VP Debate, OpenAI Financial Churn, and Guest Mike Maples Jr.

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Hi, everyone.

This is Pivot from New York Magazine and the Vox Media Podcast Network.

I'm Kara Swisher.

And I'm Scott Galloway.

Scott, I'm back in San Francisco.

Say more.

I'm here to, well, it's not a mayoral debate.

We're doing something different where we're going to be interviewing me and the person from ABC and someone from the San Francisco Standard are going to be interviewing interviewing the four of the mayoral candidates.

There's four mayoral candidates in San Francisco, all quite different.

And I'll be interviewing them, each of them today,

one after the other.

I changed the format a little bit, or we changed it because, you know, debates, they just performative.

So these are real, you know, in-depth interviews with each of them with us asking them tough questions.

I think it'll be substantive.

And generally, the San Francisco mayoral race kind of, the candidates sort of range from crazy to batch it crazy right now.

No, no, as always, thank you, Fox News.

You've been hanging around with Jess Tarlove too much?

Oh, my God.

No, they are not, actually.

Daniel Lurry is a centrist, I would say.

He ran a homeless organization for a long time, a very famous one.

Mark Farrell is very considered very pro-business.

London Breed has obviously been mayor for six years.

So it should be.

Who is Ron Conway supporting?

I don't know, actually, although I just texted him the other day about he's in national politics now, Scott.

He's moved on to national politics.

He's big time.

Big time.

Who are the tech bros planning to recall before they've even been re-elected?

Oh, I just said, you know, they've gone, so we don't have to listen to them.

Actually, the city is seeing a mini-boom with AI.

And so things have turned around a lot more than you realize.

I think you've been listening to Elon's rants and Fox News a little bit too much these days, I suspect.

Oh, is that what we think?

I don't know.

I just like, you don't see, you don't assume you haven't been here.

So you must, there's a lot of big issues.

And San Francisco's always been a a leader in innovation and everything else.

So it's a boom and bust cycle for this city.

So we'll see where it goes next.

And AI is definitely giving it a shot in the arm in terms of stuff, but still suffers fentanyl crisis, homeless crisis.

But the new Supreme Court law has helped it a lot to help clean out those

encampments.

Just like every city.

And you're always a bit of a booster.

Do you see a notable uptick in the lifestyle in San Francisco?

I do.

I do.

Since the pandemic.

I think San Francisco gets everything in the extreme and then it solves everything in the extreme, if that makes sense.

You know, every city is suffering from these issues, you know, however well they cover it up, whether it's a blue city or a red city.

Every major city has to deal with a commercial real estate crisis, with drug issues, et cetera, et cetera.

So

mental health crises you talk about a lot.

So I think

it's just a

you know, it's a different kind of city, and that's why it's borne so many amazing entrepreneurs and people.

And I think if you had to pick a city who's given the most to business, San Francisco would be one of them, or the San Francisco Bay Area would be the top one.

It would be the top one.

Not even no other city comes close except New York.

And that's with finance and stuff like that.

So, I don't know.

San Francisco any day of the week, given how much it's contributed.

Yeah, you love it there.

You're a fantastic advocate for it.

Well, I just think it's contributed to our country in ways that other like, like, I'm sorry, but what is much of like the south, all the big cities there, not compared to San Francisco, not compared to New York, even Boston.

Maybe, you know, Dallas and the fossil fuel industry, I guess, would be, or the car industry.

Oh, I don't know.

The

fastest growing cities in the nation are in the South.

I don't like to defend the South, but yeah,

look,

there's some amazing cities in the United States, including San Francisco, which has,

you're right, has been the epicenter of the part of the economy globally that has grown faster than any other part of the economy.

Yeah.

It just overall, if you're you're going to rank them over 100 years, you're going to have to give it to California.

You just, well, in our country at least.

And so that's all I'm saying.

California is the fifth largest country in the world by its economic output.

And it always,

I mean, I grew up in California, and they provided me,

I still,

although I don't spend much time there.

Until I, that is, I sold my original scripted drama to Netflix.

Just bottom in the room, Kara.

Or I can go to the Beverly Hills Hills Hotel and hang out at the poll lounge.

Ladies, I'll be there starting Friday for weeks.

Oh, no.

Oh, no.

Anyway, I like being here.

I'm also interviewing Yuval Harari, who wrote Sapiens.

He has a new book out called Nexus.

It's about AI.

And then I'm going to the Berkeley Hospital to talk to the students there because I like it.

You're going to the Hospital?

I am.

Wow.

Anyway, exciting week for Kara Swisher.

Anyway, we've got a lot to get to today.

There's a lot going on, including Tim Walls and J.D.

Vance facing off on the debate stage and obviously Open AI, which has been the big bright spot in San Francisco and California, but it's got a lot of financial churn going on.

This has cost a lot to become the most famous tech company in the world.

Plus, our friend of Pivot is Mike Maples Jr., co-founder of the VC firm Floodgate.

I've known him for a long time.

He was an early investor in Twitter, Twitch, Lyft, really smart guy.

He's got a new book, Pattern Breakers: Why Some Startups Change the Future, and actually, he'd be a good person to ask about OpenAI about.

He's a very thoughtful VC, which is a very low bar,

but he really is.

So it'll be an interesting discussion.

First, Scott, did you watch SNL?

Gene Smart hosted the season 50, can you believe it, premiere, which featured Maya Rudolph playing Kamala.

Andy Sandberg is Doug Amhoff, Jim Gaffigan and Tim Walls.

And let's listen to a clip.

I got to be honest here, folks.

When Kamala Harris called me and asked me to be her vice president, I said,

yeah.

This is personal for me.

I love this country.

And as a former teacher, I need the money.

This suit is from Costco.

It's a Kirkland brand.

They make great dog food.

Thank you, Tim.

As for the Republican side, Boen Yang played J.D.

Vance, which I thought was brilliant.

Let's listen.

Anyway, hello, hello.

It is odd, J.D.

Vance.

How much do you love Donald Trump?

And just this afternoon, he told me, JD, you're like a son to me.

Because I don't like you, and I'm stuck with you.

So, did you like it?

Did you watch it?

You know what?

Actually, I'm embarrassed to say it.

I didn't see it.

My boys are home, so it was all football all weekend.

What did you think of it?

I thought it was great.

I thought, you know, Maya would, I don't know if this show overall was the best one they've ever done, but I thought Samberg as Doug Amhoff was really actually very good.

And

Maya Rudolph playing Kamala, she's got every one of her tits.

It's almost good.

She was really good.

Trauma Law.

Drama Luck, Traumala, Pajamala.

You know, it was everything with her name.

It was, you know, we were expecting it and it delivered.

I thought it was quite good.

They'll have, we'll see, you know, we'll see how the election goes.

But if Kamala Harris wins, she'll have a job for a while.

And the guy who placed Donald Trump meant blanking on his name.

He's he was quite good, but he was more cogent than Trump has been recently.

A lot of Trump's recent speeches have really gone off the rails in these word salads, but forgetting words and stuff.

I think we need to start talking about his cognitive difficulties very clearly.

But we'll get to that in a minute.

California Governor Gavin Newsom, speaking of California, has vetoed an AI bill designed to provide safety regulations against AI misuse.

The bill had divided the tech industry with opposition from Open AI, Meta, and Google, but support for Manthropic and Elon Musk, very strange petfellows.

Newsom said he did not believe the bill was the best approach to protecting the public, but is working with AI leader and Dr.

Feife Leader to develop responsible guardrails.

State Senator Scott Weiner, who we had on the show, who co-authored a bill, called the move a missed opportunity for California to lead.

Lots of people had issues with how broad the bill was.

And I have to say, it definitely, you could drive a truck through some of the, you know, how to keep people safe and legal issues.

I do like that California's, as usual, is on the cutting edge of the legislation around tech.

But what do you think?

Well, it was vetoed, right?

Yeah.

I mean,

what's just as interesting here is who was for the legislation?

And Adropic, which is a kind of distant number two or three, and Elon Musk were in favor of the legislation.

And as I understand and read the legislation, there was a component in there that saying that it would only apply to companies that spent more than $100 million training their LLMs.

