Anthropic S-1 文件震撼市场：史上最强生意？谷歌市值蒸发 5000 亿美元，中期选举预测

Jason Calacanis (00:00:00): Alright, everybody. Welcome back to what is, of course, the number one podcast in the world tweaking. All the mid podcasters out there, four or five years running the all in podcast. It's episode two ninety five, and Sax is back. Sax is back. Sax is back. How are doing, brother? David Sacks (00:00:21): Good. Good. I saw some fake news that Jason Calacanis (00:00:23): Oh. David Sacks (00:00:24): You guys had stopped using the term super intelligence, you're getting some shade for that. Jason Calacanis (00:00:29): Oh, I I... Listen, we're we're here for this week in super intelligence right now. David Sacks (00:00:34): I Jason Calacanis (00:00:35): mean, the whole docus super intelligence. It was kinda ridiculous. Oh, are they David Sacks (00:00:40): And maybe I shouldn't Streisand it, but they were trying to say that we were using the term AI still instead of SI. Chamath Palihapitiya (00:00:45): Who was saying that? Jason Calacanis (00:00:46): This is literally what the press is David Sacks (00:00:48): spending their time on? This is why it's such fake news. They've referred me. I wasn't even on the October 23 episode. Jason Calacanis (00:00:56): Though. You do look very presidential there. Man, if only David Sacks (00:00:59): we're looking fake news. Jason Calacanis (00:01:01): I mean, they're You asked tech for David Sacks (00:01:03): most influential tech podcast. Well, that's good. But, actually, we're not just a tech podcast. The number one podcast David Friedberg (00:01:07): in the world. Jason Calacanis (00:01:08): Give us a David Sacks (00:01:08): on the use of the term super intelligence. And then they try to say that I somehow was defying Wait. Wait. The president's instructions. Jason Calacanis (00:01:17): Alright. David Sacks (00:01:17): But I but I wanna clarify, it was not on the October 23 episode. Jason Calacanis (00:01:21): So Gotcha. David Sacks (00:01:21): Gotcha. I'll be keeping you guys in line on this from now on. Jason Calacanis (00:01:24): Absolutely. Well, we will get focused on super intelligence. With us again this week, your favorite organic farmer, David Friedberg. How's OHalo doing? You've been pretty busy yourself. David Friedberg (00:01:39): OHalo in Kenya this week. Lots of excitement. Lines of farmers trying out true potato seed. Jason Calacanis (00:01:46): Your energy looks pretty good. You look like you got some good energy. And speaking of good energy, man, we had a fun time playing cards last week. That was a blast. Great dinner. Chamath Palihapitiya (00:01:57): You didn't stop talking for seven hours. David Friedberg (00:02:01): It's sort of like the podcast. Yeah. I'm just like the podcast. Chamath Palihapitiya (00:02:03): It's unbelievable. It's unbelievable. We just kept time. Come on. Was a lot of mess. Talking. Affleck texted me after I'd never want Jay Cal in the game again. Jason Calacanis (00:02:12): I can get out Affleck as a member of the group. Chamath Palihapitiya (00:02:15): It's gonna be Ben Affleck or you, and we pick him. So you're out. David Friedberg (00:02:18): That's fine. Chamath Palihapitiya (00:02:19): You're never getting an offer. Jason Calacanis (00:02:19): Fine, man. It's an upgrade. Chamath Palihapitiya (00:02:21): I mean, you just kept chirping for eight hours straight. It's unbelievable. He could not stop talking. Jason Calacanis (00:02:26): Game for a long time, had a lot of material. I had I had It was a... Chamath Palihapitiya (00:02:29): It was Jason Calacanis (00:02:29): really fun, though. It was really Chamath Palihapiti, everybody's favorite enterprise sales executive from the eighty ninety corporation. How'd you do this week? Did you hit... Did you ring the gong? Did you hit your quota? Or are you gonna have to work this weekend? Chamath Palihapitiya (00:02:43): Q 4 is off to a good start, but I never wanna count the chickens. Jason Calacanis (00:02:46): Okay. That's that's good considering you whiffed Q 3. Chamath Palihapitiya (00:02:50): No. No. No. Q 3 was okay. We whiffed Q 2. Butchered it. Butchered it. Butchered it. That's why when I invested. All my fault too because I I forced forced these poor sales people to just only focus on the gigantic deals. Jason Calacanis (00:03:07): You're learning. Chamath Palihapitiya (00:03:08): You're learning. I had to learn the hard way. You wanna get those singles and doubles Jason Calacanis (00:03:11): and the people who pay on time and and who Will start projects. On time. Chamath Palihapitiya (00:03:16): We'll see in Ancest One, but like, you know, you can build a ginormous business with singles and doubles. Jason Calacanis (00:03:20): Absolutely, you can. Speaking of gigantic businesses, Anthropic Ant dropped their s one, that's the document that outlines the nature of the business for an IPO, an initial public offering. And gotta ask the question, this seems to be the greatest business in the history of entrepreneurship. Goldman and Morgan Stanley are gonna lead the round, and they are targeting November 16, right before Thanksgiving for this IPO. We've been waiting for a long time. It's been delayed. The ticker will be ant, a n t, and they're aiming to raise, wait for it, $100,000,000,000. In other words, like, three months of compute and that would make it the largest IPO ever, suppressing SpaceX. They raised 85,000,000,000 back in June if you remember. And Polymarket says, our great partners at Polymarket say 78% chance Anthropic raises at least 95,000,000,000. The valuation, 1.5 to 2,000,000,000,000. Here's your Polymarket. Right now, it's saying between 1.75 and 2,000,000,000,000, market cap 31 percent. David Sacks (00:04:34): So, Jason Calacanis (00:04:35): yeah, assume it's gonna be slightly under 2,000,000,000,000. The revenue is the story, SACS, 16,300,000,000 in the first half of twenty twenty six. That is 14 x year over year. So in other words, the first six months of twenty twenty five, one fourteenth of what they did in the first six months of this year. Q two is gonna be a whopping 11,600,000,000, a 30 x jump over the last five quarters and almost as much as they made in the first half of the year. They say the TAM, the total addressable market for their tokens and services is 40,000,000,000,000. That's extraordinary. I don't know how they backed into that, but we'll talk about it. And they're projecting a 100,000,000,000 of ARR by the end of the year. Now, unspecified if that's annual reoccurring revenue or their annual revenue run rate, which is ARR, like a pirate. They've got a $112,000,000,000 in cash and a very unique ownership structure. Seven founders, yes, they have seven, are gonna hold 50.1% of the voting power through a single class f share. Sacks, is this the greatest business in the history of capitalism? David Sacks (00:05:51): It could very well be. I mean, I think this is probably gonna be the biggest venture outcome of all time, especially given the time in which this was created. I mean, is only a six year old company. I think the exit here is going to be on par with SpaceX's IPO, but SpaceX has been around for like twenty something years. So this is probably the fastest value creation of any venture backed company in history. And I don't know if you saw, but there was a tweet this morning about the distribution of wealth this is gonna create among the employees. Hundreds and hundreds of employees are gonna be making hundreds of millions of dollars and then thousands of employees are gonna be making $10,000,000 plus. I mean, this is gonna be an enormous wealth creation event like San Francisco and maybe all Silicon Valley has never seen before. Now, there's a few other data points in this s one that I think reflected the strength here. So number one is that this $80,000,000,000 loss number that we've heard so much about that the media's constantly been pumping and harping on as proof that Anthropic was either a fake business or that we were in this sort of whole bubble, That narrative basically just got completely refuted because it turns out that that $80,000,000,000 loss is a phantom number. It resulted from the fact that Anthropic had issued convertible notes So basically their infrastructure partners like Amazon and so forth. And as Anthropic's valuation increased, those convertible notes got recorded as a loss on the balance sheet and that flowed through into the income statement, but it's not a real loss. If they had just issued equity, that loss wouldn't be there. So it was not a cash loss. It's basically a fake number. And in fact, what was revealed in this s one is that Anthropic has been an extraordinarily capital efficient business. So they've raised something like, I think it was around a 110,000,000,000 roughly, and they've only spent about 9 or 10,000,000,000 throughout the entire course of this this business. And they still have, like you said, Jay Cal, about a 100,000,000,000 left of cash or cash equivalents on the balance sheet. So everyone thought based on the previous reporting that this was a huge loss making business. In fact, it ended up being a very capital efficient business. David Sacks (00:08:09): And then the other thing that you saw was that their margins have been improving. I think their gross margin is now something like 85%. And what you see is that for a given task or capability, they're showing roughly 10x improvement year over year in their ability to deliver that task, the cost effectiveness of that task. It gets 10 x cheaper year over year and that allows them to cut the cost of that model or that task by let's call And it 50 so the consumer recognizes a huge cost savings, but they are able to realize an even greater savings because they're they're able to capture the rest of that efficiency in their margin. And that's what we basically saw is that, again, they're cutting the cost of their tokens significantly, but their margins are going up even faster because they're able to produce these models that are more and more efficient. And they call them compute multipliers. It's very interesting the way that Anthropic sees their business. The framework that Dario has is that there's raw compute, which are scaling very rapidly as well, as a result of better and better chips and more and more of those chips. And then there's the compute multipliers which are things like algorithmic improvements or better curation of the data or it can be things like better architectures, more, you know, MOE architectures, things make Yeah. All these models So they're able to give you the same answer for one tenth the cost or they can take those efficiencies and create greater capabilities. So this is what we're seeing is that that business is actually improving. And I think it is a little bit of a refutation to all the people who've been saying over the past year that they're getting commoditized away, that open models are basically putting them on a hamster wheel where they're basically going to zero on gross margin or that it's a business that only works because it's heavily subsidized by venture capital. In fact, I think there's a lot of reasons to believe that Anthropic has a pretty big lead. And if you believe that recursive self improvement has kicked in as they are claiming it has, then their lead