The Stablecoin Future, Milei’s Memecoin, DOGE for the DoD, Grok 3, Why Stripe Stays Private
all right everybody welcome back to the number one podcast in the world. I am your host Jason Calacanis and with me again a couple of my besties David Friedberg, you know him as our sultan of science. Lots to get into today, sultan, huh? How you doing?
I’m keeping busy, thank you. Keeping busy. Jamoth and I on Valentine’s Day we had a little trio; we were on MK Ultra’s podcast and it hit number four all in podcast, of course number one.
Uh, Chamath reflections on our Megan Kelly, our triumphant Megan Kelly Valentine’s spectacular… it was fine, it was good, okay wow. Thanks, you’re such a great performer, giving me so much to work with Chamath, as always. But it was a great, great pod. Shout out to our friend and friend of the pod, Megan Kelly.
Awesome, we’ve got an incredible duo! For the first time we’ve invited a duo to join us in the red throne, David Sax’s seat. He’s busy saving the country, but we’re really excited.
Colson Brothers are with us!
Thank you for having us! You guys want to hear a great lost porn story? John has one for you.
The last time we met Chamath was 18 years ago when we were working on our prior startup, Optomatic, with Origin and Cool Tagar. You were how old?
They were 17, 18, 19, it was one of these San Francisco setups where it was like a two-bedroom apartment. There were a few of us living there, I think maybe six people working out of there.
A normal number! Exactly, normal numbers to load up a two-bedroom apartment with. And then Chamath, you came and visited.
This is what’s so brutal about this: okay, I could have invested a dollar. One single dollar, and I would have made a billion dollars. I remember meeting these guys and I was with Alan Morgan who was my boss at the time. I was a junior principal at Mayfield, shout out!
And I think we tried to, guys, I don’t know if you remember Patrick and John. I think we tried to invest in the business or it didn’t happen or then you ended up shutting it down. But right away you spun back up and started Stripe, and I just watched from the sidelines the whole way.
It is such a… first of all, it’s amazing. It’s an—well, no, it’s an amazing place for Silicon Valley where you can see these people just keep pushing the boundaries up and up and up.
Number one. Number two, the thing that is such a learning for me is like why didn’t I just pick up the phone and call them at any point in the last 17 years? What am I thinking? It’s so brutal.
Oh my God, it’s so brutal! Two things. One, first, you probably don’t remember this, but I remember that meeting. You know we offered you—and do you want something to drink? We did not have a broad selection.
I think we had water or milk in the fridge, and you asked for a glass of water. So I went over to the sink, and I realized that we hadn’t really been on top of the washing up. So I had to sort of gingerly wash a glass for you to get your glass of water, which, I can’t remember if you touched it over the course of that meeting.
But then secondly, like when we started out with Stripe, like the fintech sector basically didn’t exist. I mean, the word hardly existed and didn’t exist. Yeah, people just didn’t think that. I mean, you know teenagers weren’t actually teenagers at the time, but you know people in their early 20s, college kids taking on, you know, PayPal or the incumbents or regulated financial services or whatever. You know, people just didn’t think it was a good idea.
So I don’t know, you certainly were like the vast majority of investors we spoke with in the first year or two of Stripe turned us down, so you were not anomalous.
John, tell us what that meeting was like and to just take you back to the moment. Here’s a picture—stop, stop! Here’s a picture. No, striking. Here’s a picture of free… free nine-figure tremor!
Oh my God! And this is when he shopped at Macy’s! Does that maybe jog some memories, John? When that guy walked in with his khakis and that light pink Brooks Brothers shirt, what did you think?
I don’t know. I think you can, uh, you can go back and find historical photos of anyone and use them too. Like if that’s the worst historical photo you have, that’s pretty lightweight stuff!
Exactly. Jason, do you want to tell everyone in the audience what Stripe is? I mean, do we have to?
Okay, Stripe processes payments. This is a 10-plus-year-old startup that basically if you’re a startup company and you want to do transactions, you use Stripe.
For example, the All-In podcast uses Stripe to pay for the tickets, and then we give these guys for some reason a half million dollars every year. No discount. They don’t sponsor the event and they’re making a fortune! They got 10,000 employees and the company changed the world.
Well, we’ve never been offered to sponsor the event. I didn’t know this was an option, but you hit us up for a half milli last year. I mean, maybe this year we can hit you up—that’s negotiate it live.
That’s broadly accurate. I would just fact-check that it’s nowadays not just startups even though they run on Stripe, but also the world’s largest enterprises. Hertz, Amazon, Ford—all these kinds of companies.
And so when we started out with Stripe, we thought it would only be for startups. Like we thought those were the people who needed a problem solved and we thought payments were broken for them.
As time went on, we just found it was kind of broken for everyone. And so is it public how much volume you guys do a year? Do you guys talk about that?
It’s more than a trillion dollars a year. A trillion dollars a year is processed through your network and which works out, you know global GDP is around 100 trillion a year, so it works out to around one percent of global GDP.
Incredible! And you could say, well, you know GDP is final goods and you know Stripe processes more than only final goods, so it’s not exactly the right—it’s not a fair comparison or something. But Stripe mostly is used to sell final goods, so I think it’s reasonable.
And just the other thing I’d say is, you know, people I think reasonably think of Stripe as a payments company because, you know, that is certainly what we started out doing and it’s certainly the largest line of our business.
But the thing we kind of realized a couple years in is that, you know, what business—like the structural secular thing that’s happening is that every kind of money movement is going from being manually orchestrated to being orchestrated by software.
And there’s, you know, some programs somewhere making the thing happen. And so because of that, like just because of what we hear from customers and the pull there, we’re now, you know, helping with lending, we’re helping with card issuance, we’re helping with treasury and money storage, we’re helping with cross-border money movement.
Stable coins! We got to talk about stable coins!
Yeah, why’d you do a stable coin?
Stable coins are finally happening, and they’re really useful! Like we followed crypto for a long time. The Bitcoin white paper dropped in 2008, the year before we started working on Stripe.
And so it’s been funny where Stripe and crypto have grown up together. And you know, we tried to make Bitcoin happen as a payment method on Stripe. Just wasn’t that good as a payment method.
I mean, it’s good as a store of value, as kind of a gold substitute. But transactions are slow, transactions are expensive—you never know exactly how much you’re going to get because it’s not denominated in dollars.
The stable coins are now really good! If you look at, you know, something on an Ethereum L2 or Solana or something like that. And so we bought a company called Bridge late last year, who is building the Stripe of stable coins.
And so if you’re, I mean, I think you guys have talked about them a little bit, but you know, people like SpaceX using them for treasury management, people using them to offer US dollar services to people all around the world.
Just stable coins are, I think, the first really big payments use case and I think it’s finally coming because the tech is good!
Is there a moment, guys, where is it a regulatory event where you’ll say the Visa-Mastercard duopoly can get challenged?
Is there a set of boundary conditions that you have written down where when you can check a few of these boxes you know that it’s time for those companies to get dismantled?
The behavior we’re seeing right now is that stable coins are most interesting and seeing most adoption where there is some cross-border component. And so you need to manage corporate treasury around the world. You want to send remittances to people in other countries.
Often it’s people in other countries want to hold dollar balances or things like that. What we’ve always seen is that, I don’t know in the U.S. things work pretty well, in Europe things work pretty well.
And so we even see this pre-crypto where the way people pay for stuff has been radically changing. Your UPI in India, PIX in Brazil—you have all these designed by central banks, actually really good kind of government-run Venmo solutions.
Those have all happened in emerging markets broadly and not in the U.S. and Europe. We certainly keep our eyes peeled for that changing at some point.
But I think right now, I don’t know Patrick, would you characterize it that way—that like a lot of the interesting stuff we see is happening internationally?
Yes, so you know with respect to Visa and Mastercard, I think an important thing to keep in mind is that most of the interchange fees that are charged to merchants—and you know, you mentioned what we charge the All-In podcast—you know, the vast majority of that flows right back to the issuing banks in the form of interchange.
And almost all of that flows right back to the consumers in the form of, you know, the lending that the cards themselves represent, but then also in card rewards.
Like card programs are not actually big profit pools for most of the major banks.
And so I think any, you know, any substitute for Visa and Mastercard in that sense, you know, is sort of a question of, well, are the consumer rewards going to go down?
Are the consumer protections going to go down? Would be extending less consumer credit, maybe other points in that space are viable? But, you know, it is a set of trade-offs and it’s not as simple as there’s this enormous rent extraction happening.
John’s totally right, I think the interesting use of stable coins is cross-border—is outside the U.S. I mean, the big use case that’s taking off right now is consumers in other countries seeking to hold dollars.
You know, we in the U.S. here today, you know, we obviously benefit from being able to do that. The vast majority of people in the world have kind of a—are subject to a worse currency. Worse in the sense that it’s less stable, it’s more inflationary, you know, storing savings is much less favorable.
You know, if you look at the Naira, for example, there are a lot of people in Nigeria and the currency there has devalued by a factor of, you know, three or four in the last couple of years.
And so that use case of consumers being able to store dollars is really exploding and we think about this really as kind of an analogy to the Eurodollar system where, you know, the Eurodollar system in the 70s and 80s was a way for companies to store dollars and to, you know, have something more stable and reliable and so forth.
But it was only except, I mean, I think the minimum transaction size was like a million dollars. And so there’s kind of a very high barrier to entry.
Whereas with stable coins now, you can be a consumer in Ecuador and you can have like a $10 U.S. dollar balance, and that was just not a product that was accessible to you before.
And so I think it’s a really big deal, you know, certainly for people in those countries, and in some sense also for the U.S. because the dollar’s status as the world’s reserve currency, I think is becoming much more deeply established.
Yeah, that is the huge win for allowing stable coins and, you know, making them legal, giving them rails, putting aside Tether and all the bans and fugazi stuff they’ve been doing or have done and all the lawsuits that they’ve lost and the bans in different countries.
Having USDC, having yours, and other ones in the United States means we can regulate them and they have to buy treasuries. And so okay, dollar supremacy continues, and that’s fantastic.
But right now, All-In, just using the example, could accept payment in stable coin, correct?
With Stripe, we just check a button, we get stable?
Correct, yes. Okay, so then the next piece I have is we’ll follow up with you afterwards to make sure we get that going. You can—I’m actually really excited that you guys are going to be sponsoring the All-In Summit this year. That’s actually exciting!
So it’s super exciting! No, Freeberg is great at securing the bag.
Yeah, the thing that’s interesting though is if let’s say we had a milli sitting in our Stripe account and then we had to pay a venue or pay other vendors. And we’re sitting there in your coin’s called Bridge. Is that what’s going to be called or is called Bridge is the company that’s the platform?
That’s like, there are—okay, so they’re not a stable orchestrating? Correct?
Correct, correct! But you’ll have a Stripe stable coin at some point?
Yeah, like one Bridge actually has one already. Yeah, Bridge has a small stable coin. Great! But we don’t need to get into details, but Bridge is primarily a set of software APIs. Got it.
But you’ll obviously have a Stripe stable coin. The point is if you turn on stable coin acceptance with, you know for All-In today—that’ll use USDC. Perfect!
