Uncapped #58 | David George from a16z

David George is a General Partner at Andreessen Horowitz, where he leads the firm's growth fund. Before a16z, David was a General Partner at General Atlantic. He has been involved in investments including Databricks, Ramp, Harvey, and Figma. We discussed David's framework for thinking about the AI buildout: why the thesis that "it's all going to work" is the right one, and why the answer to almost every question in AI right now is "and" rather than "or." We got into where we actually are in the diffusion of AI into the enterprise, why there are 1.5 billion knowledge workers that AI has barely touched, and what would have to be true for the buildout not to continue. David shared his framework for thinking about product cycles vs. capital cycles, why right now is a 9 or 10 out of 10 on the product side, and why autonomous driving and robotics are massively underappreciated. We also talked about why vibes and narrative matter more than ever for founders, why he never shorts a messianic founder or a product people love, and how he thinks about the scale and ambition of Andreessen Horowitz as a firm. Timestamps: (0:00) Intro (0:23) The answer to every AI question is "and" (1:27) Where we are in the AI buildout (4:55) What would stop the token buildout (7:16) Sellers vs. buyers of tokens (10:39) Frontier labs vs. open source (13:18) Application investing and the coding blast radius (14:01) Harvey and legal as a category (20:46) Consumer AI and where we are (22:14) From reactive to proactive AI (25:52) AI, autonomy, robotics, bio health (27:49) Autonomous driving and why it's underappreciated (30:46) Robotics and what comes next (33:25) Benchmark's new growth fund (34:11) Why growth investing is compelling now (34:53) Half of private market returns happen at growth (37:57) Product cycle vs. capital cycle (41:54) The importance of narrative (43:14) Why vibes matter (46:20) Never short a messianic founder (49:39) How big can Andreessen Horowitz get Links: https://x.com/DavidGeorge83 https://x.com/jaltma https://uncappedpod.com/ [email protected]

• 0:00Speaker 00

  If the premise of your question is, is this going to be successful or that going to be successful? The answer in AI is probably and like it's just the most exciting time, you know, to ever be an investor and in the technology markets. Keeping up with it is going to be hard. Keeping up with it is going to be hard.

• 0:17Speaker 01

  All right, David, I'm really excited to do this. I've been, I've been really looking forward to this. So thanks for, thanks for coming by.

• 0:21Speaker 00

  Yeah, great to hang with you.

• 0:23Speaker 01

  So one of the topics that's been on my mind a lot that I think you've got really good thoughts on is something that my partner Eric Visher said recently on the Invest Like the Best podcast. And it was basically, he was like, it's all going to work. And it was in the context of, you know, people question, is it going to be open source or frontier? And he's like, the open source is going to work, the frontier is going to work. Is it going to be Nvidia or is it going to be new chips companies? And he's like, there's going to be both. And you can kind of like go on and on through, you know, the stack and AI. And Eric's point was basically like, people are asking the wrong question of just like, is it this or it's that? He's like, it's both. And I'm curious how you think about this at Andreessen and sort of in your seat.

• 1:04Speaker 00

  Yeah, of course. So I am very, very closely aligned with Eric on this point that it's all going to work. I actually like the way that he framed it up. I framed it up slightly differently, which is just like the answer to all this is and. And so like, if you're answering, if you're, if your question, if the premise of your question is, you know, is this going to be successful or that going to be successful? The answer in AI is probably and. I think it's helpful to start just like, where are we? So right now, from an infrastructure build out standpoint, we just surpassed the railroads.

• 1:34Speaker 01

  Right.

• 1:34Speaker 00

  As a percentage of GDP, which has been recovered.

• 1:36Speaker 01

  It's like 3% now or something like that.

• 1:37Speaker 00

  Exactly. And, um, you know, look, it's probably going to get harder and harder to build data center, which we could talk about later, but I think that's going to 10x. So right now, like what's happening is basically.

• 1:47Speaker 01

  As a percentage of GDP, you think?

• 1:48Speaker 00

  I think it will, no, I think hopefully this will drive GDP growth. And this is going to take many years. So it won't 10x in one year. So it won't be whatever.

• 1:53Speaker 01

  But we'll be spending many trillions.

• 1:54Speaker 00

  But we will spend many trillions, right? So like, all of this success, which is the greatest, fastest success we've ever seen in business, which is basically OpenAI and Anthropic together. And then if you add in SpaceX AI, now with Cursor, they're, call it like 120 billion of revenue. And they add more revenue per month than all the hyperscalers, except for Amazon.

• 2:13Speaker 01

  It's crazy.

• 2:13Speaker 00

  Now, all of that is on the back of just actually a small amount of people paying for stuff. So it's like 30 million coders in the world who are the vast majority of the revenue. There's 1.5 billion knowledge workers, but like basically all of this, which is like adding more, more revenue than the best businesses that have ever been created, is on the back of a small group of people.

• 2:32Speaker 01

  That's actually a really interesting point, that it's over a billion users of these things. And we think about it that way, but it's actually, you're saying 30 million are spending basically all the money.

• 2:39Speaker 00

  30 million. So there's a billion consumer users. And by the way, we should talk about consumer because we're like nowhere in consumer right now, even though there's a billion users. But in the enterprise, basically the, the vast majority of the revenue is coming from just a small amount of coders.

• 2:50Speaker 01

  Yeah.

• 2:50Speaker 00

  And this is like in power terms.

• 2:51Speaker 01

  Even within that 30 million, I'm sure it's a power law.

• 2:53Speaker 00

  It's a massive power law. Like we, I'm sure you've talked to your companies and a lot of this and stuff.

• 2:57Speaker 01

  The top million of the 30 are spending.

• 2:58Speaker 00

  The top, the top million of the 30 are spending just a massive amount. And so if you take an optimistic view of what that means, like the potential is so much greater than what has actually diffused into like everything beyond those million people.

• 3:10Speaker 01

  Yeah.

• 3:10Speaker 00

  And so, again, there's one and a half billion knowledge workers and we're just talking about B to B. And so, um, so it's just a massive amount that is going to happen in what I think is going to be like the next five years.

• 3:20Speaker 01

  Yes.

• 3:21Speaker 00

  Right now, demand is totally insatiable, right? You know, in, in the enterprise, basically what's working, it's like coding, writing stuff. You're starting to see early signs in some, you know, functions beyond that, like legal is one where we've kind of seen this take off. I think it's like 12 months behind. But for broad knowledge work, for the one and a half billion knowledge workers in the world, we're like nowhere.

• 3:42Speaker 01

  Yeah.

• 3:42Speaker 00

  So you just start with that as the premise, which is, um, you know, we're, we're already seeing like scale that's never been seen before. And, you know, we're like scratching the surface and diffusion. It's like less, less than 5% diffused into the B to B economy. That means we're going to get really, really big.

• 3:58Speaker 01

  Yeah.

• 3:58Speaker 00

  If we're right about this sort of diffusing and being applicable broadly. So that's, so that's one piece. On the supply side, we are massively, massively constrained.

• 4:07Speaker 01

  Massive.

• 4:08Speaker 00

  Like basically in everything in the supply chain.

• 4:09Speaker 01

  Yeah.

• 4:10Speaker 00

  So basically, you know, you can't get data center capacity until 2028 because basically there's bottlenecks in every step of the supply chain. So that is where we are in the supply and demand. And I think it's important to lay that groundwork because it is like the crux of why I think everything is going to work.

• 4:25Speaker 01

  Yes.

• 4:25Speaker 00

  Right? Like all of, all of the state, all of the sort of like steps in the ladder are going to work.

• 4:30Speaker 01

  Talking about the supply side for a second. So it's four gigawatts right now. Is your, is, is sort of like your kind of view at the moment that if we had eight gigawatts live and online, it would all get used as well?

• 4:39Speaker 00

  Yeah, it would get used. Yeah, I think it would all get used. Yeah, yeah. And look, maybe like it would be at different prices or something like, we could talk about pricing of what's happening for tokens.

• 4:46Speaker 01

  Yes.

• 4:47Speaker 00

  But yeah, I think, you know, if you, if you get like more OpenAI and Anthropic or SpaceX AI capacity live, it generally gets used.

• 4:56Speaker 01

  So I, so just to sort of like check the premises along the way. And obviously, as you know, I fully agree with what you're saying. But, um, just to check it along the way, what would have to happen for it not to be the case that as gigawatts come online, all the tokens keep getting consumed? Is there any world where, is there anything that could update our priors, you know, that four gigawatts becomes 20 and they don't all get used at the same or even higher prices?