could actually grow. Jason Calacanis (00:10:22): Friedberg, your thoughts on the David Sacks (00:10:25): impact Jason Calacanis (00:10:26): of this massive deluge of capital coming in to Silicon Valley and then this corporate structure, 51% ownership, and what impact this might have on the technology industry, the venture capital industry, and then on democracy here in The United States. We've never seen this much capital flow through to a nonprofit organization or whatever they're calling this anthropic nonprofit entity, but 80% of the seven founders shares are going into this nonprofit entity of some type. Benefit Corporation, who knows what it's gonna be structured as. It's optional, but that's another interesting shoe to drop. So take it whichever way you like and whichever order you like. Can I just comment on the the economic David Friedberg (00:11:16): value that's arising from AI that, of course, kind of Jason Calacanis (00:11:19): perhaps David Friedberg (00:11:19): revealed a little bit in this? So in the s one, Anthropic shows how many customers they have that are spending a 100 k or more. If we take a look at the image here, it's a pretty remarkable ramp in customers spending a 100 k or more. 200 customers in 2024 end of year, 1,500 end of twenty twenty five, and at the end of September, 11,900 customers spending a 100 k or more. So I asked the question, you know, how many customers are there for which a $100,000 annual spend is less than 1% of their total annual spend? And the answer is in The US, it's about 200 to 300,000 businesses. Globally, it's a bit over a million. So, you know, if you just say, hey. Look. Anthropics customers that could spend a 100 k or more and have it be less than 1% of their total spend, the addressable customer base is about a million customers. So they're only at, call it, 1% of total customer penetration potential. Now the question is, is there real money to be made here? So I took a look at the kind of AI value stack to try and identify who's making money where, and it turns out everyone's making money. So I... And I think we've talked about this quite a bit, and I know Jamaf's got some views on this as it relates to the Neo Clouds. What is a shard? Is this, Jason Calacanis (00:12:42): like, AI output or that... Or you made this? David Friedberg (00:12:44): I had I had Claude make this for me as an image. Cool. Or I should just say my analyst made this for Chamath Palihapitiya (00:12:51): me David Friedberg (00:12:51): in my shop. Jason Calacanis (00:12:52): You're bot. David Friedberg (00:12:53): And so, you know, I basically said, like, start with NVIDIA. How much does NVIDIA spend to make the chips, and then how much do they sell the chips for? So for every dollar of COGS, every dollar that NVIDIA spends, that turns into $4 of revenue for NVIDIA, 75% margin. And then that gets sold to SpaceX, and then SpaceX turns around, and they're making, you know, an 83% margin on that chip spend because they're kind of looking at a five year depreciation. So they spent 10,000,000,000 on Colossus one, five year life, 2,000,000,000 a year depreciation. And so that's kind of the cost per year, but then they're making 1,250,000,000 a month on Colossus. And then Anthropic is showing in this s one pretty remarkably to Sax's point that they're making about 85% incremental gross margin on every incremental dollar coming in. It's obviously a baseline of compute spend, but 85% is kind of the incremental gross margin. So at the end of the day, a dollar that NVIDIA spends turns into $18 that Anthropic is making selling to customers. And the question is, are customers making money? So if we're seeing the customer ramp as it is and the spend ramp as it is, and the customers are making, call it, on the order of two to 10 times the money they're spending because, otherwise, there there would be probably a retention issue and a decline in spend. Maybe I'm wrong. Maybe it's early days of exuberance and people are losing money, and we could debate that point a bit. But generally speaking, if AI is delivering value to the customers, I think this shows that there really is true productivity arising from AI, that across the whole value chain, there is such margin to be had. There's so much value being created all the way through to the customers, and we're only 1% or Anthropic is only 1% penetrated on their customer potential and probably less than 10% of the spend potential per customer. David Friedberg (00:14:45): That this really is what I think Eric Schmidt a long time ago in the early days of Google used to say Google's total addressable market is global commerce. And I think for the first time ever, we're seeing a business actually potentially starting to realize that theory that if you can create enough productivity gain for your customers, that your TAM is commerce. And it really highlights that maybe, you know, we're almost growing the equivalency of the human working population by a 100 x or a thousand x or a million x with this technology stack. So I I just thought, like, to me, was so striking how early we are, but also how incredibly profitable everyone is, which indicates there's quite a bit of productivity being produced across the whole value stack. Those are my biggest takeaways kind of from the s one. I don't know if you guys agree with this, but, you know, it all felt pretty remarkable to me. I'd be curious to know if you guys think I'm I'm I'm a little loopy on being too exuberant in my reading of this stuff. Chamath Palihapitiya (00:15:39): I think the thing that that is probably the most important is the last box that you said where it... You wrote in assumption, where you said assumption. Right. Yeah. Totally. David Sacks (00:15:49): Well, how do they measure that? But by the way, I agree with you. David Friedberg (00:15:51): But The last box I made up. I said assume two to 10 x. So I'm just I have no idea. But I'm a user of Claude. I think we get a lot of value for Claude. I think our people are able to do more because of Claude than they would otherwise be able to do. So our business grows faster. We can get more done in a shorter period of time. I think I tangibly experience that pretty regularly. I've talked a lot about moving to open source, and we have our own cluster installed with our own kind of open source now. But I think what Claude is showing is that they they have such a high margin. They actually have good elasticity on pricing. So they could push price down, and you could start to see them start to segment the market a little bit where they could start to be more competitive perhaps with cheaper tokens for cheaper, easier tasks. And then premium tasks charge a higher price for intelligence and start to stratify the value of the intelligence that they're providing by changing the price points. And I'm... I envision that's where everyone's gonna go. Chamath Palihapitiya (00:16:44): Nick, I'm gonna show you... This is to Friedberg's point about what is the potential downstream productivity gains that everybody can have theoretically with AI. Just put that on the screen. This is from Microsoft's earnings. My research team put this together. It's really quite incredible. What this shows you is that Microsoft's revenue went from 198,000,000,000 to 332,000,000,000 in the last four years while staff only increased by 2,000 people. I mean, isn't that stunning? Like, you would have thought before AI that if somebody said, great, we're gonna, you know, get close to doubling revenues at this kind of scale. David Friedberg (00:17:29): Right. Chamath Palihapitiya (00:17:29): You probably would have thought that headcount would have doubled too. And the reality is headcount stayed flat, and we don't know how many people will take this offer that Microsoft just gave for, you know, to to leave because I think they offered it up to 60,000 people, but this number could be under 200,000 depending on how many take it. And so just the scale and the impact on the productivity, to your point, this idea that it creates job loss, don't think it's true. It's more that you're seeing productivity gains at the same number of human input, and I think that's interesting. I went through the s one. You want me to give you my little s one breakdown? Jason Calacanis (00:18:05): Mhmm. Chamath Palihapitiya (00:18:06): This is the most incredible business I've ever seen. I hope that they go public after November 11 because it will force them to update with q three, and then we'll get even more insight into... This is like some contraption that I've never seen before. I've never seen a business like this. It's really, really, really incredible. So let's cross our fingers because post November 11, you'll see q three drop. What people have been whispering is that the revenue growth kind of moderated to sort of like the 50% range. Q4 is TBD, but let's break this down in a bunch of charts because I think it's interesting. Okay, so Nick, start with chart number one and we'll just go through them one by one. Okay, so the first thing that I always read in an S1 is what are the risk factors? And what I had my team do is I said go put together a word cloud. This is great, David Friedberg (00:19:01): is cool. Chamath Palihapitiya (00:19:03): First tell me what are they afraid of, okay? And when you look at it, the share of words in the risk factors that are allocated to different risks are very important, and what this tells you is the single biggest risk to the ant business is compute. They mention it more than anything else. And specifically inside of compute they talk about data centers, power, chips, grid, electricity, hardware, etcetera. Then a close second but still second is regulation. Okay? They care about government policy. They care about sanctions. They care about export controls. Then it's this idea of zero data retention and privacy and IP. Then it's AI safety. Then it's just making money. Then there's their competitors. Then there's governance. What you notice is what are they not afraid of? They're not afraid of customer traction because they they rarely mention it. They're not really afraid of employees leaving because you'd be an idiot to leave if you were inside, and they don't really care about taxes and any of these other things. So this is a business that is very much on the forward foot that understands the binding constraint. So now if you know that the the compute is their biggest risk factor, then you double click into that. And I had my team run a further analysis, which is to say, okay, how do they describe these risks, right? How many times do they mention them? How many words are you spilling talking about this? And what you find is that inside of the compute problem, their biggest issue is really data centers. And then further, it's the financing commitments that they have and it's the power. All of these are really important because, again, it helps us highlight what the binding constraint is to this business. So as goes data centers, as goes power, and by the way, this is a great setup for the politicians because it's very obvious if you're a Democrat as you read this, and I'll speak about it in a second, what you should be trying to do to win in '28 versus what Republicans have to do in '28. Right? Basically, the