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Argue. It's not. It's really not that important. It's just kind of like an extension of the existing software paradigm. It's just SaaS. Well, yes, yes, yes, yes. You're right. It's hard because you can't do that. And then also, you know, continue to sell this. Yes. Did we just lose power? What's going on, boys? Yeah, what's going on with the lights? It's crazy. Probably a nation state, as usual. Who knows? Trying to take us offline. Indeed. Well, privy. Privy makes it easy to build on crypto. Rail security.

Right now and there's about 75 people total. Wow. So talk about the shape of the business. You guys had a post going viral this week. Somebody was saying team talking about grinding. The team's grinding because you guys are generating. There's billions of dollars flowing through the platform and only 75 people working on the team. But the common criticism would be like, you know, WAP is a course platform and obviously like some of these partnerships you're announcing, like the bigger, broader vision I think is certainly starting to crystallize for me. But talk about the shape of the business and really like where, where this is all going. Yeah, well, I think it's really funny how many people get offended when, when there's teams that are hard at work. I think it's, it's obviously like results most important. And I think that is not really the intention is nothing about trying to rage, bait anybody, or even to seek unnecessary attention. I don't even Cameron expected that to go that viral. But I think at the end of the day when, when our team is excited about something, people are going to be working hard. And given the nature of our team, we have a lot of former founders and a lot of former entrepreneurs that are really driving huge parts of our business forward. And I think that the common people know wat for so many different things, right. We started in sneakerbots and then that naturally progressed into more broader variety of different desktop software. And then people are like, hey, can we sell chats with the software? We're like, yeah, that sounds like a good idea, let's make sure you can do that. And then people are like, hey, can we drop the software entirely and just sell chats? And we're like, that sounds pretty cool. Paid chats, let's do it. And, and then people start to do that and then they're like, can we also add long form video? And that made sense. People used to make the long form video as a way to explain how to use the software. And pretty quickly people are like, wait, we don't even need to sell software or chats. We can just sell long form video. And that's what the course is. And I don't think that we ever set out to be a course platform at all. We really focus hard on the primitives that are necessary for the future of work and for the future of commerce generally. And I think that one of the lowest we lift ways to start a business is making a course. And I think that when you look at our business today, I mean, I think we probably do more than $1 billion a year in paid groups and educational programs we probably do almost $1 billion in agency services that are sold on the platform we'll do maybe $300 400 million pure software sales and on the emerging side I think we even have more than $50 million of physical product sales each year now that when you go to our homepage we do a pretty poor job showcasing a lot of the supply that's not been a huge priority of ours today we are very focused on our infrastructure for the sellers and for the platforms now that are integrating with our product so I think that there's a the core sellers are generally the loudest because they're very good marketers and they typically go out of the other stuff in the platform people know well as well for clipping and things like that which are also really awesome ways to make money but yeah the core stuff is funny totally. What'S going on on the actual infrastructure side you guys used to work with stripe on the back end you killed.

Have been insanely, insanely busy, it seems. Give us, give us the update from the last few months. Yeah, so I think we talked in March and since then things have been really crazy. I think the best way to put it is that at this point in time in our company, in order to even grow the business by 50%, we have to add more than a billion dollars in earnings on our platform each year. And I guess just to put in perspective what that looks like, if we to onboard 1000 businesses that do a million dollars a year, which those are not small businesses, that would only grow our business under 50%, which is pretty bad. So I think that the story of our, of our recent months has been how are we going to really 10x this thing? And that requires us to think a lot bigger. So we've been expanding pretty aggressively internationally. We have been partnering with really amazing platforms. We had an announcement earlier today and I think that there's a lot of stuff that breaks when we grow, but the year has been pretty nuts. There's a lot of stuff coming out soon and I'm really excited. And how big is the team today? The core team, people w2by.

Design and development teams build great products together. Gyms are coming to airports. This is big. This is big. Will you work out on your next day? Consumers have been saying the other passengers aren't sweaty enough. Yeah, so this is for. We gotta have gyms in right next to the gate. We have another guest joining in just a minute, but I wanna riff on this for like 10 minutes. This is hilarious because it seems to be a collab between the. Secretary Kennedy, who's the Health and Human Services secretary, so there's HHS crossing over with DOT somehow and they're like, let's make the airports healthier. Which is like a funny thing. I feel like these collabs don't happen before, but they're happening now. I don't know. The idea of working on an airport, it's kind of crazy because if you are all sweaty and then you have to. And they also said like you should dress up when you go to the airport and if you're dressed up and then you are all sweaty, that seems pretty rough. But I don't know, I like the idea of doing something new in airports. I think it's cool. I think it's good that there's some, some opportunity for some sort of grant program. I guess the question is the $1 billion grant program with how much it costs to make like is this like 10 gyms? Well, so I don't know because there's a world where you build like a proper gym in the 10 most premier airports that has like a sauna, showers, like full laundry, like you know, you're good to go. You can spend like a couple hours and they really get a serious workout in. Or it could just be like a couple pull out bars and you put one in every terminal in America. I don't know. It depends on how. Like can you imagine if it's just like. Okay, yeah, like, you know, turns out JFK put in an awesome, awesome application. They got all 1 billion little calisthenics sound. They got it all. I don't know. It's a very funny story. Anyway, let me tell you about Fall, the generative media platform for developers develop and fine tune models with serverless JP.

And allow us to work on the stuff that we really enjoy. I think one thing that's been interesting is how many, how many traditional journalists have gone independent, but historically they were in the scoop business and then they go independent and they realize like when you're part of a bigger media company, you can get one crazy scoop every three months and you're like, from my view, like you're killing it. Like you're adding a lot of value to the organization. But when you go independent and you're like getting three scoop every few months, is that enough? Are you creating enough value to justify having people give you a lot of money every, every single month? I think yes, to some degree. But I think you'll see a re bundling in certain niches around, let's say a bunch of like scoop driven technology journalists that say, like, hey, we all went independent, but we should actually kind of rebundle together because it'll just create a more incentive for somebody to subscribe because they know like on an ongoing basis I'm going to be getting. And that's what obviously like you're doing. TVPN roll up of like Alex Heath and Casey Newton. We wouldn't want it. We wouldn't want it. We wouldn't want to do that. But I. No, I'm joking. But I could, but I could. I totally see what you're saying. I mean, in a way, the way. That'S where you're kind of what you're doing totally. This is a kind of scoopy, aggressive reporter, especially what I am. Who wants that, who I think I want. People want that kind of direct connection with an audience and authenticity and transparency that you get with Substack. But also there are features of that kind of reporting that it makes more sense to be part of a newsroom. And we've tried to create a space that is, that is the best of both of those worlds for journalists. Yeah. And I think when a journalist goes from like being able to spend all their time like obsessing over a company or an industry or in getting scoops to then, okay, I have to do all of that still to put food on my plate. But then I also have to develop an ad sales business and I have to figure out and I have to manage a podcast editor and I have to hire another editor and I gotta do my taxes and things, it just really adds up. And then are you gonna be as elite of a journalist if you're doing all those things? And there's a very real scenario where someone else just takes your job that you had previously and ends up out competing with you on scoops because they don't have to worry about any of that stuff. So I think that's something that a lot of people will have to figure out. You know, a lot about newsrooms. That is so much about, like, the way we were thinking about founding Semaphore. That's hilarious, because I don't think. Have you ever been in a room. I've never been in a newsroom, but I just. But I mean, yes. So much of. Part of a lot of the success of. The reason that we've been able to break through this year is we're not trying to do anything else besides. Besides media. Right. I mean, you've seen. How many people have you seen build a tech media company and become a venture capitalist as soon as they have any amount of. I got to get out of. I got to get out. I got to get out. Yeah, I just enjoy. I. There's. There's very few things on earth that I love more than advertising. So I love. I love media. There's very few things on Earth I love more than talking with John about business and technology. So we know. We know. Our final light round. What's the biggest fish you've ever caught?

Legacy media. And, and I'm like. They're like, yeah, they felt very new me. It was very funny. Anyway, sorry. Yeah, like I was, I sort of. Was a blogger when that was new media. Right. So it's. I feel like I've seen. But you know, the core. I do think there's like still a. Nostalgia for a 20th century media that's. Like not coming back because that was. Because you needed a broadcast tower or a printing press to reach a lot of people. And that was a. And there's been a tech. And I think when people, people in. My business and in the east coast. Media often try to figure out like what went wrong. You know, was it when the CBS. News got something wrong about Bush in 2004? Was it when the New York Times put up its paywall too soon or too late or something? And like, no, there was a huge technological shift around distribution that kind of. Swept away a lot of this old stuff. And it wasn't something they could have tactically really avoided. It was just a huge technological change. And so there'll never be that kind of. Or not in our lifetimes unless the government imposes it reconsolidation around a very. Limited number of news sources. Like, you gotta go to North Korea for that. But. That said, I think we are. Because it's driving consumers crazy. The pendulum has swung out. They say media only bundles and unbundles and we're out at the unbundled moment. And you can just see it swimming. Back like, Fox is rolling up right wing podcasts. MSNBC is about to roll up a bunch of left wing podcasts. By the way, are we still calling these things podcasts? It's TV. And everything is converging on. This tell this very familiar but kind. Of boring television format that will start. To get juiced up and become a. Game show with 19 boxes and whatever. And we're all going to have to start spending. I can't tell if you're talking about productions. No, you know what I mean. By the way, we also produce a. Podcast that like, I think looks fine. But I can feel the pressure to. Raise the production values. Whereas like two years ago we could. All have been like in our pajamas in our basements and it would have been fine. And so I think there is this. Convergence and the audience is going to. Expect is going to be competitive. It'll have to look better, it'll have to be more tightly edited. I suspect people are going to want that. And it won't look, it won't look. Like old TV But I do think you're going to see consolidation around all. The advantages you get when you're consolidated. You have a central guy selling all. The ads you can build, subscription technology. You can cross promote. There's all these again, media business is. So unlike the tech business and unlike the finance business and how uncomplicated it is. And I think you're going to just see consolidation for all these really dumb. And obvious reasons that have to do with. And also, it's sort of exhausting to. Run a small business for a long time. And people who start them will. I don't know. How are you guys? Actually, I'm curious, because you're in this. How are you feeling about it? Do you want to stay independent? Do you want to be consolidated? Well, I would say the best way to think about.