• 5:20Speaker 00

  I think there's two forms where this could take hold. One is, um, like what happened with coding is anomalous relative to everything else in B to B or knowledge work. And because of the difficulty of injecting commerce from knowledge work from companies, like the rest of white collar work just doesn't really like have major impact. Like, I think that is extremely unlikely. Um, I think it's sort of like a data collection problem and like an application of the models problem. The other would be, you know, we do have teams that we've backed that are working on like algorithmic breakthroughs, right? And so, you know, perhaps you would get an algorithmic breakthrough where, you know, rather than having to consume, you know, massive.

• 6:03Speaker 01

  Oh, just efficiency goes way up.

• 6:04Speaker 00

  Yeah, like efficiency goes way up, both in training and in, and in inference.

• 6:07Speaker 01

  Yeah.

• 6:08Speaker 00

  I think that's unlikely. I think it's possible we could get breakthroughs in training. Like, I don't know, you've probably seen the stats on what it took you and I to like build our knowledge base. Like it's like, you know, whatever, two or three orders of magnitude less than what the models actually train on. Um, so there seems to be an opportunity there. You still will then have inference, which is an absolutely massive market that's going to be much bigger than training anyways.

• 6:28Speaker 01

  Yeah.

• 6:29Speaker 00

  And so, you know, yeah, we could get efficiency gains in inference, but I think what we've learned so far is the more you reason at the model, like at the time of inference, the better the results get. And so I think that'll continue to hold, um, in knowledge work broadly. So I, I struggle to find a way for this like not to work. Now, if we went to, you know, from five to 100, you know, in a quick amount of time and the products aren't built to actually like take that on, you know, sure. But like, we don't, we're not going to have that problem because it's going to be really hard to get this stuff online.

• 6:59Speaker 01

  I'm curious what you think about this. I mean, the, so I also can't easily see it, but the best factor that I've heard was a conversation I had with a friend where we were basically saying, you know, all this stuff come, has come online. And so at first, you know, a few years ago, there was like the big build out and you saw like, you know, we're putting hundreds of billions in at the time. And then you get, you know, the models get a little bit better and you start deploying them and you kind of like keep moving through the pipeline. And now you see revenues growing like crazy on the back of AI. But the point in this conversation was most of the revenues that are, that we're talking about are sellers of tokens, not buyers of tokens. And so the next thing we kind of need to see is data around the buyers of tokens actually getting these huge efficiency gains. In other words, you know, a hyperscaler.

• 7:42Speaker 00

  Yeah, like what's the ROI at the enterprise level?

• 7:44Speaker 01

  Yes.

• 7:45Speaker 00

  Like, you know, users, like writing all this more code, like, is your, is your, is your business getting better by writing all this?

• 7:50Speaker 01

  Yeah. Or said another way, it would be a bad outcome if the sellers of tokens were making lots of revenue and the buyers of tokens were not making lots of revenue, they were just buying lots of tokens.

• 7:57Speaker 00

  Look, I, I'm very optimistic about this point. Like, I think that whole argument is predicated on the fact that there won't actually be tangible, tangible productive use of like writing more code.

• 8:06Speaker 01

  Yeah.

• 8:07Speaker 00

  Far more efficiently is better.

• 8:08Speaker 01

  Right.

• 8:09Speaker 00

  Like, I just think that's like fundamentally wrong.

• 8:10Speaker 01

  Yeah. And I haven't, I haven't looked. I know like a year ago, there was a study, or maybe even a little more, but it's something like a year ago, there was a study that like in AI coding, it was, you know, actually you got 20% less effective by using AI code. But this was like before.

• 8:24Speaker 00

  This was before the big four, five, yeah, breakthrough, right?

• 8:26Speaker 01

  My guess is if you reran that study, you would not see that anymore.

• 8:29Speaker 00

  Yeah. And like the best coders in the world have like fully flipped over on this.

• 8:32Speaker 01

  Yeah.

• 8:32Speaker 00

  And, um, you know, if you talk to like the CEOs of the cutting edge companies, I think they would tell you that they feel much more productive. Like I, you know, spending time with Stripe, like they feel like there's very high returns to them being able to be a lot more efficient in writing code.

• 8:46Speaker 00

  You know, like is like Procter and Gamble getting big efficiency gains from what they're spending on AI today? Like probably not yet, but I think they will.

• 8:55Speaker 01

  Yeah.

• 8:55Speaker 00

  They probably need a lot of handholding. That's probably the answer is, you know, I think the labs and, you know, data bricks and Palantir, companies like that are probably thinking about it the right way where you have to do a lot of handholding to produce value, but you will produce a lot of value for those companies. You know, and then there's companies like Stripe, like I, I don't know, one of the things that we're thinking a lot about right now is like, where is that effort actually going to? Is it going to like front end, building more products? Or is it going to like backend, trying to make your business more efficient?

• 9:22Speaker 01

  Yeah.

• 9:24Speaker 00

  And like the best companies in the world right now are singularly focused on front end.

• 9:28Speaker 01

  Hundred percent.

• 9:28Speaker 00

  You can produce, um, you know, uh, 10x, 100x more revenue potentially if you nail the next product.

• 9:35Speaker 01

  Yes.

• 9:35Speaker 00

  Right? Whereas like on the cost side, like you can only get so much more efficient and that opportunity will kind of always be there. It's like latent.

• 9:42Speaker 01

  Yeah.

• 9:42Speaker 00

  So it's like shorting your own future if you are just focused on the cost side, whereas like you're taking an expansive view of what you can become if you're focused on the front side.

• 9:50Speaker 01

  By the way, the open router idea was very good there too. Just to be like, we're going to own this at the AI layer as well.

• 9:54Speaker 00

  Yeah.

• 9:54Speaker 01

  It's very smart.

• 9:55Speaker 00

  Yeah. Look, and like, I think they're right that the economy is going to like oscillate between using dollars and tokens and like, it's going to be a new form of currency.

• 10:03Speaker 01

  Totally.

• 10:04Speaker 00

  You know, so, uh, so yeah, we're obviously, you know, we're big fans of those guys.

• 10:07Speaker 01

  Also to the point of like, it's all going to work, you know, it's, you know, we talk about open source a lot in relation to the frontier labs. And I guess the point there is if the, if the total token, you know, usage just goes up by a hundred x, it's just like, these things are all going to get so big.

• 10:23Speaker 00

  They're all going to get so big. And so, you know, I, I wanted to like lay the groundwork first before making the case for like which of the individual layers of the stack are going to be successful because. Like, I think it paints a picture where we're gonna like 20x or 50x over the next 10 years and just how much work is being done with this stuff. And by the way, we're just talking about enterprise right now.

• 10:42Speaker 01

  Right.

• 10:42Speaker 00

  We should talk about consumer, but just in enterprise. So, you know, if you look at the frontier labs like today, you know, the frontier labs are like 95% plus of dollars.

• 10:51Speaker 01

  Yeah.

• 10:51Speaker 00

  Like the 125 billion or so across the three of them. You know, it's like they're consuming all of the revenue in the market, basically. Everything else surrounding air. They have raised more than like the entire downstream ecosystem, like just OpenAI. Anthropic have raised like 350 billion dollars. So like they do have scaled, like they have massive scale benefits.

• 11:11Speaker 01

  Yeah.

• 11:11Speaker 00

  And right now, what's revealed in the preferences of users is users are opting to use frontier models. And I think there's a bunch of reasons why that's the case. Right now, people are willing to pay, you know, 10x more for frontier, for frontier tokens. You know, I think encoding, that's, that's definitely gonna persist for some period of time. You know, there's, there's reasons why you could see a case that people will like cost optimize and use like below the frontier over time.

• 11:40Speaker 01

  Yeah.

• 11:41Speaker 00

  But right now, like

• 11:41Speaker 01

  You have to assume that the

• 11:42Speaker 00

  The revealed, the revealed preference is like everyone, everyone who has a, have a user of this stuff wants to use the frontier. I think there's

• 11:49Speaker 01

  Well, and also it seems to me like if that happens, the frontier should be at even more valuable tasks that are worth even more.

• 11:55Speaker 00

  Even more so like, yeah, curing cancer. Yeah, like

• 11:57Speaker 01

  If coding was worth X, like what's curing cancer?

• 11:59Speaker 00

  Curing cancer is worth, you know, some, some astronomical. Yes, of course. And so right now, like I think there's a couple of reasons why people are using the frontier stuff. Like one is just there's so much user or consumer surplus to having this work done for you that you're willing to pay so much, like you're willing to pay the incremental amount for that frontier.