Now could we then go pay people from our Stripe account and then you could lower our fees if they were also doing stable coins? Does that exist today or is that something coming next year?
Look, you could pay people in stable coins, but again to the point of where you’ll see adoption first is paying people via bank transfer in the U.S. Like, yeah, it’s not great, it’s kind of slow, everything like that, but it’s fine.
It’s not the biggest problem, and it’s really cheap today.
Yeah, yeah, exactly. Whereas the people who are using Bridge, it’s like Scale AI is, you know, they have to pay the contractors all around the world.
And when you want to get money to people in the Philippines, that starts to get really annoying and expensive. And so just from our point of view, the like real hair-on-fire problem is the international stuff and domestic, I don’t know, I assume you’re paying domestic suppliers?
It’ll come later. I think you’re right, I think you’re answering narrowly to, you know, stable coins. I think everything you just said is right, but I will say I think, Jason, your intuition that man, it’s really inefficient and annoying to, you know, engage in B2B transactions and to get these invoices paid and just like the whole system.
And if you look at most companies, they’re losing one, two, three percent of revenue to AP and AR. Now, some of that might be because of the transaction rails themselves, a lot of that is just because of, you know, baroque inefficient processes where you have humans setting invoices, humans reconciling them, you’re trying to line up transfers in your bank account statement and figure out, you know, what corresponds to what and so on.
And that’s super inefficient. And so we’re separately, I mean, simple coins will be part of the solution here, but there’s more to it.
Is there separately—we’re trying to solve that with a product called Stripe Billing, which we actually just announced last week, has passed, you know, half a billion in ARR.
And so we can send an invoice to somebody, which—right? Exactly, got it! So that’s like FreshBooks or whatever those other products in the market are all amazing—all the back office!
Is there a version of a network effect inside of Stripe for their customers where if I just allowed you guys to just be integrated into my GL somehow, and you gave me some kind of phantom bank account?
Why isn’t it just a ledger entry if I’m just making a payment from me to somebody else that’s also on Stripe? The thing we really want to solve is all the calculation, the ID verification, the risk—like those are the things that are actually expensive.
If you look at this flow, it’s where companies lose their money today. Having said that, you’re right.
You know, we’re the fraction of money movement on Stripe for, you know, the two counterparties are both part of the Stripe network is obviously growing.
And so I think that’ll be another way we can reduce fees over time. Although again, I actually think the biggest part of that is it’s going to be because we reduce fraud, like both counterparts are known.
And like right now I talked to a company, a payroll company recently, and they were describing, you know, how big a deal it is for them that, you know, people sign up, you know, fraudulent companies, whatever, and you know, they can lose millions of dollars in a single attack.
And so having some kind of trusted node rather than just like routing an account number would be a really big deal for them.
Look, you have a very good pulse. And what I would say is that as a subset of the economy, you probably reflect a large part of the global economy.
Have you ever been approached or have you ever considered on a regular basis publishing some sort of economic sentiment? One of the big things that we’ve talked about is how many backward revisions there are to everything from non-farm payrolls to GDP— that they’ve become so unreliable.
And so it’s very difficult for people that are transacting in market to know what to do. Have you guys ever thought about that? Because I’m sure that you have a much more accurate sense of where the economy is than many other people.
We have, and I feel a bit rueful, you know, with you asking the question because I feel like on some level we should have done it.
And the thing that makes it kind of tricky is because two things—one, Stripe is not like a full cross-section of the economy. You know, we’re more biased towards online, we’re more biased towards innovative companies. You know, whatever that, that you know, it’s kind of net that out somehow.
And you know, there can be these stories where, I mean during COVID, like the online economy was doing great, the offline economy is sort of a different story. So the interpretation can be a bit tricky.
But then just the second thing is the Stripe business is growing so quickly and changing so fast that again, you know, it’s not necessarily representative of the economy. And even if Stripe is way up year over year, you know, you have to be a bit hesitant in drawing conclusions from that.
Having said that, I think in principle you could draw, you know, some conclusions. And, you know, one thing we did look at was just inflationary data over the last couple years and I think you can construct and the team did construct a pretty reliable kind of leading indicator for inflation.
And so we would like to share that openly because, you know, I think it’s a public good for there to be better and more reliable economic data.
Alright Freeberg, before we get into the dock, you got any question for the boys here?
If you were to kind of build the financial system from scratch today, we’ve got SWIFT, we’ve got banks that store assets, we have credit cards and these credit card networks, then we’ve got transaction service providers that sit on top of this.
What’s the right solution? If we were to build a financial system for the world from scratch today, and can you guys see a world where we bridge away from the credit card networks, where we move out of some of these legacy systems, or are they so deeply ingrained and everything that it’s going to continue to be this thing where we’ve got to build these complicated solutions into and around the legacy of financial infrastructure?
I’ll give my view and then I’m curious what Patrick has. I would say, firstly, there is just general tech scalability. You know, there’s the, um, you know, the finance industry has its version of the mineshafts for sure, where everything should be highly scalable in real time.
And I think in a way stable coins are solving something that you wouldn’t—you don’t technically need full decentralization to do. But the ability to make kind of real-time payments any hour of the day or night is a useful property and again some private systems have also built that.
I think a big one for us is trust and the fact that the fraud problem hasn’t truly been solved in online payments—a big reason people come to Stripe is basically we are a reputation network across the Internet economy.
And so when someone comes and buys something from a Stripe user, 93 percent of the time we have seen that card before and so the merchant can know something and know that they can trust this end user.
And it’s gotten to the stage now where if someone comes along and buys with a credit card, if they’re, you know, signing up with an email address or a phone or something that we haven’t seen before, that is just ipso facto suspicious because, you know, they are coming along and maybe trying to—it’s a stolen credit card or something like that.
And so a big part of what Stripe ends up doing is acting as a reputation network to keep fraud out of the system that maybe you would have wanted to design in from day one.
Well, in fairness, Jamoth told me I could use that credit card any time I want. I don’t think he remembered, but I think you need to turn my account back on!
And Freeberg, I just got news from our CEO John—Mastercard just canceled their sponsorship of All-In Summit! So this is costing us a fortune, this podcast so far!
Two things: one, to your point about just all these different networks and so forth, I think stable coins are going to be a big part of a big part of the solution.
I actually don’t think that’s going to supplant all the consumer-facing networks. I think we’re going to see consumer-facing networks built upon and, you know, substantially leverage these things.
But I think stable coins will probably be the common rail. And then just secondly, I think part of what you’re hearing is most businesses lose more money to fraud than they do to the kind of pure transaction costs themselves.
And you know, you’re hearing us talk a lot about fraud here, and that’s because one, it’s just—it’s a huge economic cost for these businesses today and there’s even indirect costs where you make the consumer experience more hostile.
Because you have to protect against, you know, possible fraud. Like, you know, why, why do you have to type in all my bank account?
Yeah, all this stuff, exactly! But then secondly, I think we can just see it in the data. These problems are actually getting worse and harder because, you know, ML AI, globalization, everything.
Yeah, exactly! And so like, you know, various fraud metrics across the industry and ecosystem are way up over the last couple of years now and Stripe actually down by 80.
But it’s really becoming an acute issue!
Alright, and we’ll get into staying private longer and when you guys are going to pull the IPO trigger later in the show. But we got to get through this docket, we got so many great topics to talk about!
Let’s get to our first story here. It’s a kind of fun one: Jamie Dimon went on a rant about remote work and Zoom in a town hall and here’s a snippet: A lot of you were on the Zoom and you were doing the following, okay, you know, looking at your mail, sending texts to each other when the other person is okay, not paying attention, not reading your stuff.
You know, and if you don’t think that slows down efficiency, creativity, creates rudeness, and so it does, okay? And when I found out that people are doing that—you don’t do that in my goddamn meetings! You’re going to meet with me, you got my attention, you got my focus!
I don’t bring my goddamn phone—I’m not sending texts to people, okay? It simply doesn’t work! The young generation is being damaged by this.
They may or may not be on your particular staff, but they are being left behind! They’re being left behind socially, meeting people.
In fact, my guess is most of you live in communities a hell of a lot less diverse than this room! That’s not how you run a great company! We didn’t build this great company by doing that, by doing the same semi-disease that everybody else does.
Colson Brothers, tell us about how you run Stripe. Are you remote? Does this resonate with you? Four years after—we’ve come out.
I love listening to Jamie Dimon rants! Like I feel like that’s business ASMR.
Um, Business ASMR? That itself could be a great podcast! I was about to say I’m subscribing. That’s an instant ten dollar a month subscription! But what do you think, John?
Yeah, I don’t know. People just said a lot of during the pandemic. Like you remember it’s like, oh, handshakes are going to be over! Business travel is going to be over! Every company is going to be fully remote!
I would say Stripe broadly is in a pretty similar spot to where it was beforehand, which is most people go into an office.
Like most people are, you know, part of our San Francisco office, or New York, or Dublin, or Singapore, wherever. And then we have a bunch of people also who work remotely.
I think kind of obviously, you know, Jimmy is right on some points. I think also working remotely has had a bunch of benefits where there’s a way larger talent pool available to companies like Stripe.
And there’s a lot of people, you know, you see, uh, kind of the two-body problem, where it allows a lot of couples where, you know, maybe one partner is assigned to some hospital in Idaho and like they don’t get to choose what hospital necessarily they got assigned to and the other person gets to work a high-paying tech job.
And so I don’t know. I think when—like one of the theories for, uh, declining dynamism in the U.S. and declining TFP is there’s allocative efficiency of, you know, people have declined as women enter the workforce because now you have, you know, what John describes, this two-body problem where, you know, both people have to make coordinated switches and, uh, remote works all of it.
Exactly!
Freeberg, you’re running a company now. You’re the CEO of Ohalo. Tell us, does this resonate with you?
What do you think especially by younger people—his point and like being rude or being focused, being in the meeting—and then like maybe there should be half as many meetings and people should be paying attention? What do you think?
Well, there’s always room for optimization. We deal with this too—too many meetings, too many people.
I think what was most striking for me about the Jamie Dimon rant and the resonance it seems to be having, particularly in Silicon Valley and particularly with folks that are in leadership positions or on boards, is that this is another example of what I think is kind of a different tenor for leaders in business right now relative to where we were a few years ago.
Leaders are starting to step up and speak their mind and speak more directly and lead from the front rather than lead from the back.
I think the last couple of years—and I would say that the whole kind of transition away from wokeism and coddled employee workforces, which is something that a lot of folks talk about.
I’m not trying to just characterize it, I’m just saying that’s the characterization that’s been placed on it—that the employees made the decisions, and then the leaders kind of said, “Okay, I’m subjugated to the employees’ whims and needs.”
And look at what’s gone on with Zuck. He said, “You’re with me, you’re against me! Here’s a buyout option!” Elon obviously was a exemplar of this at Twitter.
We’ve now seen this become—yeah, CoinBase, Brian and his letter—and we’ve now seen this become, I think, a bit more of a standard in the kind of emergence in the post-COVID era that leaders can lead from the front, speak directly, and say, “This is the way things are going to be.”
My job is not to coddle my employees. My job is to lead my employees so that our organization, our team wins and we achieve our mission. That’s the objective.