takeaway from all of this is I think antisemblematic of the entire AI complex, which is to say it's all about data centers, which means it's all about power. If you're a Democrat, the best thing you wanna do is slow all of this down so that there's a recession going into '28. The only thing you need to do is slow down power and slow down data centers. Chamath Palihapitiya (00:21:30): On the other side, if you're a Republican and you wanna have the best chance of winning in '28, this is the one thing that must be done right. You must get the power, electricity, data center thing right. Jason Calacanis (00:21:40): Okay. So based on this, your premise Chamath Palihapitiya (00:21:42): is Jason Calacanis (00:21:43): they need data centers. If they don't get data centers, it can't keep growing. However, Sachs, the truth is these are the liberal of all liberals in Silicon Valley. It is the largest amount of money that has ever been made by founders outside of Elon Musk. It would make sense to me perhaps the opposite of what Shammat's saying. Shouldn't the Democrats come in and say, we are pro data center and energy because this is gonna help society because they wanna see Dario and his group win because they are gonna be the equivalent on the left of Elon Musk on the right. Wouldn't it be better for them to steal the the data center charge and make Anthropic even more profitable so that that 51% of all of their... Or 80% of all their money just flows into democratic super PACs? David Sacks (00:22:40): Maybe. But I don't think that's the democratic party that we have today. I mean, the old Clinton Democrats... I mean, Bill Clinton Democrats are long gone. I don't think the abundance Democrats are picking up a lot of momentum. I mean, the Democrat Party is... As Gavin Newsom said, is becoming DSA dominated. So what is their agenda with respect to superintelligence? Either to ban it Jason Calacanis (00:23:03): outright David Sacks (00:23:04): as Bernie Sanders and Elizabeth Warren and AOC want to do. They basically want twenty year jail sentences for developers of superintelligence and they want corporate death penalty for companies that build superintelligence. Or they want to have some extremely draconian regulatory regime that would feature a federal department of AI or federal department of SI, I guess, that would review and approve every single model before its release. Basically, they wanna have a DMV for models. Jason Calacanis (00:23:37): Let me challenge Look, David Sacks (00:23:38): that is that is the democratic agenda on this. Now, could that be shifted through oligarchs like, I don't know, Reid Hoffman or maybe some of these new anthropic oligarchs like maybe a Dustin Moskowitz, something like that? Maybe they can, through their massive influence in democratic circles, could effectuate a change. But I tend to think that Chamath is right that democrats want to do anything they can to sabotage the Trump economy and this whole SI boom is what is driving the Trump economy right now. I tend to think that's gonna be the partisan that's gonna be the partisan impetus. Jason Calacanis (00:24:18): So you don't need to do much, I think, Freebird, to scuttle the Trump economy since the the war, tariffs, and all that other stuff have driven inflation and all those problems. Wouldn't it be smarter for the Democrats I to David Sacks (00:24:33): mean, just just hold hold on a second. Jason Calacanis (00:24:35): Mean, look. David Sacks (00:24:36): Jay Cal, I think the latest numbers from like Fed GDP now, I think it was 3.7 in q three, and it was two and a half percent in the first half of the year. And you could also look at all the CapEx that's being spent right now on this build out and it's roughly 3% of GDP. So you could say that all of the economic growth in The United States right now is coming from this superintelligence build out. Jason Calacanis (00:25:03): Concur with that. We can have fun with numbers, but the Trump economy is a disaster according to Trump's own supporters. So let's just call balls and strikes here. His own voters, the independents who flipped over and voted for him, they are very displeased with the economy and that can be seen very clearly in him having the worst approval rating of his entire career and there's been some doozies in that career. Friedberg, what should the Democrats... David Sacks (00:25:30): I don't think... Even even those critics, even... First of all, I don't know what Trump supporters you're talking about. Jason Calacanis (00:25:35): I'm talking about the America First people who feel that he didn't deport the 20,000,000 people that they No. Know. I know. David Friedberg (00:25:41): I'm Jason Calacanis (00:25:41): just talking about that cohort that you could put Tucker in there, you could put Megan in there, you you know, all that sphere. David Sacks (00:25:47): Yes. There are definitely people who don't like the war and they recognize that there is some inflation being caused by the war, but I don't think they've said the economy is a disaster. Anyway, whatever. I don't wanna put both of out of words. Jason Calacanis (00:26:00): If you're not an equity holder, I think you look at this economy and say both parties, Biden and this Trump two point o, I think the the bottom half of the economy believes that both parties don't care about them. That... That's what all the feedback that you're getting, and and we'll confirm it all next Tuesday and see what happens with the actual voting. Chamath, let's continue your teardown. Chamath Palihapitiya (00:26:21): So that was section one, which is you always read the risk factors first, get a sense of what is management concerned about, right? So again, the takeaway is management is concerned really only about compute. This is a compute problem. Okay, the next thing that I always look at is I look at the revenue side of the ledger and I try to understand what kind of business they have, and this is an incredible, incredible business, exactly what Friedberg said. Why? Because at the growth that they have and the revenue that they have, they have barely scratched the surface of the commercial working world. And so this is a little bit more of a nuanced chart because what it does is it starts to really break down what we think the revenue stratification is by customers inside of Anthropic. So there's about 40,000,000 individuals and small businesses that are spending under 100 k. 40,000,000. Then there's about 10,000 that spend between 100 and 1,000,000. There's about sixteen fifty that spend between 1 and 10,000,000, and only 250 customers spend 10,000,000 and more. So to your point, I think what Friedrich said is right. The setup is is that these folks can negatively churn into these existing customers and grow and attract new customers at an incredible rate, which I think is just crazy. And so this allows me to think about what is the upper bound of revenue. And you you don't need to get to 100% of what's possible. You need to get to 25 or 30%, and then you need to have a reasonable distribution of negative churn assumptions. And what you start to see is that this can be a very large revenue business in the hundreds of billions of dollars in sort of this three to seven year timeframe. Now what slows that down? As far as I can tell, and this is more me putting the $80.90 hat on, the reason why you have so much traction in the million and under is when a company gets large enough, they allocate responsibility and budgets down. And at the director, manager, VP level, there are millions of humans running around with kind of million dollar budgets. Chamath Palihapitiya (00:28:34): And so there's a lot of experimentation that can happen inside of that bucket. They're willing to sign up for three, four, five, six, seven, eight, nine things. The minute you sort of transition from a million to like multimillion dollar deals, and this data sort of confirms it, it's a much more thoughtful pitch, It's much more cross functional inside of a company. And you have to show some form of ROI or total cost of ownership advantage, right? So what's interesting about this, Jason, is 1,900 companies have been able to make the case. That's what I would say. I think there's a ton of experimentation, and I think about 1,900 companies can clearly see an ROI where they can now start to rip in big checks. Now of that 1,900, a big portion of those are gonna be AI natives, right, folks that are venture funded. So you have to strip those folks away. And then what's left over is probably a couple of 100 Global 2,000 type companies. So I think the ROI case is still a little speculative, but the potential is there. And as long as the potential is there, I think the market's gonna kinda price it up. So now that's revenue composition. So then the next thing I think about is capitalization. And I said this before. I said Ant needs to have 200,000,000,000, and I really hope that they actually get close to $2.50. First of all, let me just say, the CFO of Ant, Krishna Rao, has done an unbelievable job. The fact that he, entering June, already had $125,000,000,000 is unbelievable. And there's a chart I didn't include, but their total net burn to get there has been like $9,000,000,000 or $10,000,000,000 It's just infinitesimally low relative to the market cap. So I thought that they had a lot less cash than this. So when I said they need to raise between 200 to $2.50 and they need to price closer to a trillion, I was assuming they had $30.40, 50,000,000,000 on the balance sheet. I was wrong. So these guys need to raise between, I would say, 80 to 120,000,000,000 to get to that 250,000,000,000. And I think in order to do that, the price is probably now gonna come in between 1.3 on the low end to 1.7 on the high end. So call 1.5 the midpoint. Chamath Palihapitiya (00:30:50): So if I had to price the IPO just eyeballing this, I kinda think it'll come in around $1.05 if I had to if I had to just kinda guess. And the other thing that I noticed is how much cash Alphabet has and also how much cash Meta does not have. I was shocked to to see that Meta had negative 1,200,000,000 of cash. This must be a mistake, but if you look at the 10 q's as of the end of September, this is what it shows which... Cash? Jason Calacanis (00:31:12): Net cash? David Sacks (00:31:13): Maybe it doesn't include short term investments for some I'm David Friedberg (00:31:16): gonna take a look at Meta's numbers David Sacks (00:31:17): Yeah. David Friedberg (00:31:17): Right David Sacks (00:31:17): doesn't make sense. David Friedberg (00:31:18): Yeah. I'll I'll tell you in one second. David Sacks (00:31:19): But Jamath, your larger point is is right that Anthropic, like you said, over a 100,000,000,000 of cash they're sitting on, they've burnt very little of the money that they've raised. Again, their company's been a model of capital efficiency. They're about to raise a 100,000,000,000 in this IPO. I think they've got about a debt facility with another 80,000,000,000. So you add it all up, and this is a company with over 300,000,000,000 of dry powder or or it will soon have that. So you've got all these, you know, anthropic bears who are saying they've made all these CapEx commitments in the future that they're never gonna be able to live up