Good cop, Bad cop is a classic strategy. Yeah, I guess. So. What do you think are some of the. Outsider interpretation of the deal? A lot of people are worried about just Warner Brothers getting sold. It feels like some people are anti Warner Brothers getting sold to anyone because they're like, no matter where it goes, they're going to cut jobs or they're going to pull back from. From movie theaters. How are you interpreting? And I do think the people that are like, oh, well, you probably subscribe to Max and Netflix and you'll be able to cut one of them, but I just don't buy that Netflix wouldn't just. They might give you, like, a sweetheart deal for a couple years until everyone forgets. And then it's like, hey, we have, like, by far the best portfolio of content in the world. And we're. You might even call it a bundle. We're bundle maxing. We're back to the bundle. And as a consumer, I am annoyed enough at having different accounts and bopping around. I'd be happy for just one. I'd be happy for rebundling. But I just don't buy that it's a win for consumers even in the medium term and probably not at all in the long run. I don't know if it's not a win for consumers because that thing you said, it's so annoying. This landscape is so annoying for consumers. You realize, oh, my God, I signed up for MGM plus two months ago to watch something and it's still billing me. Everybody is living in this world of like, two or three streamers. You feel like you have to have three or four others that you forgot you signed up for, and it's not a tenable situation. And I think that kind of consumer push is pretty real and is the kind of like, the obvious. Media is a boring, straightforward business. We're not like, trading credit default swaps here. And I think that just obvious consumer sense that it's time to bundle Max again is what's driving this to have the number. The notion that you solve it by basically having the number one and number two merge with each other is not the obvious solution to that. I think, and I totally agree with you, obviously means prices grow up. I mean, the people who are most freaked out, though, are the sellers. Right. The issue of, like, is this a monopsony? Or, like, the, you know, are the movie makers the actors gonna take a haircut? Because there's only one buyer left and they're very. And Hollywood is obviously very concerned about that. Yeah. If you have one buyer you have. You're a price taker. Yes. Yes. Yeah, it's.

And then just make, just deliver them better, make the ads better, you know, grow, grow the business in that way. So what did Mr. Wang say? He argued that the goal should be to catch up to rival AI models from OpenAI and Google before focusing on products that people said this makes sense, right? This makes sense for Wang. I don't know that it makes sense for the company. I would like, I would like from everything that we've seen so far, it feels like Meta could. Add a trillion dollars to its market cap by just focusing all this incredible talent on just making the core business better. But Wang and the rest of the team are going to be a lot less motivated by that than having the biggest data centers doing the biggest training runs, having the best model competing on the global stage. And so I can see why Wang is pushing the other direction. Okay, so let me tell you about adeo, the AI native CRM. ADEO builds scales and grows your company to the next level. But, you know, like, let's actually unpack this because like, if you know Mr. Wang here, who says he's developing the model, he argues that the goal should be to catch up to rival AI models from OpenAI if they wind up having a model that is actually in the same league as Claude and Gemini and OpenAI and XAI and it's this closed source, it's an API, it does well on MMLU, it does really well in the benchmarks. What value does that really bring? Because that's what I'm saying. Even on the benchmarks, you could just go and get a model off the, like, if you want to compete in search, knowledge retrieval, even, even agentic commerce, you can take models off the shelf. Yeah. In, in the same way that, in the same way that Apple's doing. Yeah. Oh, it's good enough for Apple, but not Meta. Interesting. Interesting. Yeah. So I'm, I'm just trying to think you, you make the best model in the world. Are you going to go compete with. So, so we've seen this, we've, we've run this with xai, Right. They are trying to build the best model in the world. Yes. And it's now becoming clear that just having a great model does not automatically give you a meaningful amount of market share. Yeah, no, no, you need to productize it. And OpenAI has productized very well with a viral, like it is synonymous with AI, consumer AI. Everyone has the app mostly on their home row. They're using it a ton. They have a billion daus. It's growing, doing great, or maus but then you have Google, just so much surface area to actually stuff knowledge retrieval AI in knowledge retrieval products. You're already trying to do that with Google search. So you do AI searches. You do, you know, you stuff Gemini and Sheets and Docs and all the different products makes a ton of sense. Anthropic, super focused on code, super focused on B2B. Facebook doesn't have a B2B team. Like, they're not like a hyperscaler. Like that might make sense for Amazon to, to be like, hey, we want to get, we want to take that approach. And then XAI is sort of the same thing. At least they have X to distribute through. But being the fifth hottest, even if the model is for this week, the number one, it's like no one can really tell. It's very hard to be definitively number one for seven months straight. It just doesn't. Yeah, I get excited to look at benchmarks and have people on to talk about, but it. Does it change my behavior and does. It stack and does it stick? It rarely sticks because it's like, you know, what do we see? Gemini 3 was at the top of all the benchmarks. Then Opus 4.5 comes out. That's at the top. Now we're seeing, you know, 5.2 from OpenAI, probably coming, probably going to beat on a number of benchmarks, probably going to be better in a bunch of different ways. But is that going to radically change consumer behavior, even radically change business behavior? No. And so I don't know, I would be very focused on what can be done within Instagram and Facebook and WhatsApp to a lesser extent. The flip side, the other question is. Just. The reason to be excited about that as a Meta shareholder is that AI is such an obvious tailwind for Meta's business. Right. It's, you know, talk to Sean, Sean Frank from Ridge. Right. He's creating, he's having to create hundreds of new ad assets a week. If AI, if Meta can help him create thousands, he will spend a lot of incremental dollars on Meta. Right? Yeah. You can get better at targeting, he can get better at serving content. Right. And that will ultimately, over time provide even more resources for these sort of like moonshot style projects. Meta has been pushing this personal super intelligence narrative. The only problem with that is that I don't know what that means. Right. It sounds awesome and I'm happy to wait and see. But they've been having, there's been a number of employees kind of churning out already and it's possible that they don't necessarily know exactly what that means themselves yet. They're running it like a startup internally. Let me tell you about Fin AI, the number one AI agent for customer service. Automate the most complex customer service queries on every channel. So I agree with you. What does personal superintelligence mean? I feel like there is room for product led innovation in AI. New instantiations of the underlying, new ways to interact with the fundamental. We're having this AI moment and then we get video models, we get image models, we get image editing, we get knowledge retrieval, we get agents, deep research, we get coding agents. Like we've had three or four or five like really cool instantiations of it. And not every lab is frontier at every single instantiation. Anthropic doesn't have an image generator. Right. Other labs, like they're, you know, obviously OpenAI really thrives in the consumer and, and has created just a great app that is reliable and answers your questions reliably. Other companies have struggled. To hit that instantiation. It would be very, very cool to watch the Facebook team figure out what is a way that they can bring AI to bear inside of Instagram in a cool way, in a new way. The problem is that. Facebook and Instagram don't really have that DNA. They sort of tried it with the Vibes app, but also as soon there's very low like ROI on that. Because as soon as you, as soon as you like, let's say that they do come up with like the next stories and it's like, oh wow. Like you take AI and you stuff it in a social app and you do this one special thing and then everyone loves it. It's great. It's not just like, well, they didn't create that. No, I know, I know. But let's say that they did. It's like it's gonna get copied everywhere anyway. So it's not really that much. Like they really should just wait around for everyone else to do their R and D. They should wait. They should be Evan Spiegel, what are you doing? Come on, invent something for us. You know, and so, and so I can actually see Alex Wang's pushback on like, hey, you want to, you want to use Instagram and Facebook, you want to, you want to do something more incremental. But like, what are we going to, how are we going to do something great in AI in those ecosystems? Like, I don't know that there is that much because again, the actual Feed ranking team, that's not the Genai team that's not msl, that's not TBD Labs, that's core AI that team is cooking. They've been using GPU accelerated algorithms for a long time. They're doing fine. They're shipping ads and also all the advances in AI they're showing up in the financial results over there. The ads are definitely getting better targeted. They're showing people more ads. They're showing people reels went zero to 50 billion. Yes. And a lot of that is an AI story and they're not getting credit for that because it's core AI, it's not gen AI. And gen AI is the cool one because it's like wow, cat picture, video, awesome music. What do you think, Tyler? Yeah, I mean I feel like a Nana Banana Pro product in Instagram is like very obvious or like Sora is also just like in Instagram. If they just made that, it's like a killer product. So.