• 12:18Speaker 01

  Yeah.

• 12:18Speaker 00

  Does that make sense?

• 12:18Speaker 01

  Yes.

• 12:20Speaker 00

  Secondly, like they've done a pretty good job with first party products. So, you know, people really like using Codex and Claude Code and Cursor. And, you know, I think increasingly we'll use stuff like GrotBot. Like it's gonna be really valuable to use the first party stuff. There's a bunch of reasons why that's the case. They've done a good job with product. I also think they have very tightly coupled their harnesses with the models.

• 12:39Speaker 01

  Yeah.

• 12:40Speaker 00

  So that the experience you have with those products is actually very, very good. And so subbing out some other model where you don't have the harness and you don't have the product and don't have the interface, like no one's doing that today.

• 12:51Speaker 01

  I'm curious your thoughts on what you, how do you, and obviously it's very hard to know, but how, how do you sort of mentally picture what their incentive should be on making more first party products? And I'm asking this in relation to as you think about investing in applications at the growth stage and you think like, what's gonna be worth it for them to build a first party app in and will that matter? Or again, does it all win? Like, how do you think about their incentives and how if at all it relates to your application investing?

• 13:19Speaker 00

  Yeah, so we've done a lot of application investing. So again, this is like in the theme of AND, right? Like, we think, we think, we think a lot of things are gonna work. On the application side, my framework is the big labs are going to be very focused on first party products that are obviously in coding and within the blast radius of coding. And so you can interpret the blast radius of coding however you like, but it's, it's probably some things around it. You know, that's, that's one piece. And then secondly, they're gonna be focused on first party products that appeal horizontally to all 1.5 billion knowledge workers. So think like Microsoft Office and Google Apps. And they would like to have those as first party products. We know from their work that they're doing, like the, the work that they do with data vendors, like they are very focused in those areas, right?

• 14:04Speaker 00

  So think like, you know, all the Microsoft Office products. And so, you know, outside of that, there's a question of like, what number priority is it for them? So, you know, we're large investors in Harvey. And so, you know, Harvey, I feel like, you know, legal is, I don't know, it's very interesting to people on X. But, but it's a market that's like absolutely in takeoff.

• 14:28Speaker 01

  Yeah.

• 14:28Speaker 00

  Right? So if you take an optimistic view of it, there's many differences which we could talk about, but it's probably like 12 months behind coding.

• 14:36Speaker 01

  Yeah.

• 14:36Speaker 00

  Just in terms of like diffusion into the workforce. And it's now gotten to the point where end clients are demanding that their law firms use Harvey.

• 14:42Speaker 01

  Yeah.

• 14:42Speaker 00

  They're like, we care about it for product and we care about it for cost. And so you must use it. So it used to be this thing where people would talk about like hallucinations. And then now it's just like, no, everyone has it. And so, you know, it's probably like somewhere between number six through 15 on the priority list.

• 15:00Speaker 01

  By the way, that, that one, it, it really is funny how much it gets people on X. And, you know, we know this too, obviously.

• 15:05Speaker 00

  Yeah, for Legora, yeah.

• 15:06Speaker 01

  And, and it's like, I think people, A, were surprised that these companies can grow this fast in legal, which you would not have thought would be an early adopter. And then you have, you know, then you've got a lot of doubt, you know, because they're like, oh, well, wasn't it hallucinating and stuff? It's like, yeah, like 18 months ago.

• 15:21Speaker 00

  Yeah, 18 months ago. And like, they made a smart bet, which is like, what happens when models get 100x better?

• 15:26Speaker 01

  Yeah.

• 15:27Speaker 00

  And like, you know, and it's gonna work. Like, and so

• 15:30Speaker 01

  And legal is actually just like a perfect thing too, because it's language, but it's like kind of mathematical.

• 15:34Speaker 00

  Yes, exactly. Like they're, yeah, it's extremely logical. It's extremely well documented.

• 15:38Speaker 01

  Yeah.

• 15:38Speaker 00

  Like in terms of case law.

• 15:39Speaker 01

  Yeah.

• 15:39Speaker 00

  Right? And, you know, the big breakthrough that we saw, which I'm sure is the same case with Legora, is, you know, reasoning models.

• 15:48Speaker 01

  Totally.

• 15:48Speaker 00

  And so like lawyering is reasoning.

• 15:50Speaker 01

  Yeah.

• 15:50Speaker 00

  And so like, yes, it makes sense.

• 15:51Speaker 01

  But no, I agree that that, that doesn't seem like the next, because there's, there's a trade off too, I think, where if they start picking off random companies, then you lose the trust.

• 16:00Speaker 00

  Yeah, then the ecosystem, yeah, of course. And so, yeah.

• 16:02Speaker 01

  I think all the big platforms, I'm sure Microsoft had this.

• 16:04Speaker 00

  Salesforce had it.

• 16:05Speaker 01

  Yeah, they all had to decide like, is it worth pissing everybody off to go like eat some random thing?

• 16:11Speaker 00

  Yeah, the old Microsoft thing, like, you know, a platform is only a platform if all of the things built on top of it generate more revenue than it.

• 16:17Speaker 01

  That's right.

• 16:17Speaker 00

  Right? And so I, I don't think that the, that that's totally lost in the labs. Now, like, it might still be priority number six.

• 16:25Speaker 01

  Yes.

• 16:25Speaker 00

  And, and like, there was a major validation event, which was when Kirkland came out and said they were gonna spend 500 million bucks to build their own technology stack.

• 16:31Speaker 01

  Yes.

• 16:32Speaker 00

  Like people were like, oh, man, what's that mean for Harvey?

• 16:35Speaker 01

  Yes, and so then you've got these bubble ones where they're

• 16:37Speaker 00

  But it's great.

• 16:37Speaker 01

  It's not a niche, but it is not, you know, it is not the path to AGI.

• 16:41Speaker 00

  Yeah, exactly.

• 16:42Speaker 01

  But it is gonna be worth many, many billions.

• 16:43Speaker 00

  And there's two things that are really important about it. One, like the last details of the product really matter to the users. And then two, it requires like real go to market and on the ground efforts.

• 16:55Speaker 01

  Yes.

• 16:55Speaker 00

  And so, you know, those two things, everyone talks about like, what are now the modes of software or applications?

• 17:02Speaker 01

  FTEs.

• 17:03Speaker 00

  Yeah, those things like in the ground, like making sure they work, like is a big thing.

• 17:07Speaker 01

  Yes.

• 17:07Speaker 00

  And so, you know, will the labs like go do that in a verticalized way at law? Like probably not, like, you know, whatever, there's a cloud legal product.

• 17:15Speaker 01

  Yeah, they just can't be everywhere all the time.

• 17:17Speaker 00

  They can't do all of the things.

• 17:18Speaker 01

  Yes.

• 17:18Speaker 00

  Right? And so, you know, our investments are informed by that. Like, you know, it's not to say that we won't do things in that blast radius or in that, you know, sort of knowledge worker horizontal category. But we do ask the question, you know, a lot more about like, what is the product roadmap? What's the right to win?

• 17:35Speaker 01

  Yeah.

• 17:36Speaker 00

  In the applications beyond those, like I think there's gonna be, you know, hundreds of flowers that bloom.

• 17:41Speaker 01

  Yeah.

• 17:42Speaker 00

  Because there's gonna be a massive, a massive unlock. And so

• 17:45Speaker 01

  Yeah, but you know, back to the point of it's all gonna work, I think even the stuff in the blast radius.

• 17:49Speaker 00

  It's probably gonna work.

• 17:50Speaker 01

  It's probably gonna work.

• 17:50Speaker 00

  Yeah, like we're large investors, we're biggest investors in Replit. Like, it's working very, very well.

• 17:55Speaker 01

  Yeah, Replit and Lovable, and you would, you wouldn't think that these things, you would think that though, you're like, well, isn't, you know, aren't Codex and Claude Code gonna be able to make a website? And the answer is, yeah, they can. And also, these things are unbelievable.

• 18:06Speaker 00

  They're very good. And you know, like Cursor also, and that is like dead in the center of the blast radius. And, you know, there's a huge market of people who use it. And so, yeah, it's all gonna work. I, I think, you know, at the model layer, like the, the appetite for frontier technology, I, I just think it's like undisputed.

• 18:23Speaker 01

  Yeah.

• 18:24Speaker 00

  It's just going to, to be there. The appetite for N minus one or open source technology is also gonna be huge.