I saw this simply as the

slow down open AI bill

because,

and I find that

I think we need a progressive tax structure, but I'm not sure we should have progressive regulation.

And that is, I'm not sure that small AI companies pose less of a threat existentially.

They do pose less of a threat in terms of income inequality.

But

I immediately, when I saw Elon Musk, who claims that Washington should just get out of the way, backing this bill, and then the number two backing it, it became clear to me that, and then when I read the fine print, that this was basically trying to kneecap

the leader, open AI.

And so I think this is what you call selective regulation.

In addition to that, Kara, I just did some quick analysis here.

So

NVIDIA and OpenAI, let's just talk talk about NVIDIA and AI in California as you were talking about San Francisco and how the state's economic boom.

I mean, just the amount of value they add to the economy.

So, Jensen Huang is now worth about $105 billion.

He's worth more than Intel or Boeing, just impersonally.

So, bottom line is Gavin Newsom wakes up in a cold sweat every night, imagining a phone call from Jensen Huang saying, Governor Newsom, I'm moving to Austin.

So, I mean, you want to talk about the most valuable constituent right now in California is, I think the governor has to be very sensitive to ensuring that California maintain its alchemy of innovation.

I think he was smart to veto this.

And we need America has,

I mean, we constantly talk about the need for more regulation.

And I think that's absolutely true.

But if you're going to have regulation, it needs to be systemic across all AI.

What are your thoughts, Kara?

I think it should be a federal bill.

Again, I like that California does lead in lots of ways, but this one was, I think it was overly broad.

I think a lot of people were mad that he pushed that Scott, who I think is a really interesting legislator,

pushed it forward so quickly and didn't sort of wait a second.

And with Gavin bringing in Fei Fei Lee and some names, I think that's saying we want to do this, but we want to do it in a way.

He is definitely squeezed between business interests like OpenAI and the excitement around an open AI or an NVIDIA

and others.

And there are a lot of people who live in,

like I was saying, Ron Conway is one of them who are trying to really get the California moment back, which happens over and over again.

Like this is not a new fresh thing for California.

Oh, by the way, I didn't even mention the film industry in California too, like Hollywood.

Like just, I think it's really difficult to try to, because they, of course, have issues around AI and AI usage, too.

I think it has to be, California should be the leader in this legislation because they've got Hollywood, they've got, or most of the tech, most of the Hollywood companies are located here, media companies in that regard.

And we've got the biggest companies, Google, Open AI, Meta, and Nvidia, you know, to say nothing of all the others, Netflix and things like that.

And so I think it probably

was wildly broad, I think, in terms of being able to be sued or other or the required.

It was too, it was unspecific in the interests of a good thing, right?

It was the interest of safety and AI.

So that is the good thing.

It's a question of how you do it.

And there's going to be, you know, I know a lot of people are like, oh, the corporate interest won here.

I'm like, the corporate interest should have a little bit of a say here, too, right?

We, even though they may have too much of a say in many ways.

So, I think there'll be another bill.

I think, and I think California will continue to leave.

It's not going to be Louisiana for fuckers.

It's not going to be any of those states.

So, it's got to be California.

And then ultimately, it has to be a federal bill.

And we'll see if Kamala Harris wins.

There certainly will be a safety bill.

If she has control of anything, that will be probably top of mind for her in terms of creating innovation in this country.

Anyway, um, but speaking of another stock that's not so good, is uh the co-founders of Trump Media are dumping their stock in the company.

The uh company's co-founding firm, United Atlantic Ventures, sold most of its stake after the end of the lockup agreement and stopped large investors uh from selling shares.

Former President Trump has insisted he will not be selling of his shares.

I bet he is in the back.

I just feel like there's a backroom deal there.

This year, he has seen his stake in the company drop from 6.2 billion to 1.6 billion, and that's 1.6 billion too high.

I, you know, this idea of sticking to his word to keep True Social floating,

I think there must have been a side.

I just feel like he somehow is going to benefit no matter what, in some backward way, like selling his watches instead of campaign donations or whatever, right?

It's just, it's always a grift of some way to get money into his pocket.

So I don't know.

Yeah,

it's become a tracking stock for the likelihood he's re-elected and he figures out a way, which he likely would, given the kleptocracy that the American voter would probably be endorsing to a certain extent if he's re-elected, to prop it up and get his investors their money back.

But I think it's off about 75% in the last couple of months.

It's had a bit of a bump in the last few days, actually.

It's up about 20, 25%.

It's just become a tracking stock for whether people believe he'll be re-elected or not.

It's definitely strange.

We're in uncharted territory here.

I don't know.

Other than to say, I mean, let's just talk about a little bit on the company.

It's, it's effectively, it's not a company, right?

It's just, it makes no money.

Its user growth is flat and it's hemorrhage.

It's smaller than our podcast, but go ahead.

I think that's right.

It is.

No, it's right.

I check it all the time.

Yeah.

So it's not, but it's become sort of a vessel.

It's sort of the ultimate, it's sort of the ultimate meme stock.

The firm reported $836,000 in revenue last quarter, a 30% drop year on year.

So it's actually declining.

I don't know how many social media companies are seeing their revenues decline and a net loss of over $16 million.

So

it loses basically $18 for every dollar it takes in, and it trades at 488 times sales.

I mean, it's just not, it's not a company.

It's almost like a shitcoin where they say, okay, there's nothing here, but you can speculate on it.

And

did I ever say I was offered a shit coin?

One of these companies, the Mint Coin says, we're going to do a project.

It'll cost 10 million.

It'll be the Prof G coin.

It'll be something about access to learning or technology.

We think it'll go out at a market cap of $200 to $300 million.

You'll make $30 to $50 million.

We'll make $30 to $50 million.

And I'm like, and then what?

What happens?

And they're like, well, most of these companies come under selling pressure, as I said.

I'm like, so basically, we dump the bag.

That's what you're saying.

And this was happening everywhere in 21 and 22.

anyways it's scams it's called a scam it should be zero dollars this is just a piece of shit i mean if he loses oh

if he loses it'll go down to less than one if he wins i wouldn't be surprised yeah i guess what's really interesting karao is you know i can tell you based on how the stock trades in the pre-market on wednesday i will be able to tell you who according to the public won or lost the vp debate oh all right okay all right although that sometimes doesn't matter okay speaking of which let's get to our first big story.

Senator J.D.

Vance and Governor Tim Walls are set to face off Tuesday in the first and only vice presidential debate of this election cycle.

The 90-minute debate will be moderated by CBS's Nora O'Donnell and Margaret Brennan.

What a team.

I think that they're both really fantastic.

I love Margaret Brennan.

Except they're not fact-checking.

This is interesting.

The candidates' microphones will not be muted, though CBS says it's reserved the right to change course if need be.

Vice presidential debates historically don't have a big impact on elections.

I think that people will watch this.

I'll be interviewing Yuval Harari at the time.

Talk about, they're not, I thought what David Muir did at ABC was perfect fact-checking, lightly fact-checking, I guess.

No, but he didn't.

He fact-checked.

They're going to have them fact-check each other, which I really don't like.

It confuses voters, I think.

But I don't love that decision, but they don't want to be dragged into a political fight, I guess.

But what does Walls need to do?

And what does Vance need to do?

I mean, these are all performative anyway.

Yeah, look,

everyone's going to say it's more important.

The only thing we know, and Jess Tarloff said this, and the only thing we know is that both sides will claim victory and everyone, all of the media and everyone will say that it was more important for the Harris campaign for some reason that what happened here, that it just seems, even though they're tied, it seems like everything she does is more important.

because we've become numb or

their campaign has managed to normalize this strange behavior you would never see from anyone else.

So there's no mistake that's out of bounds.

It's like, okay,

and I'm sure you would correctly kind of equate this, and I think you'd be right, to women's behavior.

There's just less room for error here on the part of the woman running for president.

Whereas the other person, it's just sort of, well,

you know, well, he's going to, you know, Trump's going to be Trump.

He's, look, I think, I, I, I think J.D.

Vance, if you've read Hillbilly Ellergy, I think the guy's brilliant.