to. Well, actually, this secures those commitments because Yeah. They've got the capital now to basically back up all of those compute orders, all the forecasted CapEx spending till, I don't know, 2030? Chamath Palihapitiya (00:32:06): You're exactly right. And because they only have to raise 80, right, or 90 or 100, that's a lot different than trying to raise one fifty or one seventy five or 200, which is where I thought they needed to be. And so the demands they're gonna put on the capital markets into the IPO are gonna be less, which means that they'll have more pricing power. They'll be able to manage the float better. All of these dynamics, I think, give you a constructive read going into the IPO. Okay, now let's move on because I think here's my biggest takeaway. David Friedberg (00:32:37): Meta's net cash is negative two. It is 80,000,000,000 of cash and short turns and 82,000,000,000 of Oh, god. Jason Calacanis (00:32:45): Wow. Okay. Chamath Palihapitiya (00:32:46): Go back to this. What is my big takeaway? It's bigger than it. I'm gonna build on what Saks said. The entire United States economy is levered to the AI complex. So very narrowly, we're talking about seven or eight companies that sets the tone for the entire country. And whether we like it or not, that is where we are. Why do I say that? One, the most important companies in the world are in a massive spending binge. Right? These were highly profitable, highly cash accretive, highly cash flow generative businesses that have said we're gonna put the foot down on spending because we believe in what's coming into the future. That's what drives GDP and it's what drives growth. David Sacks (00:33:31): Okay. Chamath Palihapitiya (00:33:32): Next chart. Now as they do that though, they deplete their cash and they have to raise debt. Okay. And this is what you see. All but Microsoft... By the way, what an incredible job Satya has done. He's halved his debt while everybody else has, you know, just gone to an unbelievably crazy high number. So the the AI complex now owes $344,100,000,000,000 dollars to the market. And you'd say, okay, why is that important? The problem is this. These companies are raising so much money, it starts to crowd out the capital markets. And the most important part of the capital market that it starts to crowd out is the appetite for government treasuries. And what you can see here is that when you look at these AI firms, the amount of money that they need to raise through the end of twenty seventh, it's 30% of all of what treasury is about to issue in that same period. So there, whether we like it or not, they are going to start competing for demand. Isn't this nuts? It's like you have seven companies that are crowding up the treasury market. David Sacks (00:34:42): You know, Chamath, a lot of people are looking at that number and they're trading these stocks down based on that. I kind of view it the opposite, which is I don't... These are smart companies. I don't think they'd be making those kinds of investments unless they thought there was ROI there. Jason Calacanis (00:34:56): And so Well, obviously is ROI based on the token usage and the fact that only one or 2% of people in corporate America are even using these tools. We are greatly underestimating the uptick here. Claude hasn't even launched a bot yet, a Grok bot. And OpenAI just launched theirs and it's in like a a small use case when a 100,000,000 or 200,000,000 white collar workers Right. Subscribe to, say, the Office Suite. Right? The similar Office three sixty five thing happens in corporate America. Everybody's got five agents running. I think the utilization of these things is going 500 x. The token usage is I think that's right. Then x. That means we're gonna have Yeah. Not enough compute, and everybody's got the build out completely wrong. There won't be enough. And people are gonna look back on this moment and say, why didn't you build more compute? Why didn't you spend more on CapEx? Chamath Palihapitiya (00:35:47): You're absolutely right, Jason. The problem is the regulatory pushback. The the amount of approvals and the ability for utilities to find the staff and the ability to actually turn these things on and then the ability to get the capital equipment you need, it just isn't there right now. So we as a country are sort of clogged up. We can't do it even if we wanted to do it. Jason Calacanis (00:36:08): Fribourg, you know, the the other issue here is if we are not spending enough building this out and the country, a large percentage of of of the country believes in socialism and is against the oligarchs, both Republican, independent, and Democratic oligarchs, this is is what they think of us and of the leaders in our industry and other industries. This is really dangerous because we're not gonna be able to to build out the compute we need. And what does that do to the entire industry in the next three to five years if we if we can't build out this? And how do we turn that narrative around so people are like, yeah, we should have data centers? David Friedberg (00:36:48): I have a view that humans try to organize into groups, organizations to try and create power that benefits the members of that group. So, you know, we form tribes. We form communities. And in sense, governments are a form of an organization. It's an organizational coalition of individuals to achieve an objective for, in the case of a democracy, the majority of the voters. And as a result, organizations in a in a world of, you know, call it pseudo limited resources, compete with each other for those resources. Nonprofits, for profits, governments, they're all effectively competing for resources because the individuals that they represent, the interests of are gonna be served if they get more resource, they get more power, get more influence. So to some extent, the power of AI and the influence it enables in terms of media, in terms of capital accumulation, in terms of changing people's minds, in terms of aggregating resources through its competitive capacity, productivity, etcetera, makes it a bit of a threat to government organizations. And so to Chamath's point, if one of the manifestations of that is that AI is now accruing more interest from capital than governments, governments aren't gonna wanna let that happen. And the governments, whether they're right or left, are gonna fight for the AI to become either part of the government and the government to subsume the AI or control the AI organizations. And this is why I've kind of argued the case. I think that you're gonna end up seeing compute get regulated in the future where compute capacity is going to be assigned by government, and they're gonna pass laws to try and do that. Post production, that is. Like, meaning, they're not gonna control the chips. They're gonna control the actual compute layer, and they're gonna determine who's gonna get access to what amount of compute, I think, for governments to compete. David Friedberg (00:39:01): And I think one of the ways this is gonna play out to Jamaf's point is in the near term in capital. There's more capital going to the AI organizations and the government. The governments aren't gonna wanna let that happen. So they're gonna try and stop the data centers because then Chamath Palihapitiya (00:39:13): I've never seen something in my adult working life where a complex of a handful of companies are effectively competing with governments now for capital because you've never seen companies in an organized manner Jason Calacanis (00:39:27): have Chamath Palihapitiya (00:39:28): one very narrow thing that they need money for that is a one way bet on something that attracts the same amount of money that would otherwise go to a traditional two, three, four, five year, ten year bond auction. It's it's kinda nutty, actually. By the way, the David Friedberg (00:39:43): story you're gonna hear from both sides is a story of which side benefits the people more, and that's gonna be the narrative argument, which is gonna be every side's gonna say the other side's lying. Because remember, if one side's lying and another side's not lying Chamath Palihapitiya (00:39:58): Yeah. David Friedberg (00:39:58): The side that's not lying says, hey. Those guys are lying, and they're correct. The side that is lying de facto says that the other side is lying because they're liars. And so you'll hear both sides screaming, we are the better path for society. We are the better path for humanity. It's either government or private market AI, and that'll be the huge battle that's gonna brew over the next half decade. Jason Calacanis (00:40:22): Wow. David Friedberg (00:40:23): And we'll see which one Jason Calacanis (00:40:24): Politicians are for sale and Dario and Anthropic should start buying just like the right did. David Sacks (00:40:30): Oh, they already have. Jason Calacanis (00:40:31): I don't see them with champions. Where are their champions? Do they have champions yet? David Sacks (00:40:36): For sure. Listen. Anthropic, even as a startup, prioritized government affairs. They were very active during the Biden administration. All those former Biden officials who were doing AI in the Biden administration immediately joined Anthropic Jason Calacanis (00:40:51): My point, Saxe, is that you don't David Sacks (00:40:53): the end of twenty twenty four. Jason Calacanis (00:40:54): No. No. I get that. But you don't see them doing what you guys did, hosting a fundraiser for Trump, being out there publicly in front of it. You don't see them out there. David Sacks (00:41:02): But they've they've... They have spent... They've created PACs. Chamath Palihapitiya (00:41:05): Sure. David Sacks (00:41:05): And all sorts of entities and nonprofits, all NGOs, all that kind of stuff, and they have been massively funding it. They have a huge Jason Calacanis (00:41:12): government fairy you guys did, like, in, you know, getting out there and What do you mean you... David Sacks (00:41:17): I don't know what you mean by you guys. Jason Calacanis (00:41:19): I did were public about your support for Trump. I've never seen Daria publicly come out David Sacks (00:41:24): for any politics. Yeah. Exactly. I'm not I'm not... Can you let me explain? Not a corporation. Of course. I'm just one person who has views and, yeah, I support certain candidates and I do fundraisers for candidates. I'm not, like, seeking regulatory capture. I'm just one person No. I'm I'm Jason Calacanis (00:41:39): saying why hasn't Barrio or the other founders done that? Why haven't they said we choose this candidate? We choose these candidates? Chamath Palihapitiya (00:41:45): We don't know that they haven't. How do we know they Jason Calacanis (00:41:47): done it publicly because we've never heard them do it. That's my Sure. David Sacks (00:41:50): But they have given huge amounts of money Jason Calacanis (00:41:51): to us. Agree they've done it properly. David Sacks (00:41:53): Which which is public information and those PACs have supported candidates. Jason Calacanis (00:41:56): If they're gonna make a run at this, they should do it publicly. David Sacks (00:41:59): There's a huge revolving door where Anthropic has been snapping up every former official. First, it was the Biden administration. Now, frankly, they're