• 18:30Speaker 01

  Yeah.

• 18:30Speaker 00

  Like it's gonna be massive, because if you 50x the usage that happens, like people will care about cost. And like, maybe there will be a point where if cost is 100x higher for frontier, like people really start paying attention to it.

• 18:41Speaker 01

  Well, and N minus one is gonna be really good soon.

• 18:43Speaker 00

  It's gonna be very good.

• 18:44Speaker 01

  N minus one will be better than five, six.

• 18:47Speaker 00

  Like, yeah, take

• 18:48Speaker 01

  By the end, you know, I don't know when, but by soon.

• 18:50Speaker 00

  Yeah, and so you can see it actually at the cutting edge of the application companies, right? Who care about their own cost because that's their gross margin. And so, you know, how long has it been since most customer support tickets required the highest end model?

• 19:04Speaker 01

  Yeah.

• 19:05Speaker 00

  Like three years?

• 19:05Speaker 01

  Yeah.

• 19:06Speaker 00

  Or something, right? And so you can see a path to the sort of abstraction layer following how much value is required. And there's gonna be a lot of people vying for the abstraction layer, like the application companies, obviously the labs with their first party products, companies like Databricks or Palantir or Snowflake, like they're gonna vie for it. But I think people are gonna use like every variation of that.

• 19:27Speaker 01

  Yeah.

• 19:27Speaker 00

  And it's all gonna work.

• 19:28Speaker 01

  By the way, the customer support example is such a good one to me of how long diffusion is gonna take. Because the technology has been more than good enough for a little while and we still, I don't know what percent penetration.

• 19:40Speaker 00

  Tiny.

• 19:41Speaker 01

  But tiny and it, that's like the clearest example to me of the technology is fully there. It's just gonna take many years to get there.

• 19:48Speaker 00

  Yeah, the old enterprise thing of better, faster, cheaper.

• 19:51Speaker 01

  Yeah.

• 19:51Speaker 00

  Like it's been better, faster and cheaper.

• 19:53Speaker 01

  It's one on everything.

• 19:53Speaker 00

  For two years.

• 19:54Speaker 01

  Yeah.

• 19:54Speaker 00

  And like.

• 19:55Speaker 01

  And the companies are doing great.

• 19:56Speaker 00

  The companies are growing faster than any other application companies before them.

• 20:00Speaker 01

  There's still some laws of physics here.

• 20:01Speaker 00

  But uh, but yeah, I mean, you know, you gotta sell it and you gotta implement it. And it's like, there's a, there's a lot of messy integrations you have to do and rules that you have to follow. Brand guidelines. Again, like the labs aren't gonna build that motion.

• 20:13Speaker 01

  Yeah.

• 20:14Speaker 00

  Like there, there will be companies built on top of them. So I, that's like a classic and.

• 20:17Speaker 01

  So this is all enterprise. What about consumer? So you know, like I think, um, I mean, obviously chat G P T was sort of like the first consumer moment. And you know, it was also the, the whole AI moment, but the first AI moment was a consumer moment. And like, that's what caught everybody's attention was for the first time people were using this thing. And they had been hearing about AI for, I don't know, 10 years. And then all of a sudden you have this thing and even the first version of chat G P T, we were like, oh, I've never seen that before. But you know, now talk to me, you know, four years later or whatever it is, like what's the progress of consumer and how do you see it?

• 20:47Speaker 00

  Yeah, I mean, there's a billion people using it, right? And there's more than a billion people using it, you know?

• 20:53Speaker 01

  Obsessively.

• 20:53Speaker 00

  Obsessively.

• 20:56Speaker 00

  But like the instantiation of the product and the use case is like very basic, right? We're in like skew morphic mode for the vast majority of consumers, which is they are doing what they used to do on a search engine inside chat G P T.

• 21:10Speaker 01

  Yep.

• 21:11Speaker 00

  And like, that's the extent of the use case of the vast majority of the.

• 21:14Speaker 01

  Except for the kids, the kids use it better than that.

• 21:16Speaker 00

  Mike, yeah, my son, uh, I mean, total aside, a 10 year old is like writing full on rap songs.

• 21:22Speaker 01

  Yeah.

• 21:22Speaker 00

  And creating music.

• 21:24Speaker 01

  Yeah, no, it's not an aside. This is the future.

• 21:26Speaker 00

  This is the future.

• 21:26Speaker 01

  But this is like incredible. It tells you the difference where it's like, there's a, there's a, a, a large cohort of people who, you know, are gonna probably always Google. You know, use this as a Google replacement, but it's not how the kids are gonna use it.

• 21:38Speaker 00

  The kids are gonna be, the kids are gonna be totally native.

• 21:39Speaker 01

  Yes.

• 21:40Speaker 00

  Like and, and you know, you can see it with the kids now, like they didn't, they, they never were like trained. My kids were never trained on like search engines and now they just, it's a whole new thing where they get it to, you know, to give them answers to anything and give them, you know, work product of anything. The big shift is gonna be like when it goes from being reactive to proactive. And you know, we're like just scratching the surface on that.

• 22:00Speaker 01

  Yeah.

• 22:01Speaker 00

  It's gonna be multimodal, so it's not gonna be just like sitting doing this, like the voice stuff actually is very, very good now. You know, there's a bit of a head fake because the OpenAI voice stuff was not very good for a period of time and it had to rely on a dumber model. And now it doesn't and it can handle interruptions and things like that. So like a natural human interaction form now exists.

• 22:20Speaker 01

  Yeah.

• 22:22Speaker 00

  And capabilities for doing proactive work on your behalf. And like action taking is like, we're just now there, right? Like Open Claw was the first moment. I think Grok Bach is a, Grok Bot is a moment now. And I think that'll be kind of the future of consumer use. It's so funny to me that no one talks about consumer right now.

• 22:41Speaker 01

  Yeah.

• 22:42Speaker 00

  Everyone is obsessed with coding, rightfully so.

• 22:44Speaker 01

  Yeah.

• 22:44Speaker 00

  Given what's happened with the revenue ramps of the companies. But if like historical technology markets are any guide, like the big prize is gonna be the killer consumer products. Cause you can, you can address billions of people with them. So I think those are gonna get a lot better. I'm very optimistic. And those are gonna come with like the world's best business models too. It's gonna be like a lot of value generated. There's gonna be a ton of consumer surplus.

• 23:05Speaker 01

  Like what would that look like?

• 23:06Speaker 00

  I think it'll be advertising or some greater form of advertising. Like i- i- if you tried to describe, the thing I always say is like, if you tried to describe the form factor of the feed to people like during classifieds at newspapers, like it would make no sense.

• 23:20Speaker 01

  Yeah.

• 23:20Speaker 00

  So we have yet to figure out like what the native consumption model is gonna be and then what the native ad format is gonna be that follows that.

• 23:27Speaker 01

  Yeah. Do you think it's ads and subscriptions?

• 23:29Speaker 00

  Yeah, definitely. Yeah.

• 23:30Speaker 01

  Yeah.

• 23:30Speaker 00

  I think it's both.

• 23:31Speaker 01

  Like you think that it'll be a situation where hundreds of millions of people might be willing to pay today surprising amounts for this thing?

• 23:37Speaker 00

  Yes, absolutely. And again, I think.

• 23:40Speaker 01

  And that's when it's like a personal assistant.

• 23:41Speaker 00

  That's when it's a personal assistant for everybody.

• 23:43Speaker 01

  Yeah.

• 23:43Speaker 00

  And so like, I, again, I think my framework is like 10x more value will just accrete to the surplus of the users. But like, there's gonna be a lot of value created for that, for that 10%.

• 23:52Speaker 01

  Yeah.

• 23:53Speaker 00

  And so that, that accretes to the companies. And so it'll be subscriptions. You know, it'll be, um, it'll be ads or some form, new form that isn't quite what we think of today as ads. That hasn't probably yet been invented. And it's gonna be a new form of like consumption.

• 24:09Speaker 01

  Yes.

• 24:10Speaker 00

  And so I, I'm very, I'm very optimistic about that.

• 24:12Speaker 01

  You're most excited about in consumer is something that gets to an assistant for everybody.

• 24:16Speaker 00

  Yes, yeah. Yeah, and like take action on your behalf in a trustworthy way. You know, like, I don't know, I've started building all these automations for myself and like, I'd say, I'm, I'm aggressively trying to make myself more native.

• 24:29Speaker 01

  Yeah.