It’s not to create a family workplace for everyone to be happy all the time. It’s to help the organization succeed.
And so I think, I have heard from people individually, I’ve seen this tenor shift underway right now, and I think that Jamie Dimon is another kind of exemplar of this that seems to have some resonance.
Alright, Shamath, I want you to respond specifically to this next clip.
Let’s play the second clip about organizational bloat.
“Every area should be looking to be 10 percent more efficient. If I was graduate department 100 people, I guarantee you if I wanted to, I could run it with 90 and be more efficient. I guarantee you I could do it. I could do it in my sleep!
And the notion these bureaucracies—I need more people, I can’t get it done! No, because you’re filling out requests that don’t need to be done. Your people are going to meetings they don’t need to go to.
Someone told me to approve some of his wealth management that they had to go to 14 committees. I am dying to get the name of the 14 committees! I can’t stand it anymore!”
Alright, Shamath, the bloated bureaucracy at big companies, your thoughts.
Well, you know, there’s that adage that says something akin to 50 percent of advertising is useless; we just don’t know which 50 percent!
Yeah, I think it’s probably true from most corporate structures in general, which is that a lot of the organizational bloat has evolved because of the way that people have responded to how you use technology.
So meaning if you went, look back 50 years ago, if you look at that famous picture of the Microsoft early team, they didn’t rely on software necessarily; there wasn’t Salesforce, there wasn’t Workday, there wasn’t all of this infrastructure.
And so instead, they probably organized by what they were good at and they just tried to do things efficiently.
And I suspect that many companies in the absence of technology found a way to just be very efficient.
That started to change when you had these rigid demarcations of where one job ended and another job started.
And part of why that happened is because you had all this software that went in and convinced people this will create efficiency, but in return the Chief Marketing Officer’s job is X, Y, and Z, this is how the roles are defined, this is how people do it.
And so I think that the reason why things have become so bureaucratic and bloated is that there is just this propensity to run towards software because you think it’s a solution.
At best, it’s a symptomatic aid; it doesn’t address the root cause, and in fact, it promotes bureaucracy and it promotes the bloat that Jamie’s talking about.
And if you look at Jamie’s P&L, he spends 16 billion dollars a year on IT, and I suspect that if you streamline that, you’d actually have half as many people because they’d be doing the job in a wholly different way.
And by the way, the counterfactual to it is if you look at companies like Facebook or Google or Tesla or SpaceX, who designs—and I’m sure Stripe is the same—who designs a lot of stuff internally that’s custom built for their org.
I think the way that you see this in the revenue per employee and a bunch of these other metrics in terms of the efficiency of those companies.
So I think what he is talking about is that he is a victim of this push to productivity because he would look like a Luddite if he didn’t adopt technology.
But by adopting the off-the-shelf stuff, he introduces organizational bloat. Because these things are demarked very, very rigidly.
You got the marketing team, as you mentioned, using HubSpot, and then you got like the sales team using, I don’t know, Salesforce, and organizational bloat.
The other thing I just want to say on the first topic is I’ve mentioned this before: other than engineers, who are who are naive but can be extremely productive from day one, there are very few other job types where naivety is an asset.
Most people early in their career are in a J-curve where they are negatively contributing, and the whole yes, slowing everybody down!
And the whole goal is that you invest in these people so that they come out of the J-curve.
There are probably other jobs that are like engineering, but many, many are not.
And so I think it’s important to get the kind of mentoring you get by being in an office. And in the absence of that, I think these young people, like Jamie said, are totally lost—that’s on them.
But then for the company, they’re completely unproductive and useless, which is on us.
Hey, John, Toby—I don’t know if you know Toby from Shopify, but he did this like zero-based budgeting kind of concept for meetings.
He just purged all meetings at the beginning of the year! He just like deleted everybody’s meetings from the top down.
I’m curious how you think about bloat and just all of these meetings and committees. Do you worry about that at Stripe?
We know Toby very well, and I don’t know, I always feel like yeah we should—I’m tempted to take some of the ideas like we haven’t done the meeting deletion one.
And you just say, “Oh, the meetings get recreated.” But they measured it, and they didn’t. It sounds like—and I do always enjoy Toby’s perspective, which I think that, you know, many organizational problems are in fact software problems.
And you know, you just need to write a script to literally—like I think he wrote the script to meet all the meetings from the Google Calendar instance. But there’s kind of this purity that you’re over-intellectualizing your problems.
And I do agree with you Jamath on the remote thing where like it’s very dangerous. One thing that can be dangerous with as CEOs think about this stuff is I think there are these unfair anecdotes that feel unfair that get people really riled up.
The quiet quitters, the anti-work subreddit, you know, all these talk of people working two jobs and that generates a lot of energy with corporate leaders.
But you don’t want to design your policies around like the bottom five percent of the company; that would be a horrible mistake!
Yeah, you want to design your policies against the top ten!
We have some like outrageously productive remote people, and they’re off and, again, the cabin in Idaho, somewhere, just you know, coding up a storm.
The thing that we have seen, and interestingly we measured this before COVID, because we were doing a lot of remote hiring and we wanted to see—we wanted to see how much we should lean into it.
Is that it is not good for early career people! We could actually measure it in our productivity data before the whole discussion about remote work happened during COVID.
And it’s bad from a work point of view; it’s also just bad from a personal point of view where they go mad because they’re 23 years old and they’re not—and they’re in solitary confinement!
Exactly! It’s literally solitary confinement, it’s ridiculous!
And by the way, breaking news here—Jamie Dimon now knows which 2,000—or I’m sorry, one thousand seven hundred and thirty-nine employees to lay off first!
There’s a co-worker.org petition to get Jamie to retract his statement, so the opt-in has been created.
If I know Jamie, I know he’ll be retracting that statement right away! Absolutely, he will bend to the pressure of those 1,700 mids!
Patrick, how do you deal with mids at Stripe? How do you deal with the people who—I’m not saying you have any, but maybe you’ve run into, because you got over 10,000 employees?
When somebody’s average, that must make you crazy! How do you deal with it?
No, the median employee at Stripe is awesome! The median employee at Stripe is not the median person in the population at large, although I think the median person in the countries we—you know, we put a lot of work into this team.
Well, no, I was using the term mids; mids are people who are just average people, not the above-average Stripe people who opt into that.
But how do you deal with low performance is kind of what I’m getting at?
Well, look, you need to have an aggressive performance management culture and to stay on top of that. And look, it’s not good for anyone to keep those people around because nobody likes feeling that they aren’t succeeding.
And so if those people are, you know, their careers aren’t advancing, they’re not getting, you know, positive feedback from their manager, from their peers, they aren’t shipping things—like whatever.
This is just like not a good equilibrium for anyone.
So we really try to, you know, stay on top of that. We track it closely.
The thing just on this discussion broadly to say is I think people very readily fall into a kind of normative moralizing perspective on this stuff and people should be in the office, they shouldn’t be in the office.
But like there’s a lot of should here! I think it’s helpful to just, one, kind of as John referenced with, you know, some of the analyses, just, you know, be quite empirical and objective and just like look at what the data says.
And then second, just recognize there’s a lot of heterogeneity; as in people have different preferences; people have different abilities to work effectively, you know, when they’re by themselves.
And you know, some don’t. Organizations are doing different kinds of work: Nvidia, you know, last I checked is doing pretty damn well.
And you know, Jensen is on the record as saying he, you know, doesn’t give a shit about where you work!
Coinbase, Shopify, you know, they’re all these, you know… Remote first companies and then, you know, I was recently chatted with the folks at Jane Street, and they really believe that, you know, being co-located and to be able to share ideas on the trading floor and so forth is really important. But I don’t think these pictures are necessary. These worldviews are necessarily contradictory; they probably hire different kinds of people or in different kinds of businesses and so on. And so, I don’t know. I guess I’m just skeptical of flat shoulds in this space, and yeah, many paths to heaven.
All right, so let’s move on to our next story. The number one we should just keep in mind is labor productivity in the U.S. is up like 20% in the last 10 years. And so, just like, again, you just look at the data; just the median person in the economy or the average person is producing 20% on an inflation-adjusted basis more than they were 10 years ago. Yeah, and that’s going to keep wrapping up with AI and all these amazing tools that are coming out. We’ll leave that on the side for now because that would be an hour-long rabbit hole we could jump down, but we got to get back into Doge.
The number one, well, I’ve heard a couple of criticisms of Doge. One of them is it’s one-sided. We’re only hearing about, you know, people on the left doing grifts and USAID. The other one is, hey, you’re pointing at little tiny things like USAID. When are you going to get to defense spending and social security? Well, here we are. The Washington Post is reporting that in between doing sets of 47 push-ups, Defense Secretary Pete Hegseth asked senior leadership at the Pentagon to develop a plan to cut 8% from the defense budget each of the next five years. That’s compounding 8%. Here’s a chart; we’re talking about close to 300 billion in savings over five years if they hit—which isn’t a crazy target—8% a year. It’s just crazy in our country where we haven’t even been able to have our defense department pass a basic audit if you’ve seen those types of reports.
Let’s pause there and just talk about military spending. Chamat, I think that military spending needs to sit downstream from technology because if it doesn’t, you’re sort of misappropriating the money. What I mean is that we’re inventing incredible capabilities in AI and autonomy. I think that you need to take those things first and figure out how to projectize them because I think that builds the kind of modern war machine we need. Otherwise, what happens? I tweeted about this. Nick, maybe you can find it. But like the CBO red-flagged a project where the Navy was about to appropriate 1.2 trillion dollars to build frigates. Now there’s a body, I think, of military planning that says this is a projection of power, and so you need to spend this kind of money because people want to see the big boats and the big iron in the water.
Okay, and maybe there’s something about that, but the reality is you can’t be spending three or four billion dollars a boat and taking, you know, eight, nine, ten years to build these things. It’s so this is not sustainable. And part of why they do that is it’s not coupled to what’s actually happening with respect to innovation, where there are core pockets of companies. Saronic just announced a 600 million dollar raise today, Sail Drone announced hundreds of millions of dollars of contracts with the Navy, and Drill is doing that with the Army. So I think that military spending needs to happen downstream from what’s actually happening in technology broadly speaking. We don’t have that.
What you have instead are system integrators with extremely deep connectivity that are able to contract well, not necessarily to invent well. Freeberg, any thoughts there on cutting defense spending? Obviously, we have, to Chamat’s point, amazing founders like my guy Palmer Lucky cutting the cost of very important—
He’s not your guy; he hates—
That’s my guy; he hates—
Bestie?
Oh no, we—it’s all a joke, everybody calm down. You just have a little—
I literally hate you, Jason.
No, I talked to—listen, I know all the board members. I got a personal relationship with—your career’s ended, he’s gonna do everything he can to your ranch—
He loves Jacob; he loves it. Everybody needs a foil. It’s all sorts of problems for the rest of us when you go out and talk about people for no reason.
It’s great.
What are you talking about? I never talk about Stripe, guys. You don’t have any beef with your employees, mids, for no reason.
For no reason you’re just like, “Oh, what about your—?”
That was a hypothetical.
Yeah, okay, I did say that you guys pocketed 500 large.
Look, we can come to the summit and, you know, Palmer style just like—
Oh my god, yeah.