hiring a lot of former Trump administration officials. Chamath Palihapitiya (00:42:11): Oh, really? David Sacks (00:42:11): And... Oh, yeah. This... And this is all public information. Yeah. But they are building a massive government affairs operation. And look, I think you can expect that as they power up through all of this capital, having a $2,000,000,000,000 market gap That's my point. They're gonna have even more influence in Washington or they're gonna be capable of buying a lot more influence. And I think that is concerning. One thing I will say though is that as they go from being a startup to being a public company that's one of the top handful of companies by market cap on earth, it's gonna be very obvious that they are a big tech company and therefore they should be treated like other big tech companies, which is to say with suspicion, as opposed to this being some poor little startup that, you know, has innocuous views or is not the 800 pound gorilla they actually are. So I do think it'll be clarifying on that level for them to be seen correctly as what I've been saying is that they are the most powerful monopoly or duopoly ever in human history, which is they're creating AGI, right? I've been saying that for a long time. So I do think that them going public will actually right size them in the public consciousness. Yeah. My And one thing you're you're seeing already actually, is there's starting to be a doomer anthropic split. There's a very interesting article in Vox, which is this huge doomer publication, over the past week, and it was quoting a bunch of these NGOs, kind of doomer NGOs, that were basically pointing out that, you know, Anthropic actually, if you if you separate their rhetoric from what they actually do, they are the ones leading the charge on Recursive Self Improvement. There's no single company in the world that is doing more to race towards full RSI than Anthropic. They are hell bent for leather on getting to full recursive self improvement. In fact, a lot of the reason why they are becoming so efficient with their compute, the reason they're able to cut costs, offer the same capability at one tenth the price, is because they've increasingly been using their own models to generate these algorithmic improvements, to create these compute multipliers. If you go back to August, Anthropic published a very interesting blog talking about how they were using RSI and and 26, they had a chart showing that 26% of their tasks that are involved in basically trying to create the next generation of models, they were already were using RSI to do that. David Sacks (00:44:46): Now that was back in August, so who knows what they're at now being in October. So look, they are pursuing RSI very very quickly and you know, one way to think about that whole pacing letter that Dario published a few months ago is it's almost like they're creating an alibi for themselves where they are acknowledging that, hey, we are pursuing RSI as quickly as anyone and it's almost like they're saying to the world, well, we want it to stop. Right? Like, we want it to slow down. We tried to get you all to agree to pace, but you guys wouldn't agree to do that. So therefore, we kept going. You know? And it's almost like creating an alibi in advance for themselves if this RSI thing goes really bad. Jason Calacanis (00:45:29): Alright. David Sacks (00:45:30): But I think that they had to know when they published that pacing letter that they're not gonna get the whole world on board with pacing. So the whole thing was sort of an exercise in virtue signaling. But in any event, I think what it shows again is I do think that it's possible that an anthropic doom or split is coming because there's no way for them to maintain their lead as the number one superintelligence company without continuing David Friedberg (00:45:57): to David Sacks (00:45:58): advance the frontier very rapidly and to continue to pursue recursive self improvement. And that is something that the doomers are most afraid of. Of all the of all the various risks, right, they are most worried about a breakaway superintelligence. So I do think that this is the beginning maybe of a divorce between Anthropic and the doomers, but we'll see. Jason Calacanis (00:46:22): Okay. Let's get back to your breakdown, Chamath. You had the the greatest revenue, greatest business ever built, yada yada. They have a ton of cash. They have the cash for the build out. They're gonna raise some cash in the IPO, and they are... They... All of this bond activity is crowding out treasuries is where you left off, I believe. So let's continue. Chamath Palihapitiya (00:46:41): So I think I think you have to go to these risk factors now and think if you're gonna price the IPO or if you're gonna buy the IPO, how would I decide to buy the IPO? And I think at the $1.04, $1.05, $1.06, it's kind of priced fairly, so there's no deal. But they're giving you an entry price into the future. So then you have to sort of have a view on the future. And I think there are two risks. The first risk was what I showed you on their revenue composition, which is how long does it take for Ant to show those 10,000 customers the ROI math that they will need to move from less than a million to single digit millions to tens of millions, right? That's one very simple thing that you can check quarter after quarter after quarter. As those numbers swell, the reason they will swell is that they'll have defensible use cases and white papers and analyses that make it very straightforward for a corporate infrastructure to sign off, a multi person executive team to sign off on a multimillion dollar spend. So that's an ant risk, and I think that you can price that risk. The second though is what I teased here, which is the risk you cannot price, which is this market risk. The AI complex has gotten so big that it now competes with US treasuries. Why is that an important thing to note? And why does that create market risk? Nick, if you just go back to the last chart, please. So when you look at this, what does it mean for treasuries having to compete with Facebook and SpaceX and Anthropic and OpenAI Jason Calacanis (00:48:24): for money. Chamath Palihapitiya (00:48:26): Dollars, yeah. Well, it means that somebody is going to have to pay more. Now, let's play out one example. If it's the hyperscalers that have to pay more because people believe the flight to quality and the durational risk of the government is better, then all of the money that the hyperscalers and the AI complex and Anthropic and OpenAI have to raise will have to come in at a higher coupon. If that's true, then Friedberg's chart is also true which is that those rates cascade through the ecosystem. The neo clouds will have to pay more. All these other folks have to pay more. What that means is that you increase and you pull forward the risk of defaults, which we talked about last time. So you have this negative reflexive cycle there. Let's say the opposite is true. Let's say that, you know, the AI complex is able to raise money at reasonable rates, and it's the US Treasury that has to actually go through an auction and pay more. Now you have the broad based cost of borrowing goes up because every other part of The United States economy is levered to the twos through fives and ten year complex. That is a huge market risk that I don't understand because I've never seen before. Jason Calacanis (00:49:47): What is the market risk? Explain it just crisply here as we as we wrap. Chamath Palihapitiya (00:49:51): What is the market risk? If interest rates go up because the US Treasuries have to pay more for people to buy their bonds Got it. Yes. Then everything else in the economy has a higher cost of borrowing. That has negative implications. If the opposite is true, the AI complex has to pay more, and then there's a bunch of negative repercussions narrowly to the complex. The problem is we're trying to buy an AI stock. So many roads lead to downside risk more than upside risk. Now there are versions in which this all works out and everything is off to the races. But I guess my structural takeaway maybe, Jason, is we're entering this very weird phase in The US economy where we've seen this before and we're seeing it now. This complex is too big to fail. And I think when you start to see these guys representing 40, 50% of all capital market equity and debt flows, which then in turn represents 30, 35, 40% of all treasury issuance as well that this competition happens, these guys are too big to fail, which means that there's a different problem at hand, which is a more systemic problem. So I'm not saying that there is. I'm just generally bullish. Jason Calacanis (00:51:03): This is confusing to you as a market participant who's on the inside. I get it. What I'll say is I... You could actually argue the opposite, Shmoop. This is the greatest business ever created. It's an American business. The American economy is still the greatest economy in the world. You could argue versus China, etcetera, but we are running the table on super intelligence. And if you look at the history of the greatest franchises ever made, I I I did a little bit of research and and just this is first seven years of revenue to to back up what you're saying here. If Anthropic hits the targets they've set out, you know, ballpark here is getting to a 100 and then $300,000,000,000 in revenue, eventually 600,000,000,000 in revenue. They're well on their way. They're at about a 100,000,000,000 in revenue this year, which is like a third of a Google, you know, a quarter of a... Of an Apple. And you look at the cumulative revenue in the first seven years of the best franchises America has ever made, which would be Amazon, Google Search, cost per click search, Freebreaker alma mater, and the iPhone franchise, it's gonna become clear that the three best franchises in the history of business in my mind, iPhone, Google cost per click search, and Amazon, which will... This doesn't include AWS. This is just books and retailer. You you put the books into the the the AWS into it until later years, so it gets even more interesting. It's possible Anthropic's business is bigger than the top three franchises in the history of business put together. And that is something we've never seen, which means you have no choice but to buy American debt and this debt if you're a global participant. Where are you gonna put your money? In France? You know, in China? Can't put it into China. David Sacks (00:52:47): I'm confused. Jason Calacanis (00:52:48): Yeah. David Sacks (00:52:49): Haven't you been saying for like the past year that open models are gonna eat Anthropix lunch? Well Have you changed your tune on that? Jason Calacanis (00:52:56): In the face of new evidence, you would have to say that they are lowering the prices and the opportunity in the enterprise is is so great that they're not being dramatically impacted by it. You will see anecdotally startups and enterprises exploring it, but it's obviously not enough now that we know their numbers that it's slowing them down. It's not slowing them down yet. Chamath Palihapitiya (00:53:23): Not debating revenue traction. It's still the biggest risk factor, but if you're I'm not debating revenue traction at all