• 24:30Speaker 00

  And I get like real value out of like two out of 10 of them. But like, there's a lot more that I think will be done. And you know, the models will get 10x to 100x better over the next five to 10 years.

• 24:42Speaker 01

  Yeah.

• 24:42Speaker 00

  And so think about what that's gonna resolve in.

• 24:44Speaker 01

  One of the other big consumers, I fully agree with this, I've said, one, one of the other big personal consumer, you know, autonomy, AI things I think about a lot is just self. Self-driving cars and autonomy is, I just feel like, I mean, you know, I just got a Tesla for the first time and like, I gotta, you know, I, it is insane. It is like the best product because you get in the car, you type in where you wanna go and it takes you, you don't have to think about anything.

• 25:08Speaker 00

  Yeah.

• 25:09Speaker 01

  Else, the, the whole ride gets you out of any weird thing. It can park anywhere. And I don't think most people have realized how good self-driving is yet unless you have a self-driving Tesla.

• 25:20Speaker 00

  Yeah, or if you, or if you live in a place where you can get a Waymo, like basically that's like it's a small.

• 25:24Speaker 01

  Of course, yes.

• 25:24Speaker 00

  People, yeah.

• 25:25Speaker 01

  So it, you know, and so it's like, you've got these companies that can do it now, Waymo and Tesla. And, but it has not diffused yet. And so A, I don't think people realize, I don't think, you know, the people who have done it realize, but I don't think everybody realizes how good autonomy is right now. But then the other most important thing is I don't think that it has turned into the business model that it needs to turn into yet.

• 25:45Speaker 00

  Yeah.

• 25:45Speaker 01

  So I'm curious to your take on this is, I know you're, you know, an investor and you have thought a lot about this, but like, where are we on the autonomy curve?

• 25:53Speaker 00

  Yeah.

• 25:53Speaker 01

  Yeah.

• 25:54Speaker 00

  It's so funny to think about these other major technological tailwinds that are happening because like AI just, you know, like supersedes everything.

• 26:01Speaker 01

  Yeah.

• 26:01Speaker 00

  In our minds right now.

• 26:02Speaker 01

  Totally.

• 26:03Speaker 00

  Like I always find it helpful to just take a step back and you say like, okay, what are like the way, like product cycles drive our business. And so like, what are the big waves that we're catching right now? Like autonomous driving is one. But the previous generation of these was like mobile phones plus social, e-commerce, SaaS, cloud, kind of all coinciding.

• 26:19Speaker 01

  Yep.

• 26:19Speaker 00

  And that produced like 25 trillion of market cap. And like, it's like a ton of, that's like a lot, right? And you know, like what do we have staring at us in the face right now? Like we've got AI, we've got autonomy, we've got robotics, we've got AI's application to health.

• 26:36Speaker 01

  Yeah, I was gonna say bio.

• 26:37Speaker 00

  We have the American dynamism category, which is like, you know, modernization of defense. Like the combination of all of those.

• 26:45Speaker 01

  Gotta be more than 25.

• 26:46Speaker 00

  Is way more than 25. Like it's just the most exciting time, you know, to ever be an investor and in the technology markets. Autonomy specifically, I, I think it's just very underappreciated. Like the auto industry and people driving cars is one of the biggest industries in the world, obviously. Right now, okay, so if you rewind all the way to like taxi driving, right? That was like less than point one percent of the overall miles traveled in the US. There were a bunch of reasons why that was the case. Then the ride share companies came along and you know, I was an investor in Uber, you know, obviously you, you guys worked too. The big thing that happened obviously was like a better business model, but it was, it was really like the 10x-ing of the market size.

• 27:31Speaker 00

  So like, you know, taxis were a hundred million bucks in San Francisco and then they became a billion dollars like three years into Uber and Lyft. And so it 10x the market size because you delivered a much better product. Autonomous driving, we're gonna look back 10 years from now and say like, oh, there was another obvious 10x-ing that would happen there.

• 27:50Speaker 01

  At least.

• 27:50Speaker 00

  At, at least, just on the ride hail side. So if you have a product that is 14 times safer than a human driver.

• 27:58Speaker 01

  Then it's barbaric to drive.

• 28:00Speaker 00

  It's actually so, like this is my view now.

• 28:02Speaker 01

  Like, don't you think, like, if you're like, how many people die a year from a human driver? If it's safer, isn't that, you know, cause isn't the data like pretty abundant now?

• 28:09Speaker 00

  It's 14, it's, it's millions of drop, millions of miles traveled in Waymos and they're like between 10 and 14 times safer than a human driver.

• 28:16Speaker 01

  Yeah.

• 28:16Speaker 00

  So like, it is barbaric to not actually allow for these things to diffuse into your economy. So, um, I think like history will look back on people and judge them very poorly if they don't let it happen.

• 28:27Speaker 01

  Yeah.

• 28:28Speaker 00

  But for the consumer side, just start with that. If you can drive in something that's ten to fourteen times safer, you would pay a massive premium.

• 28:35Speaker 01

  Yeah.

• 28:36Speaker 00

  I think there's a very clear case for how you actually get the cost below the cost of Uber and Lyft today. So, right now, owning a consumer car equates to like eighty cents per mile, like it fully loaded, depreciation, insurance, gas, all that stuff. Like, that's your, like, cost of an incremental mile. Riding in an Uber or Lyft is probably like two bucks and change per mile. This market is like massively elastic, so like if you can get, you know,

• 29:06Speaker 01

  The cost of a

• 29:07Speaker 00

  a Waymo or a Tesla or whatever, you know, ride-hail service,

• 29:10Speaker 01

  Everything.

• 29:10Speaker 00

  I think there'll be others. Down below that, like, there's going to be an explosion of demand. So it's fourteen times safer. It's only gonna get better, by the way. It's gonna get safer. It's gonna be twenty times safer soon. And, you know, it's gonna be less than the cost. Like, you will see a ten X plus. Then, you talk about personal car ownership, and so there's seventeen million cars sold a year in the US new. And by the way, there's like two hundred and fifty million cars in the US. Just in the US, like, how much would you pay for full autonomous features for a passenger car that you owned?

• 29:42Speaker 01

  A lot. It's like double.

• 29:43Speaker 00

  Ten thousand. Yeah, like, minimum ten thousand dollars, right?

• 29:47Speaker 01

  I mean, once you're used to it, it is

• 29:49Speaker 00

  Yeah, you can't not have it.

• 29:50Speaker 01

  It's really hard to go back.

• 29:51Speaker 00

  So you could sell it upfront, you could do a subscription, but like, call it minimum ten thousand bucks a car, seventeen million cars. Then you have all of like the Western world, and then, you know, eventually it'll get cost, you know, compelling enough to to reach developing markets.

• 30:05Speaker 00

  So it's going to be one of these things where fifty years from now,

• 30:07Speaker 01

  Yeah.

• 30:07Speaker 00

  it like the whole

• 30:08Speaker 01

  Like, no one will be driving.

• 30:09Speaker 00

  composition. Yeah, no one will be driving. Like, the composition of everything looks different. It takes time, because you gotta produce the cars. People are always struck, like, how many Waymos there are, right? Like, Waymos, if you're in one of the cities where they are, they feel ubiquitous. There's like less than ten thousand.

• 30:23Speaker 01

  It's crazy.

• 30:24Speaker 00

  In the US.

• 30:24Speaker 01

  Yeah.

• 30:24Speaker 00

  In the whole US.

• 30:25Speaker 01

  Yeah.

• 30:26Speaker 00

  And so, you know, it's one of those areas where, you know, there's there's Waymo, there's, you know, Tesla. I think there'll be other players. Like, we've backed a couple that I think have a real shot at it. And it's not gonna be ten players, and it's gonna be a massive market. And so it's easy to lose sight of markets like that, because it's like, you know,

• 30:42Speaker 01

  Totally.

• 30:42Speaker 00

  the the growth of AI. But like, those are gonna be huge, huge markets that we're super excited about.

• 30:48Speaker 01

  Yeah, and then, you know, related, there's robotics, which is gonna be, I mean, there's nothing quite going yet, but you see the glimmers of it now. And it's like, you go into the labs that are working on it, and, you know, like, the startups that are doing it, obviously Tesla's very good at it, there's, but it's it's clearly gonna work.

• 31:04Speaker 00

  It's clearly gonna work. Yeah. And like, it'll be a bigger market than language, right?

• 31:07Speaker 01

  Yeah.

• 31:07Speaker 00

  when it does work.