I really do.

I do not.

There is something

very strange and very dark about his views on the intersection between government and economics and women's rights.

His view of women is just very, very

off about it.

Like something happened, and he really does,

you know, whether he's describing childless cat ladies who hate themselves and hate their lives, or talking about the rights of the unborn, which seems to be basically saying women are vessels for birth and really lose all rights.

It feels very strange.

Having said that,

I bet he's going to be an outstanding debater.

I think he's very smart.

And Walls just, this is, well, my prediction is the following.

If you watch the debate, I think it's going to be reminiscent of Carter Reagan in 1980.

If you watch the debate, you're going to think that Wall's won because he's more likable and comes across just as like a dad who, when, you know, his teen, when his kids' friends leave the house, he says shit like, watch out for deer and text me when you get home.

Or, you know, when a check comes, he's the kind of guy that says to the waitress, what's the damage?

You know, he's just so likable, right?

And

I think Vance is not likable.

I bet the people who listen to it, more of them will give it to Vance because I do think if he stays disciplined and on topic, I think he's a very bright person.

And I think he's actually probably a pretty good debater.

What are your, what's your projection?

Oh, he went to Yale Law School.

Speaking of elites, yes, he went to Yale Law School.

I think he is so profoundly unlikable, he's not going to win no matter what he does.

First of all, he's creepy.

He doesn't like women.

It's so clear.

He hates them.

It's weird.

And I think the numbers are so clear.

People really don't like him.

Like, Wallace has a positive rating.

Vance has the historically lowest rating.

He's a creepy guy.

I think he'll be insulting.

And I think he's got to explain why he wants to tax people without children more than people with children and make them pay and be punished.

Something happened to this guy sometime in his life.

And it's, and I'm sorry for child J.D.

Vance, but adult J.D.

Nance needs to get therapy.

Anyway, also on the ticket, speaking of heinous behavior, Donald Trump's latest attack line is calling Kamala Harris mentally impaired.

It's a heinous insult.

Even Republicans couldn't take it.

It's just bizarre.

He also called for a violent day of police retaliation to end crime in America at a rally.

One violent day will take care of crime.

It's like one dictator for a day.

I think he's, if you watch any of his speeches, something's gone wrong in this guy's head very significantly,

even from the last month or so.

And using terms like, this is sort of him unhinged, I guess, even though, though, and I don't think we should grade him differently.

Calling someone mentally impaired is insulting to people who have mental impairments.

It also is sexist.

It's also weird.

And

a lot of what he's saying is weird.

I find it really disturbing, actually.

Biology is ages.

Two-thirds of people over the age of 70 have some sort of cognitive impairment.

It's just part of aging.

And I think you're starting to see signs of that from him.

And,

you know, Vice President Harris, like her or dislike her, doesn't show

that type of behavior.

I have noticed it, and I'm trying to starch or I'm trying to separate myself from my bias.

I do think he's become more meandering

and wandering.

He used to go on

these kind of digressions or tangents all the time, but now they're just sort of inco, they're a little bit incoherent.

But you know what, Kara?

I don't think, I don't think his base cares.

I don't know if they care or not, but I definitely think it's incredibly repellent.

And

I think it's harder to hide what is going on.

You know, just the way we were tough on Biden, this guy is losing his marbles in a way.

He was always a nasty prick, but now he's a crazy nasty.

I mean, he's like a mentally, speaking of mentally impaired, I think he needs to get checked by a doctor.

He's the meal ticket for so many people.

It'll be difficult.

Anyway, Harris also appears to be taking our advice, speaking of the fact that she's brilliant because she's showing some openness towards crypto.

She said it's important for the U.S.

to maintain dominance in blockchain technology in a major economic speech last week.

Recent policy documents also say Harris would encourage innovative technologies like AI and digital assets.

You know, I think she had to throw a bone to the crypto folks because they're...

they're putting all kinds of money.

And there's a little war between all the crypto folks, ones that sort of want this more regulated crypto so that they do really well and these sort of Wild West crypto bros.

You suggested she outline a couple basic policy measures supporting crypto and she did.

So what do you think about that?

She's triangulating.

She's just trying to take away,

she's trying to remove cudgels.

And crypto is, we talked about this a few episodes ago.

There's so few places where there's undecided voters where I think people are up for grabs.

I actually think one of them is young men.

The Latino vote's really interesting.

The Latino vote has totally moved away from Democrats.

It used to be Democrats were up by like 40.

I mean, they just used to own the Latino vote.

And now

it's not a toss-up, but it's been dramatically, it's shifted.

And I think it's really ⁇ I think it's a lot of it is too, is that we should almost do away with the term Latino in the sense that

I got a bunch of deserved shit from people when I said I was taking my son to Africa for some charity work.

They're like, well, we're an Africa boss.

I mean, that's just a dumb thing to say.

And Latino voters, I mean, talk about conservative Cubans in Florida.

They have a much different viewpoint.

than, you know, undocumented workers, or well, they can't vote, but recent citizens who had immigrated from parts of Central America.

I mean, they're just, it's very hard to start labeling and drawing conclusions from a group of people that you just label as Latino.

Yeah, I would agree.

It's a wide-ranging, they contain multitudes.

You don't do that to white people for sure.

And there are very different kinds of white people everywhere.

But what's amazing about that, in some ways, they're more heterogeneous and more disparate than, say, white males.

Yeah.

And what's kind of inspiring about it, if you think about it, is they're just becoming, quite frankly, they're becoming more American.

They're identifying with certain components of our country and others are identifying with other components of our country.

I see it as the Latino community or that community is just becoming American.

They're just attaching to the rights and the different things that work for them or don't work for them.

Yeah, absolutely.

Finally, very quickly, a familiar face we cover in the election, one that you like.

I know you do.

Amazon is in late stage talks with former NBC and MSNBC Brian Williams.

I know you do.

To host a live election night special on Amazon Prime Video.

And then, you know, and if you don't like his take, you can buy another one.

That's the big joke.

What do you think?

They're getting in the live news game.

Like, Netflix and Amazon have stayed away from it.

They have all stayed away.

Like, every time you talk, Netflix isn't in the news business.

I've heard that from the Netflix executives a million times.

And same thing from all these Amazons, the Googles.

We're not in the news business.

We don't want to be in the news business.

But now they kind of want to be in the news business.

What do you think?

Well, first of all, I just want to, for a moment, backtrack to, what's his name?

David Muir, the guy who did the ABC,

moderated the ABC debate.

Handsome man.

But he posted, he did, they did a, I posted a clip on threads of one, you know, they have those feel-good shows at the end where they're like, okay, we just did 27 minutes of how fucked up the world is.

We're going to talk about a dog, you know, marching across the nation to find his owner.

But they had the loveliest episode about this young couple who planted a tree and they take a picture in front of the tree.

It was just

true.

I love that.

It was so lovely.

Yeah.

And it was on ABC News tonight.

He was just sitting there.

80% of my comments or 80% of the comments on the thread were, this guy has no credibility.

This guy is the worst journalist in the world.

And I thought to myself, how many of these are bots just trying to undermine the credibility of ABC because

they had the willingness to fact-check?

I went back and I thought, did they not fact-check her?

It's not that they didn't fact-check her.

They didn't, quite frankly, press her sometimes and they said, you didn't answer the question, Madam Vice President.

That's because he was a font of lies.

It was like 33 to 1.

But go ahead.

That's different.

I think.

Anyways,

I thought what I'm saying is, and I think you agree, is I just, it seems to me,

anyways, I don't know him, but he's so handsome.

I empathize with him in a weird way.

Brian Williams or David Muir?

They're both handsome.

Yes, yes.

But going back to Amazon.

Yeah.

They're smart.

They want to get into live.

They want to get into sports.

They want to get into big events.

That night, they might get, I mean, more people have Amazon Prime than have a Christmas tree, a pet, go to church, own a gun.

That is essentially our common bond or our threat or connective tissue.

And Brian Williams is so perfect.

I just can't wait for the first like, that's like getting a moose to drive a convertible.

And you're like, oh, I just like it.

I know what that means, but

I get it, sort of.

I love Brian Williams.