Long list of things I’ve said about you, please.
Yes, absolutely. Shout out to my guy Palmer Lucky.
But what do you think, Freeberg?
For sure, let’s get back on track here.
Okay, so here’s what I think. If you take defense down to first principles, there was an excellent tweet that we were all texting about yesterday. It may be an observation that Trump’s negotiations with Russia and China, where there’s all of this hemming and hawing about those negotiations being complying with the wants and needs of dictators, may actually be a shift in strategy on the global relationship the United States has with other global powers, in particular a shift from the objective being about U.S. primacy and the U.S. being kind of the sole great power on earth, to recognizing that that’s no longer the case and that in a multipolar world we no longer need to invest in wars, need to invest in defense with supposed allies to try and build up our strength across the globe.
I’m not saying that this is necessarily the right strategy, but it was an observation that maybe the strategic imperative is now to have kind of a multipolar stance in the world rather than a stance of primacy. And in that framing, you then ask the question, okay, let’s make that the case. Now, if we do agree that we are all going to settle into a new world where China, Russia, and the United States are not necessarily equal powers but shared powers across the globe, in that context do we need to have as much of an investment in global defense? Do we need to continue to pour dollars into building up arsenals and military bases and troops and stations and positions all around the world? Perhaps not. Perhaps the world gets divided peacefully and we open up global trade relationships and everyone benefits economically from the advances in technology and improvements in productivity, and the world order is peaceful but multipolar. Maybe that’s the new era that we’re entering, and in that context, you don’t need as much of a defense.
Separately, to Chamat’s point, there’s different technology that’s now in play. We’ve seen it in the Ukraine-Russia context that a ten thousand dollar drone can destroy a ten million dollar piece of equipment, and China now has drone factories that can output millions of drones each month. So, if China develops this new type of arsenal with millions of autonomous flying systems that can go and attack troops and attack expensive pieces of equipment, do we really need aircraft carriers? Do we really need tanks? I think that’s the whole Hegseth-led, Trump-led conversation that’s underway in defense right now. Number one, multipolar. Number two, therefore we don’t need as much defense spending. Number three, maybe the defense spending that we do should account for the new technology in play in the battlefield, and that really changes the character of how the defense department is structured and how funding is structured. So that’s really, I think, the way to look at it versus, hey, let’s just cut defense spending for cutting sake, and that might be what’s going on right now: a holistic view of it.
Patrick, any thoughts on what we’re seeing in defense tech saving money through Doge?
Well, obviously, what Andrew and others are doing is pretty amazing. But, you know, we’re obviously not defense experts, but sort of just bring the credit card merchant perspective to bear here. You know, we naturally just go and look at the time series and the sort of the data around us. I guess I’m struck by, and again, maybe I’m getting some of the details wrong here; this is outside of our zone, but as far as I can tell, the cuts proposed over the next couple of years for the defense department are of approximately the same magnitude as the reduction in the defense budget that occurred between 2010 and today. And so, it’s not like this is some unprecedented transformation in the DOD budget. We’ve done this.
And then secondly, you know, as far as I can tell, one of the most ecumenical uniformly shared bipartisan issues in Washington is the inefficiency and the profligacy of defense procurement. James Fallows was writing a book about this in the late 80s. You had, you know, Augustine’s laws and their whole book about this. Just everyone seems to fervently believe that defense procurement is monstrously inefficient. Now, you know, it’s possible to make budgetary changes without fixing that, but obviously the prospect of meaningful improvement there seems really beneficial.
And if I can just give a quick book recommendation, you know, this book Boyed by Robert Quorum about John Boyd, the Air Force colonel who was part of the reformist movement. I feel like everyone in Silicon Valley has that book on their shelf and no one’s actually read it, but it is a—
Exactly.
It is a kind of referencing, sprinkling some OODA loops into your remarks always helps.
Exactly, yeah, sounds smart.
But that is a great book and it’s a book about Air Force procurement essentially where he had his— you know, basically the story was that the Air Force generals of the time wanted planes that were bad and he had a theory about better fighter jets and he had his fingerprints all over the F-16 and the A-10 and the F-15 and various aircraft, and it was a real battle to get the Air Force to produce better aircraft. And they really, you know, the generals really wanted these bad aircraft that they had planned.
And so, that’s a fun read at this moment in time when it feels like we have this similar transition from—
Man, tell us the name of the book again. I know there are many books about it.
It’s called Boyed by Robert Quorum.
Okay.
And it’s a really engaging read; it’s also just very well written. It’s this kind of narrative non-fiction style.
Yeah, there it is, okay.
Another book selection from the All-In Book Club brought to you by Stripe. Use the code ALLIN to get a year free of the Stripe Press books.
Absolutely, oh, you do actually have a series of cool books.
Yeah, we’ll plug those towards the end.
All right, Chamat, you added a crypto corner.
Crypto corner is back! We had an exciting week of innovation in the crypto space. Last week, Argentine President Milei, who is a hero to a lot of people on the right or for government efficiency, promoted a meme coin. It was called Libra—dollar sign Libra. He originally tweeted this private project will be dedicated to encouraging the growth of the Argentine economy with a link to Libra for his citizens to go buy it. And buy it they did, but he deleted that tweet when this whole thing came apart and said, “I was not aware of the details of the project, and after having become aware of it, I decided to not continue spreading it.”
The market cap ripped four billion; it crashed 95% as these meme coins always do. 74,000 traders lost almost 300 million. 24 wallets had losses over a million, and Malay has been sued 100+ times already, and this just happened last week. He’s being investigated by his own government now, and there is an impeachment attempt underway by the opposition. Malay’s team told CNN that his endorsement of the coin was a mistake. Really? Oh wow, going out on a limb there. According to insiders, Malay never actually owned any Libra and was not associated with the coin. I think family members maybe put him up to it. The details of why he promoted it remain a little bit unclear.
There’s a lot of speculation. Chamat, do you have thoughts?
It’s kind of crazy. I mean, he was on such a positive upswing of momentum. It doesn’t make much sense why he got embroiled in all of this. The problem with this, though, is I think that the cover-up is always worse than the crime itself. So the first message was, you know, very Clinton-esque, like, “I did not have sexual relations with that woman.” He was like, “I did not endorse it; I just shared it.”
What’s his justification for how he could rationalize what he did?
The kid that’s behind this thing, Hayden Davis, I think is his name, he was on Coffeezilla—was an incredible one-hour. Did you see that, the Coffeezilla?
Well, I saw some of the clips on X, and it was pretty brazen because he essentially said that he had Javier Malay in his pocket. And then there were text messages that used some pretty colorful language to basically say the same thing. Then on top of that, there were some text messages that seemed to implicate Malay’s sister as having got some of the money from all of this. I don’t know; the whole thing just makes absolutely no sense that he was doing so much good, and now he’s going to go through this whole cycle of trying to wash his hands of this whole thing. It’s a complete waste of time and effort. I don’t know why he did this.
There was another interesting little tidbit. Friedberg, a friend of the pod, David Portnoy, supposedly he’s been getting in on this, and he’s a gambler and he loves gambling. He looks at his gambling. Obviously, he had put reportedly millions of dollars into this, and this guy we’re talking about gave him his money back. This guy also has something like a hundred million dollars sitting in a bank account anywhere. What’s your take on all these meme coins, Reburb?
I don’t like them. I don’t think that they’re like good. I don’t think they’re productive. All right? I think that a bunch of people are going to put money in and lose money, and a few people are going to make a lot of money. But at the end of the day, it’s no different than the people that sell trading cards or the people that create and sell collectibles and get paid for them. And this is just effectively a digital collectibles business.
Unfortunately, I think it’s amplified by like a thousand times because collectibles businesses have friction, and they’re manual, and you got to ship them. This creates a bit more of a digital frenzy where you see the social feedback loop happen really quickly in real-time, and that drives these things to a high value, which means people have the ability to lose a lot more than they otherwise would. But look, I mean these are not helping the financial system get rebuilt, as we talked about earlier. They’re not creating productive value; they’re entertainment mechanisms just like any other kind of gambling system might be. And, you know, people can choose to do that if they want, but personally, I’m not into it; I just think it’s stupid.
But whatever, Patrick, do you think these are like collectibles, or do you think they are perceived by the people buying them more like securities and more like Bitcoin?
To steelman the other side of the argument, they do trade with a ticker symbol; they are traded on major platforms like Coinbase and Robinhood, and people share charts about them. Where do you stand on it? You’re in the finance business. Meme coins good, meme coins bad?
I’m basically with Dave. I mean, they seem to me to be maybe analogous to gambling, which, you know, I don’t know that we want to ban gambling. Like if you’re able to do it responsibly and you understand what you’re getting into and so forth, like I guess that’s fine. But, as you say, judging by the tweets that I see, there are a lot of ticker symbols and charts and prognostications about future price trajectories and so forth that lead me to think that people are placing somewhat more weight on the asset and security value of these as compared to, I don’t know, some numerous intrinsic aesthetic value.
So, yeah, John, maybe two things could be true here. People are gambling, and they are being presented as financial instruments, and they’re trying to trick the suckers at the table—the suckers in this case being the people who voted for Malay. To Chamat’s point, this is the unbelievable cell phone of the decade.
Yeah, look, I don’t like meme coins; I think they’re bad. And I think they’re part of, like Patrick said, a broader suede of things that we need to figure out societally where the legalization of sports betting, combined with highly targeted advertising—I don’t know if you guys have seen the stats on, you know, whales in sports betting losing very large amounts of money—and there are just these heartbreaking tales, and there’s a very large number of them of people losing much more than they expected.
And I don’t know; we have to reckon with these societal questions. I don’t think the super easy answers that come along from time to time. I only learned recently that state lotteries are a relatively recent phenomenon. Like, I think it was one state started doing it in the 1970s, and then a bunch of the other states followed suit. But it’s kind of odd when you step back that I pass a billboard on 101 for Power— you know, the state of California trying to, you know, get me to buy a lottery negative EV bet.
Yeah, it’s just like—but that’s become very normalized. And so I think it’s a bucket of hard questions here around meme coins, sports gambling, whatever. I don’t know what you do, but there are a lot of meme coins that are not the only place you find these very heartbreaking stories.
This is the first time where they’ve actually talked about, or at least where I saw the details of how this stuff happens because he laid it out, and there are these people called snipers that go and pump up the bids right as soon as the coin gets launched. And then they’re able to—so there’s like this entire mechanism. It’s all so shady.
I was going to say somewhere where I feel like the specific thing within meme coins that’s probably most pernicious is like the rugging dynamic. And if you could have meme coins to a girl but without the pump and rug, if it was like, I don’t know, just some mimetic tracker of some sentiment or something, like maybe that’d be okay. But the particular way in which they seem to be, you know, employed is like, yeah, some sort of discontinuous run-up and then—
Well, the rug, what do you think, Jason?
I agree with you, Chamat. Malay had the greatest PR run of all time. I mean, he became an inspiration to all of us here in America who were concerned about the deficit and out-of-control spending and ridiculous departments. We heard Jamie Dimon talking about ridiculous committees and all this nonsense.