But they really don't want that sort of. They want to get ahead of the employment collapse. Yeah. I want to know more about inflation. Sagar and Jetty did odd lots. Everyone should go listen to that episode. Just came out a week or two ago. He's coming on our show on Friday. I know he's going to try and pin the inflation on the AI data centers. Is there anything to that? Have you seen any data that helps understand what's going on at a lower level within the inflation numbers? Because, I mean, I was at Target last week and I feel like they were selling TVs for like 40 bucks. And so stuff's still getting cheaper in certain segments, but then other things are getting more expensive. What's actually happening within inflation? If you try and unpack it a. Little bit, I basically, if something is made in China, it's getting cheaper. Like that is like the phenomenon of the, maybe the last 25 years, which is that you can break down the things that China makes and things that China doesn't make. So China makes TVs. The prices have collapsed. Does China make your child's daycare center? No, unfortunately it doesn't. So childcare costs. Does China build your homes? Yes, unfortunately. Cars. And so the price have gone up. Yeah, cars are a good example. So once, once the teleoperated robots, the humanoid robot is taking care of your kids and the tele operator is in China, then it gets cheaper and then the robots. But that is the phenomenon of our time. Look, I think the data center story is very important. They're all kind, you know, you guys, I assume you guys talked about it yesterday. I thought the, the boom aerospace story was super interesting because all of these different aspects of the supply chain are being repurposed towards AI. It's like this is worth more. Their, their technology, at least at this point, might be worth more in a data center to make natural gas turbines than in a plane. That might or might not explain that. The narrative over the last, over Crusoe and Coreweave and so many of these NEO clouds, I mean, they started out as bitcoin miners and then the highest and best use switched and very quickly these became AI factories. AI data centers. Yes. So what I think is there are a lot of resources that are being, you know what, we could reallocate this better to AI and that means that that creates an element of tightness in the supply chains, certainly in key categories. I think by and large it would be hard at this point to actually draw a line, however, between what's happening in data centers to measured inflation and even electricity prices, which would be the most direct one because we know electricity prices have gone up quite a bit. The link between electricity prices and data center build out, it's pretty tenuous at that point. It's not really enough to be meaningfully moving the dial. There are other drivers of. Higher electricity prices, including just maintenance on the wires, which has gone up for just sort of garden variety inflation reasons. Yeah, I feel like the boom supersonic. If.

You're giving them a variety of ways to monetize. Yeah. So you can kind of think about the core value prop to be payments and distribution all out of the box. And I think that we never really set out to be a payments platform. I think that's pretty boring. And I think there's a lot more that we can do. I'd say that today money is much more commoditized than it was 10 years ago. And especially on the payments front, we don't think that that's a real long term way to create value. And I think that when we look at our ecosystem as a whole, the mentality is like, how can we bring all these parts of the Internet together in a way that makes it really easy for retail and for general consumers to actually get what they need to start a business. Right. You have, when people think of payments today, they really only generally notice Stripe and after that is a huge fall off. No one really can generally name even another company that's similar to Stripe. You may have Shopify in the picture, but they're very, very focused on physical and larger shops now. So for us it's really, really important that everything is extremely tightly integrated. And when you're asking about infrastructure, the way that we look at it is we have people earning about $200 million a month on the platform today. So part of our infrastructure is dedicated to thinking about how can we get more functionality delivered to those merchants so they can do a lot more with their money. Today, just for reference, these, the process is almost universal across every merchant. They'll make money and then they'll withdraw to their bank and then they'll go invest on Meta and TikTok ads or whichever ads platform of their choice and they'll invest in crypto. And I think that it's really exciting right now on the infrastructure side because we're about to let merchants do a lot more with their money. So you can imagine you make money, go invest it into ads, you go invest it into Bitcoin, you go place predict bets on polymarket, you go and do a lot more with your money. So we're doing a lot to bring a lot of our activity on chain and to tap into the broader financial application layer that exists today. So that's one part of our infrastructure side and the other part of our infrastructure side is on the advertising front. I think distribution is critical and we recently partnered up with a number of different, for example, games on Discord or publishers writing blogs that will actually render products that are listed on wap and that means that anybody selling on our platform gets to take advantage of pretty immediate distribution. So those are the things I think I'm pretty excited about, the infrastructure side, the move away from Stripe, I think. I mean, I've been building on Stripe since I was 12 years old, and I love Stripe so much. And I think that we're still partnered with Stripe, and we still use Stripe. And I have nothing but great things to say about Stripe. I think that when you're looking at our mission, which is to deliver everyone a sustainable income, there's certain primitives that need to be available, and those are simply not available on Stripe. So, I mean, getting paid out in Venmo, getting paid out in crypto in other emerging markets throughout Africa is very, very important to our mission. Interesting. So talk more about the partnership with Microsoft.

Merry Christmas. Have a great rest of your day. We'll talk to you soon. Love the show. Appreciate you all having me on. Thanks for so much. We'll talk to you soon. Cheers, Matt. Goodbye. Let me tell you about Figma. Think bigger, build faster. Figma helps design and development teams build great products together. Gyms are coming to airports. This is big. This is big. Will you work out on your next. Consumers have been saying the other passengers aren't sweaty enough. Yeah. So this is for. We gotta have gyms.

So much for coming on the show. Great to meet you. Yeah. Nice to meet you guys. Thanks for having me on. This is a lot of fun. Cheers, Ben. Bye. Let me tell you about numero.com compliance. Handled numeral worries about sales tax and VAT compliance so you can focus on growth. Our next guest is Matt Hicks, the CEO and president of Red Hat. We've been keeping him waiting too long in the restream waiting room, so let's bring.

Miss Have a great to see you Joe weekend. We'll talk to you soon. Turbo Puffer Serverless vector in full text search built from first principles on object storage. Fast 10x cheaper and extremely scalable. The air horn over the Christmas music is not something I've ever heard before. Turbo Puffer. Anyways, should we get into this post from.