So do I.

I know he got in trouble for the helicopter thing, but I'm going to forgive him.

Forgive him.

That was stupid.

In today's age?

In today's age, so what?

I know.

He looks like nothing.

Are you kidding?

Well, no, he shouldn't have.

He's not killing bears or like sending dick pics out.

Nobody likes glory that wasn't earned.

Anyway, that's fine.

He shouldn't have done it, but nonetheless, he would be great.

Statue of limitations.

I think it's dicey.

Statue agree.

That's what he just said.

I literally don't think it's a good thing, but it's statue.

And he doesn't age.

You got to love a good-looking guy who doesn't age.

I have to give you a statue of limitations every week, essentially.

But

I think he's.

You should never say anything offensive.

You know, you know why they don't wear mini skirts in San Francisco.

Oh, no.

Okay.

Because it would show their balls.

That was wrong.

That was wrong.

That was wrong.

By the way, the Folsom Street pair was here yesterday, and there was a lot of balls showing.

Nonetheless, it's very dicey to get into news, I think.

So I think it'll be an interesting thing, but I think if anyone can do it, Brian Williams is a great choice.

All right, Scott, let's go on a quick break.

We come back, OpenAI's financial wins and losses, and we'll speak to a friend at Pivot, Mike Maples Jr., about spotting a successful startup.

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Scott, we're back.

We're learning more about OpenAI's current financial situation as the major funding round comes to a close.

The New York Times reviewed some of OpenAI's financial documents and reported the company expects around $3.7 billion annual sales this year.

Very impressive.

But OpenAI also expects to lose roughly $5 billion due to operating costs and other expenses like salaries and office rent, et cetera, and compute, obviously.

Should investors be concerned?

I'm interested to know what you say here about how much money OpenAI is spending.

Obviously, you got to spend money to make money, that kind of thing.

But main revenue sources are sales of services to companies, chatbots, subscriptions.

OpenAI will will predict its revenue will hit 100 billion in 2029.

That's a lot more, which will roughly match the current annual sales of Nestle's or Target.

That's a really big revenue leap.

So talk about costs in line with the new funding, theoretical profits, et cetera.

What do you think of that?

I think this has all the makings of a company that's going to become one of the 10 most valuable companies in the world.

And

the fact that they're losing this kind of money,

this isn't out of line for companies that grow this fast or this kind of thing.

Amazon comes to mind.

Amazon comes.

Or Netflix.

So

they're expecting about 3.7 billion in sales.

They think next year, and they probably already have pretty good, they probably asked ChatGPT what their revenues would be next year, but they're going to do $11.6 billion next year.

And the losses here are not extraordinary.

They can absolutely find this money.

I wouldn't be surprised if they increase the spend and increase their losses because

you've probably seen that graph, but it shows the adoption, the seminal technologies that really resonate, whether it's radio or the fax or the telephone or mobile, kind of zero to mass adoption keeps getting, the cycle time keeps decreasing, right?

And also what you have is what I'd call fastest zero to monopoly time.

And I think just as you had this windtail monopoly, I think what we have emerging already is what I'll call the Open VIDIA monopoly or duopoly.

Open AI has something like a 70-plus percent share of what is supposed to be an emerging market.

This is like Google in the early days.

I agree.

I think people are making, it's a lot of money, but it costs a lot of money.

And if they don't, they will get run over.

It's the best value in AI right now.

Look at their, I mean, their 425 revenues are going to be, if they're in fact going to be about $12 billion, that means they're raising money at 12 times revenues.

The average SaaS company trades at six times.

And then if you look at any of these other guys, they're trading at 50 to 100.

Right now, Open AI

is the best value.

And let me be clear, I think the whole space is overvalued.

But I'm sort of, I'm a, I don't want to say I'm a convert, but I am using this thing.

I upload board decks now and say, pretend you're an aggressive VC.

What questions would you have for me?

When, you know, we're out, I'm talking about, I upload our

download numbers and I say, what components or what channels, distribution channels should we be thinking about?

What topics are we missing?

And it gets it wrong a lot, but you always,

it's just such a great thought partner.

Yep.

Interesting.

Apple was one of the big names participating in this open-eyed funding round, and they've pulled out of those talks, according to the Wall Street Journal.

I'm not sure.

I didn't do any reporting, so I don't know why.

Yeah, I have no idea either.

But I don't understand why they would leak that they were even involved in it to begin with.

I would imagine when Apple shows up, they expect a lot.

I mean, Apple's like the, the, you know, when the hot girl comes to dinner or the hot guy, whatever, they're just kind of expectant.

I got to imagine Apple is we like X, Y, and Z.

And probably at some point they said, no, we're not going to do that.

I got to think Apple really expects and usually gets a lot from any terms they ask for in an investment.

They don't quite have this company on its back to do that.

You know what I mean?

On its back foot.

Anyway, Sam Altman is also denying the reports that he's getting a giant equity stake.

I I think it was 7% of the company last week, though.

Altman and OpenAI CFO Sarah Fryer did note in a meeting that investors had raised concerns about Altman not having an equity stake.

He makes money all kinds of ways, but what size equity stake do you think he should ultimately get?

OpenAI chair Brett Taylor told CNBC the board had discussed the stake, but no decision had been made.

It's got to have a stake.

I think it's kind of silly and kind of performative that he didn't.

It makes sense.

His incentive should be in line with the companies.

I don't know why that's weird well so typically what you do is be careful what you ask for so typically the person who decides or the the group that decides a ceo's compensation is the compensation committee i i've always found that the toughest part about management and being on a board is compensation

And because you don't want to pay your people too little, you don't want to pay them too much.

And CEO compensation has gone absolutely batshit crazy.

It's gone from 30 or 40 times the average salaries worker to over 300 times because what happens is basically you get weaponized as a board member.

You like showing up and getting a free dinner and making a quarter to a half a million dollars a year.

And typically the CEO was the fraternity or sorority rush chairman.

They're very likable.

Over time you get to like them.

They're doing a great job adding shareholder value or they're doing an okay job in the face of real challenges.

They're very good at managing their board.

They cherry pick people who will like them and do what they want.

So generally speaking, boards are kind of bought off.

And they also don't want to do any work.

So they hire Towers Perrin or a comp consultant to come in and help with compensation.

And this is what the comp Towers Perrin comes back.

And it says, okay, a tech company that is doing 3.6 billion, growing this fast, this is how much the median is.

Zero is the lowest paid person in a similar company, a similar industry.

100 is the highest paid person.

And they say right at the median, this person should make X.

But no one on the board says, oh, Lisa is just an average person.

They're like, let's pay them at 60 or 70%.

The problem is, is that when you pay people 1.2 times the average every year, they end up doubling their salary every six to eight years, and you end up with just out-of-control CEO compensation.

Anyways, having said that, in a company like this, typically, typically what you would find is that he or she would get options on somewhere between four and six percent.

Now, given the extraordinary valuation of this company at 150 billion, they could go get an amazing CEO for 1%.

But because he's been around so long, I think that they could justify saying this guy should have 4% to 6% of the company.

Four to six.

Well, interesting.

I suspect it'll be a little less.

Yeah, at least three for sure.

You're right.

He could be bumped up to chairman and get a stake, but he's got to have a stake.

It's kind of ridiculous.

He won't be chairman.

They like Brett Taylor.

He's doing a good job.

They do.

You're right.

Yeah.

Anyway,

we'll see.

Good luck, Sam.

You're paying for dinner next time.

Neither of us are worried about this company, including all the drama around it.

I bet if you looked inside Anthropic or you know, Microsoft at any day of the week, there's all kinds of drama.

This is just the company of the moment.

And

I think that's why it's attracting.

And also, Sam, you know, as you said, they didn't kill the king and therefore the king gets to decide.

Anyway, let's bring in our friend of Pivot.

Mike Maples Jr.

is the co-founder of the venture capital firm Floodgate.

He's written a new book, Pattern Breakers, Why Some Startups Change the the Future.

And let me say, I was just telling Scott a second ago, you're one of my favorite people to talk to you because you're so smart.

You always give me good insights.

And although at the same time, with many VCs, it's a low bar.