I don’t know if you guys remember, but remember he was like minister of culture, afuera, and minister of gender, afuera. This was the precursor to, of course, Doge where now we’re like, “USA deleted. Department of Education deleted.” You know, “Defense Department minus eight percent.”
And you know what I really find terrible about this is what it means for leadership. What Malay did was he rug-pulled the people who put him in office. The people who voted for Malay are the ones who got hurt here. And when you think about leadership at its core, it really is about putting the needs of your constituents ahead of your own interest, the needs of your investors in the case of, you know, if you were running Stripe, right? You got to think about all these shareholders.
Leadership, you know, at its core, is, I think, setting the example, right? You set the standard—the moral, the ethical, the vibes, the culture; you set that standard. He had set such a great standard that we all loved, and you know the appearance of impropriety is impropriety, in my mind. That’s the leadership standard that should be here.
So, even being near this—your sister launching it, your brother launching whatever it is—he then went on to taunt. This is where I’ve really— you know, like people make mistakes, but—and this is a stupid one to make—but the taunting of his own followers. You know, I’m out on Malay right now.
This is what he said: the reality is if you go to the casino and lose money, I mean, what is the claim if you knew that it had these characteristics? This is another failure of leadership. Leaders own their mistakes; they don’t attack the victims. You take ownership of it. And the way you should judge people, I think, is what they do when they’re given a lot of power and what they do when they make mistakes. Malay is a failure on all of those fronts. It’s absolutely abhorrent.
That’s it. Thanks for coming to my TED Talk.
No, I’m just—I’m on fire about it. I just think it’s like really terrible.
Do you need help getting off your moral grandstand?
Now I do, I do, actually, yes.
Okay, yeah, I’m over here. I’m sorry; I actually care about morals, ethics, and leadership. I think that there’s a standard set by these people. That’s what I think about when I think about you.
Yes, of course, thank you.
All right, with friends like these, call some brothers. Can you imagine?
Please say the name right now!
It’s the goddamn “I.”
Okay, there’s an “I.”
I’m pronouncing the Irish.
We speed things up a little bit. We could put them together, it’s a little bit different. You wouldn’t know this from being from Sri Lanka, a great country. You know, you guys wouldn’t know why anyone watches this show, would you?
Oh, yeah, I don’t know—everybody says you had no content for this.
It’s why!
Do you make every show a train wreck? And we have to get it out of the—
The banter is why people come. People listen.
You know how many TV shows are about—I mean, you look at Friends or How I Met Your Mother. My wife and I are re-watching The West Wing right now, and it’s basically a show about, you know—
Yeah, but it’s just like they’re all buddies and loyal to each other and everything.
And I think the underlying idea behind lots of TV shows is it’s nice to have friends.
And I think that’s the success—the all-in one swing, by the way—is an incredible—
Which season are you on?
It’s an incredible show.
We’re up to season four now.
God, I got to get five or seven.
I’ve never got in on The West Wing, but of course, Sorkin left after season four.
Season four is so good!
So many people said the whole thing about the great debate that America needs to have. I think it’s still like the missing aspect of modern politics.
Explain the great debate.
Yeah, well, the great debate is like let’s talk about the topic that’s at hand and talk about it on the merits of what’s right for their country, as opposed to everything being about attacking because the other side brought the idea forward. And now we have to attack the other side and frame the idea as being beneficial to them and hurtful to us. Nothing actually gets resolved because we don’t end up having objectivity around these conversations around some of the major issues that the country faces, many of which, by the way, both sides have valid points of view.
And if we can kind of have the great debate, if we can have these conversations, like Doge, right? Like abortion, like, you know, the rights of states, like spending, like there are all these things that we should be talking about rather than use that moment as a way to attack the other side politically so I can make sure I’ve got points and kudos leading into the next election cycle.
It’s just awful. Anyway, I missed that about The West Wing. It feels like a purist, like just a beautiful way of thinking.
I wonder what it would be like to watch The West Wing and then House of Cards back-to-back.
That’s something I should know, but it’s like really a juxtaposition—those two different shows.
Yeah, but isn’t The West Wing kind of the opposite of what you just said you want the all-in to represent? Because I see The West Wing as being sort of fully immersed in and representing, you know, one sort of particular worldview.
There was, you know, in some sense we look back on the 90s of the Clinton years or something as, you know, this period of great harmony in the country. And you know that harmony might have been great and the economy was doing well and, you know, all the things. But it wasn’t exactly a period—I mean, whatever; I wasn’t here in the 90s, but you know, from afar, it did not feel to me when I was eight or whatever as a period of tremendous ideological debate and fervor and schisms and all the rest.
During the 90s, during the Clinton era, you’re saying?
Yeah, yeah. And I think—I mean, maybe I’m wrong. But I think of The West Wing as, you know, a kind of recapitulation of the Clinton years.
Maybe they were—I mean, maybe they were the compromising party because—I mean, tell me another modern Democrat president that’s had any point of view on balancing the budget and creating a surplus, which he was essentially aligned with the Reagan point of view at the time.
And he kind of, you know, again, as Jake L said, he was a centrist and he brought the parties closer together rather than farther apart with how they operate.
I agree with Patrick; the thing that makes The West Wing a great show is that it’s about the insider nature of the White House and the West Wing and where you see these characters like Toby, who would never be a star in any other show under any other circumstance on any network ever, and instead, he’s one of these central quasi-good, quasi-nefarious bully kind of, you know, he was like a precursor to the Rahm Emanuel archetype in the Obama White House.
I think I also find it funny where, you know, the way Dominic Cummings has talked about just his experience of life in government was that it’s so distracting trying to get anything done because, you know, you have some plan, you get up in the morning, and you’re gonna go do something that matters for the country, and then you’re just instantly by 8 a.m., you know, sideswiped by some kind of silly controversy of the day.
That’s basically many of the episodes of The West Wing, where they like have some actual important thing that they want to get done and then they just get waylaid by a silly controversy.
Yeah, it seems to me like you’re also the product of the technological innovation that occurred during your presidency and during your term. And if you think about Clinton, he got to ride the internet and this massive economic boom, and you look at, you know, Reagan, the PC boom. I mean, sometimes the timing really matters.
I think, though, I think, you know, and again, I’m not any grand expert on the on the Clinton years, but I think, you know, it is interesting where, you know, one of the first acts of the Clinton presidency was the was the deficit reduction act. You know, to your point, you know, when’s the last time that a Democratic president really, really cared about the deficit?
And I think federal spending fell by five points of GDP over the course of the of the Clinton presidency, which is really not a small amount. You know, so obviously there were some kind of structural tailwinds from, you know, technology and the internet and all that.
So, yeah, a bunch of that was defense, but like, nonetheless, so he did it, and the last two administrations—and you look at California; there were massive windows of surplus, and there were massive windows of a surging stock market over the last eight years, and we plundered and we wasted them by adding 16 trillion to the debt during a good time!
Like what’s going to happen during a bad time? Just absolutely brutal.
Let’s move on. Where do we want to go here? We got Grok 3, we got the China private sector, we got a victory lap for Freeberg. You heard I want to ask you guys questions about ARC Institute and the EVOL model.
We should do that!
All right, let’s do the ARC Institute. Freeberg, why don’t you ask the question?
Patrick runs the ARC Institute, right?
Okay, yes.
And we’re the co-founders, and then there are two scientists, and you guys are funders of it, or—
Yeah, maybe you guys give us the answer. They put a lot of money into this.
Yeah, yeah. So, the Institute is a non-profit; it does basic biology research. It’s in Palo Alto next to Stanford. It’s about 230 people today, and yeah, John and I are among the funders of this, but there are a bunch of other very generous donors.
Can you have curiosity-driven research that’s on the website?
Yeah, there’s kind of two things behind it. So the first is science: the vast majority of biology scientists today receive NIH grants for basic research, and the NIH grants are one, just hard to get and annoying to get. You know, scientists spend 40% of their time working on grant overhead and so forth. But worse, like even more perniciously, the grants are very restrictive in terms of the kind of science they can do.
And so we ran a survey of scientists back a couple of years ago of top scientists, and four out of five, like 79% of them told us that if they could just spend money however they wanted, if they weren’t kind of limited by, you know, what they’re prescribed by these NIH grants, four to five told us they would change the research agenda a lot.
And so I think the analogy here is imagine if there was only one VC firm and it was run by the government. How would that change the firm?
Had strong opinions on what kind of companies people should build?
Exactly. You know, literally the grant panels at the NIH are—and they’re consensus-based like explicitly. They’ve kind of consensus-based scoring mechanisms, and they, you know, penalize you if you’re doing work outside of your field and so forth. So hey, we kind of we go to all this work to train these amazing scientists and then we sort of don’t let them pursue their best ideas?
That’s kind of problem one, and ARC—the ARC investigators, you know, they’re fun to do whatever they want: curiosity-driven research. And then the second thing behind ARC is this idea that you can kind of divide diseases into three categories. You know, you have infectious diseases, and we, you know, broadly speaking, know how to, you know, generate cures for and treatments for infectious diseases. We have monogenic diseases, like one genetic mutation or something, and we don’t know how to cure those in most cases, but we can be screened for them and so on.
And then we’ve, you know, what the biologists call complex diseases, where there’s some kind of gene-environment interaction that’s most cancers, most autoimmune diseases, most neurodegenerative diseases, and so forth—Alzheimer’s, things like that. Exactly. And we’ve never cured a complex disease, and, you know, many of these diseases are very tragic precisely because, you know, not only have we not cured them, we don’t even have treatments, as you know, as John says, in the case of Alzheimer’s, for example.
And so, you know, the question is can we do something about this? And, you know, what would a research agenda and program that, you know, can help, you know, shine some light on these complex diseases look like? And our hypothesis—you know, we’ll see how much it’s borne out—but our hypothesis is that we’ve gotten a couple of new technologies over the last couple of years: single-cell sequencing. We can sequence the DNA or the RNA just like in one cell; we’ve, you know, fancy new functional genomics and CRISPR technologies.
So, you can make these, you know, fine edits and perturbations, again even just in a single cell. And then obviously you have transformers and AI and ML and all this stuff, and this is kind of a new read-think right loop in biology that just didn’t exist a decade ago.
And again, the question is, is this powerful enough now to, you know, solve some of these previously intractable diseases? Yesterday, ARC released this new foundation model for biology: it’s the largest biology ML model ever. It’s actually, I think, the largest open-source AI model ever.
This is EVO 2 you’re talking about?
Exactly, number two.
Yeah, and so it’s not just open weights, like, you know, the deep Seek model or Llama or something. It’s actually—it’s open-source since the training code is public, and, you know, people can go read the blog post or the paper or whatever. The thing I find amazing about EVO and that just really surprised me is so it’s trained on nine trillion base pair gene tokens.
So, you know, ChatGPT LLMs are normally trained on human language; this is a language model, but it’s trained on DNA, the language of life. And there’s only one human genome in the training set; it’s mostly other species, and even though it’s only seen one human genome, it’s state-of-the-art at predicting the pathogenicity of human genome mutations.
And so, you know, a famous mutation is the BRCA mutation for breast cancer: like it’s state-of-the-art at predicting the pathogenicity, the harmfulness of BRCA mutations. Again, it’s only despite never having seen one in humans; it’s only seen one human genome, and that human, you know, did not have these pathogenic mutations.