To reach the starts. To shape up future. Sam. Good morning. Merry Christmas. You're watching TBPN. Today is Wednesday, December 10, 2025. We are live from the TBPN Ultra Dome, the temple of technology, the fortress. Of finance, the capital of capital. Ramp time is money. Save both these corporate cars, bill pay, accounting, and a whole lot more all in one place. The perfect Christmas gift for that special person in your life. Get them on ramp. Do them a favor. Stocking stuffer. It can go under the tree. Yeah, it can go anywhere. So Nvidia can sell H2 hundreds to China. Now, it's a big reversal from the chip controls a few years ago, which actually started during the Biden admin. We were really pushing to not allow big, you know, the best and the best and most amazing chips to go to China. Well, all of that's changed with this H200 news. Now Nvidia can sell to China, but they got to pay 25% to Uncle. Sam, the big man. The big man, Uncle Sam. And so. The estimate for you, the taxpayer, assuming you're an American taxpayer, is that you will be $5 billion richer. Because Nvidia is estimating that they will be able to sell $5 billion of chips to China every quarter. That's right. 25% of that, of course, is 5 billion per year. But it's unclear where this will actually pan out. I'm not sure where it will land. It is an interesting question because there's been a lot of. There's been a lot of diversion. There's been a lot of engineering that's happened in China to work around the frontier. But then also they might have gotten their hand on some Blackwell. There's a whole bunch of crazy headlines going back and forth. One interesting story. So there's a bunch of good. There's a bunch of good arguments on both sides and there's a bunch of terrible arguments as well. But we should go through some of these. So the best argument that I have heard for allowing an American company, Nvidia, to sell H200s to Chinese companies is basically just free trade. Keep the government out of the boardroom. Nvidia is over 30 years old. They make computer parts. If you don't believe in nuclear level AI capabilities, then why would you be so worried about AI going to China? China, it's just autocomplete. It's just better SaaS. It's not, you know, yes, it might increase their GDP, but there are tons of things that we sell to China that does increase their gdp. We bring the business of manufacturing iPhones there, right. We bring them quite a lot of business. We sell soybeans, we sell all sorts of food. They sell us stuff like free trade has happened for decades. Like yes, there is a little bit of a decoupling but for the most part the modus operandi of the American geopolitical system has not been try and reduce GDP growth in all of our geopolitical rivals at full stop. Right? No, it's never been that way. And at the end of the day, if you're an American company. I am sympathetic to this idea that Jensen is just like, look, I'm just trying to build a big company. I want to sell my stuff everywhere. I think my stuff's good, I don't think it's dangerous. I don't think I'm making nuclear weapons. I didn't get in the nuclear weapon business and now I'm being treated like I'm selling nuclear weapons. It doesn't quite make sense. I understand that there are other. It's hard for him to go over there, go to Washington and argue. It's really not that important. It's just kind of like an extension of the existing software paradigm. It's just SaaS. Well yes, yes, yes, yes, you're right. It'S hard because you can't do that. And then also continue to sell this. Yes. Did we just lose power? What's going on boys? Yeah, what's going on with the lights? It's crazy. Probably a nation state as usual. Who knows? Trying to take us offline. Indeed. Continue Privy. Privy makes it easy to build on crypto rail, securely spin up white label wallets, sign transactions, integrate on chain infrastructure all through one simple API. So there are other factors in the trade relationship. One sort of giga brain take is if you believe that AI slope will one shot people it will reduce the birth rate because people will be so obsessed with AI avatars, romantic companions. Well then. And if you are anti China maybe you should export as much as possible, right? I don't see anyone making those arguments today. But I do wonder if there's someone if you are doom pilled in that way where you think that AI is bad but you also think China is bad. Do you have to argue in favor of the export of the H200? Maybe let him have. I don't know. Anyway, everything there was something interesting because we also don't know exactly how big of a deal this H200 unbanning is because last time there was news on this front the CCP basically said like, hey, we don't want our Chinese companies buying these, even if they are available. But we don't want them. We don't want them here. And the CCP kind of doesn't want Nvidia chips filling up Chinese data centers. It feels like China at the very least has been somewhat receptive to this idea that they don't want to become dependent on the American tech stack. Right. But clearly Chinese companies do want Nvidia. We saw this with the Deep Sea team figuring out how to get some Blackwell apparently. And, and it's actually going further than that. There's some Chinese nationals that have been recently risking legal consequences from the American justice system. This is very interesting. On Monday, the U.S. attorney's office in Houston revealed something called Operation Gatekeeper. Very exciting name. Which government is weirdly great at naming. Yes. And coining some of these operations. Interestingly, when you Google, when you Google Operation Gatekeeper, you get something about building a border wall. And it was. But, but from the presidency of Bill Clinton. So Operation Gatekeeper originally was a measure implemented during the presidency of Bill Clinton by the United States Border Patrol, then the INS aimed at halting illegal immigration to the United states at the U.S. mexico border near San Diego. It was. And so I guess they had, they constructed a wall on the beach in the 1990s. He literally built a wall, which is crazy to me because I thought that was like a Trump era thing. Anyway, the new Operation Gatekeeper, the operation. For that Canadian snowboarder is called Operation Giant Slalom. Giant Slalom, that's a good name too. So the new Operation Gatekeeper has nothing to do with the domestic immigration across the US Mexico border. It instead is focused on AI chip smuggling. And this particular operation has just uncovered $160 million worth of illegal AI chip smuggling. Very, very interesting. So a 43 year old Chinese citizen named Fan Yui Gong was living in. Yeah, his name's Gong, which, I mean, we love gongs here, but I don't love. Before we figure out the bad stuff that he's doing, let's give a quick. It's a fantastic name. So this guy's living in Brooklyn. 43. And also separately a Canadian citizen from China. They independently conspired with employees of a Hong Kong based logistics company and a China based AI technology company to circumvent US export controls. Basically, they bought a ton of Nvidia GPUs, then they would send them to a co packer or like a fulfillment center, remove the Nvidia labels, put new labels on the chips that would Say sand kian. Sand kyan. I'm not exactly sure how to pronounce it. Once the chips were packaged back up, they would ship them. Oh, I said chip them. Need to change that. Probably already went out. They would ship them to China or Hong Kong under a generic classification of generic computer parts. And so everyone involved faces significant legal consequences. Now, I couldn't figure out exactly what the consequences are. I'm not sure if it's like, years in prison, but it doesn't seem good. You know, you're responsible for diverting $160 million worth of chips. That's rough. The question then becomes, how did it get in their hands initially? Oh, because they were just like, hey, I'm a Brooklyn guy. I want to buy some Nvidia. I know, but 160 million. It's a big company. They do a lot of revenue. But you would think, oh, what's this address that we just got this order from? You'd be like, brooklyn. Is that a. It'd be like, yeah, I'm shipping it to a company in Brooklyn. Oh, it's probably like a coffee shop or something like that. Yeah, maybe it's like, you know, I want to have an accelerated, you know, design studio in Brooklyn. Something. I don't know. I know, I know. But the. Seems like a KYC failure, potentially. Yeah. I mean, I don't know. There was one of the guys involved. It was technically a Canadian citizen who was from China. And so you. You stack these. All these up, and you have like, okay, well, I'm shipping it to Brooklyn, and the guy's a Canadian national. And, you know, at a certain point, you're like. And it could have been through some sort of reseller. I don't know. I'm sure we'll find out. Last name's Gong. His last name's Gong. ESPN hits a Gong a lot. It's probably. They probably got too excited, and they were just like, wait, we sold how? We sold 160 million boxes today. Let's ring the gong. They just got fired up. But. Mr. Gong will unfortunately not be hitting any Gong soon because he might be going to jail. Very unfortunate, but it's, like, one of the worst. It's so stupid because he could have just done nothing in one. Like, because today what he did is not illegal anymore. Like, you can actually. They were age two hundreds or. I don't know if they were age two hundreds. They were. They haven't said exactly the mix of the GPUs, but in general, it's like this Happened a year or two ago. Why would. So it was not like he was getting Blackwell. It's not like he would have been buying H2 hundreds in Brooklyn. They would have been even more like, wait, you realize we have an American version of this? No, no. So the H200 is the American version. You're thinking of the H20, the nerfed one. Sorry. So we initially were selling the nerfed one, then now with this new. With this new Trump rule, you no longer have to sell the nerfed version. You can just sell the real American version, which of course is actually Blackwells are shipping now. And so we're still, like, the US Policy is still keeping China one iteration behind. And maybe that will be the ongoing decision here, the ongoing strategy. I'm not exactly sure. It doesn't. Like, the administration hasn't really laid out a philosophy of this at all. I mean, originally, what was it Lutnick said, like, we're not giving them the best we have, we're not giving them the second best we have, we're not even giving them the third best we have, we're giving them the fourth best we have, like the H20, like super nerfed. But now it's like, we really are giving them the second best we have. So I don't know. That seems like a shift in policy, but we shall see. And so what's interesting is that now that Nvidia is approved for export, I'm interested to understand where will sales to China land. Like they've said, if there were no geopolitical considerations, we could sell5.5 billion a quarter, 20 billion a year, which is, is. It's not a drop in the bucket, but it's not exactly, you know, half of their revenue. I think they did 60 billion last quarter or something like that. So you're looking at like a $200 billion company. This is like 10% of their revenue is going to be in China next year. If they really take the. Take the, Take the handcuffs off, take the gloves off. So, but the big question is, like, how much smuggling was actually happening? Like, we know 160 million was happening because it caught him, but was there a billion happening? Because you don't catch 100% of what's going on. Right. So in theory, there could be like a couple billion, maybe 10 billion that was happening. And so, you know, how much. What is demand actually for Nvidia GPUs in China? I would imagine it's higher. But then, of course, you have the dynamic of the ccp. There was also this debate about, yeah. It seems like netting at around 10% of global sales makes sense given they're projecting 210 billion or that sort of consensus for next year and nearly 300 billion for 2027. I would expect, you know, I would expect something more like 30, 40, 50% if China's really trying to like keep up and win the race and this is like the best supplier. But, you know, I guess it does take time to build up a local industry that actually can support that level of investment in AI chips. So there's a lot of debate over this particular deal, the decision to sell H2 hundreds to China for 25% tax. There is, there's some debate over like, whether this should be some sort of like, you know, big picture trade deal where we sort out the rare earth element picture in Taiwan. And we also work through the soybean issue and we work through, you know, a whole bunch of different export things all at once instead of just doing like one off, one deal after another in isolation. I'm not that nervous about that. I don't really feel like I really need it all to be resolved once and for all. I feel like it's fine to have this happen and then watch the consequences of that and see how the chips stack up. And how valuable is this? Because does China really, Are they going to be breathing a sigh of relief in six months? They're going to be like, okay, well if you gave us this, we really do like the chips. We're very thankful to that. And in exchange, we will be loosening export restrictions on rare earth elements, for example. I don't know that it has to all be done within one deal. But regardless of whether America wins from this, China wins from this. It's clear that Nvidia wins and also that smugglers lose because the smugglers are going to jail. Yeah. So good luck to that. Don't break the law. Stay compliant. Get on Vanta Automate compliance and security AI that powers everything from evidence collection and continuous monitoring to security reviews and vendor risk. Without further ado, I think we bring in our first guest. Fantastic brother Joe. We have Joe Wise, Joe Weisenbault in the studio. How you doing, Joe? Good to see you. I'm good. Thrilled to be here on this wonderful Fed Day. Yes. And also, is it not. Did you have a 10 year anniversary? Was that yesterday? When did the party. The party was last. Last night? Yeah, the party was last night. I'm sorry it didn't align with your hopefully increasing number of trips to New York City. I can't wait. I can't wait. Yeah, we're going to be there all the time. 20, 26 on the IPO front is looking. Yeah, I'm shocked. I'm glad, I'm glad you were able to, to get out of bed, sober up by 2:00pm Eastern for this. For this press for the rate cut. For the rate cut. It's very impressive that, that I'm here right now. Of course, yeah. Everyone should be very impressed that I'm coming on tvp. And yes, given the circumstances. Yes, yes, I'm