or business quality. What I'm saying is there are moments where there's systemic risk in markets where everybody goes risk off. And I think that what I am saying very explicitly is I've not seen in the last fifteen or twenty years the last time we came close to this was in the GFC, where you have a narrow part of the economy represent basically all of everything that's happening in the capital markets. And all that means is that everybody has to pay a lot more attention. It doesn't matter what side of AI trade you're on, whether you're long it, whether you're short it, that's not... I don't think that's important. I'm saying something more structural, which is about 10 companies collectively to fund one thing will be competitive with global governments on borrowing. I don't know what the implications of that is because I have not seen that. Jason Calacanis (00:54:17): To the point, Sax, that you made, in challenging me, which is great, their revenue is slowing down dramatically. You know, their quarter their over quarter revenue is decelerating. So, obviously, it's on a big number. David Sacks (00:54:28): So We don't know q three yet. I mean, the scuttlebutt on X, and who knows if we can totally believe this, is that things did slow down in q three a lot, but some of that may be attributable to the fact that they eliminated 99% of distillation. Right? So they voluntarily took a big hit to the revenue Jason Calacanis (00:54:45): From people stealing from them. David Sacks (00:54:46): Yeah. Yeah. To prevent the copycat models from from basically distilling them. So there was that. And then I think the scuttlebutt is that since they cut their token costs considerably, which was done pretty recently, now the demand has reaccelerated. Jason Calacanis (00:55:03): So Yes. Jeb and Sirendai is in full effect. Yeah. Yes. It seems like they're back David Sacks (00:55:07): to resuming their previous growth after a couple of hiccups in q three. But I think the thing that's really impressive is just that the way they're able to cut their token costs, it's not just because they're giving up pricing power. Right? It's not that they're losing margin. They're actually gaining margin. The reason they're able to do that is because all the algorithmic improvements Efficient. They're making in order to make their models much more efficient. Jason Calacanis (00:55:33): Yes. And Now here... David Sacks (00:55:35): Yeah. Jason Calacanis (00:55:36): Go ahead. Just just to dovetail with that, Saks. What's happening with the models is even more impressive. The... They're lowering the price of tier two and tier three models. Right? Your your Sonnets, your Opus. Those are getting cheaper, but enterprises are saying that's enough for me. So as they make that cheaper, then businesses get more value, they solve more problems out of it, and they don't feel the need to be on the latest greatest fable. If you're all hollow, maybe you need that to do science. If you're a mathematician, you need it. If they can keep making their second and third run models this much cheaper, 10 x cheaper each year, the Jevons paradox is gonna get even more pronounced because enterprises will use it more. Token cost matters. Right? We're sitting here with the token max and cost. David Sacks (00:56:19): What we're is that... I mean, we we keep seeing Jevan's paradox play out at every level, which is as you cut the cost of tokens or more and more use cases, enterprises use it more and more and the the net result is that the total demand just keeps going up. And the total revenue and market size keeps growing. Also, just to reiterate a point that you made earlier in the program, the new applications that are coming all consume a lot more tokens than the ones that we started with, right? Like agents use a lot more tokens than prompting. And cyber defense is gonna use a lot more tokens than just doing, you know, a pen test once a year, right? You're gonna need continuous monitoring of agents, attack surfaces, all that kind of thing. So all the new applications are gonna be using exponentially more Jason Calacanis (00:57:08): 50 to a 100 David Sacks (00:57:10): Yes. Exactly. So the price will keep going down, but the market size keeps increasing. I think the biggest risk factor to Anthropic, I do think it is some version of the open source models, maybe not catching them, but sort of saturating intelligence at a low price point for Commoditizing it. Commoditizing it for things like coding or, you know, where there is a big chunk of the market, that is still a risk. I would say sort of a second order risk is that in order for Anthropic to stay ahead and to keep making their models more and more efficient, they have to keep using more recursive self improvement, right? You see this in the charts that they published, that they are using their latest models more and more to discover these compute multipliers, to discover these new algorithmic efficiencies. So they have to kind of push the limits of what they themselves call risky activity. I don't know if I fully believe in the Doomer story about RSI, but they themselves say that RSI is very risky, but they have to keep pushing RSI in order to keep delivering these algorithmic improvements in order to stay ahead of the open models. And I just wonder how sustainable that is. At some point, do you get a breach with the doomers that becomes irreconcilable? Do the doomers want to basically shut down RSI or basically slow it down to the point where then the open models truly do catch up? I don't know the answer to that question. It's sort of just a more nuanced take on this idea of open models catching up. Jason Calacanis (00:58:44): Yeah. And I think this chart is super illustrative. If you could pull it up, Nick. Gallup's been keeping a survey of who's using AI at work daily versus frequently defined as a few times a week. And, you know, the people using it, like, frequently versus daily, we're still talking about 1020% here. It's nascent. A lot of the top enterprises are not letting their employees use this in an unconstrained fashion, and they're certainly not letting them connect their email, their knowledge bases, their Notions, their Slacks. Big corporations are not letting people actually use the power of AI because they're scared about cyber. So once the cyber threat Schemoff gets mitigated, this is gonna go from 10% of people being daily users to 60, 70, 80%. There's so much growth left here when every single employee has an agent. I saw just last week, Uber bought open a... OpenAI ChatGPT for every employee. That's gonna be the next shoe to drop is do you buy these things for every single employee? Okay. I think we beat that one to death. Congratulations to the Anthropic team and all the investors on making an incredible business extraordinary. And, yeah, shout out to Sachs David Sacks (01:00:05): who Jason Calacanis (01:00:05): predicted this would be the greatest business ever on multiple programs. Turns out you got that one correct. And we'll see we'll see what happens. David Sacks (01:00:16): But like I said, I I said two things. Number one, best business ever creating this AGI monopoly. Second, they're going for regulatory capture, and we should definitely not allow that to happen, especially in light of number one. Right? It's just kind of unseemly and gross for them to be seeking red capture when they already have such a good business and they're in such a dominant position. And I think actually that this IPO will be very helpful in clarifying on that because, again, once they're seen as a big tech monopoly or part of a, you know, huge duopoly, the arguments for giving them, like, regulatory Jason Calacanis (01:00:49): advantage David Sacks (01:00:50): will go go away. In fact, we should do everything we can to make this market more competitive. Before we help the break up anthropic Chamath Palihapitiya (01:00:57): movement, break up anthropic, separate Jason Calacanis (01:01:00): the land It could happen. From the tokens, from the subscription. It will. Like, if... And the... Who said it? Gavin that they were claiming they were building the last business ever? You know, when you look at the other franchises David Sacks (01:01:11): said that. Jason Calacanis (01:01:12): Well, Gavin said somebody said Dario. Oh, sorry. Yeah. David Sacks (01:01:17): Gavin said that Dario said that Jason Calacanis (01:01:18): and then said it. And that actually David Sacks (01:01:20): But Dario did not deny it. Remember? He had this lengthy response, but then said... Jason Calacanis (01:01:26): Yeah. So... Yeah. I I mean, I I think they obviously believe it. And if you look at that chart I made with the other franchises, they they obviously have an incredible franchise that's theirs to lose when we get the OpenAI data. Man, then we're gonna have all three of the major players in this space disclosing the key information we need, and that's gonna be really interesting when we have all of the hands turned over in this poker game when OpenAI files. Alright. Google got smashed on Thursday, 10, 15% down. We we record on Thursdays, obviously. Q three earnings wiped out about 500,000,000,000 in market cap. Why? For two straight quarters, Google missed on search revenue. Even though searches are growing massively, the people clicking on the ads is not, which leads to a little bit of shenanigans and trying to get people to click on more ads. They're negative on free cash flow even though cloud is ripping. Cloud doubled year to year, 30,700,000,000. That's the AWS business they have. It's called Google Cloud. It's quite nice. And overall revenue is still strong. They're growing 25% year over year. The issue is people are looking at that Google cost per click advertising network and saying, well, obviously, that goes away at a certain point if you just give people the answer. Right? ChatGPT, Anthropic Rock, they just give people the answer. In some cases, they go solve their problem if it's an agent. So that is pretty disruptive. Search business, is what pays for everything, and that grew 12% down from 17%. So it's decelerating, but it's still growing nicely. Fribourg, this is your alma mater. You witnessed the cost per click greatest business ever. This was the previous one that we said was the best business ever created along with the iPhone franchise. What are your thoughts here? Are you worried about that franchise, or do you think they've done a good enough job with the other businesses? Google Cloud and YouTube come to mind, Android, in terms of diversifying their revenue. You worried about Google as a buy opportunity, or is this stay away? David Friedberg (01:03:30): It's a complicated story. I think the core services, the core Google ad revenue is a real challenge right now in terms of can they keep the momentum up. Overall, the business trades at roughly 21 times operating income, and you get that sort of a multiple based on reliability of future cash flows and and effectively growth of those cash flows. I think the Google Cloud business is looking, you know, really tremendous. I mean, I don't know if you guys remember. It wasn't too long ago when this thing was not making money. Last year, the Google Cloud business for this quarter was generating 3,500,000,000 of operating