So, but I've always appreciated your insights.

It was always different and unusual.

So let's just get into it.

Just for people who don't know, you were an early investor.

You've always been a very earlier investor in Twitter

when it was Odeo, Twitch, Lyft, and many others.

We're going to talk about current companies too, because we'd love your thoughts.

We just discussed the Open AI funding, et cetera, recently.

But what exactly defines a founder or company as a pattern breaker?

I mean, that's why, why'd you call your book pattern breakers?

Yeah.

And, you know, some books are written because people are smart.

This one was written more out of feelings of anxiety.

So I'd noticed that over 80% of my exit profits had come from pivots.

And so over and over again, I'd see these situations where, you know, Twitter, they can't decide who the CEO is.

They've got the fail whale, all kinds of drama, and they have great success.

And they weren't doing a whole lot of best practices that I could discern.

And then,

you know, company after company did all the right things, hired all the right people, had a high performance culture, and then shut down because they didn't work.

So I thought maybe I was just a lucky fool and I should retire before I get exposed.

To give you a sense of how crazy it was, I didn't even say this in the book, but like Twitch, I didn't know I was a shareholder in Twitch.

So I had to invest in Justin TV and

it morphed into two companies, Twitch and Social Cam.

Social Cam gets bought by Autodesk.

So I just thought that was the company.

And then one day, Twitch would make 84 times our money.

And I have to tell my LPs, hey, I'm really sorry about this, but we have this big windfall and I don't have it in my financials.

Do I need to restate them?

And they're like, nope, we're good.

Just send us the money.

So I thought, okay, is it possible that I've just been lucky the whole time?

And because I couldn't explain the success with normal frameworks.

And so I thought, okay, I need to figure out if there's something more worth understanding or I need to go find some new line of work before I, you know, luck, what luck giveth, luck will take it away too, you know, usually.

So why pattern breaker, meaning they do what?

Yeah.

So this is, and this is one of the reasons I'm kind of interested in talking to you folks because I think both of you will have interesting takes on this, maybe, maybe pro and con, right?

So what I came to believe is that

the way startups win, startup capitalism is a different kind of capitalism.

So most people, when they think of capitalism, they think of it as corporations.

And corporations try to create competitive moats and they try to build economies of scale, network effects, and brand and supply chains.

And they, you know, in many ways, when you invest in a normal company, you're betting on its ability to persistently compound more than most people think it will.

But a startup, you start to realize, doesn't have anything to compound.

And so startups create value in a different way than building moats.

They create value by changing the subject.

So startups lose, or at least minimize their upside when the future is going to be a new and improved version of the present.

Because then the startup has to compete by the rules of the incumbents.

And business is never a fair fight.

The only question is who gets to fight unfair.

And the default is that the incumbents will fight unfair because they have the advantage of the incumbency.

So what a pattern breaker does is they

refuse the premise of the rules and they show up with something radically different.

And they show up with something that can't be reconciled with anything that's come before.

So, you don't, they force a choice and not a comparison.

They can't be compared.

That's a really digital.

Yeah.

So, so, like, um, I'll give an example that's not even in the startup realm, but it would be a pattern breaking example of recent times, the Tesla Cybertruck.

Now, you may like it, you may dislike it.

When I saw it announced, I thought he might be joking, right?

Like, I was like, is he really going to ship that thing?

But nobody, when they see a cyber truck, ever says, well, so how does that compare to an F-150?

So Elon kind of says, live in my future or don't, but you have to choose.

So pattern breaker is the idea was that we tend to operate according to consistent patterns.

And that's actually not a bad thing.

That helped us avoid saber-toothed tigers.

It helps us fit in socially and communities and stuff.

But

pattern matching creates a bias as well.

It causes you to not see other opportunities.

Yeah.

I would say the better comparison would be, even though he was incumbent, someone like Steve Jobs, actually, when he would take things off of the computer and he's, he'd always say, like it or not, this is what I'm doing.

When he would take dongles off the side, when he would do, remember,

he did a bunch of things like that.

And he goes, well, either pick my choice or don't, but this is what I'm doing.

I agree with that.

And to take that even a step further, right?

Like Steve Jobs didn't think of the quote unquote market for smartphones like it was a map that exists and you got to go find the treasure and the treasure map.

What pattern-breaking founders do is they propose a radically different future that can't be reconciled with the present, and then they teach the rest of us how to think about it, right?

So they don't like the problem with the notion of product market fit is it

suggests that there is some market to go be discovered that exists in some objective, tangible way,

but sometimes the product creates the market.

And it's the pattern-breaking founder with the pattern-breaking idea that creates the new market and creates something that we didn't even know we wanted or didn't think could even exist before, right?

Nice to meet you, Mike.

Doesn't this all bubble up to what I think is somewhat conventional wisdom among early stage investors, that it's...

You're really not investing in a concept or a company.

You're investing in a team.

And that team has the ability to recognize patterns and if and when necessary, make a pivot and that you face the enemy.

I mean, I

reduced everything to war.

And the reason the Americans were so successful is that

when we were more agile, that when the leader of a platoon got killed, the rank and file were just very good at adapting and figuring out a new strategy

in the fog of war, in the heat of battle.

Isn't that really what you're looking for as an investor?

There's a little more to it than that,

but I'll be curious about kind of how this lands with you, Scott, because I know you've started companies before, right?

So you're not just playing a founder on TV, right?

But like, so

what I believe is that founders need to harness particular forces that enable them to change the subject, right?

So like the Lyft founders were great founders, but they

harnessed two things.

They had an inflection, which was the iPhone 4S had a GPS locator chip.

So an inflection is a new thing that happens in the world independent of startups.

And most of us don't even know that they're around us all the time.

Most of us don't realize the thing in our pocket gives us a new form of empowerment.

But in the case of the iPhone 4S,

you could have had the idea for ride-sharing before that, but you wouldn't have been able to implement a system that embodied that idea until you could algorithmically locate everybody who wants to be a rider or driver.

So, that's the inflection.

So, the inflection is important because it lets the startup wage asymmetric warfare on the present.

So the one question I ask founders that maybe not everybody asks is, hey, this sounds like a great idea.

I'm excited about it.

Like, tell me some more.

But before we even get there, could you explain to me what inflection this thing rides?

You know, what is the external change event and what is the specific form of empowerment that it offers and who does it empower?

And why now and only now can that empowerment be unleashed?

And so a lot of the companies that I worked with, with, that's why they pivoted successfully.

They were riding an inflection that was important and profound, but their first product was a reference implementation of the inflection, right?

And then

when they realized they weren't quite on target, they adjusted.

And so then

the other thing is the insight.

And so I believe that a great startup has to not just be right, but it has to be non-consensus and right.

And it goes back to pattern breaking.

My view is that

if a customer customer has the option to buy from the incumbent, why would they buy from a startup?

And so there has to be something about it that's radically different.

And so

I take your point.

Founders matter a lot.

And there's a whole other set of things about how do they act different, not just how do they think different.

But I do think that some ideas embody more power than other ideas and that those powers can be understood.

And that

why I care about this so much is that I don't care about failure in the conventional sense.

I care about failure when the founder loses their time, when they're three years into an idea that they don't believe in anymore or that they're, you know, they're doing it out of obligation rather than passion because they pursued something with a capped upside without knowing it.

Just to double-click on that,

I invest in a lot of small companies on nearly at the scale or the success of Floodgate, but I was, I think of it in a sort of a similar way, what's the offshore storm?

And that is, I used to surf when I was a younger man.

And whenever I go to Hawaii or Costa Rica, where there are gray waves, I'd convince myself I was a good surfer.

And I realized, you know, waves are almost more important than the surfer.

And I always think market dynamics will trump individual performance.

And I would ask any company similar to what I think you're saying, what's the offshore storm here?

What's going to create waves that are coming such that you're just going to be an amazing surfer and we're going to think you're a better CEO than you are because you knew what big waves were coming?

I mean, like zigging when you're zagging.

I think the genius of some of these companies, NVIDIA just zagged.

It said, we don't need factories.

It's all about the IP.