• 31:08Speaker 01

  Yeah.

• 31:08Speaker 00

  Because it will have, you know, B two B, you know, applications, it'll have consumer applications. Like, I think we're probably pretty far off from having

• 31:16Speaker 01

  It does feel like a little house.

• 31:17Speaker 00

  Yeah. But, you know, for

• 31:20Speaker 01

  But for like, you know,

• 31:21Speaker 00

  Defined

• 31:22Speaker 01

  In a factory.

• 31:22Speaker 00

  Yeah, factory. Like, relatively defined use cases with like redundant tasks with safe environments, like, we see it. Like, we invested in, you know, one of my partners, a lot of investment in in Mind Robotics. And so, you know, Sarah did this deal, and it's the founder of Rivian, and, you know, he basically was like, first of all, he's an exceptional founder.

• 31:44Speaker 01

  Yeah.

• 31:45Speaker 00

  And has produced a great company with great products. But he's going to put robots on the factory floor, and so they'll do, you know, manufacturing, assembly work on Rivian's. It's relatively, you know, defined use cases with pretty high ROI today, and then it's an embedded customer, you know, you kind of have it. And you can not only get revenue from that, but you can also have the models learn from the work that you're doing.

• 32:09Speaker 01

  Yeah.

• 32:10Speaker 00

  And so you have this feedback loop in the field that you can actually work on. You know, there's other stuff that is kind of picks and shovels stuff that we're excited about, but like, we will have a chat GPT moment for robotics. I don't know when it's gonna be.

• 32:22Speaker 01

  Yeah.

• 32:22Speaker 00

  Like, I think it's within five years, hopefully. There's very, very smart teams working on it.

• 32:27Speaker 01

  Yeah.

• 32:27Speaker 00

  And I think it's gonna be one of the biggest markets, so it'll be bigger than language.

• 32:30Speaker 01

  Yeah, and it almost like has to be when you think about

• 32:33Speaker 00

  Think about the industrial impact of it, right?

• 32:35Speaker 01

  And it's just one of these things where it's like, the physics doesn't prevent it from happening, and you can see the glimmer, so it's, this'll take, I agree with you, this is gonna take more than ten years to get all the way there, but like, I just don't see why it wouldn't all work.

• 32:46Speaker 00

  Yeah, I think it's, I think it's gonna work. Yeah, I think it's gonna work, and I think we'll have them, you know, everywhere. And and I think, like, by the way, the byproduct of this is that we'll have, like, massive productivity booms.

• 32:57Speaker 01

  Yeah.

• 32:58Speaker 00

  Like, I think that's gonna be the economic impact, and quality of life will go up. You know, we'll have to think hard about, like, job impacts and stuff like that, and, you know, our workers kind of trained to make a transition, especially if it happens fast.

• 33:09Speaker 01

  Yeah.

• 33:10Speaker 00

  But like, the history of all these technology breakthroughs is that we find higher order things to do. Like sixty, you know, whatever, sixty percent of jobs didn't exist seventy years ago, like, that we have today. So like, we'll have a similar transition period that happens. But I think it's gonna be a massive productivity boom. It's gonna be awesome.

• 33:27Speaker 01

  So I want to talk about capital and financing a little bit.

• 33:30Speaker 00

  Yeah.

• 33:30Speaker 01

  We at Benchmark just raised our first growth fund in history, and, you know, the the baseline for that was something

• 33:36Speaker 00

  Yeah, welcome to the dark, welcome to the dark side.

• 33:38Speaker 01

  Yeah, exactly. It's like, you know, the forbidden fruit. And some, you know, but the the thinking for us behind it was something along the lines of venture returns now happen at growth in a way that they didn't used to. And, you know, this conversation that we were, that we've just had really supports it, because, you know, the outcomes are that big, and the things that run really run, and it's all gonna work, and all of these things. And that sort of led us to the thinking that, you know, the sort of ten to hundred X or thousand X, whatever, you know, the the really big multiples can happen all along the way.

• 34:09Speaker 00

  Yeah.

• 34:10Speaker 01

  Which I know you believe that, obviously.

• 34:11Speaker 00

  You preach in the choir.

• 34:13Speaker 01

  I want to connect this, though. So, you know, I I would like to hear your thinking on that, and I'd also like to hear, you know, we just talked about the product cycle and where we are. But there's also this related, but not exactly the same thing of the capital cycle.

• 34:25Speaker 00

  Yeah.

• 34:25Speaker 01

  And the capital following the products and investing behind them and all those things. So I I'd just be curious to hear your take on where we're at from a capital perspective, from a growth investing perspective.

• 34:34Speaker 00

  Yeah, of course. I, so, you know, as it as it relates to like, why go do growth and like, is it a compelling category? Obviously, you you have you have seen the light.

• 34:46Speaker 00

  But

• 34:46Speaker 01

  The dark light.

• 34:47Speaker 00

  The the dark, it's it's great.

• 34:50Speaker 00

  The market that we're in is like a five trillion dollar market, so it's like, you know, whatever, it's like twenty percent of the S and P five hundred. So if you're not actually, you know, playing the full, you know, the full sort of gamut of that in the private markets, like, you're probably leaving a lot of money on the table. Like, we did this analysis a long time ago that basically showed half of half of private market returns get generated between the seed and the B. And then half of returns get generated from the C plus. And so, you know, if you're not aggressively playing from the C plus,

• 35:20Speaker 01

  You miss half.

• 35:21Speaker 00

  you're definitely leaving off half. And by the way, that was during an era when companies went public earlier. So now the companies are staying private longer. If you could fast forward five years, the ratio is gonna be even more extreme. It'd probably be seventy, thirty or something in favor of the late stuff. You can also get venture outcomes because the power law is so crazy strong today, right? And so, you know, when you get it right, like, it can really go right. And we're in this dynamic market where the power law is more extreme than in the past. And I think it's a result of a few things. One, it's just, you know, we're we're early cycle. And so, you know, the the early companies can establish themselves as leaders earlier.

• 36:00Speaker 00

  Secondly, this one in AI is unique, because if you throw more money at it, it can just scale up

• 36:07Speaker 01

  Yeah.

• 36:07Speaker 00

  and get better, right? So like, that is different than previous cycles, right? If you threw endless amounts of money at ServiceNow or Workday or Salesforce, like during the SaaS era, they would get all messed up. Like, we saw this experiment with like the Vision Fund, right? Like, you throw money at these things, and the companies get screwed up, right? Or if it was a consumer company, they would spend it on Google and Facebook, and like, that's not a good thing either.

• 36:33Speaker 01

  Was that the mechanism for why the Vision Fund was, was it just like dumping too much money on companies that didn't need it? Or was it hitting, you know, the cycle at too late of a time, or was it both?

• 36:42Speaker 00

  I think it was both. And it was like, well, first of all, like, I don't think it was a bad idea. I think it was just like wrong time of the cycle, and then we were not in an environment where if you put more money into something, it got better.

• 36:53Speaker 01

  Yeah.

• 36:54Speaker 00

  Just automatically, like, with with no scale limitations. Like, that is what happens with AI.

• 36:58Speaker 01

  Yes.

• 36:59Speaker 00

  Like, it it used to be, you know, if you put, you know, a forty billion dollar fundraise into Salesforce, like, Were they gonna do, like, go hire a bunch of sales reps and engineer? Like, it just wouldn't work. Whereas if you put forty billion dollars towards training, you know, these models,

• 37:14Speaker 01

  Yes.

• 37:14Speaker 00

  you know, like, they get much better.

• 37:16Speaker 01

  Yeah.

• 37:16Speaker 00

  And so that is very unique in the moment that we're in right now. You know, I, I think about the world as like product cycles and capital cycles. And I tell my team, like, the ideal state of the world would be you're in a great position on the product cycle. Like, scale of one to 10, 10 being good, one being not good. Like, in 2021, we were at like a one, which is like, we didn't realize it at the time.

• 37:39Speaker 01

  Yeah.

• 37:39Speaker 00

  Um, but that was like late SaaS.

• 37:42Speaker 01

  It had played out.

• 37:43Speaker 00

  Cloud.

• 37:43Speaker 01

  Yeah.

• 37:43Speaker 00

  It was post-mobile phone growth, like, all of the incremental consumer time spent was going to the major, you know, the major technology companies already. So there was like no room for something new.

• 37:53Speaker 01

  Yeah.

• 37:53Speaker 00

  Um, so product cycle was like a one out of 10. And in 2010, it was like a eight out of 10. It was very good.