sure it was, I'm sure it was a lot of holiday cheer and a lot of revelry and it's a massive, it's a massive moment and, and again, just congratulations. We've said it before, but what a generational run with odd lots. Ten years, that's, that's not easy. A lot of people give up and you've stayed the course and just built and built and built. It's fantastic. And everyone is clapping for you because we're all busy. That's right. That's right. Let's hear it. Yeah, let's keep going. No reason to stop. Let's just do this for 10 minutes. Anyway. Did you see our post, Henry, on our team hit the timeline. It said Fed word, scissorhands. The Fed just cut interest rates by 25 basis points. Anyways, breakdown. How have we gone this long without anyone making that? I've heard a million Fed puns over the years. Inspiration comes from. I think that's the first time I've heard that one. Genuine novelty. I think it is the first one that's really good. Novelty is important, but explain to us what happened. How are you processing the news? What does it mean? It's very interesting to think about this cut in the context of some recent development. So I think I would start by saying that, you know, two or three weeks ago, the market didn't even think the Fed was going to cut. If you looked at implied odds from various instruments in which traders trade the short end, it was below 50%. So I think that's an interesting place to start. The fact is, it seems like Powell had probably had to do some politics to bring the Fed around and actually make the case because there are crosswinds. We know that the unemployment rate has been creeping up, but inflation is certainly not back to target. And I think actually if you look at the statement from the Fed, one of the things they noticed, they, they noted is that inflation has, has been elevated since the September meeting that it's actually gone up. They're still not back to their 2% target. In fact, it's actually drifted higher. Now you could say, okay, well maybe this is a tariff effect. And so you look through that. But I still think it's quite notable that we've had basically five years of the Fed not hitting its inflation target. It's still warm, and yet they. Powell got through a cut. But you. So one might look at this and say, you know what? The fed doesn't take 2% inflation as seriously as it used to. In fact, a lot of people on Wall street are saying this. Maybe there's a soft, you know, 2.8 inflation target right now, which maybe the tradeoff is worth it because you don't want employment to snowball. You don't want that to run away. So maybe you tolerate higher inflation. But look, I think fundamentally you could ask, does The Fed take 2% inflation as seriously as it used to? But there's something else, an important dynamic, which is that as we know, you know, Trump is going to appoint or announce a replacement for Powell very soon. Trump would like to see more faster rate cuts than we've been getting. But, you know, there were three dissents. And so the president of the Kansas City Fed, Schmid, the president of the Chicago Fed, Goolsbee, they voted for no cut. The other dissent was Stephen Myron who voted for a 50 basis point cut. But this is really important because whoever, yeah, whoever. Did. Anyone did anyone. Was anyone brave enough to call for a 200 basis point cut or maybe a 500 basis point cut. Let's go. And come negative. Let's just go straight back to Zirpin. I shot. Yeah, Venture. Can we get a venture capitalist in there? Is that possible? Do you need, do you need credentials to be. We need a venture capitalist and we need like the most over leveraged real estate developer that you've ever met. Yeah. And get them on the board and they would slash it to zero. Yes, but there's an important element. No, no, no, not at all. There's an important element here, though, which is that like, you know, we know that Trump is not thrilled with Powell, but Powell is good clearly at getting the votes on. Sure, sure. And so it raises some interesting questions, which. Let's say Trump were to appoint a real estate developer. He's like, you know what? I want like that 500 basis point cut right away. It's not a. I mean, let's do something less hyperbolic. Let's say, you know, let's Say he appoints someone who wants a very aggressive sequence of cuts. That person has to win votes, that person has to win the credibility from the other FOMC members to get to make that decision happen. And so what it's saying already, there's already a significant number of dissents. It's not clear how much a Powell replacement will have the credibility or the political standing within the FOMC to actually get that increasing pace of cuts. So I know that Trump is not thrilled with Powell, whatever, that's his prerogative. But another way to look at this is he has a man in the chair position right now that could deliver cuts, period, when it's not obvious that most of the members of the FOMC are thrilled with further easing. And yeah, it raises some question about even if there is going to be a more dovish fed chair come 2026 to the degree that he'll be able to like, you know, get those cuts through, it's not guaranteed. Yeah. Can you, can you help me like, zoom out and, and understand the mindset of the, of the Fed with regard to understanding that trade off between unemployment and inflation? Because I, I could understand it if I'm a politician and just personally, it feels like inflation something that everyone feels. Unemployment is something that you either feel it or you don't. Right. Because you're either unemployed. If you're unemployed, you are upset with the government and if you're employed, you're like, it's not great that, you know, my brother doesn't have a job right now, but at least I do. Whereas inflation, everyone feels it. And so if I was purely in, in politics mode, I could understand that trade off. But how does the Fed think about that trade off? Because a little bit different, right? No, I mean the way you described it is, is absolutely perfect. And it's interesting, you know, look, like if you're just going back a few years to sort of the worst of the pandemic, you know, if you think back to like spring 2020, you know, people are thinking, oh, is this going to be another great financial crisis? Right. Are we going to have another period of like terrible unemployment, etc. Now it turned out that the job, the labor market bounced back very quickly, almost much faster than almost anyone had anticipated. So we might sit here and say, look, you know what we avoided, you know, we avoided sustained 10% unemployment, we avoided another great financial crisis. But I don't think like most people really like think about their life in terms of counterfactuals. And so to that like the main phenomenon of those times was significantly higher prices, higher prices that at least for some time was, were significantly outpacing wage growth, etc. And so we know that was like incredibly popular. You know, I think the thing to think about is that one of the phenomenons that recurs over and over again in the economy is they talk about unemployment increases, tends to increase in a nonlinear fashion by which you get these small increases. You go a little bit up every month, you get a little bit increase in the unemployment rate and then suddenly it snowballs because it has the snowballing effect. I lose my job, I start spending less. The various stores and restaurants and services that I was consuming, they then have to cut workers because people are spending less at their establishments. So unemployment has this tendency to snowball, to go from modest, being modestly worsening to rapidly worsen. And once it rapidly worsens, then it's very hard to reverse that. Then you have to ease massively and it takes years potentially to get back to where you were. Yeah. So from the Fed's perspective, what they're thinking about right now is, yes, inflation is too warm. It's not at our target, people don't like it, but it'll be really bad if we let employment snowball. So the only way to avoid that is to sort of cut in advance to try to get ahead of it. And so that is, that is the balance. And it's a very difficult balance, obviously. And we know that very few people have like sort of called this cycle correctly. I mean, people have been predicting an imminent recession for a long time because you have all these signs. It's like, oh, are we right there? Is it, is it all sort of one day away from falling apart? And so they're trying to thread this very difficult path here where they're aware of warm up, warm inflation, but they really don't want that sort of, they want to get ahead of the employment collapse. Yeah, I want to know more about inflation. Sager and Jetty did odd lots. Everyone should go listen to that episode. Just came out a week or two ago. He's coming on our show on Friday. I know he's going to try and pin the inflation on the AI data centers. Is there anything to that? Have you seen any data that helps understand what's going on at a lower level within the inflation numbers? Because, I mean, I was at Target last week and I feel like they were selling TVs for like 40 bucks. And so stuff's still getting cheaper in certain segments, but then other Things are getting more expensive. What's actually happening within inflation, if you try and unpack it a little bit. I basically if something is made in China, it's getting cheaper. Like that is like the phenomenon of the maybe the last 25 years which is that you can break down things that China makes and things that China doesn't make. So China makes TVs. The prices have collapsed. Does China make your child's daycare center? No, unfortunately doesn't. So childcare costs. Does China build your home? Yes, unfortunately. Cars. And so the price have gone up. Yeah, cars are a good example. So once hella operated, once the tele operated robots, the humanoid robot is taking care of your kids and the telegram is in China, then it gets cheaper. But that is the phenomenon of our time. Look, I think the data center story is very important. They're all kind, you know, I, you guys, I assume you guys talked about it yesterday. I thought the, the boom aerospace story was super interesting because all of these different aspects of the supply chain are being repurposed towards AI. It's like this is worth more. Their, their technology at least at this point might be worth more in a AI data center to make natural gas turbines than in a plane that might or might not. Yeah, I mean the narrative over the last with over, you know, Crusoe and Core Weave and so many of these Neo clouds, I mean they started out as bitcoin miners and then and then the highest and best use switched and very quickly these became AI factories. AI data. Yes. So what I think is there are a lot of resources that are being, you know what, we could reallocate this better to AI and that means that that creates an element of tightness in the supply chains, certainly in key categories. I think by and large it would be hard at this point to actually draw a line however between what's happening in data centers to measured inflation and even electricity prices, which would be the most direct one because we know electricity prices have gone up quite a bit. The link between electricity prices and data center build out, it's pretty tenuous at that point. It's not really enough to be meaningfully moving the dial. There are other drivers of. Higher electricity prices, including just maintenance on the wires which has gone up for just sort of garden variety inflation. Yeah, I feel like the boom supersonic, if boom did release a fleet of supersonic planes, that should be deflationary to air travel in theory. Even though it's going to come in at the super high end, just having more planes is a supply and demand equation and you're going to see deflationary if they move over into focusing on AI and it pushes out their timeline. Of course, Blake at Boom is arguing that this actually accelerates their timeline because they can. And I'm, and I'm sympathetic to that argument. But, but it was, it was fascinating to see that like, okay, there were, there are companies that I could see pivoting to AI. Boom was pretty low on the list for me. You didn't think that the airplane startup was going to. But it makes sense, right? Like if there's, I mean it's intuitive. This is one of the ironies about sort of talking about inflation on the big scale, which is that what do you, how do we get things more? How do we get things cheaper? Well, we need more supply side capacity, we need more planes, we need more wires, we need more. All this in the meantime, that all costs a lot of money and it absorbs a lot of resources, etc. So supply side expansion sounds really nice because that's ultimately how society moves forward and things become more affordable, etc. However, to get there, that is a resource intensive process. And so it's not the kind of thing that like a, none of that disinflation will happen tomorrow or the next week or the next year even. And in the meantime it creates tightness across the supply chain, which is potentially inflation. Yeah, I mean the other thing, anecdotally, I know a number of companies that were just like, oh, we have tariffs now. I'm going to pass this on to consumer, the consumer. And they just immediately raise prices. And so that factor is very real. How is. How is Wall street in general thinking about the tariffs just being determined to be unconstitutional? There feels like that. Wait, do you mean the Nvidia 25% tax or. No, no, I'm not talking about export tax. Yeah. It's just that the Supreme Court says the tariffs are nullified. You know what? I think Wall street would just love to not have any more headlines about tariffs because look, the stocks are basically at all time highs even with the announcement. No more headlines, no more call them off. Moratorium it. Presumably if this.2% a day forever, that's all we want. Yeah, presumably if the Supreme Court strikes down these tariffs, the assumption is that the administration will come up with new tariffs under some different rule. Like they'll come up with some different argument that's not national security related tariff jiu jitsu. But then we have more tariff headlines. So it's like I think that in theory, yes, maybe it's better for stocks in the market if the Supreme Court strikes down the tariffs. In reality, I think people are like, oh, we just let them be. They have the stock markets at all time highs, etc. The last thing we need to do is to have yet another liberation day where Trump unveils a new reason to have tariffs under some other statute, some other technicality of the law. I think that's the last thing investors want to see right now. Yeah, yeah. How much are you paying attention