Netflix said the fastest, the best broadband in the world is something called the United States Postal Service.

And we're going to start sending zeros and ones through the USPS.

And they just saw these waves and they weren't afraid when everyone's barking up the same tree.

They just weren't afraid to just go entirely

the other way.

Yeah.

And by the way, Scott, that's when it hit me.

I was surfing.

That's like, so an inflection is a wave.

I was like, you got to ride the right wave.

Okay.

You're bringing up what you note in the book, the right amount, and this is a quote from you, the right amount of disagreeableness can be a founder's ally in developing breakthrough ideas.

Now, at the same time, it can lead to toxicity.

You mentioned Elon.

He was very disagreeable, but it's morphed into toxicity now, right?

In a way that's everything is disagreeable, right?

Talk about that balance, because I agree with you.

You know, I think I'm a disagreeable person.

I think that's one of the reasons I'm successful because I disagree.

No, but I go, I'm like, I want to do podcasts now 10 years ago.

This is what I, even though, and a lot of people said, no.

Don't say anything.

Don't say anything.

Shush, shush, shush, shush.

But we talk about this disagreeableness and when it becomes kind of, you know, I was right before and you'll see that I'm right again because it's not always the case for sure.

Yeah, so

So I'm going to tread carefully on this question because my, you know, I'm a little bit more positive on Elon Elon than you might be.

Yes, I am that.

So, so, like, the way I'm a VC looking for his next deal, what do you see out there with a fund open is critical of Elon.

Okay, well, let me.

So, I haven't invested in his cup in.

Anyways, but I'm sure your fondness for him is genuine.

Go ahead, Mike.

So, let me just kind of describe.

Like, one of the things that I try to do, and there are trade-offs to it, is I try to keep my tribal affiliation small.

So, because like Elon contains multitudes.

And, you know, like if you look at

NASA versus SpaceX,

to launch a kilogram, SpaceX can do it for a 20th of the price.

And so I say, okay, I'm pretty interested in that.

Right.

Like,

I'm glad that that part of him exists in the world.

And then

when I look at what he's done, you know, to enable Starlink over the Ukraine, and so

there's like, there's things about him.

I wouldn't do those things, but, but I try to, I try to kind of separate, you know, the things that he does that are really positive and not try to like paint him with one single negative or positive brush.

I think that people are just complicated, and especially people who change the future.

And so I'm, I'm a little more sympathetic to him than you might be.

I mean, I understand your objections to him, but

if complicated means having 12 kids and living with none of them and

demonizing,

we get worried.

It's complex.

Like what I'm saying is, like,

I'm not just a shill for Elon, right?

I haven't invested in his startups.

I'm not like,

I'm not trying to say, I'm not trying to be tribal about it.

I'm like, you have a very comat attitude.

Mark Benioff has the same one.

Here's the only thing I would say about the cutting prices.

He was allowed to blow up rockets.

NASA isn't.

Like, so he can be more disagreeable and risk-taking than, you know what I mean?

It's very easy to figure out the way to do it if you're allowed to blow things up.

And so I think that, and by the way, I think that's good.

I think we need more of that, right?

Like, so, you know, but NASA can't.

So attacking NASA, NASA actually can't blow things up.

But I'm not attacking him.

I'm just saying a pattern breaker changes the future.

We're acknowledging the truth.

He can put shit into space for less money than anyone else.

And I'm saying that all things being equal, I like that.

So like the thing that Elon brings that I think we need in, you know, an ingredient in this recipe is he builds things, right?

like when he says he's going to blast rockets into outer space he does and when he says he's going to make an electric car work that's interesting and awesome he does and you know i i got a lot of time for people like that in this society right all right i'm curious mike you uh you strike me as infinitely likable and reasonable and and balanced and separate the person from the politics all

all other things that i

think are important good lessons for younger people.

I'm just curious when I was in living in San Francisco in the 90s and raising money, there was this sort of the, I called it the code of the white guy because all VCs at that point, and it's gotten better, but all VCs in the 90s were white men.

And no matter how competitive they were, how much they may have disliked each other personally, they would never say anything negative about each other.

It was very much a gentlemanly kind of clubhouse rules kind of environment.

And some of the stuff I've seen out of VCs shit posting each other the last 12 months, it is so aggressive.

And as someone who's, quite frankly, not shy to be judgmental, probably overly judgmental about people, some of it makes me blush.

Why do you think it's happened in the last 24 months?

And

can you give us a sense for why you think it's sort of burst out onto the open and whether you think it's bad for the venture community?

Yeah.

So, and this goes back to,

I think I learned this from my dad a little bit growing up.

So my dad was a pretty prominent exec at Microsoft back in the day.

And

he used to, he used to, we used to talk a lot about just the dangers of tribalism.

And one of the things that we talked about a lot is how being too affiliated with a tribe makes you stupid.

And so like, like, for example, like I'm an Oklahoma Sooner fan growing up and I just love the sooners, right?

And I'll all shit talk about the Sooners versus who they're playing and stuff like that.

now fortunately the stakes don't matter so it's just like me being a fan but what i find is that people get that way with their religion or with their politics and i don't care which side of it you're on i don't care if you're pro-Trump or pro-Kamala Harris I see no limit to people's stupidity on both sides and how they're acting and I think it's because they've let their tribalistic urges get the best of them.

And so like I'm I'm like interested in immigration.

I'm happy to talk about it, but I won't talk about it by parroting somebody's talking points.

Right.

And if I get, if I'm, if I make my political tribal identity too big, I'm just going to become blind.

Nobody's going to listen to you.

Nobody's going to listen to me, and I'm not going to listen to anybody else.

Right.

You're very sensible.

I hate sensible people.

Let me ask you, I'm going to switch you from this just for a minute, but there's so many AI startups now.

We just talked about what was going on at Open AI, and we thought losing money, all the mishagas, it doesn't matter.

This is a world-changing company, right?

It's been doing astonishing things.

Ultimately, it probably will settle itself out.

But what would you, what would get you to invest in one?

And what are you interested in, especially considering all the competition now?

There is a lot of OpenAI, Google, Microsoft, Anthropic.

It goes on and on and on.

Yeah, I haven't done a whole lot of AI investing.

No.

So we've had a couple of ones that have been good.

So Applied Intuition is a company that helps with autonomous vehicles and EVs, but it's enterprise software,

you know, really large contracts.

And then I invested in Trip Adler's new company, the guy from Scribd.

It's called

Created by Humans, and it's

trying to let creators create licensing deals with the LLM companies.

Open AI is really not my kind of investment.

I mean, I wish them very well along with Anthropic and all these other guys, but my business is hard, but not complicated.

I'm wrong 85% of the time.

And when I'm wrong.

Airbnb.

Airbnb.

Yeah.

And when I'm right, I have to be spectacularly right.

And so I'm really good if 5% of my investments, I make 100x on the first check and another 10% or so, I make more than 20x on the first check.

I don't see a path to doing that, investing in OpenAI right now or XAI or AI.

It's not a venture investment.

You're a venture investor.

It's no longer a venture investor.

Exactly.

And by the way, a lot of people who call themselves venture investors in today's world are unrecognizable to me for what I think it is.

But that's up to them.

I'm not trying to comment on their strategies.

I wouldn't expect them to have an opinion on mine, or at least I'd rather say what my own is.

So I don't know.

I mean, I'm rooting for the company to succeed because I like their products and I think they're doing interesting things, but I don't really think of it as an investment.

I don't think of any of these companies that are high-priced as investments.

So how do you invest in this sector then?

Yeah, so the struggle for me has been I see lots of inflections everywhere I look.

You know, so there's, I see all kinds of ideas where I'm like, that is very empowering.

I could totally see why I would use it.

Millions of people would use it.

That's amazing.

But what I can't answer is, why won't there be 10 just like it?

And it goes back to you got to be non-consensus and right, because if you're not non-consensus and right, your opportunity gets arbitraged away.

And so I have to find something that's not only empowering, but I have to say these guys have a structural competitive advantage somehow to win the future.

And there haven't been many of those, right?

There's been

few and far between, to be honest.

It's been tough.

In the in this sector.

Yeah.