• 37:59Speaker 01

  Yeah.

• 38:00Speaker 00

  So, right now, product cycle is like a nine or 10 out of 10. For all those reasons I, I laid out, like AI, autonomy, American dynamism, robotics, biohealth, like, all these things are gonna happen over the next 10 years. Capital cycle, you know, your ideal would be like a 10 on product cycle and like, you know, a 10 on capital cycle, meaning valuations are really low. They almost never coincide because there's like excitement about the trend.

• 38:24Speaker 01

  The best part of the product cycle ever and no one else saw it but you.

• 38:27Speaker 00

  Like, 2023, like, early days of when AI started working.

• 38:31Speaker 01

  Probably pretty good.

• 38:32Speaker 00

  And the capital markets were a little more benign. And like, some of the crazy stuff and run-ups hadn't happened yet. Like, that was like, I don't know, like a seven. And, you know, like, 2010, you know, you could buy like SaaS companies and B2B marketplace companies for like, you know, whatever, four times revenue or something like that. That was pretty good, too.

• 38:48Speaker 01

  Yeah.

• 38:49Speaker 00

  Um, right now, capital cycle-wise, like, people see the excitement. And you can still find ways to do good investments and the companies are growing so fast and they're so dynamic, it's fine. But like, we're probably at a six or something.

• 39:03Speaker 01

  Yeah.

• 39:03Speaker 00

  You're like, it's, it's okay, but not great. But the thing that drives our business over 10 years, whether it's venture or growth, is the product cycles.

• 39:11Speaker 01

  Yeah.

• 39:11Speaker 00

  And that's like a nine or 10 out of 10 right now.

• 39:13Speaker 01

  Yeah. It's sort of like, um, I think this, I can't remember if this is, I heard this first from Thrive or somebody, but it was like, you know, one way to be contrarian is to believe a thing nobody else believes. The other way is to believe the same thing everybody else believes, but believe it 10 times more or something like that.

• 39:28Speaker 00

  And that's sort of like, that's a little bit our motto as a firm, I would say, is just, you know, especially at the growth stage, incrementally believe like what could go right.

• 39:37Speaker 01

  Yeah.

• 39:38Speaker 00

  And like, spend the time thinking about what could go right.

• 39:40Speaker 01

  Yeah.

• 39:40Speaker 00

  Um, you know, like, I, I always say, like, our business is we like pay fair prices for great companies. And like, the alpha you get is always on the revenue side.

• 39:51Speaker 01

  Yeah.

• 39:51Speaker 00

  It's not like, is this gonna end up a higher margin business than on? Like, it's like, and so that's like market insights, product insights, and it's,

• 39:58Speaker 00

  you know, like, it, the, the market doesn't appreciate sometimes, like, the things that can really, really, really grow fast for a long period of time. Like, Databricks is an example of this.

• 40:08Speaker 01

  Yeah. By the way, we, um, I got to have dinner with Ali recently and, oh my God, what an amazing CEO.

• 40:15Speaker 00

  Like, so, I, I, I like coined this phrase like model busters or whatever, which is basically like, the first time we invested out of the growth fund, obviously, you know, Ben did the Series A and then we did basically every letter and I think we're on like M now. I, I like joke with Ali that, um, you know, we're gonna be like stadium seating and get to like double A. You know, like, you know, it's, we're gonna.

• 40:35Speaker 01

  Just stay private.

• 40:36Speaker 00

  I don't, I don't think so, yeah, but, um, uh, but the first one that we did out of the growth fund, was right when we started the growth fund and we did a, around at like $6 billion. And like, the technical terminator Ali has like figured out, seven years later, his, his revenue has accelerated. It's like, he has figured out more new products. And like, our observation, when things really go right, it's often the founder that figures out the next thing.

• 41:00Speaker 01

  Yeah.

• 41:01Speaker 00

  And, you know, his business is now positioned to benefit from AI. That's why it's growing so fast. And our bet is he'll figure out the next thing and the next thing and the next thing. And he's great. And like, he, like, those founders like that, like, as you guys have a, a growth business, like, late-stage venture business, like, those founders are the asset class. Like, if you back them, they're gonna figure out all these amazing things to do.

• 41:22Speaker 01

  Yeah.

• 41:23Speaker 00

  Like, when we, when we did SpaceX, you know, like, Starlink wasn't even GA yet. Like, it was like, you know, and they had theories as to, and the economics were terrible and like, it didn't work. And, um, you know, like, here we are, that is like one of the best business segments ever created.

• 41:39Speaker 01

  Yeah.

• 41:40Speaker 00

  And he's got an AI business on top of it. And he's gonna have, you know, Orbital Compute, which is also gonna work. And so, those founders are the things that you have to bet on. And, you know, the outcomes of the companies can be much larger than you would ever put in a financial model. And like, that is the thesis that we have.

• 41:57Speaker 01

  One of the things that I really look up to about Andreessen is I think you got the sort of importance of narrative right from the beginning. You know, like, I think about even when the firm was started, there was such an understanding that, you know, at the time, it was, you know, media was very important, but there was just an understanding that stories matter and that, you know, the way you present matters. And being loud and in the conversation is really important. And I feel like, obviously, from, when, from like 2009 or something?

• 42:26Speaker 00

  2009, yeah.

• 42:26Speaker 01

  You know, since then, obviously, things have changed a lot and, you know, very, uh, I think in a very happy, uh, update, we've had sort of the Lulification of everything, where people are going direct and owning their own narrative and you get more authenticity. You know, you guys have, uh, you know, a lot of like new media going and all these other things. But I think Andreessen has understood the importance of narrative. And it seems to me that narrative is like louder than ever. Right now, for companies, you know, it's like, and it's at all stages. It's like, companies launch and you see these beautiful videos. And companies at the later stages have their investors kind of, you know, creating stories for them in various ways and they're owning media and it's all just loud.

• 43:07Speaker 01

  But I think it's important and I'm curious how you think about narrative now, at this point in the cycle, when we're all, you know, living on X and we're living in, in the news and, you know, how do you think about this all?

• 43:17Speaker 00

  Yeah. Look, I, this is just like the vibes, right? Like, the vibes, the vibes matter tremendously.

• 43:22Speaker 01

  They matter, yeah, right?

• 43:23Speaker 00

  A lot. I, I actually have a funny story from, um, a meeting that I was having with Ben in 2018. So, this was, I don't know, three or four months before I joined and we were kind of hashing out, you know, what is our strategy gonna be? And, uh, and so, you know, I had all these ideas of like, these are the new teams we need to build and this is what the investment team looks like. And he's like, well, what's your marketing strategy? And I was like, we don't really need a marketing strategy. It's not really a thing in growth. And he just like, looked at me and said, like, that's the dumbest fucking idea I've ever heard. And, like, venture firms didn't market themselves. And then we did and it worked really well. So like, why would you not do it here? And so I came along, you know, I came from a place that was a lot more conservative. And, uh, and so I've, I've sort of seen the light. Vibes matter. Let's just talk about why the vibes matter.

• 44:08Speaker 00

  So the vibes matter because, um, of fundraising, of your valuation,

• 44:16Speaker 00

  for retaining your employees and for hiring new employees, among other reasons. And, and, and like, in some markets, the vibes matter for your customers too. But like, at a minimum, it's those things. If you look at, um, and, and this is basic, but like, why does a higher valuation matter? Like, higher valuation means, you know, less dilution, more ability to raise capital.

• 44:37Speaker 00

  And, um, you know, you can use that as a weapon.

• 44:39Speaker 01

  In a world where capital actually makes your company better.

• 44:41Speaker 00

  Yeah, exactly. It's worth more.

• 44:43Speaker 01

  It was worth less when it was not, you know, the thing.

• 44:45Speaker 00

  Yeah. And like, now, every investor and every employee and potential employee is like living on X.

• 44:52Speaker 01

  Yeah.

• 44:52Speaker 00

  And like, consuming the vibes. So if you look in the public markets, the companies that have done a great job of this, like, there's a direct line to their valuation and their life gets a lot easier with a higher valuation, right? So, like, famously, right now, it's, it's Palantir and Karp. And, um, you know, he's got like a cult following.

• 45:08Speaker 01

  You know, what's amazing about that one is that he, I mean, Palantir had a huge multiple before the recent, like, now it's, I think the growth has inflected recently.

• 45:18Speaker 00

  Yeah, it has. Yeah, it's massively accelerated.

• 45:19Speaker 01

  Massive accelerated, but it had the premium before it had that.

