01:12:28 · Jordi Hays, John Coogan
[01:12:28] S2: GR says, but John, my refrigerator needs WiFi cameras and a two terabyte a month data usage limit. [01:12:34] S0: You gotta be able to tweet from it, for sure. Now, return to the the old thing, the icebox. You want the you want the gentleman stopping by in a in a gas powered vehicle to deliver you a cube of ice that you will use to refrigerate your milk. Maybe they'll come back in Milkman. Maybe that's maybe that's what Did happens [01:12:53] S2: you see that Weil, Gotshal, and Mann Mann? I don't I don't actually... I'm not familiar with this firm, but a very large wall... Law firm. It's gone bankrupt. [01:13:03] S0: It's on the cover of The Wall Street Journal. Yes. I saw it. [01:13:07] S2: Can you pronounce it? [01:13:08] S0: Storied law firm, Weil Gotshal, to a close. I just kinda steamrolled that one. Let's see.
01:13:15 · Jordi Hays
[01:13:15] S2: Turner Novak says, I'm genuinely curious. How does a law firm go bankrupt? They literally just sit at computers and charge people 1 to 10,000 per hour to do things that AI is now automating. No offense at all, there's a lot of expertise required to do this. How does that not print money? John Woo followed up and said, it's confusing why a major multi billion dollar law firm is going bankrupt, so I talked to a bunch of lawyer friends about why Weil could suddenly be insolvent. Unintuitively, law firms are basically fixed cost businesses. Revenue comes from a concentrated core group of rainmakers. Let's give it up for rainmakers. Those rainmakers carry the whole business while the rest of the business basically drags, a word I'm not gonna say, junior partners or rainmakers in training, they can't yet bring in huge load bearing dollars. Interesting placement of load bearing. Everyone else, associates, back office staff comprises one gigantic fixed cost center, not to mention basic overhead like offices, revolver interest, etcetera. The problem with law firms in particular as opposed to other advisory businesses like banking, consulting, accounting, is that the clients are inherently portable, so any partner can take their team and clients and leave. Doing so de leverages the rest of the partnership because a small number of partners carry most of the revenue while leaving behind fixed costs. Once there's a crisis of confidence, it no longer makes sense for partners to stay because they're now getting underpaid in profit share relative to their revenue potential. If they were to leave for a mega firm like Kirkland, they'd be properly compensated for their earning potential instead of being saddled by rising fixed costs as a percent of revenue. There's not much IP or brand moat in a law firm. Clients follow partners and the process of crafting exceptional judgment is mostly in partners' heads. And lastly, the partners are the equity in the firm. Law firms have no terminal value. So when the partners leave, it's as if a huge chunk of the firm equity walks out the door. TLDR law firm bankruptcy is basically a crisis of partner confidence, and the resulting departure spiral saddles anyone remaining with the gigantic fixed overheads of running a billion dollar business. So
01:15:24 · John Coogan, Jordi Hays
[01:15:24] S0: good. Be clear, this is not a bankruptcy. I think that I think that's why there's a lot of confusion on the timeline about this. They're just winding down the operations. It's more akin to, like, a a venture capital firm not raising the next fund. It's not that they went bankrupt and had some sort of, you know, balance sheet issue. It's just that they don't want to continue with the current firm structure. Those lawyers will diffuse to other firms, start their own practices, do all sorts of stuff. But it's not it's not bankruptcy. Like, they're not going... They're they're winding down the firm, which is still surprising. Like, it's on the front page of The Wall Street Journal. [01:15:59] S2: But they're working with restructurings. [01:16:01] S0: Yes. But that's but that's not... It's not bankruptcy. It's like it's like every partner has a different stake on the equity. There is value there. And how you decide where that goes, that's the... That's why you bring in a restructuring firm. It's not that it's like in the hands of creditors, like the the... I believe the partners will own the the assets. I would be very surprised if it's like they're... I mean, I don't know. [01:16:24] S2: Amendment pretends as great succession planning by the greedy boomers. [01:16:28] S0: Just shut down? What does that mean? [01:16:30] S2: No. I mean, like, you know, one read on this is that the the the partners, the rainmakers [01:16:36] S0: Mhmm.
01:16:36 · John Coogan, Jordi Hays
[01:16:36] S0: Mhmm. [01:16:37] S2: Like, the the the the sort of legacy partnership probably had a ton of exposure still. Yeah. And if you're a rainmaker and you feel like you're saddled with all these legacy, basically, owners of the firm, they make... It could make a lot of sense to bounce. [01:16:53] S0: Yeah. I mean, that happens all the time in in hedge funds anyway. [01:16:55] S2: And we're... And and this is happening real time with, like, various venture firms [01:16:59] S0: Totally. [01:16:59] S2: Where you have [01:17:00] S0: Young stars or...... [01:17:01] S2: That are... That have effectively been retired that are still... [01:17:05] S0: And they might pull out millions and millions of dollars every every year in in fees, and that fee stream is not exactly being handed over to the next generation on any short time scale, so the great great investors are moving on and starting their own firms. What else is in the timeline? Let me tell you about Figma. Agents, meet the canvas. Your AI agents can now create and modify your Figma files with design system context. [01:17:31] S2: We gotta talk about Snowflake [01:17:35] S0: Oh, yeah. [01:17:35] S2: And data What's going on? Pretty crazy exchange. [01:17:42] S0: We've had both of these folks on the show. [01:17:47] S2: Ben Horowitz posted something about, just a blog post about Databricks. Databricks is an incredible company, obviously. Ali is just is is future hall of famer [01:18:01] S0: Yeah. [01:18:01] S2: Hands down. [01:18:02] S0: He basically said my boy wicked smart.
01:18:02 · John Coogan, Jordi Hays
[01:18:02] S0: He basically said my boy wicked smart. [01:18:05] S2: That's what he said. Sridhar says, release all the numbers. Does 80% year over year become 65% when you remove pass through inference? What does it become when you remove AI natives, and how much of it is from one time software license versus a service transition? Ask for a bunch of other metrics. Curious, people want to know. PS, Ollie, happy for your success. The world is big and lifelong. [01:18:32] S0: He's just [01:18:33] S2: like And of course, so so basically [01:18:34] S0: I wish I was private. [01:18:36] S2: Yeah. So Databricks has the benefit. Yeah. Databricks is an incredible business and has the benefit of being able to selectively release numbers and not... Doesn't have to report things quarterly. [01:18:47] S0: They don't have to release any number. That's gotta be stuff leaks, they don't have to release anything. Private. That's what I'm saying. [01:18:51] S2: Even to investors leaking. [01:18:53] S0: Yeah. [01:18:53] S2: Yeah. Yeah. [01:18:56] S0: Sridhar. [01:18:57] S2: Sridhar is is is, I think, probably genuinely curious. Right? [01:19:01] S0: Yeah. Yeah. Totally. Yeah. That's actually... Good point.
01:19:01 · John Coogan, Jordi Hays
[01:19:01] S0: Yeah. Yeah. Totally. Yeah. That's actually... Good point. [01:19:04] S2: There there's part of that, but it but it came across as Yeah. As, you know, antagonistic. That's definitely one way to put it. Ali responds in that and says, I don't think we should fight the two companies that are complementary since you're not doing this AI stuff. Shots fired. I really think Snowflake should consider getting its AI tokens through Databricks. You can get both cheap open source models as well as Frontier from our platform. It all goes through Unity Gateway, has smart routing budgets and access. You can even use Omnigen, which with any harness, including Coco, which is Snowflake's harness. Most of our customers use this to reduce token spend 30% Yeah. Last few months while token count went up. Genie lets you then track all your financial...