to the, to the ten year. Now? In the near, in the near term, it obviously dropped on the news and then it's just climbing, climbing back up. I think this is actually very important. Again, thinking about who is. When we think about the Fed in the future under any chair. Right, because what is the 10 year yield? The 10 year yield is the average overnight yield for the next 10 years. That's how to think about it. The Fed directly controls the overnight yield. But let's just say, okay, let's say the Fed cuts aggressively, let's say we get that 200 basis points cut of people's dreams, etc. Well, intuitively that would be inflationary, right? You set off another boom. You set off the animal spirits again. Suddenly you get more inflation and people are looking out, well, there's going to be more inflation over the next 10 years. What does more inflation over the next 10 years equal? Well, it probably means rate hikes sometime down the road. So there is this tension where. And so then the 10 year goes up. And so there is this tension where like cuts at the short end do not mechanically by any means do not mean lower rates at the long end. And lower rates at the long end are what the Jews where the Jews are at lower rates at the long end are what affect mortgages and credit cards and corporate borrowing and all of this stuff. So this is another thing that I think the next Fed chair and the administration has to think about, which is that you could cut rates at the short end and not get any juice in terms of the actual lower rates from the parts of the curve that actually affect the real economy. And so even cuts don't necessarily lead to the kind of monetary easing that you would like to see. Last question from my side. We'll let you get back to nursing your hangover. I love how you just assume that Joe had like such a wild night. I thought people, I imagine there was a lot of people surfing going on. Yeah, I like that. I like to imagine people surfing on all the fans for tenure. Do you read Anything into consumer confidence from Black Friday? We were covering it a lot like with our friends who run E commerce stores and like there were a lot of good signals there. But it's hard because it's like one E commerce store that we know and they're doing well. It's not like the broader economy and. It'S a broader trend of Black Friday just moving online. Exactly. It's hard to get, you know, it's hard to get a read. You know, JP Morgan, actually they presented at a conference yesterday. They said they're starting to see a little bit of cracks in the consumer. Okay. I don't want to. I don't remember the exact term, but they did call out potential frailties there. So that was very notable. It's so hard to get a read on confidence because for the last five years we've been getting the most the surveys. We've been getting the most dismal consumer confidence measures in going back decades. Yeah, people still like spend like crazy. It's the vibe session thing a little bit. The Kyla Scanlan. So it's so hard to get a read on confidence. But. But by and large, yeah, there was a. I think that you have to take those comments from JP Morgan seriously because they have like, you know, they have a great read on. They have just so much business everywhere that they could see into these things. But by and large there isn't a ton of evidence yet that like, oh, there's a real deceleration happening in consumption. Yeah, yeah. No, that makes sense. Jordan, anything else? No. Thank you so much for coming on. Thank you. Merry Christmas. Can we play some Christmas? Overnight success. Overnight success. Play some Christmas music to let Joe go about his day. Merry Christmas. Have a good to see you Joe Weekend. We'll talk to you soon. Turbo Puffer Serverless vector in full text search built from first principles on object storage. Fast 10x cheaper and extremely scalable. The air horn over the Christmas music. Yeah, not something I've ever heard before. Turbo Puffer. Anyways, should we get into this post from Matt Levine? Absolutely. He says the Warner deal will take a while. We said something similar last week. I'm sure he will have. Levine's also coming on the show on Friday, but let's give everyone a taste of his news. Also M&AI data, trillion dollar IPOs and good TV is bad for stocks. We're really doing Bloomberg Day. Warner Wars. It's perhaps worth saying that Paramount offer for Warner Brothers Discovery Inc. Is not exactly a classic hostile tender offer. Warner has signed a merger agreement with Netflix in which Netflix would buy most of Warner for about $27 per share in cash and stock, leaving Warner shareholders with a bit of the company worth somewhere between $1 and $5 per share. That merger will take a long time to complete. For one thing, Warner shareholders have to vote on it. Which means that Netflix and Warner need to put together a proxy statement and prospectus for the deal, file it with the SEC, and hold a shareholder vote. That could take months. For another bigger thing, the U.S. department of justice will need to review the deal for antitrust concerns. Those concerns are significant, and Netflix and Warner have budgeted at least a year for that review. That jump was announced. That deal was announced last Friday. And on Monday, Paramount jumped in with an all cash$30 per share offer to buy all of Warner, which we discussed on Monday. It took the offer directly to Warner shareholders. It launched a tender offer scheduled to expire on January 8, to buy those shares. The two deals operate on different timelines. Warner plans to ask its shareholders to vote on the Netflix deal, but that vote will happen long after Jan. 8. And if Paramount buys all the shares before the vote, then the question is moot. Well, because they'll own all the shares. They'll vote no. Yeah, interesting. If the shareholders all sell their shares to Paramount in January, they can't vote on the Netflix deal in March. And if 51% of the shareholders sell to Paramount, Paramount will control Warner, vote down the Netflix deal and acquire the company itself. That is the classic benefit of the hostile tender offer. It's fast. If Paramount's tender is more appealing than Netflix's merger, then Warner's shareholders will sell their shares to Paramount before the Netflix vote and Paramount will win. And if the deals are roughly equally appealing, if shareholders are more or less indifferent between the two bids, then the speed of the tender offer is a real advantage. Shareholders. The headline here is that this is this deal is going to take a long time. And here he's saying it's fast. So let's see where he gets. Interesting. Then the speed of the tender offers a real advantage. Shareholders think, I don't care too much, but if I tender to Paramount, I'll get this done faster, so I might as well tender and Paramount wins. Or that is a classic theory, but it is hard to achieve in practice, and it's not really true here. Paramount's offer says at the top that it expires on January 8, but it's not like it will buy it. But it's not like it will buy the shares on January 9th. Even if 51%, or for that matter, 100% of Warner shareholders tender into Paramount's offer, the offer will not close until two other conditions are met. One, Paramount Steel also requires antitrust clearance. It is not legally allowed to buy the Warner shares until it gets that clearance. For a combination of fundamental and trumpy reasons, Paramount thinks it will have a much easier time getting antitrust clearance than Netflix would. But I remember seeing that the Netflix team was arguing that from an antitrust perspective, Paramount has a lot of watch time as well. And so Paramount plus, even though it's a much smaller streamer, you put everything together and they were like, it's really not that. It might even be more total watch time across everything. I'm not sure that that pans out. But. It was an interesting point that just from creating the monopoly perspective, like maybe it's the fourth biggest, the fourth most controlling stake, but there is an argument there. And so it does need to go through review. And so that will hold things up. Yeah. Paramount's proposal expects to receive regulatory approvals likely within 12 months, faster than Netflix's expected timeline, but a lot slower than Jan.8. Two, Paramount Steel is, by its terms, conditional on becoming a friendly deal. Addition of its offer is that Warner Brothers shall have entered a definitive merger agreement with Paramount and the purchaser, substantially in the form of the merger agreement submitted by Paramount to Warner Bros. On December 4, 2025. That is, Paramount does not just want to buy a majority of Warner stock and block the Netflix deal that way. It wants Warner's board to abandon the Netflix deal, pay that $2.8 billion reverse termination fee and sign a deal with Paramount instead. Interesting. The deal is too big and the antitrust approvals and financing are too complicated to do as a purely hostile deal. Paramount will need Warner's help to close its deal. In some sense, then, the Paramount deal is not a real tender offer, one that depends only on the shareholders, one that shareholders can accept even over the board's objections. The Paramount deal is a pressure tactic, a way to get shareholders thinking, hey, I would rather get $30 in a year than $27.75 in 18 months. And telling the board that if the shareholders all would tender into the Paramount deal, then it's hard for the board to stick with the Netflix deal deal as a matter of fiduciary duties and shareholder pressure. But it's not like if those shareholders all do tender into the Paramount deal, it will just close. It's a jumping off point for negotiations. And so Bloomberg's Lucas Shaw reports at. Paramount and Netflix are girding for a battle they predict will stretch well into 2026. Lucas says, well, if you want to. Follow along with Paramount or Netflix, go to public.com investing for those who take it seriously. Multi asset investing trusted by millions of and yes, Netflix is on there. Paramount's on there. Warner Brothers is on there, at least for now. Lucas Shaw says Warner Brothers was given 10 business days to respond to Paramount's hostile $30 a share bid for the company on Monday. Since that offer was already rejected once, the Warner Brothers board isn't planning to cancel the merger agreement signed last week with Netflix. According to people familiar with the company's thinking, doing so would require Warner Brothers to pay Netflix a 2.8 billion termination fee. That puts the onus on Paramount to make the next move in what everyone expects to be a drawn out affair lasting months. Paramount can follow through on its tender offer to buy Warner Brothers shares from investors at $30 each on January 8th. It can also extend the bid sue to stop the Netflix deal or increase the terms. Shareholders of Warner Brothers, one of Hollywood's biggest film and TV companies, are hoping for a bidding war that further boosts the price of the deal. Both companies have communicated that they have the ability to increase their offers. And the Financial Times notes some WBD shareholders expect Paramount to lift its bid before the tender offer expires after Ellison's company said in a regulatory filing that $30 was not its best and final price. Going up. Well, you get another sovereign in or something, you know, spread that across everything. How many more sovereigns do we got? We got the big, we got the big three. We gotta go to. He's gotta go to Norway. Norway would be cool. Paramount is privately weighing an increase or whether to instead add sweeteners intended to give WBD's board greater confidence in its regulatory prospects versus Netflix. And Matt goes, yeah, you don't go around saying on television as Paramount did, that your offer is not best and final. If you want shareholders to tender so you can close next month, they know there's a lot of negotiation to come. Yeah, it's. This position that the Ellisons are in where feels like every other week they have to offer a higher price. It's like, how do you. It's kind of a vicious cycle. Yeah, it's pretty crazy. To have them going back and forth here. I feel like it's going to land with Netflix. I don't know. I mean, this is the first time I've tracked one of these. This closely in my entire life. It's also just sort of an unprecedented deal because of the scale and all the political stakes and whatnot. But it just feels like the breakup fee is real. Like the fact that there's a massive multi billion breakup fee on both sides that's like material to their market cap. Material to their you have to pay essentially 1%, 2% of your market cap in the event of a breakup. That feels like Warner Brothers and Netflix were like, let's actually make this happen. Let's be really sure this is going to happen. Let's make sure it makes it through antitrust. Let's make sure. I don't know. Then again, the Adobe Figma thing, I was shocked when that broke up because that felt like a crazy breakup fee. But 1 billion was still lower than what Adobe was trading at at the point it was less than 1%. This is higher on a percentage of market cap breakup fee to market cap ratio. So I don't know. It feels like Zaslav probably thought about it a lot. But we have some more folks coming on the show today to talk about this. We can answer a lot more questions. We have Ben Smith from Semaphore. He's the co founder and editor in chief at Semaphore. He's joining in just 15 minutes. While we move on to our next story, let's tell you about graphite.dev, code review for the AI Age. Graphite helps teams on GitHub ship higher quality software faster. So much clapping going on across the studio and the soundboard that should we. Get into this piece on Meta? Absolutely. From Eli Tan over at the New York Times. What does it say? Meta's new AI superstars are chafing against the rest of the company. It's chafe gate. We've established this, Eli writes. An us versus them mentality has emerged between Meta's top artificial intelligence team and longtime lieutenants to Mark Zuckerberg. Yes, Eli writes, when Mark Zuckerberg revamped Meta's AI operations this year, he recruited a new leader, former guest of the show, Alexander Wang. Let's go. A 28 year old entrepreneur, to build a team of top researchers from rivals like OpenAI and Google. Yes. That team, called TBD Lab for to Be Determined, was placed in a siloed space next to Mr. Zuckerberg's office at the center of Meta's headquarters, surrounded by glass panels and sequoia trees. Mr. Zuckerberg wanted to separate the new AI group from the bureaucracy of the company, which owns Facebook, Instagram, and WhatsApp said two people familiar with the matter. I'm glad those people know that Facebook owns Instagram. I'm just kidding. Five months later, that divide has