income. This quarter, it's over 11,000,000,000 of operating income, and this is a lot like the SpaceX AI story where the value of the compute infrastructure that's been built is just tremendous. The question is, does Google actually have the models that sit on top of it? And in many cases, they do so they can make a higher margin on that piece of the stack. So when I say it's complicated, I think there's a story you can build in the cloud business that shows the next couple of years of really progressive growth in that business. The core Google services, I think, is when it becomes challenging where over the last year, it grew from 33 and a half to 39. And as some people have pointed out, this may largely be driven by a change in the pricing algorithm for ads and how Google is now in some cases over earning for those for those clicks. And over time, advertisers will see that. They'll experience that. They'll reduce spend. They'll attrite some dollars, and it won't look as good of a business. So the question then is do they have a consumer AI business that catches up and accelerates to support that? That's the thing I think everyone needs to be watching is what does the AI replacement look like on the consumer side for Google's core business? Jason Calacanis (01:05:24): The core cost per click advertising network when you type a search into Google. That's the core business you're talking to. David Friedberg (01:05:29): That's the core consumer business. So the question is, is there a consumer AI alternative that starts to generate meaningful revenue to replace that revenue, and what does the revenue ramp look like there relative to the flattening or decline that may arise in core search, and how quickly does that happen? That is a dynamic and challenging question to answer now. Internally, I think there's a bit of turmoil. There is a bit of like what are we, not just overall as a company but just even within the business segments. What is Google search? Is it AI? Is it search? What is Google Cloud? Is it the models or is it just the compute, the rental of the compute? And I think we saw this battle play out recently where Jeff Dean and others left Google and I don't know this for sure, but the theory is that the computer scientists that have been building models at Google maybe aren't getting the resources that they had hoped to get because Google can make so much more money renting that compute out to others. And so it's a really hard question of what do we wanna be at Google right now? And I don't think that they have a great answer, and I don't think it came across well in the earnings report. Jason Calacanis (01:06:40): It didn't come across well, obviously, and people reacted, Shammoth. But they did know this was coming. They did plan for it. They renamed the company Alphabet, and they said, they've got this great CFO. Let's make all these other bets fend for themselves. The Waymo's of the world have to make their way in the world, raise outside capital. So they they did prepare for this. In fairness to the team over there, YouTube surging, Android surging, you know, Google Cloud surging, and then you have the the franchise slowing. Search is up, but revenue growth slightly down. So do you think they can fix this, or should they just do a bending spoons and get as much money as possible out of the search and put it into other things like consumer AI, corporate AI, and their future models and hosting of other people's models. What are your thoughts, Hirshan? Chamath Palihapitiya (01:07:29): I don't think that's what bending spoons does. And not everything is an analogy to bending spoons. Jason Calacanis (01:07:35): Well, no. No. I'm saying manage it for rep. I'm saying manage search. Let me be clear. I'm saying Okay. When I say bending spoons, I'm saying manage it for earnings, not for, like, growing it necessarily. Just just get as many dollars out of it as possible. Chamath Palihapitiya (01:07:49): I think that's what they've been doing in the last quarter. That's why people people didn't like that. I mean, there was a very interesting tweet. Nick, maybe you can put it up here. I think a lot of the consternation came from people reacting to what Max Anderson wrote, which got 5,000,000 views, by the way. And he wrote this through the lens of somebody... And this is... These are his claims, I don't know if they're they're true or not, but spending $500,000 or more a month on Google for years, and he itemized all the ways in which things have changed. And the most important thing that I pulled out of here was what Friedberg mentioned, is the change in the auction model. So typically in a Vickrey auction, what happens is Friedberg bids, I bid, if I'm the underbidder, what happens is Friedberg gets filled at my price because he was the high bidder. And so it's a really great way of doing price discovery. At Facebook, when we built the first ad system, that's essentially what we copied. We copied Google's feature for feature. But if now what they're doing is they've abandoned the Vickrey auction, Freiburg's right, you're over earning. And if the market starts to smell that out, they're gonna start to wonder what's actually happening underneath the hood. So these claims, are now well syndicated, have been out there since July. And I'm not sure that Google IR has necessarily nipped these in the bud because I think what happened was the... At least the information war that happened post earnings was recirculating Max's post here and saying this has been going on for a while. And when you look inside the comments, it's a bunch of other people seconding his analysis as accurate. So without knowing the details, Jason, because they don't spend money in the Google ecosystem, I think it's really important for Google IR to get in front of this because I think if this momentum builds, this idea that this franchise is essentially robbing Peter to pay Paul, like pulling money from the future into the present to kind of smooth out earnings, the market will react badly to it. Chamath Palihapitiya (01:09:55): You're seeing it today. Jason Calacanis (01:09:56): But Chamath Palihapitiya (01:09:56): then this other problem starts, which is, to your point, the composition of ad revenue as a percentage of the overall will fall below a threshold and then they do look like more of a structured conglomerate, where now you'll have a YouTube revenue block, a GCP block, an Other Bets block, and a Search block. None are dominant, which in some ways I actually think is better because then you're more diversified and you're less levered to any one single business. But they'll have to go through this complicated process where a bunch of folks may not wanna own that kind of a business. And there's a different buyer pool. So you have to go through transitioning out the folks that wanted to own a single stock bet on search or ads or whatever it was and now have to move to this other kind of business model. And when you switch buckets like this, a bunch of folks kind of say, oh, it's too complicated. So problem number one is what I would say is if you are Google IR, please read this and refute it or try to figure out how to get in front of it because every analyst now will will try to figure out whether this is true. The second, though, is, very narrow. How do you keep Demis at Google? That's it. That's the only task. Jason Calacanis (01:11:06): Okay. Chamath Palihapitiya (01:11:08): Zach? There's there's there's nothing else. Pay Thomas Curian whatever he wants. How do you keep Demas at Google? Jason Calacanis (01:11:14): Sachs, looking at this business, it's been obviously a journey for the past ten years to make Alphabet have resiliency in revenue streams, diversify the revenue streams. You think there's some great risk here and would you be long, short, or neutral to stock? David Sacks (01:11:34): Well, I'm seeing people post that Alphabet's Google search revenue drop below 50% of total revenue for the first time and they're making it sound like that's a catastrophic situation. Basically playing into the narrative that the search business is going to be disrupted by SI. And that's what it seems like on the surface, but when I dug into the numbers, it didn't really seem that bad at all. So it's true that Google Search's relative share decreased, but its absolute revenue still increased. So if you look at Google search revenue year over year, it was still up 12%. It increased from 56,000,000,000 to 63,000,000,000. So it's still a roughly $7,000,000,000 year over year increase in Google search. So Google search is still thriving, I think you could say. It's not growing that fast relative to other businesses, but you're not seeing it deteriorate yet. And again, the reason why the share fell below 50% is because other Alphabet businesses are simply growing much faster and the main one is Google Cloud which basically doubled year over year to 30,700,000,000. So it's the rise of the Google Cloud business that has made Google search seem like it's on the decline. But I tend to think it's a good thing that Alphabet is now finally getting some of these other businesses to really work and to really grow fast and to finally diversify the revenue. Diversifying from search has been something they've wanted to do for a long time. They now have all these other segments. You've got YouTube, you've got G Suite subscriptions. So in any event, I tend to think Google's a little bit oversold on this news today. Jason Calacanis (01:13:20): I agree. David Sacks (01:13:21): Although I'm not... Certainly not telling anyone to buy anything. Jason Calacanis (01:13:23): Since inception and maybe past ten years, can pull both charts up. We'll go through them real quick here. But this is just... This franchise, the number of searches is still going up. The revenue per search and that issue is obviously the one people are concerned with. But the other side of the coin is absolutely correct, David. The other businesses, they're now only 50% dependent on this business, and that will continue. So for me, I just literally bought some shares. So I'm long. I just bought more shares of Google while doing the show. David Friedberg (01:13:55): Just remember, Alphabet owns 6% of SpaceX and, like, 15% of Anthropic as well. Jason Calacanis (01:14:00): I think 85% of Waymo as well. Right? Like, that's the the other piece of this puzzle. Amazon also owns a big piece of Anthropic. They're gonna be a big winner. Alright. Listen. That's our time here. David Friedberg (01:14:10): Do you guys wanna talk about the election ahead of Tuesday night and predictions or anything like that? Jason Calacanis (01:14:16): You've been shepherding this. Yeah. David Friedberg (01:14:17): What are you guys watching on the midterms? Anything you're keeping an eye on Shimov? Any big contrarian predictions on what might happen on Tuesday? Chamath Palihapitiya (01:14:24): It's so interesting. I'm, like, really confused. I've started to stop paying attention just because there's so much misinformation. I thought that we are going to have, and I still think, what Sacks called a spritz. Jason Calacanis (01:14:40): You know, little spritz? Chamath Palihapitiya (01:14:41): I think it's more of a democratic spritz. But when you look at some of the the