And so it’s kind of learning something deep across the tree of life. And I know I find that pretty cool.
And sorry, is there a phenotypic dataset that’s used in training?
So, I think, like, you know—
No, when you’re typically, right, and so when you’re building models in typical genotype by phenotype models, you’re trying to look at the phenotype, the physical characteristics of, yes, the organism: what can it do? What does it look like? What are the features?
And then you look at the genome, and so that tells you, hey, these are the specific genes or alterations or mutations that drove this particular phenotype, is kind of what the model tries to learn over time, with the objective being hey can I ask it to define a genotype or a genome based on a phenotype, based on a physical set of characteristics I’m looking for?
Vice versa, maybe you can just help us understand what is it trained on and how did that kind of, you know, prediction and BRCA—you know, how is that possible?
Great question. So it’s totally unsupervised, that is to say, you know, you’re just showing us lots of genomes, and any kind of latent structure that it learns is just based on trying to figure out how to kind of organize that knowledge. But we’re not showing it any labeled data or phenotypic, you know, kind of outcome data, or you know, what have you.
And so then you’re able to—you can give it a genetic sequence and ask relative to its understanding of the genetic universe how likely is this particular sequence, and so then you can do things like like, you know, predict anomalousness or pathogenicity or whatever. Right?
You can also then kind of, using the embeddings of the upper layers— now we don’t get too technical here, but like, you can train another model on top of the model, and even if you showed maybe only a couple of examples, it learns very quickly, okay, kind of here’s, you know, here’s how the weights of EVO2 correspond to this particular task.
And those sort of models trained on top, in turn, out to be, you know, really accurate.
You guys open-source the base model or you open-source the fine-tuned or both?
We open-source the base model, but there’s no kind of proprietary reason that we didn’t open-source the fine-tunes, like it’s really easy to produce them. And yeah, if anyone wanted one of them, we’d happily share.
Where does it stand in the spectrum of different tools that folks would use to solve these life sciences problems? There’s cell models that are being developed by some; then there’s these protein models. Where does this fit in the landscape of foundation models in biology?
It’s obviously very new, so it’s a bit of an open question, sort of how exactly people are going to find, you know, ways to use it and applications for it.
Part of I think is cool is that proteins and RNA and, I mean, phenotypic expression and everything, you know, all these things sit on top of the DNA. Like in some sense, the DNA encodes everything because, you know, the whole organism comes from the DNA.
And so I guess the question would be—and, you know, we don’t really know yet—is DNA all you need?
And with EVO1, we saw some, you know, encouraging suggestions that, for example, you can build really good protein structure prediction models out of a DNA foundation model, even if you don’t train on a lot of, you know, protein structure data.
But I’d say just it’s a really exciting time, and it’s kind of an open question, and I don’t know if you analogize EVO2 to, I don’t know, whether it’s GPT-2 or 3 or something, but, you know, I think we’re going to see a similar Cambrian explosion of applications over the next couple of years.
The thing we’re really excited about at ARC is training cell state models and trying to better understand, you know, how cells, you know, what causes them to change states.
And so we’re thinking a lot about that. But, you know, the reason that the weights are on Hugging Face and hopefully we’ll be surprised—
And, Patrick, do you just expect that over time, as Stripe continues to grow, you can just take some of your own excess capital and other people will do the same, and keep funding ARC and then if there’s something that ARC creates or innovates on, if it can generate some amount of money, it would just kind of flow back?
Is it meant to be self-sustaining, or is it always just going to be via patronage from successful folks that just want to keep it going?
John and I are, you know, we are ourselves very committed to us, and we’re kind of underwriting it in that regard. But, well, one, we’re just lucky where there’s a growing donor pool of other people supporting it.
I think it’s just better for an institution if it’s not kind of beholden to the whims of, you know, one donor, one group of donors, or something. So, I think that’s just a much healthier structure for us. There’s also a large group of people who are just becoming interested in science and realizing, I mean, you know, Jason was on his moral pulpit. My pulpit is that you know all is not well in basic research in the US today.
And again, the way to see this is just to talk to the scientists themselves and they tell you how kind of inhibited they are and, you know, the kind of problems caused by the strictures and structures around them. We don’t see arc as, you know, the answer. Hopefully, it can be sort of one point in the space, but then you know there’s other people doing cool stuff; you know, Brian Armstrong, of course, started a company in the longevity space, and Yuri Milner and others started Altos.
And you know, this is the people, this, the Chan Zuckerberg Institute. So, you know, people are trying different things, but no, our arc is, you know, we’re very happy to support it. And then, if you know, it’s possible that arc over the long term becomes self-sustaining, but you know, that was my next question.
Yeah, it takes a while to get things into the clinic, so you know, we’re not holding out for that tomorrow. Well, I, you know, when they have this technology transfer department at every major university where when scientists get grants and they work on some innovation, it gets monetized. And so what happens here? Who owns the innovations? How do you license them? Because it would be amazing if it just wasn’t based on…
I believe you guys have put over a billion dollars into this. That was my understanding. Is that true? It’s just like you guys are over a billion dollars into this effort. Not quite; the numbers are public. So arc spends around 100 million a year. Oh, okay.
And it started about three years ago. So, hundreds of millions of dollars. This is a really significant thing. Yeah, and again, I want to emphasize there are other donors, so it’s not just us. But I mean, it’s a non-profit; there have been spin-outs and there will continue to be. And so if one of those, you know, really, if one of those becomes Moderna or, you know, the next Ozempic or something, then, you know, that could be really good for arc, and arc might have an endowment and be able to kind of self-sustain and so forth.
There’s no prospect for us to make money on it in the sense that, you know, it’s a non-profit.
Well, actually, John, yeah, just one thing there. I was talking to a friend of mine; you could, if this thing actually hits, you could flip this non-profit. Oh stop, I got a guy you could talk to. Oh anyway, John, go ahead.
Oh, strays on the whole modeling world. We talk a lot about the idea that you can kind of use a computer to state the phenotype or the physical characteristics you want in a biological organism and have the software resolve the whole DNA needed to make that physical organism real. And it can do it from its prediction ability on what genes, what combinations. But we’re a couple orders away from that, right?
I mean, I think like ultimately we always talk about, hey, we want to be able to define or have the software define the plant that can grow on the surface of Mars. It knows the soil type of Mars, it knows the air, you know, it knows that it’s carbon dioxide based; it’s 10 percent of the earth’s atmosphere. This is what the daylight structure looks like; it needs to be wind tolerant, and then the software predicts an organism that might be able to do that.
And obviously, there’s a lot of this predictive work going on in proteins, then the higher order is cells; so single-cell organisms, microbial organisms, and then ultimately multicellular organisms. So, plants and then finally animals, where you could basically create organisms from scratch using software because we have all the other tools to biologically put these pieces together today.
But this is a great kind of, I view it as a pyramid; there’s a ton of phenotypic data that still needs to be fed in, ultimately to kind of have us all understand protein-protein models and a lot more to it. But it’s a great…
I think that’s right. Like you can, there’s a certain amount you probably derive sort of, you know, from first principles just by looking at genomes. But I think the really powerful models are going to need to do exactly what you say and to feed in a lot of ancillary phenotypic and just kind of other data, how they fare in different environments.
And the sequencing data got ahead of the phenotyping data because there’s so much sequencing data that’s come in. So you can do a beautiful job predicting, like, correctness in a genome. But this sequencing data is really nicely digital, whereas you know the phenotypic stuff, it’s like, well, what exactly is the data?
Yeah, totally. Dave, sorry, I’ve—while we’re in the science corner, I have a question for you. Dave, which are strawberries? You might know the answer to this. A bunch of tree species around the world are under attack. So in Ireland, we have this problem that the ash dieback—ash is kind of Ireland’s national tree. They use it to make hurlies, which is, you know, for the national sport. Since the mid-2010s, you know, especially as the live plant trade has ramped up, we need to have a hurl for Jason, for Jason, obviously. Yeah, put it right here on the shelf to the American chestnut here.
Yeah, no, exactly. I was going to reference the American chestnut as well in the US, but it feels like we have this real problem, and it’s so sad where so many beautiful trees are under attack from the bark beetle in California and, you know, the various conifers that we’re losing.
So we got us on the black pod disease, the black pod fungus in cacao and coffee is being destroyed; TR4 is destroying bananas right now. Let’s go. No, no, like it’s a real, like this is a real issue. Down to the science corner here, so this is…
Yeah, I mean this is exactly what we aim to address at Ohalo. So, in some cases, you can actually silence a gene that’s a suppressor of immune function of the organism, which can actually improve disease resistance. But how do you do the delivery of ash? Do you like this airborne sprays or what’s the—yeah, how do you treat the tree?
Yep, so ultimately if you’re going to use a genomic method, you would transform the genome so you would edit the genome and you would regenerate a plant or regenerate a tree and then propagate that tree.
Okay, but then like we have to—we have to replant all the trees. To replant the trees, we’d have to replant the trees and ultimately do custom projects. Can we do a little thing on ash in Ireland?
Absolutely, that is some of the work we do. So we announced a few weeks ago a partnership with the University of Florida to use our methods to basically introduce disease resistance for a major fungal pathogen that’s destroying the Florida strawberry crop. And so that’s what we call a trade program, where we can identify a specific genomic trait that we can go and introduce into that plant. But then you’re right; you do have to grow all the plants back and then put them back in the ground. That’s the second best to pure extinction.
But I have—in Ireland, I ended up owning this kind of country house and virgin woodlands, where you know, woodlands that Ireland used to be fully forested and then was denuded with the arrival of agriculture. There are some kind of ancient woodlands on us that are from the original when Ireland was fully kind of covered in trees, and I find the die-off of species very sad.
And so we got to get… yeah, but no, I’m not like, I’m very optimistic. Like we know how to address these solutions; we know how to regenerate the trees; we can do this quickly; we can resolve these problems. But you are right; I think you should be selling a skew to the people in Tahoe. Like, you know, the Tahoe Basin has been so worse than decimation, as in decimation is only one in ten, which is like, you know, half the trees in Tahoe have been hit by a bark beetle.
So those are very interesting ones because insects, you can actually build very specific defense mechanisms against insects, but we generally have to improve genetic diversity. And in doing so, you know, there’s a natural resistance because the evolutionary… like the reason we have a TR4 problem in bananas, all the world’s banana that we grow commercially comes from one original banana clone called Dwarf Cavendish.
And they took that one plant, they cut clippings of it, put it in the ground, grew another plant, cut clippings of that, and they kept multiplying it. So all the bananas we eat and all the bananas that are planted across tens of millions of acres worldwide come from one original clone. And because of that, this fungus has been exceptionally capable of evolving itself to better eat that banana plant.
And so 60 cents of every dollar we spend on bananas today goes towards fungicide. We’re spraying these banana trees once or multiple times a week to kill this fungus. We’re consuming that; it’s super expensive. And if we had genetic diversity, if we had better genetics in the banana programs around the world, we’d be able to radically improve the administration.
So you think we need more diversity? Are you in favor of DEI, Friedberg? They cornered you, Friedberg. I got you. You got to make one promise to me. Here it comes—you’re not going to start working on raptors. I don’t want to see any of these raptors running around San Francisco!