I just mentioned Airbnb.

You had talked about it that you, you, you passed on this.

Stupidly.

Talk.

So, yeah.

Talk about why you did that.

And what do you look for when you make those misses?

Like, how do you, as an investor, when you, everyone's going to, you know, like, I can think of a dozen different people who missed.

What is the, what is, what happened there for you?

And what do you do to change that as an investor?

Yeah.

So first of all, it's helpful to just consider the backdrop that these startups are wild in the early days.

Like people talk about startups the wrong way.

It's like trying to spot a beaked finch in the Galapagos Islands with a super long beak that has an adaptive advantage that allows it to survive in a new way, but like you've never seen one before.

But it's wild, right?

It's like a mutation.

So

with Airbnb, the prior week we'd been pitched by a company called Mojo Mix that makes, lets you pick cereal online and it'll assemble it and ship you in a box.

And my partner, Ann, said, this is dumb.

Why are we talking to these people?

This isn't even what we invest in.

And I was like, okay, that's fair.

I tend to be the optimist.

Ann tends to be the skeptic, you know, when we look at this stuff.

So then

a week later, we go in a conference room.

It's airbed and breakfast.

This is a year before they'd applied to yc

and and and and looks at me all these cereal boxes like what the hell another cereal company and i kind of look back at her like i no it's airbed and breakfast i don't know what what's this cereal about so i ask him and he says we're funding the company by selling cereal boxes And so I was like, okay.

So it's Obama O's and Captain McGain Crunch.

And then and then I say, okay, well, what does Airbed and Breakfast do?

And he says, well, our advisor says that you like demos and not slides.

I said, that's right.

So he fires up the product and he can't get it to work.

And so I'm like, okay, that's cool.

We'll, we'll,

let's just go to the slides.

He's like, well, I didn't bring any.

So we're like 20 minutes into this meeting full of cereal boxes in a conference room.

And I still have no idea what air bed and breakfast does.

We're just kind of kind of looking at each other in this room.

And so, but, you know, he,

I knew even at the time that he had this certain X factor, but I, I let myself get preoccupied.

I thought somebody's going to get murdered in one of these things.

Cause, you know, at the time, it was barely more than a WordPress site.

You know, you, you invite a guest to your house or apartment, and then you serve them Pop-Tarts the next morning.

They sleep on an air mattress.

And I was just like, this is just crazy, you know, and

fortunately, because Anne and I had stupidly passed on this company.

When Lyft says, hey, we're going to do this ride sharing thing.

And, you know, people are like, are strangers going to want to get in a stranger's car?

Anne and I are like, hey, we'll take a walk on that wild side.

You know, I can see it happening.

So, but with Airbnb, it was just, it just, it was just such a discombobulated meeting.

And the idea was so crazy.

And you had couchsurfing.com, which was free and it was going nowhere.

And I just, I just wasn't awake enough.

I just, my mind was not open and awake enough to the possibility of what it could be.

Right.

And, and, you know, as a venture, you have to do that.

You have to sort of.

Yeah.

And

I, and I, I told myself, I'm going to learn as much as I can from that mistake and never repeat that mistake.

Because like in corporate capitalism, you know, Buffett would say, rule number one, don't lose money.

Rule number two, don't forget rule number one.

In my business, rule number one is don't pass on Airbnb because I would have made 6,000 times my money if I'd say I could have made no good investment the rest of my entire career.

It'd still been really good.

So I spent a lot of time really understanding what I got wrong.

And, you know, another good lesson in that is quite often the best seed opportunities don't present well.

And it's incumbent on you to be awake to what it could be rather than, oh, the entrepreneur didn't present well.

I'm out.

Right, which often happens.

Which often happens.

Maybe more often than not.

So, Mike, when I think about the different life cycles of a company and the kind of incumbent asset classes, angel, venture, growth, IPOs, public company, mature,

declining, distressed.

And I've invested across all the different asset classes and been involved in companies across that entire lifespan.

Hands down, the best investments I've ever made have been in distressed.

I think ANGEL is by far the worst.

My sense is that's consumption, not even investing.

And I think venture is a close second.

I think venture investing is so difficult.

And with, I think, two-thirds of investment in AI is now coming from just four big companies, the kind of the big four,

and that just an increasingly smaller number of not only tier one VC firms, but an increasingly smaller number

of partners at those VC funds are getting all of the deal flow because it's not the check, it's the signal about the early company and these VCs have developed amazing brands.

My sense is that just the venture or venture capital as an asset class is getting more and more challenging and more and more concentrated, that all the returns are clustered amongst a smaller and smaller number of firms and people.

Your thoughts?

Yeah,

in general, I agree.

In general, I think that venture shouldn't be thought of as an asset class because the venture, and just like startups, the average isn't any good, right?

Only the extremely rare exceptional is very, very good.

So

this is the way I think about it.

You know, those old British guys in the Anorak coats who like have journals and they spot these trains coming and going and everybody thinks that they're socially maladjusted and dorky when it comes to trains.

I'm that way when it comes to startups.

So like I can't, I can't do any job other than invest in startups because like I keep a, I have this, and I'm happy to share it someday if y'all are ever interested.

I keep a list of every startup that's 100 bagger.

And I create a time capsule for them.

So I want to know not just why did they succeed, I want to know what exactly did it look like at the time you would have had to decide.

And that's, that's hard because even the founders misremember how it really happened.

You know, people, people remember stuff differently when it works.

And so, but, but like, I get just like fascinated with that, right?

Like, I, like, I'll talk your ear off about like what I've learned about like these time capsules of looking at these startups and, and, what the great ones were and what was rare about them, what we can learn, and which of our frameworks would have worked and which of them wouldn't have worked.

Um, but like, I just, it's kind of like Buffett and Munger would just read Fortune 500 reports all day.

Like, I just, I just love doing that.

And, and, um,

so I think you can still succeed if you're, if you're like a train spotter about it, but, but it, but you'll notice I don't pay that much attention to other VCs.

And so, um, because even the good ones, even benchmark Sequoia, they're wrong more often than people realize.

You know, it's the magnitude of the right ones is very high.

But I think that a lot of it has to do with just being interested.

So I would agree with you in the main.

I'd say as an asset class, VC is bad, just like as an asset class, startups would be bad, right?

You're trying to find the exceptional.

And then you're trying to find not just the exceptional, but who can persist in being exceptional.

And that's really hard, too, because there's plenty of people who are exceptional for a 10-year window, but were they just right place, right time?

Very few venture investors are exceptional over many years or decades or you know, different sea changes of tech.

You know, I think that that, so I, so I would agree with you in the main, but if Sequoia lets me invest in their next fund, I'm probably in.

Yeah, that's a good point.

I like that.

We will end on you're a train spotter.

You're an odd train spotter.

I love that.

All right, Mike, thank you so much.

What a thoughtful discussion.

Again, Mike Magles Jr.

And by the way, his father was a legend.

I remember him.

Thank you.

And again, the book is Pattern Breakers, Why Some Startups Change the Future.

Thank you, Mike.

Nice to meet you.

Great to see you all.

Thanks for taking the time.

All right, Scott.

Isn't he a smart guy?

Really interesting.

Yeah, seemed very nice, too.

One of my favorite people to talk to.

Seemed like he'd be a really good, he'd be a good kind of, he's not elder, but a statesman for the industry.

He is like the Tim Walls of Venture Capitalist.

Anyway, we'll be back for Wins and Fails.

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Okay, Scott, let's hear some wins and fails.

Do you want me to go first or do you want to go first?

Sure, you can go first.

Okay.

I would say a fail and it's not a fail of the story itself, but the Washington Post had a story about a woman in Florida who got into trouble because her transgender daughter was playing on the girls' volleyball team.

This is a story about parenting and this community loved them until someone dropped a dime on it and then created hate.

What a ridiculous thing.

They loved the person and then suddenly didn't.

And it was so, it was so ridiculous.

And it's a beautiful story about parenting.

And this woman is what a wonderful parent.

That's all I had to say.

It's just what a fail of society not to value what this woman's done for her daughter, her transgender daughter.

And it's worth reading.

I would recommend it.

