

  And I have to walk them through that economics, DA, to just like, we're diluting 5% here.

• 1:08:38Speaker 02

  These 16 year olds right now in their bedrooms who are building all this shit with agents and they're token maxing and they're starting companies and they have no money and no one's permission.

• 1:08:52Speaker 03

  Token max.

• 1:08:53Speaker 02

  These are going to be the, these are going to be the greatest fucking entrepreneurs in human history. These are a, these are a different species. Okay?

• 1:09:01Jason Calacanis?

  Different species.

• 1:09:01Speaker 02

  When you get, when you, you're getting all these automated emails, I'm sure all of you, all day. It's from these kids in, you know, Pakistan in their parents' bedroom using Claude or whatever. I don't even know what they're doing.

• 1:09:12Jason Calacanis?

  Yes.

• 1:09:13Speaker 02

  But I can tell you, they're amazing and they're going to crush. And Lightspeed has no interest in talking to them.

• 1:09:19Jason Calacanis?

  Hmm. There it is. The big have gotten too big, folks. This has been another amazing episode of This Week in VC. Lon, let's thank our guests and give them a proper plug.

• 1:09:31Speaker 01

  Thanks to DA Wallach. He's the co-founder and general partner of Time Bio Ventures, a life sciences and healthcare venture capital firm. DA, you were amazing. Thanks for being here. Dave McClure, our old friend, managing partner at Practical Venture Capital. They're a firm focused on the venture secondary market. There it is on your screen. And Ben Black, the co-founder and managing director of Akkadian Ventures, a firm that invests in venture secondary, secondaries and runs SPVs. He's also the chief investment officer of Power Law Corp, the closed end fund that trades on NASDAQ as PWRL. Thanks to Ben and our entire panel for being here.

• 1:10:09Jason Calacanis?

  All right. Well done, everybody.

• 1:10:10Speaker 01

  Thanks for having me.

• 1:10:11Jason Calacanis?

  And if you could all do me one favor, Lon, pull up This Week in Startups Substack here. We have a little announcement. Lon and I have been working in the laboratory. A little announcement here. We looked at our email newsletters. We looked at all the newsletters out there in the world, DA. And we said, from first principles, what do our founders need? And we listened to them. We make 100 investments a year. We have a couple of programs. And they always say the same thing to us. We need money and we need very tactical advice. They say, well, what do you need the tactical advice on? They say hiring, growth,

• 1:10:49Jason Calacanis?

  product market fit, et cetera. So we said, okay, we can help with that. We have products for introducing them to investors. So now twice a week, 100 times a year, we are in a competition to find the best tactical and practical applications and we're making newsletters out of them, but we also do these events live. And we're trying to hire two full time writers to help with this effort. TWIstartups.substack.com, TWIstartups.substack.com. We charge 100 bucks a year for this. Why do we charge 100 bucks a year? We're arms dealers at this point, DA. You know, if one founder has this information, then the other ones don't. And so you put $100 into the kitty, it's going to go up to 250 at some point.

• 1:11:34Jason Calacanis?

  But we're just hoping to get 1,000 people to subscribe to this for $100 each. And then keep us honest. Hit reply and tell us it sucks or it's great. And the goal here is just to make it sustainable, not looking to make a killing on these. But we want to have enough that we have two or three smart people working on getting this important information to our portfolio companies and the 1,000 people who join us to subscribe to this newsletter. That's my little mini plug, DA. Mini plug. Can you give DA a complimentary subscription, please? Please?

• 1:12:05Speaker 01

  Sure.

• 1:12:06Jason Calacanis?

  He'll give me, he'll give me.

• 1:12:07Speaker 02

  Oh, what about, what about Dave and Ben?

• 1:12:09Jason Calacanis?

  No, I want them to pay. I want them to pay. Specifically, I want their credit card number so I can upsell them. No, no, you can give it to.

• 1:12:15Speaker 01

  Drop your email in any of the chats and I will add you for free.

• 1:12:18Jason Calacanis?

  You figure it out. Don't make them work. Go find their emails. Come on.

• 1:12:20Speaker 01

  I'll figure it out.

• 1:12:21Jason Calacanis?

  Great job, everybody. We'll see you next time. Bye bye.