Okay, Chamath, your thoughts here on science corner. Here, it’s been a really enthralling one. The raptors are coming for you. I find it incredibly inspiring that there’s just so much movement in these foundational models. It’s incredible. Every day just seems like there’s something new.
The biggest problem that I think that the commercial community is going to deal with is how to actually take advantage of it because your kind of head spins because you don’t exactly know where to start. The biological models are different in that I think it’s a much smaller population of people that will use it. And I think they do have to figure out how to take these models and complement the existing pipeline.
The pipeline they have right now I think is pretty brittle. I think we all know that in life sciences. My wife struggles with this a lot—how to complement a very traditional pipeline with this kind of stuff. So, I see it firsthand and how she tries to allocate capital towards these problems.
On the other side, I just think these foundational models are really incredible. I think that I was completely wrong on a couple of my earlier thoughts. One thought that I had for a long time was it just seemed like all these base models were asymptoting, and so I was not convinced where all this capex would go in a productive way.
Like, why are you buying all these Nvidia GPUs? And then I think if you looked at Colossus, Elon’s Colossus X AI built the largest data center over a hundred thousand GPUs, going to two hundred thousand in a hundred and twenty-two days. I mean, basically what he proved was that there are still valuable gains in pre-training. So the larger the cluster, the more value that there is.
Now, he also benefits, I guess, from the X feed, but that was really interesting; so now I’m like a little bullish on Nvidia. I’m like, oh my God, if this is true, then all this capex may be justified. You could be buying a lot of stuff.
Then you look—I actually also just to maybe riff on this Grok 3 thing for one second—I had three takeaways. My first takeaway was I was sneakily surprised on the pre-training upside on having a larger cluster, so I think that’s very pro-Nvidia actually, and it’s actually also just really good in general for foundational model makers. So I think like that’s like a really positive thing.
The second thing is I don’t know if you watched the live stream, but did you guys hear some of the stuff that these guys had to pull to pull this thing off? One of the most incredible—so the way that Elon narrated it was we first had a physical problem, so we just had to search all around the country for one single location where we could actually put a hundred thousand GPUs, and they found it, which was an old Electrolux factory in Memphis.
Okay, that’s kind of interesting; the power… he only had like 15 megawatts, and he had to get a quarter gigawatt. So he had to basically buy every useful generator that was available. But then, they had to liquid cool it, and so they bought one third of all the portable liquid cooling capacity in America and located it on-prem.
But then, they figured out that there was a power problem. So, then they took all these Tesla power packs and then had to do power smoothing, which had them had to rewrite all of the power pack firmware.
You know how we talked about Deep Seek being this moment where we had lost sight in America of capital being the source of innovation? He proves actually a more generalized rule that I took away from this, which is you always have to have a constraint. So meaning, let’s say there’s like infinite capital in his case and infinite talent because he can basically recruit anybody he wants.
What did he do instead? He created this artificial constraint of time; and so he was just able to say you’re going to get this done in a moment, and Nick, I saw the third graph that the guys at Artificial Analysis sent to me. I just want to put it up here because it shows you guys the quality of Grok 3 relative to the amount of time that they’ve spent on this problem is, to me, what’s staggering.
So if you just sort of project the rate of change of this, and this is without judging Open AI or Anthropic or anything else those guys have been doing it for years, these guys have been doing it for a year and they did all of this MacGyver engineering and were able to pull this off.
So that’s my second takeaway, is that innovation needs a constraint. Sometimes it’s capital, sometimes it’s talent, and sometimes it’s time. And so if you can basically be just completely rigid on one of those dimensions, you can get a great team to create something.
So that was an interesting takeaway, and then the third is I think what this also speaks to is the notion of like a keiretsu, right, which is like the Japanese word for like companies that work together while still remaining independent conglomerates.
Yeah, lose partnerships; it’s more interlinked companies; it’s interlinked, sure. You know, Koreans have tables, right? Japanese have keiretsus, but this is the manifestation of an American keiretsu, which is Elon is able to get engineers from Tesla. He’s not just buying the power packs. He had them re-engineer the actual firmware in real-time on-site.
And so there’s this positive ability to just organize effort and human capital. Like, look, could we all stand up a data center and go and buy 500 million dollars of power packs from Panasonic? Absolutely. It would take a few months—18. And then, when it looked like we needed to rewrite the firmware, it would take another 18 months to your point, Jason. So it’s really incredible what these guys are able to do together.
Those were right; it was really, really inspiring. Chamath, a book I think you might find really fun is, uh, it’s called Henry Kaiser: Builder in the American West. But Kaiser is kind of underappreciated these days. He was the Elon of his time. He started as a road builder, of all things.
He won the contract to build the Hoover Dam; he built the Hoover Dam. He started a shipyard during World War II—uh, yeah, exactly. This car he decided to make cars; he decided to make airplanes; stations. The fame, the famous four-day Liberty ship—remember the propaganda win during World War II of, you know, they were able to lay down a ship that was at the Kaiser shipyards? Kaiser Permanente spun out of them as part of their…
Um, I was literally just saying that, pulling up my notes from the book. And, uh, just he was just a complete phenom, and he just kept finding new industries. It’s like, oh, building cars, how hard can it be? Oh, building airplanes, how hard can it be?
Yeah, I mean that is the nature of entrepreneurship. The nature of entrepreneurship is doing something delusional and then just letting… you know, most entrepreneurs just do one delusional thing once and, yes, they didn’t after—like, again, Elon and Henry Kaiser back in the day.
It’s in the world of atoms; very hard things, short timelines. And San Francisco now kind of at least in the physical domain stands for a kind of stasis; you know, it takes you 10 years to, you know, build anything.
But when he had the shipbuilding yards here, he went from zero to a hundred thousand people in Richmond in one year. He basically built the city of Richmond, California.
How do you—how do you think these guys pull this off? I don’t—personal sacrifice, massive personal sacrifice. I understand that, Jason. But I’m talking about like tactically pull this off where you have to be on-site at some point organizing this team, directing this team, being able to help isolate these problems, fix them. It just seems impossible to do it once, let alone six. I don’t understand how they actually have some insight to this.
Just from knowing Elon, this— a lot of these things compound. A lot of what he learned in material science doing SpaceX and about making the engines and then working with metal, you see in his production at Tesla and specifically in the Cybertruck. He has learned so much about factories.
I don’t think there’s a person on the planet who knows more about factories now, having built a battery factory, a space factory, an engine factory, and a car factory, and now building Optimus on top of that. So these things compound, and then, a lot of the engineers will float between the companies.
So, there are folks who have worked at SpaceX who then go do a tour over at Tesla, etc. And a number of those wound up coming into…
I’m going to read you a few quotes in this book; I’m just going to see if they remind you of anyone. Kaiser’s managers challenged convention from the start. As builders, they were experts at coordinating workers and materials.
Kaiser was almost contemptuous of traditional methods. His partners had long since despaired of getting him to follow customary procedures in preparing his bids for each new job. Kaiser would try to conceive every possible technique that might justify making a bid low enough to win the job.
Once the construction was underway, he was forever trying to come up with ideas that would expedite the work. Perhaps more than any other builder, he believed that the faster a job gets done, the lower the costs can be.
That’s incredible. Incredible! Well, and what happened with Colossus is they had told Elon that it would—when he wanted to use other network operation centers to host Colossus, you know, and he looked—there were none available. And when he did find quotes from them, they told him 18 to 24 months.
He just determined, hey, if this—there’s no reason to even do this; if I can’t get this done in a, you know, a hundred days or something, why even join the race? I’m going to be so far behind.
And if you look, just to wrap this segment up and get on to our final two segments, if you look at these two charts about Grok, it’s now—and you know, listen, these benchmarks in these arenas and testing, there’s a lot of controversy around them and people keep leapfrogging each other, but they do give us, I think, our best shot at looking at progress.
This is the benchmark here for Grok on a bunch of different tests—math, science, and coding. And as you can see, Grok 3 has now eclipsed Gemini, which is Google’s LLM, and DeepSeek from China, Claude, and ChatGPT Forum.
And so, to your point, it’s pretty impressive. Yeah, at the top of the LMSYS leaderboard. The thing here I think, Freeberg, I’d like to get your comment on is if hardware is the constraint, does that mean that the person who understands hardware and build-outs, as Chamath was pointing to, does that mean that they by default win?
No, but Jason, hold on. This is what’s counterintuitive; it wasn’t clear—because no, it was not. Yes, I would guess that the last couple of iterations, it seemed like OpenAI has moved to what comes after the base model, meaning in the allocation of resources in terms of what they were creating.
And so, this is what’s so counterintuitive; he was like, no. And so, I don’t understand what he knew that everybody else didn’t know, but that the size of that cluster made no sense. And it could only be a result like this where he basically proved that there was still value in pre-training—where size actually led to better outcomes.
That’s not—that’s I think that was counter super consequential, is my—is I mean complete agreement with the Chamath and just Freeberg to wrap the segment up and put a bow on it. We see these LLMs—they’ve made incredible progress as we just heard from Evo2; I’m sorry, Grok, and we’re making these giant gains in space, you know, in work, and it’s specifically in space. Dave, do you think this will get us any closer to Uranus?
So sad, so sad, it didn’t even land!
Okay, let’s do our final—don’t even, don’t even acknowledge it because we’ll just do more of it. I tried to get your mouth to do one; he wouldn’t do it.
Okay, last two segments: we’re going to talk about staying private longer, and when you guys are going to go public. And then, there’s an asteroid coming. What do we want to do first, boys? Do you want to talk about this asteroid coming? Dave, is it the end of the world if it hits us? What’s going on?
NASA dropped the probability of it hitting Earth to one and a half percent, so every day when the sky gets dark they can do a better job seeing this asteroid that everyone’s freaking out about. So we finally got a good night sky two nights ago. The telescopes were able to get a better trajectory reading on it and that allows the models to make estimates on the probability of this asteroid hitting Earth in 2032 when it’s projected to cross our orbit.
And so, right now the probability is estimated at one point five percent that it will hit the Earth. And based on the size of this asteroid, there’s this range—it goes up to 320 feet in diameter, as small as 80 feet in diameter—which actually can have a pretty big effect on how big of an energy release there would be if it actually, you know, hit the Earth.
So even on the high end, if it was—call it 300 feet—it would be the equivalent of—call it a 20 megaton bomb—which is not insignificant. If it were that big, it would hit the Earth; if it was smaller than that, it would probably just detonate in the air and create a massive shock wave and firestorm. But the region that it would decimate would be limited to probably a couple dozen miles up to a thousand miles of effect.
And if you look at the total surface area of the Earth, you know, we’re talking about 10 to 15 percent of the Earth having people that habitat—you know, enough people to habitat. Probably gonna land in an ocean, right? I mean…
Oh, right! Yeah, so it’s one and a half percent chance of hitting the Earth and then call it a 15 percent chance if it hits the Earth, they’re causing loss of life. 10 basis points—it hits a city; yeah—and then right, and then it’s a function of how big it is. If it’s actually as small as 80 feet, then it’s not going to be that significant even if it does get close to inhabited areas.