And it's just, you know, at the same time, Will Farrell has this show on about a partner, a writing partner of his, who

became transgender.

Amazing.

Will and Harper.

Will and Harper.

I just love these pushbacks by parents and Will Farrell and everything else.

Both Will and Harper and this story are worth watching.

And I think it's a fail in our society for making this so hateful.

And the positive, I did a beautiful interview with Joanna Coles and Sam B.

They have a new podcast.

I'm going to give them a little touting here.

It was really fun.

They're trying to do Scott and Care a little bit.

And I wish them good luck in doing so.

And I thought it was, I had a really nice conversation.

They're still developing rapport, and there's no penis jokes, but really.

Good job, girls, ladies.

Okay, so I have two wins.

My first win is the death of Hassan Nasrallah in the last couple of weeks.

Nasrallah and basically the entire senior,

the entire kind of senior staff, I don't know what the term is, of Hezbollah have been taken out.

Fun fact, in the last six weeks, Israel has eliminated more terrorists from the U.S.

most wanted lists than the U.S.

has managed to do in the last 20 years.

I think the world is a safer place with Nasrallah no longer in it.

Vice President Harris said regarding his death, Hassan Nasrallah was a terrorist with American blood on his hands across decades.

His leadership of Hezbollah destabilized the Middle East and led to the killing of countless innocent people in Lebanon, Israel, Syria, and around the world today.

Hezbollah's victims have a measure of justice.

I thought that was well said.

Thank you very much.

My other win is the life of Chris Christofferson, who passed away.

What a man.

Okay, Hold on.

So a country singer.

I put out a thread on this.

You know, I'm writing a book on masculinity.

I'm trying to find like great role models.

Anyways, this guy, all right, so obviously a country singer played college football.

He was a golden glove boxer.

He was a Rhodes Scholar,

master's in English lit from Oxford.

Army cat, and then decided to go join the Army where he rose to the rank of captain as a helicopter pilot, a Grammy Award winner, a Golden Globe winner for best actor, eight kids, seven grandchildren.

I mean, talk about just a stack of patriotism, creativity.

He was known as being a very gentle person.

He was known more as a poet than a songwriter.

A great songwriter, Sunday Morning Coming,

best song ever.

For the good times, me and Bobby McGee, Help Me Make It Through the Night.

I mean,

I really do believe that

I've been so distressed.

I think so many young people have such a bias against America.

They generally don't recognize how many, how wonderful America is.

And I think that the basis of that amongst our rights, our rule of law, our blessings in terms of our resources, our Constitution, all that.

We have so many really impressive Americans.

And

anyways, I just read, when I heard he passed, I used to go see movies with my mom, and my mom was a huge Barbara Streison fan.

And so, anything with Barbara Streisand, and we saw, and he was in the original of Star is Born.

And I didn't really follow him that much.

Well, that's not the original Star Is Born is made actually four times, including a very famous version in the 50s with Judy Garland and James Mason.

Is that right?

Yeah, but go ahead.

And so when I heard he passed, I looked him up and I thought, my God, this is just what, this is just what you want

from men.

Someone who is incredibly strong, understands his fidelity and appreciation for what it means to be American, gentle, thoughtful, nice, really valued education.

And by the way, just kind of outstanding at everything he tried.

He was also known as a very generous person to other artists.

So anyways, rest in peace, Chris Christofferson.

That's my dead at the age of 88.

What a wonderful American life.

And then

my losses, and I imagine you saw it, but there was a wonderful,

really well-done

article in

the Wall Street Journal about how men are continuing to fall behind.

I do.

And I just want to make sure I get the, oh, that's why you sent it to me.

Rachel Wolfe, by the way, about 30 people sent me this article.

But for a variety of reasons, whether it's a lack of real role models in schools or in the homes because of single-parent homes, whether it's that young men literally mature biologically later, whether it's the disappearance of middle-class jobs for men without college educations.

There's just so many things that seem to be stacked, whether it's a predisposition towards addiction that's greater than women in divorced homes or single-parent homes.

Girls interestingly have similar outcomes as girls in dual-parent households, but boys come off the rails.

It ends up that while boys are physically much stronger, they're emotionally emotionally and psychologically much weaker than girls.

And a lot of these factors are really coming together in a very,

very upsetting way.

And Richard Reeves, who's kind of my Yoda around this stuff, the president of the American Institute for Boys and Men, just came out with a study about

what a toll addiction and drugs are taking.

on young men.

And since 2004, the incremental deaths amongst men of deaths of despair, in other words, the new incremental number of men that are dying because of things like drug overdoses, dying by suicide, gun deaths, it is 400,000 men.

So we have lost more young men in the last 20 years to these deaths of despair incrementally above the average, the baseline before that, than we lost in World War II.

And I do think that, unfortunately, because of the advantage that I received and my father received, that there is not the same level of empathy and recognition of just the data here.

And there aren't nearly as many programs or thinking about moving in to help with programs for boys from recently divorced families, trying to get more males involved in primary schools, national service, figuring out more vocational programs, support groups.

If you walk down the hall of NYU, there's

golden seeds, women in venture capital, black women support groups.

There really aren't any support groups focused on young men who are struggling.

And more and more young men, Richard talked about this interview he was doing with these community colleges in Oregon, and they can't get young men to apply.

And when they interviewed them, they went out and did a study.

They said that they were worried they would be lonely.

And there's really something very

upsetting going on amongst young men.

And I track pretty closely all the emails I get.

And the number one email I get, although it's toning down, is something along the lines of, is it too late to invest in NVIDIA?

Which is kind of funny.

But, but the number two is all the same.

It's people concerned about their boys, and it's not from their fathers, it's from their mothers.

Yeah, I would, can I just note something here?

A lot of people would say, Why does Scott talk about the struggles of men so much?

Carrie, you should stop them.

And I got to tell you, I always am like, you know what?

It matters to all of us if men aren't thriving very much so, because men can be very destructive, too, by the way, and they are.

And they can move into really destructive points of view, but it's just it's very important we get this right with young men.

I think about it, given I have three sons too,

about it quite a lot, quite a lot.

Well, women, neither women nor America are going to flourish if men continue to flounder.

It just isn't, America is not going to work if we don't have a middle class.

And by the way,

we should do nothing to get in the way of the fact that, on the whole, women, especially young women in our society, are killing it.

That is a sign of our collective victory.

It's a cost for celebration.

And also, it by no means means we shouldn't stay very involved and focus resources and programs and justice on still the many issues that women face.

How many times do you hear, I know the most amazing women, smart, attractive, high character, and they can't find a mandatory.

And here's the thing.

They can find men.

They just can't find men they want to date.

The pool of economically and emotionally viable men is shrinking every year.

I would agree.

Very good one, Scott.

I'm going to add just one more sadness is Maggie Smith dying.

I love Maggie Smith.

What a

pound for pound.

That woman has provided us with more pleasure, whether she was in Harry Potter or Downton Abbey or earlier, the prime of Miss Jean Bodie.

What a woman.

What a man for Chris Chris Robinson.

What a woman for her.

Anyway, very good wins and fails, Scott.

Very good ones.

We want to hear from you.

Send us your questions about business tech or whatever's on your mind.

Go to nymag.com slash pivot to submit a question for the show or call 85551 pivot.

Okay, Scott, that's the show.

We'll be back on Friday with more.

And doubtless, we'll have lots to talk about because there's so much news these days, including from our friend Brian Williams.

We're excited to have you back, Brian.

Read us.

Yeah, that's right.

Well, that's like a horse drinking a slurpee at a 7-Eleven.

Today's show is produced by Lara Naman, Zoe Marcus, and Taylor Griffin.

Bernie Intertod engineered this episode.

Thanks also to Drew Burrows and Mil Severio.

Yeshua Kurwa is Vox Media's executive producer of audio.

Make sure you subscribe to the show wherever you listen to podcasts.

Thanks for listening to Pivot from New York Magazine and Vox Media.

You can subscribe to the magazine at nymag.com/slash pod.

We'll be back later this week for another breakdown of all things tech and business, golden gloves, army captain, a poet, Chris Christofferson.

Rest in peace.