early data, you know, and I don't know if Brett Baer was doing this just to kind of hedge his bets or not, but he did a clip which went viral on X where it just looked like it was gonna be a bloodbath for the Republicans, and they were gonna lose both sides, both the Senate and and the House. I think it's still set up to have the Republicans keep the Senate and the Democrats to have a narrow majority. And just going back to maybe where we started, the mandate from the Democrats then becomes obvious, which is how do you introduce FUD? And there's one way to do that, which is to start subpoenaing everybody and start to do disclosure discovery, release document after document after document, and let, you know, the the masses start to churn through this stuff going into '28. So number one, create FUD. And then number two is I think a economic slowdown benefits the Democrats going into the twenty eight election cycle, and so whatever they can do to kind of, like, influence power permitting and data centers, because as we talked about earlier, that's the levered bet. So to me, it almost doesn't matter what happens at the federal level except for the FUD part. I think we now should be paying a ton of attention to what's happening in these governorships and some of these some of these other races. David Friedberg (01:16:10): Sax, has your view changed? David Sacks (01:16:12): Look. I think that you can't trust any of these polls. First of all, a couple of these polling firms have come out and admitted that they are fake. I mean, we literally have a couple of Jason Calacanis (01:16:23): Oh, yeah. There was a hoax, right? David Sacks (01:16:24): Fake polls. There was literally a hoax and and those fake polls were included in, you know, those averages. So some of the polls are outright fraudulent and then the rest of them are well known to have a bias. Patrick Raffini did a study of the last three elections and found that three quarters of the polls all, you know, aired in favor of Democrats. So we see this as a recurring pattern. We saw this in 2024. You had Anne Seltzer, who was supposedly the gold standard, say that Trump was gonna lose Iowa by, like, 10 or something like that, and it turned out to be total nonsense. So the pollsters have a history of bias, of fraud, or you could just say, for some reason, oversampling progressives in their polls. So I think that people should shut that out. I think that some of them are a tactic designed to depress and suppress turnout, and Republicans should just go out there and vote. The the economy is not a disaster. That is total fake news. We know what the growth rates are. It was two and a half percent in the last quarter, and it's tracking at 3.7% right now. Median household income is almost $90,000. It's at an all time high. Poverty is at an all time low. I think the percent of people below the poverty line is like 12%. It's the lowest it's ever been. It's not just a k shaped recovery. You're seeing real wage growth in real terms by the average household, which was not true during the Biden years. So I don't think people should get psyched out by this media operation to make people super depressed about what's going on. David Friedberg (01:18:00): Jay Kel, any views? Jason Calacanis (01:18:01): Oh, well, I agree. The polling data has been, you know, a suspect for a long time now across many elections. Wedgewood did this, like, they're claiming performance art, but they were kinda serious. I I don't know who they're working for or or what the shenanigans are, but I do trust Polymarket. I think when you look at the Polymarket, pretty clear what's gonna happen here. I can tell David Sacks (01:18:23): Polymarket was wrong on Bolsonaro, although I think maybe he got robbed. It was wrong on Netanyahu. So the poly markets are just a reflection of public sentiment or public sentiment that's willing to place a bet Yeah. And they could be totally wrong. Jason Calacanis (01:18:35): So David Sacks (01:18:36): they were totally wrong about about those two national elections. David Friedberg (01:18:39): By David Sacks (01:18:40): the way, I'm not I'm not predicting some sort of, you know, miraculous Republican win here. It would be very unusual for the Republicans to win a midterm election when they're in the White House. Right? And you remember that Bill Clinton and Barack Obama both suffered horrendous midterm losses. Bill Clinton, remember, lost... In 1994, he lost to, you know, new king grapes, whole contract with America. That was the first time Republicans took control of the house for the first time in forty years. With Obama, you had... One of his midterms was the shellacking. So it's quite customary for the out of power party to do very well in the midterms. I'm just saying that the media is already portraying this as a tsunami or a bloodbath, and I think it might be a more normal midterm result. That's all I'm saying. So I... In any event, I think people should just go out and vote and not get depressed or psyched out by whatever the media is telling them because the media has a long track record of being wrong and biased. David Friedberg (01:19:43): And J. K. L, any view that's different than where we've been in the past? Jason Calacanis (01:19:48): I think polymarket is gonna get it right. I think Democrats are gonna win the senate, 68% chance right now on polymarket. I believe that. And house, obviously, everybody believes that, 92% chance. So when that happens, and and the reason I'll back that up is if you look at the the net approval rating of Trump, all time low. The country is very upset, and the Libs are gonna come out in force to vote anti Trump. The the the moderates are either not gonna show up and they're not gonna be Trump curious like they were for the second term and, you know, Al Kamala was such a disastrous candidate. They were like, okay. I gotta try something else here. And and they went for Trump reasonably. If you were gonna have a choice between Kamala and Trump, I think Trump's the better choice for most Americans. And then you have the fractured Republican Party where the American first people feel really like they got rug pulled by Trump because of the economy. Inflation didn't get solved. The wars didn't get solved, and he started another war. So that group's kinda pissed off. So when you put all that together, I think it's a very easy sweep for the Democrats. Then I think, you know, if we wanna look at what the next two cards are, if you look at impeachment, you know, that that process from what I understand is a house and then senate, and it's a a legal proceeding. I think we're gonna go right back to Trump being impeached, and then both houses are gonna do that. It's gonna be absolute chaos. And then the Dems are gonna start putting legislation out there and force the Republicans to vote against it in order to scuttle JD Vance's chances. So this is obviously gonna be a chaotic two years. Chamath Palihapitiya (01:21:27): You're... You and Jason Calacanis (01:21:28): I... You Let me finish. On. So let me finish before... So what's gonna happen is it could be a chaotic two years, And I think what will come out of that ultimately is we're gonna need some new candidates on the Republican side, and they're gonna put the the the Trump... They're gonna put the the Trump era to bed. And then I think that means they put JD Vance and Marco Rubio to bed, and they're gonna need a new champion that is more populist and actually executes on the populist agenda, which they feel Trump represented but didn't execute on. That's my... And and that's not my personal belief, that's just my analysis. Go ahead, Shama. Chamath Palihapitiya (01:22:05): No. I I think what I'm saying is you think there's gonna be a Democrat FUD campaign. They could control the house, they'll just subpoena everybody. Jason Calacanis (01:22:11): They're going to subpoena everybody. They're gonna look into every single accusation of grift they can think of and ones that are valid, ones that are not valid, everybody in between. Chamath Palihapitiya (01:22:21): And so... Yeah. Jason Calacanis (01:22:23): And and then I... You know, I'm... We have a really good group, by the way, coming. So join us for the all in midterm livestream, eight to 10PM YouTube x and Polymarket. Shane Copeland, Tim Dillon, Rahm Emanuel, Tela Lorenz. It's gonna be chaotic David Sacks (01:22:36): and Lorenz. She's on a redemption arc, I have to Lorenz. Jason Calacanis (01:22:42): She's David Sacks (01:22:42): she's actually been great on certain topics lately. Jason Calacanis (01:22:45): What is going on? David Sacks (01:22:46): I have to say. Jason Calacanis (01:22:49): Wow. Base Lorenz coming on the pod. Love it. It's gonna be David Sacks (01:22:53): it's gonna Jason Calacanis (01:22:54): be a fun time. I love Tim Dillon. He's coming on. David Sacks (01:22:56): I'm not gonna be there. Jason Calacanis (01:22:58): What? Where are you gonna be? David Sacks (01:23:00): What what do I need to Chamath Palihapitiya (01:23:01): do David Sacks (01:23:01): a a midterm livestream for? Because you're Jason Calacanis (01:23:05): you're gonna lose... Your party's gonna lose so you're not coming. David Sacks (01:23:08): If we outperform, I'll pop in and spike the football. That's cool. Jason Calacanis (01:23:14): Everybody wants to hear you. David Friedberg (01:23:15): Come on. Jason Calacanis (01:23:16): We can we can drink we can drink some tequila. We'll have fun with this, Zachs. Come on. You you can't cry. We should coffee and drink the tequila. David Friedberg (01:23:23): Chamov, maybe maybe we should get together at Tomas house and drink and do it live. David Sacks (01:23:26): I agree with a lot of your analysis about what will happen if the Democrats win JCAL because they have not changed their stripes. Okay? People are just forgetting who the Democrats are and what they were like during COVID, all the lawfare that they perpetrated, all the crazy woke stuff. It's all there ready to come back. They have not really analyzed why they lost in 2024. They have not really changed or adjusted anything. If anything, they've become more extreme. Right? The DSA is ascendant in their party as even Gavin Newsom acknowledged. So I think that if the Democrats do take Congress, you're likely to see how nutty they are and the American public will be reminded of that and that will be really interesting to to see. So, you know, but that's why there's a pendulum in politics. Right? Jason Calacanis (01:24:17): There is a pendulum. I think we need a... Yeah. I mean, I... I'm wondering who the champions are. If it's not JD and Ruby, I wonder who the champion on the right will be. I think it's gonna be somebody we can't even name right now is gonna emerge. I think the same thing on the left. Anyway, it's gonna be exciting. We're gonna get Saks to show up, and we'll see you all next Thursday night for our livestream. Love you, besties. Bye. Bye bye. David Sacks (01:24:48): We'll let your winners ride. Jason Calacanis (01:24:51): Rain man David Saks. And it said David Sacks (01:24:56): We open source Jason Calacanis (01:25:12): We should all just get a room and just have one big huge orgy because they're all just useless. It's like this, like, sexual tension that they just need to release somehow.