become more than physical meetings. This fall, Mr. Wang has privately told people that he disagreed with some of Mr. Zuckerberg's longtime lieutenants, including Chris Cox and Andrew Bosworth, chief product officer and cto, respectively. So, yeah, so this. You're gonna be interested in this, John. So in one case, Mr. Cox and Mr. Bosworth wanted Mr. Wang's team to concentrate on using Instagram and Facebook data to help train Meta's new foundation model to improve the company's social media feeds and advertising business. Let's go. Which is. You've been wanting this this whole time? Yes. It's like, do this whole thing, personal superintelligence, and then just make. Just deliver them better, make the ads better, you know, grow. Grow the business in that way. So what did Mr. Wang say? He argued that the goal should be to catch up to rival AI models from OpenAI and Google before focusing on products. The people said, so this makes sense, right? This makes sense for Wang? I don't know that it makes sense for the company. I would like. I would like from everything that we've seen so far, it feels like Meta could. Add a trillion dollars to its market cap by just focusing all this incredible talent on just making the core business better. But Wang and the rest of the team are going to be a lot less motivated by that than having the biggest data centers doing the biggest training runs, having the best model competing on the global stage. And so I can see why Wang is pushing the other direction. Okay, so let me tell you about adeo, the AI native CRM. ADEO builds scales and grows your company to the next level. But, you know, like, let's actually unpack this because, like, if you know Mr. Wang here, he says he's developing the model, he argues that the goal should be to catch up to rival AI models from OpenAI. Like. Like, if they wind up having a model that is actually in the same league as Claude and Gemini and OpenAI and XAI, and it's this closed source, it's an API. It does well on MMLU, it does really well on the benchmarks. What value does that really bring? Because that's what I'm saying. Even on the benchmarks, you could just go and get a model off the. Like, if you want to compete in search, knowledge retrieval, even agentic commerce, you can take models off the shelf. In the same way that Apple's doing. Yeah. Oh, it's good enough for Apple, but not meta. Interesting. Interesting. Yeah. So I'm just trying to think you make the best model in the world. Are you going to go compete with. So we've seen this, we've run this with xai, right? They are trying to build the best model in the world. And it's now becoming clear that just having a great model does not automatically give you a meaningful amount of market share. Yeah, no, no. You need to productize it. And OpenAI has productized very well with a viral. Like, it is synonymous with AI, consumer AI. Everyone has the app mostly on their home row. They're using it a ton. They have a billion DAUs. It's growing, doing great, or MAUs. But then you have Google just so much surface area to actually stuff knowledge retrieval AI in knowledge retrieval products. You're already trying to do that with Google search. So you do AI searches. You do, you know, you stuff Gemini in sheets and docs and all the different products. Makes a ton of sense. Anthropic, super focused on code, super focused on B2B. Facebook doesn't have a B2B team. They're not like a hyperscaler. Like, that might make sense for Amazon to be like, hey, we want to get, you know, we want to, we want, we want to take that approach. And then XAI is sort of the same thing. At least they have, you know, X to distribute through. But being the fifth, the fifth, like, hottest, even if the model is for this week, like, the number one. Right. It's like no one can really tell. It's very hard to be like, definitively number one for seven months straight. Like, it just doesn't. Yeah, I get excited to look at benchmarks and have people on to talk about them. Does it change my behavior? And does it stick? And does it stick? It rarely sticks because it's like, what did we see? Gemini 3 was at the top of all the benchmarks. Then Opus 4.5 comes out. That's at the top. Now we're seeing 5.2 from OpenAI. Probably coming, probably going to beat on a number of benchmarks, probably going to be better in a bunch of different ways. But is that going to radically change consumer behavior, even radically change business behavior? No. And so I don't know. I would be very focused on what can be done within Instagram and Facebook and WhatsApp to a lesser extent. The flip side, the other question is. Just. The reason to be excited about that as a meta shareholder, is that AI is such an obvious tailwind for Meta's business. Right. You know, talk to Sean, Sean Frank from Ridge. Right. He's creating, he's having to create hundreds of new ad assets a week. If AI, if Meta can help him create thousands, he will spend a lot of incremental dollars on Meta. Right? Yeah. He can get better at targeting, you can better get better at serving content. Right. And that will ultimately, over time provide even more resources for these sort of like moonshot style projects. Meta has been pushing this personal superintelligence narrative. The only problem with that is that I don't know what that means. Right. It sounds awesome and I'm happy to wait and see. But they've been having, there's been a number of employees kind of churning out already and it's possible that they don't necessarily know exactly what that means themselves yet. Right. They're running it like a startup internally. Yeah. Let me tell you about Fin AI, the number one agent for customer service, automate the most complex customer service queries on every channel. So I agree with you. What does personal superintelligence mean? I feel like there is room for product led innovation in AI. New new instantiations of the underlying, like new ways to interact with the fundamental. We're having this AI moment and then we get video models, we get image models, we get image editing, we get knowledge retrieval, we get agents, deep research, we get coding agents. We've had three or four or five really cool instantiations of it. And not every lab is frontier at every single instantiation. Anthropic doesn't have an image generation. Other labs like there, obviously OpenAI really thrives in the consumer and has created just a great app that is reliable and answers your questions reliably. Other companies have struggled to hit that instantiation. It would be very, very cool to watch the Facebook team figure out what is a way that they can bring AI to bear inside of Instagram in a cool way, in a new way. The problem is, is that. Facebook and Instagram don't really have that DNA. They sort of tried it with the Vibes app, but also there's very low ROI on that because as soon as you like, let's say that they do come up with like the next stories and it's like, oh wow, like you take AI and you stuff it in a social app and you do this one special thing and then everyone loves it. It's great. It's not just like they didn't create that. No, I know, I know, I know. But let's say that they did. It's like it's gonna get copied everywhere anyway. So it's not really that much. They really should just wait around for everyone else to do R and D. They should wait. They should be. Evan Spiegel, what are you doing? Come on, invent something for us. And so I can actually see Alex Wang's pushback on like, hey, you want to use Instagram and Facebook, you want to do something more incremental? But like, how are we going to do something great in AI in those ecosystems? I don't know that there is that much. Because again, the actual feed ranking team, that's not the gen AI team, that's not msl, that's not TBD Labs. That's core AI that team is cooking. They've been using GPU accelerated algorithms for a long time. They're doing fine. They're shipping ads. And also all the advances in AI, they're showing up in the financial results over there. The ads are definitely getting better targeted. They're showing people more ads. They're showing people reels went like zero to 50 billion. Yes. And a lot of that is an AI story. And they're not getting credit for that because it's. It's core AI. It's not. It's not gen AI. And Jenny is the cool one because it's like, wow, cat picture, video, awesome music. Yeah. Yeah. What do you think, Tyler? Yeah, I mean, I feel like a Nano Banana Pro product in Instagram is like very obvious. Or like Sora is also just like in Instagram. Yeah. If they just made that, it's like a killer product. So I had this pitch immediately. Kill. Yeah, I had this pitch during the studio Ghibli moment. I was like, they should figure out how to ghiblify every single person's profile picture in Instagram. So you just. The next time you open Instagram, it just says like, hey, we made a cool cartoon version of your profile picture. Do you want to share it on your story? Do you want to make it your profile? Do you want to share it to your grid or whatever? Here's. Let's just preload this because it's clearly very resource intensive, but they could have done it on some sort of cron job. It runs in the background, burns a bunch of GPUs, but it gives you a bunch of cool outputs and it just gets people into the. Oh, wow. Like AI filters are here. Clearly there's a lot of work to be done on the AI frontier. Like the actual developing the Model doesn't seem like they have a nano banana quality image generator model. Also, I don't know if they have the GPUs to actually, you know, release that to a billion users. And then at the end of the day, I don't know if it makes any sense because it's like everyone opens Instagram and they're like, oh, cool, you did something nice for me. You spent. Somebody's making. Making great AI generated content elsewhere. They'll just bring it up, they'll just. Bring it over and host it. Yeah. So it's a little bit, a little bit disappointing because it's like, oh, you want to do these things, but you can just. They're in the do nothing win scenario. What do you think? I mean, it feels like Google is getting like a massive, like they've in the past, like, what, two months? Like Google stock has gone crazy because of like, oh, they actually are playing an AI. So it's like if Instagram basically takes all the people that started that got a Gemini subscription because of Nanobinet Pro, which is like, probably a fair amount, if they just move them back to meta, you know, products. I don't think people will think about it that way. Like, I think people see Google and Meta very differently. I think people see Google as like, it's Google for work. It's my workplace, it's where I do research, it's where I learn things, it's where I organize my life, my data, my files, my spreadsheets, my slides. And on Meta, it's like, that's the place where I look at reels. It's an entertainment platform. Yeah. I think also for a while, I don't even know if they still have them, but Instagram had the companions and that seemed like extremely half baked. Are you talking about Stepmom? Yes. There was like an egg you could talk to. Cow. Yeah, it might have been on Facebook, but it was extremely, like, not. Well, it was not dialed. But it was also not their team. Right. Wasn't it like a. No, that was not msl. That's what I'm saying. No, no. Not only was it not msl, it was like a feature that was released by a meta team that then anyone could go in and create a personality. So it wasn't like a Facebook employee was like, I bet people want to talk to a cow. It was like, it was like, I'm going to release into the wild the ability to talk to anything. And then someone was like, oh, I have an idea. I, as a user will do ugc. It was part of what maybe we haven't discussed so far is how TBD will tie into Reality Lab, right? Is it possible that they need, in order to fully realize the Reality Lab's vision of having a pair of glasses that see and process everything that you see and can provide you that personal super intelligence? So yeah, you're walking around, it's like, oh, I forget that person. You know, it just pops up like a name tag for somebody, right? You see an item in the real world and you're like, you know, you do this and you buy it, right? So it's very possible that they need to get, eventually get that on device in order to be fast enough in order to be super valuable. And so they do need this internal competency. And so I would. There's of course stuff that we're missing here, but ultimately I can see why Boz and Chris Cox were like, hey, why don't we just figure out how to make an extra $50 billion a year by taking some of the best researchers in the world and applying them to the corpus also? I mean, I like that philosophy. They bought in on the metaverse, the ar, the xr, all this stuff. But I mean, they do got to buy time. It just feels like they need to buy time because it feels like it's still not at some sort of inflection point where, oh yeah, this is going to be the iPhone moment. Everyone's going to be using these augmented reality glasses next year or the year after. It's like it's still very niche. I was in a best Buy, I saw the meta, the meta ray ban displays I believe there, and they were certainly not being swarmed. So I don't know if we'll ever get any data on how many pairs they sold, but. I'm not seeing it on a lot of lists of the hottest tech items this year. I'm not seeing a lot of people buy them, gift them. It still feels like, okay, they've created something really cool which is technologically, it's a heads up display, it looks good, it's cool, but like there's a lot of work to be done to actually educate people, create software for it, make it seamless. I think it'll be a popular gift I'm planning to get. To what, but to what degree? Like 10 million units or a million? I don't know. It's a big question. But I know people are going to be giving each other cognition. That's right. Time with the AI engineer Devin. Crush your backlog with your personal AI engineering team. Well, without further ado, we have Ben Smith from Semaphore joining. He's in the reach room waiting room. Ben Smith, good to finally have you on the show. Thank you so much for joining us. It's good to finally be on. Yes, overdue. Nice to be here. Well we were confused. We were confused because early, early in the show about a year ago you broke a story about a group chat, Chatham House and we were very confused because we assumed that Ben Smith was a pseudonym because it sounds like the name that goes on every kid's fake id. If you don't want someone to know who you are, you make up a name. John Doe Ben Smith. This is just a name that you pull off the shelf but it is in fact your real name, correct? Wow, that's a really insightful observation. But yes, it is my real name. Fantastic.