So yeah, I’m not losing sleep over it. Did you come across in your research? I feel like this is a real—boys are monitoring the situation moment. Did you come across the Tunguska event?
Yeah, research on this.
So that one, it’s incredible! Yeah, just, um… no one knows this. In 1908, an asteroid hit the earth—it hit a relatively uninhabited part of Russia.
It was… first off, the asteroid did not hit the Earth because it got so hot on re-entry. There was an airburst, and it was a thousand H-bombs in size, the explosion. Yeah, they have here the 60-meter asteroid, and they have the megatonage somewhere.
Wow, it’s the largest impact event in recorded history. Obviously, there was, you know, stuff before recorded history. It flattened 80 million trees; weirdly, basically no one was killed because it was so uninhabited.
But this is quite comparable to the one that NASA is talking about. That’s right. It’s about the same size. Yep, exactly. And I think you can take a little bit of reassurance maybe that we have had similar size asteroids hit before, and there is some existence proof that despite the giant explosion, you know, it doesn’t show up in the climactic…
Yeah, the Tunguska asteroid was at like 160-200 feet; so if this asteroid is in that range and it hits the Earth, you have this kind of explosion in the air. If it gets above, I think 250 roughly, is where they think that it doesn’t burn up fully in the air and it actually will strike the Earth.
But yeah, that’s… um, there you go. This is roughly what we saw happen, what we think the size will be if it hits. Is there a countermeasure? I don’t mean to get all sci-fi here. Great question!
Yeah, no, but is there a countermeasure possible? And like, if this thing was coming, let’s say in five years and it was twice the size? Yeah, yeah, but relative to the Earth this is like tens of thousands of kilometers an hour, right?
It’s a very fast-moving object. It’s pretty small, right? 160 feet, so you’ve now got to figure out the exact trajectory, get it perfectly right, get a launch off of the Earth and intercept this thing at the exact moment that you need to, to push it off course or detonate something nearby it to redirect it.
So technically very complicated, very hard to pull off. But this is exactly why we have this planetary defense funding at NASA, which is to track these objects. And this is another example, by the way, where I would say AI can play an important role, and I’d love Patrick and John to opine on this, but I have a thesis that AI, more than anything, unlocks deeply complicated projects for humans that would otherwise be kind of infeasible in the pre-AI era.
I think in the post-AI era, we’re going to be like, oh, here’s all these projects that we do that are like, oh, we mine to the center of the Earth and we get cool, like rare earth minerals from like 500 miles down, and we go to space and colonize the moon and all these crazy things because AI unlocks these large-scale projects that would require millions of people to do things in a coordinated way.
And AI can be very smart in this way, but I think AI could play a role also in these planetary defense initiative concepts, JCal, in the future where you can actually build a complete project model in software on how you would actually address this problem and then, you know, go execute it with automation.
But yeah, there’s a planetary defense function at NASA; they track these objects and they’re funded to do it, so we hope that NASA continues to get funding to do this work. Very important.
And guys, it just came through that NASA just dropped the probability of an impact event to about one-third of one percent. So it’s gotten even smaller, which is—we can all go to sleep comfortably.
Alright, now good morning everybody’s been waiting for! Patrick, John, you founded the company in 2010; it’s, uh, 15 years later. The entire LP industrial complex and venture capitalists everywhere, I’m sure some employees are wondering when will Stripe go public and under what circumstances?
And what’s the hold-up here? Why aren’t you public already? Yeah, look, um, I think people sometimes hold us out to be dogmatic or something on this topic, whereas we feel like so many other people out there in the world are dogmatic, and we just try to be pragmatic on it.
You know, Keith was on the show and he was saying, you know, he believes companies should go public as quickly as possible. I don’t know, maybe that’s the right thing for some companies, but in at least Stripe’s case, that hasn’t been the case. I also think the environment has changed quite a bit where it used to be the case that to do any return of capital to shareholders, you know, or if you needed any kind of large sums of money, you needed the public markets.
That’s obviously not true today where the stable private markets exist, but we look and we say is Stripe better off at the moment as a private or a public company? And, you know, up to this point, we have determined private. That could change at some point, but it’s kind of no dogma from our point.
The last thing I’ll just say is, you know, I think Keith made the argument, people generally make the argument that it is critical for discipline to be public and public companies run in a more disciplined fashion. And I think that’s hogwash. Like, if you need a 25-year-old Fidelity analyst asking you to double click on your CapEx blah, blah, blah to run the company with discipline, something is horribly wrong at the company, and you need new management.
And so, that argument has never really resonated with me. Basically, what you guys are saying is, for your intellectual perspective, you get a lot more return on the time you spend talking with the private investors you have and your team and then—and customers.
And it would just be dilutive, and you would have your outcomes quite honestly if you had to talk to these other folks who are talking to you and 50 other companies that don’t really know much of anything, maybe very surface level, and then may actually distract you and force you to make decisions you don’t want to make.
We’re not even that negative! We’re not even that negative!
Okay, I was going to say… but it’s, um, there’s no spiritual status associated with being public. Like, why be public?
It is a cheaper source of deeper and more liquid capital. And so if you want cheaper and more liquid capital, then, you know, by all means, go with it, but you know, it’s not—it’s not more moral.
And I think, you know, again, it’s just helpful to sort of get away from that kind of framing. I also think it’s noteworthy if you look at financial services in particular, and we’re kind of a company at the intersection of financial services and technology, being private for a long time is the norm.
So, you know, Bloomberg is a private company, Fidelity is a private company, Vanguard’s a private company, Jane Street’s private company, um, Goldman Securities, Citadel… yeah, Goldman waited 130 years to go public, JP Morgan waited 70 years to go public, Visa waited 50 years to go public.
And you know, again, those are all kind of different times in history, so I’m not saying you can draw right and if you look at them, but…
But well, I think the thing of financial services where there’s always a tendency uniquely here to be kind of pro-cyclical and I think you need to be kind of particularly careful as a public financial services company to avoid some of those temptations and some of those tendencies.
And so, you know, I think that that’s a unique dynamic that applies in our space.
And then, you know, financial services generally, if you look at companies like SpaceX, they’re able to provide this yearly liquidity which actually is probably better because it smooths out a lot of the vol and then people can get back to work and just kind of…
Are you guys, are you guys, by the way, we are profitable?
Yeah, yeah, and profitable on like a fully loaded GAAP net income basis—not like a community adjusted EBITDA stuff.
Shout out Adam Neumann! Come on the prod anytime; you gotta wear shoes!
Yeah, I do think we think as it comes, you know, pertains to people joining the business and being compensated, you know, everyone loves the idea of an IPO pop. But if you look at a bunch of the other fintech companies, you know, Square, really great companies, 70% off its 2021 peak.
PayPal, 80% off their 2021 peak. If you’re an employee and you join those companies in 2021, it’s not a great feeling. And so again, I think the lack of vol, you know, the good and the bad, is you are not priced every single day by the market. But it’s not only a bad thing!
Alright, the framework, you know, if I’m trying to predict our actions, like the framework we use is kind of two things. One, I think you know what matters is less kind of the returns in a given year and more duration.
And so the question is, you know, what enables the best compounding on sort of a 10-year time horizon? And, you know, what’s best for shareholders as you really take kind of the longer-term perspective and then just what’s best for customers and, you know, what helps you build the best products?
And you know, Chamath, you kind of said it where, you know, at least at this juncture with the business growing at this rate, we want to spend the marginal hour with some customer.
And I think you guys have gotten this sense like this is our life’s work; you know, we’re not going anywhere. We’ll be very happily running Stripe in 10 years’ time, in 20 years’ time.
And there’s so much going on in the space where we spend a bunch of time talking about stable coins, talking about AI, everything like that, and it’s hard enough to stay ahead in the world of business, you know, without all these distractions, like you said.
And so, it’s just a question of how do you set yourself up to win and do right by anyone in a—we’re the world’s pretty competitive.
I think if you had to steel man the Bill Gurley point of view, there are very few founders that are probably as steely-eyed as you guys. And so what I think a lot of board members in most other situations that are not Stripe deal with is what is a good forcing function to keep these folks on track, focused, and focused, and thinking in a multi-decade kind of way?
And they found that the public markets I think do that more than anything else—that’s probably the most compelling for the folks that would otherwise maybe get distracted. But then for guys like you that can frankly just do it, it’s great.
Alright, it’s impressive; it’s really impressive. Congratulations! Appreciate you guys coming on the program. Come back anytime you were awesome today. And listen, let’s recap—what have we learned?
People got to put some pants on and get back to work. Constraint makes for great art. Stripe’s going public in 2050.
Chamath lost five billion not investing. Uh, the Colsons read a lot of books but I’m still kicking—live and kicking bro! He’s still in the arena. Got a lot of chips still to fire, so yes, he’s gonna fire, fire, fire!
South American president shouldn’t have their own meme coins, and life finds a way. We are—and you pronounce a call his son, obviously, as a course and because you know we’re down the road and carry and we go and get some eggs and coffee sometimes.
Okay, coming to South by Southwest, brought to you by the call-call us and Brothers and Stripe!
All In is headed to the South by Southwest. They’re not sponsoring it—I’m joking! All In is headed to South by Southwest on March 13th. Me and Freeberg are going to sit down and do our interviews—two besties on the future of many media and building businesses in this new media ecosystem.
We’re going to have a casual party—food, drinks, the whole thing. The event is going to be pretty intimate—couple hundred seats. When are you guys in this? March 13th? You opted out? Me and Freeberg want to do it.
Oh, it’s Thursday, no can do! Yes, and it’s by application only with a small $30 registration fee, of which Stripe will take $19. Go to allin.com/events to apply. I’m not bitter about it!
And programming note: the besties are on a tear. We were on Meghan Kelly last week, and next week, our bestie Friedberg is representing us on Celebrity Jeopardy! We can’t say what happened.
Get the clips ready! Get the clips! Get the clips ready! We are going to do a recap of every single question. When does it air? On Monday next week? I think I don’t know, Wednesday at 9 PM.
Perfect before the taping! Yum yum! Perfect, perfect! There he is, between Ana Navarro. She’s from The View, right? Oh, she’s pretty angry. I’ve seen clips of her.
I should have gotten some counsel ahead of signing up for Celebrity Jeopardy on the lack of upside in doing this, and you will see why.
We’ll talk next—oh no! Bye!
Oh no, that’s not good! You lost! You didn’t lose to The View, did you?
Look guys, I’m just telling you—guys got 160 IQ. The View put together doesn’t have 160 IQ.
Let me just tell you. Well, we’ll talk about it afterwards. I just don’t—tell me. They got you on pop culture? You’re pretty good on pop culture!
Oh, no comment!
Okay, love you guys! I gotta go! Love you! Bye-bye! See you next time! Bye boys!
We’ll let your winners ride, Rain Man! David Sacks—and it said we open sourced it to the fans, and they’ve just gone crazy with it!
Love you guys, I’m queen of Kittawah! I’m going all in!
What? What? Your winners ride?
Besties are gone! That’s my dog taking a race in your driveway!
Sex!
Oh man, we should all just get a room and just have one big huge orgy because they’re all just useless.
It’s like this sexual tension, but they just need to release somehow!