• 45:23Speaker 00

  Yes.

• 45:23Speaker 01

  And there's something interesting there.

• 45:24Speaker 00

  Yeah. And like, by the way, to tell you how much it's vibes, like, no one knows what ontology means.

• 45:32Speaker 01

  No, I don't know.

• 45:33Speaker 00

  It's not even like a thing, right? And, you know, but like, the, the big thing, obviously, they have an amazing.

• 45:38Speaker 01

  Don't even really know what Palantir does.

• 45:40Speaker 00

  Yeah, yeah, for sure. Like, including like, big holder, retail holders of the stock. Like, a friend of mine who has a huge position and I'm like, explain it to me. And he's like, eh, good vibes.

• 45:49Speaker 01

  Um, yeah.

• 45:49Speaker 00

  But what, what has happened, right? Like, they've massively accelerated in commercial and they are now seen, um, you know, among CEOs as like a trusted place to go implement your AI. So it has, it has actually given them a direct benefit on the commercial side.

• 46:02Speaker 01

  Yeah.

• 46:03Speaker 00

  Because they're seen as like the ones that will navigate the situation for you and they're trusted. The valuation is a huge benefit for them. And then it's massive for them retaining and hiring employees. Similar to the Elon companies, like Elon, you know, obviously, like, having a big valuation allows him to have a bigger war chest, to buy companies, to raise more capital, uh, to have loyal following. So you can look at like the high retail ownership stocks and there's like a, a correlation, if they're doing well.

• 46:29Speaker 01

  Yeah.

• 46:29Speaker 00

  A correlation to, you know, to the valuation.

• 46:33Speaker 00

  It's funny, I heard from a hedge fund guy, the, this theory on shorting stocks. And his theory on shorting stocks was, I never short a messianic founder and I never short a product that people love. The inverse of that is if you have a messianic founder and there is a product that people love, you, you can actually like trade very high and have all these benefits, right? Right now, in AI, obviously, you said why the capital side matters and valuation side matters. It is incredible that the whole market is like hanging by a thread on the performance of like, two, now kind of three private companies.

• 47:10Speaker 01

  Yeah.

• 47:10Speaker 00

  Um, on like a monthly basis.

• 47:12Speaker 01

  I mean, I was just thinking as you were talking that the narrative, whatever, however strong the narrative is now, it, the importance of it all is about to go like hyperbolic as these companies get public.

• 47:21Speaker 00

  Yeah, and, um.

• 47:22Speaker 01

  You can even see it, you know, there's this funny bit I, I mentioned to you. You know, you can see investors and, you know, people who are on the opposite side kind of jockeying about like trying to set expectations around these companies.

• 47:34Speaker 00

  Oh, yeah, like Anthropic and OpenAI's revenue and all that stuff, yeah.

• 47:37Speaker 01

  It's like, but you know, and it doesn't all, it's not like the insiders are all pumping, you know, crazy numbers. It's actually like expectation management versus, you know, and it's just, but it's the amount of calories going into controlling these stories is just gonna be wild.

• 47:49Speaker 00

  Yeah, and there are, it's not even just the CEO. So like, I talked about how the asset class is the founder and I talked about Karp and I talked about Elon. Ideally, if you have a dynamic founder who can be the face of the company, it's like Palmer with Anduril, right? Like, that will benefit you in many ways.

• 48:08Speaker 01

  Yeah.

• 48:08Speaker 00

  Again, if you have a product that people love, that messianic founder thing is like a massive asset. And it will make people care at every, at every layer that matters, right? Capital side, employee side, customer side. And if you don't have that, if you're like some no name like SaaS CEO, it's like very hard to command people's attention and like make them care.

• 48:28Speaker 01

  Yeah.

• 48:29Speaker 00

  It also matters for people down in the organization, right? So like right now, I think the person who's doing the best job of this in the market is TiVo from OpenAI. And like, he's very direct. And, you know, not only is it feeding good vibes among the investor community and good vibes among employees, it's driving a lot of behavior on the customer side, too. And so I think when done right, you know, it can have massive benefits. And it's not to be underestimated. Something we talk to our founders about all the time now. It's like, you gotta go direct, you gotta own the narrative. You're the face of the company. You need to tell a compelling story. And if you don't, yeah, some people will care, but a lot of people aren't gonna care.

• 49:07Speaker 01

  Yes. And someone else with this almost as good, but not quite as good product can come along and tell the story better.

• 49:11Speaker 00

  Yeah, exactly.

• 49:12Speaker 01

  Yeah.

• 49:12Speaker 00

  Exactly.

• 49:13Speaker 01

  Yeah. My last question, and I, I think I asked, I had both Mark and Ben on at different times. And they both were, you could just feel the ambition and the scale and sort of the mindset around all of it. And, you know, this shows up in a lot of ways. And, you know, you know, I was just joking to you before we sat down that, you know, Benchmark's pretty small, Andreessen's pretty big, you know, in terms of like its team and sort of all these things. I guess my question is, how far, given that we're looking at not 25 trillion, something bigger, like, how far can this all go? Like, how big can a venture firm, you know, get? What rate limiters, if any, are there on what you can do?

• 49:57Speaker 01

  Like, how do you think about, you know, what's left above, you know, the already, you know, large size you guys are at?

• 50:04Speaker 00

  Yeah, look, we, we talk about this all the time because there's, there's pieces of our business that are scalable and there's pieces of our business that are not, right? And something that you said, which I think is super smart, is if you want to go fast, you know, be small. If you want to go far, you gotta be big, right? And so there are things that we do that may cause, you know, more organizational overhead, but allow us, we think, to go further. And, you know, part, part of that is scaling our investment approach and scaling our team that does investing. And then a big part of that is the 6750 employees that we have that help our companies. So how big can it get? Yeah, 25 trillion in market cap creation.

• 50:42Speaker 00

  Tech is, call it like a third to a little higher percent of the overall market cap in the economy.

• 50:52Speaker 00

  If you look at previous eras, right? As a percentage of the overall market, different industries were actually much larger in the past. So like railroads, financial services and stuff like that. At their peaks, they would be like 80% of the market. I don't see a reason why tech will not continue to ascend as a percentage of the market cap. Like, right now, eight of the top 10 most valuable companies in the world are, you know, US venture, previously venture-backed technology companies in the US.

• 51:21Speaker 01

  And they all kind of look cheap.

• 51:22Speaker 00

  And they all look kind of cheap. And they're probably the best businesses ever created. And then, and then, by the way, like, we have OpenAI and Anthropic and SpaceX on their heels.

• 51:31Speaker 01

  Yeah.

• 51:32Speaker 00

  That are like, growing faster.

• 51:33Speaker 01

  Yeah.

• 51:34Speaker 00

  And, and that are gonna get bigger.

• 51:35Speaker 01

  Yeah.

• 51:36Speaker 00

  And then, by the way, if you go back to those big trends that I see coming over the next 10 years, like, we don't even have the players on the board yet for those. So in terms of like macro side, I see no limit on how big it can get.

• 51:51Speaker 00

  In terms of our share and our ambitions as a firm,

• 51:57Speaker 00

  we probably have like 20% market share. We measure this at least in Growth Land.

• 52:01Speaker 01

  Yeah.

• 52:01Speaker 00

  And like, if you look at like a real frame of our market, we probably have 20% market share. Now, ideally, we would have 20%, you know, the top 20%, right? Like, we would do the 20 best of the 100 things. But there's kind of no limit on like how much more we could scale.

• 52:16Speaker 01

  Yeah.

• 52:16Speaker 00

  We just want to be doing the top 20 to 25% of things. So I think you're gonna see like massive macro market growth. I think our share could grow a little bit, but like, that's not a goal.

• 52:27Speaker 01

  Yeah.

• 52:29Speaker 00

  I think it's more like we can ride the wave really well.

• 52:32Speaker 01

  I mean, and even keeping up with it is gonna be hard.

• 52:34Speaker 00

  Keeping up with it is gonna be hard, right? And so our ambitions are to be involved in the best companies across all the areas that we focus on. You know, they're all technology focused, but they're pretty discreet, right? Like, there's infrastructure, there's applications, there's American dynamism, there's biohealth, crypto, like, those all require different things. But there's gonna be new waves. And so hopefully, we can like be part of those new waves and then ride the market growth. And that's, that's kind of the sum of the goal.

• 53:03Speaker 01

  Love it. David, this was great. Thanks a bunch for making the time. I really enjoyed it.

• 53:06Speaker 00

  Yeah, me too, man. Thanks.