But even sort of like hate using it, which has happened quite quickly. Yeah, I mean, I guess I mostly. See it as just the greatest story. Like, it's just, it's an incredible story right now of politics, of economics and of technology, and we're just covering it obsessively. Reed Albergatti, our tech reporter, broke the story two days ago that Nvidia is going to be allowed to sell H2 hundreds to the Chinese. I mean, it's a story that just pulling everything in. You have this American economy that is. Limping along except for AI, which is driving all the growth. Yesterday I interviewed Governor Shapiro, Pennsylvania. That's all he wants to talk about. I mean, it's just a fascinating political moment. I mean, I use it and we use it, I think probably, I bet the way you guys do for the. Most boring stuff, it's incredible for video. Production, transcription and essentially, I think the. Way a lot of companies are using it, which is just to take out. Cost on extremely boring things that you're happy to have software do. But yeah, but I think, like, yeah, we're mostly thinking about. I think the story that I'm obsessing about now is really the coming political backlash. Like, I was just talking to a. Republican consultant here in Washington who's essentially. Shopping for a candidate to lead. The anti AI president basically sees, thinks there's this big lane. I kind of buy this against J.D. Vance. Like he's the fort running Republican nominee. And the attack on him will be this guy is a tool of the tech industry. He's a tool of these AI guys. Who want to take your jobs, poison your children's brains and build like these. Weird boxes in your neighborhoods. And it's just not, it's not a popular. It's like not popular. And one of the strange things is. That, you know, Trump is just unbelievably pro AI. It's probably the most important decision this administration made is that David Sacks really persuaded him. Came in day one, he's with Sam. Altman, he's with Elon, like all in. For AI, but he didn't campaign on it and he hasn't really bothered explaining. It or selling it at all. And so I think we're just set. Up for a huge backlash that you're going to see in the midterms. Yeah, it's a fascinating story. I mean, I agree with you about AI. Touching. Just like everything you can look at it from what.

How do you. It's kind of a vicious cycle. Yeah, it's pretty crazy. To have them going back and forth here. I feel like it's going to land with Netflix. I don't know. I mean, this is the first time I've tracked one of these this closely in my entire life. It's also just sort of an unprecedented deal because of the scale and all the political stakes and whatnot. But it just feels like the breakup fee is real. Like the fact that there's a massive multi billion breakup fee on both sides that's like material to their market cap, material to their. You know, you have to pay essentially 1%, 2% of your market cap in the event of a breakup. That feels like Warner Brothers and Netflix were like, let's actually make this happen. Let's be really sure this is gonna happen. Let's make sure it makes it through antitrust. Let's make sure. Like, I don't know. Then again, like the Adobe Figma thing, I was shocked when that broke up because that felt like a crazy breakup fee. But 1 billion was still lower than what Adobe was trading at at the point it was less than 1%. This is higher on a percentage of market cap breakup fee to market cap ratio. So I don't know, it feels like. It feels like Zaslav probably thought about it a lot. But we have some more folks coming on the show today to talk about this. We can answer a lot more questions. We have Ben Smith from Semaphore.