Invest Like the Best with Patrick O'Shaughnessy
00:30:10 · Patrick O'Shaughnessy, Martin Casado
[00:30:10] S0: Oh, yeah. [00:30:10] S1: That you're walking in like the whole thing is going on and like... Just for those that are listening, Sleep No More is an immersive play which is three hours. It was in this three story hotel or something like that building in New York and you're like running around trying to figure out and like Hamlet is being played out or whatever. We're starting to realize how powerful this stuff is. A lot of these tropes and visions of the future from the fifties and sixties we can actually make and I just think that the biggest constraint is no longer the tech. It's literally our creativity and it's just because we've been beaten down by thirty years of software being shit. I mean, let's be honest, software has sucked, technology has been hard to use, old people hate it, it's most often broken and now we're actually in a point where this stuff could actually start working. And so for me, it's like, I'm so excited for what this brings. [00:30:55] S0: It's tempting to say you could just freeze the models and their current capability and still get all of what you described. So there's like a diffusion question I'd like to explore. Before we do that, what if anything do you think is missing from the models? Like how do you hope or wish or dream that the models themselves can
00:31:09 · Martin Casado
[00:31:09] S1: be So I think if you step back and you look at like what we know as an industry, the current tech stack, anything that's digital with enough capital you can solve and the reason is is because anything you can simulate on a computer, you can create RL environments for whether that's three d using Blender, whether that's general application use of a computer, whether it's code. You and I have talked about this before. I think when it's all said and done, the most interesting thing about AI, the meta thing is that like you can take a money kit and then you can point it at a problem and it will solve that problem. Like maybe it's expensive but at least you can solve it. In the past, you'd be like blocked in engineering and you'd die. Now you can actually just direct money at problems and solve these problems. So I feel very confident saying anything in the digital world because you can create an environment and you can RL it and you can train on it, we can solve. So I just feel very comfortable. Anything you do with a computer, AI will be able to do. So maybe it doesn't do it now, but like you can just see that path happening. What I don't know is, does the same thing apply to the physical universe? Sure you could set up a lab to like, make speakers or whatever, you know, to do that, but like, are the scaling curves the same? Is the distribution the same? So anything to do with robotics and the physical world and science and medicine, I have no idea if it follows the same laws and so I think that's still an unlock. But I feel very comfortable that the current digital side is done.
00:32:26 · Patrick O'Shaughnessy
[00:32:26] S0: How have you processed all this interesting security stuff? Breaches, a vertical breachpocalypse. It's obvious that we're like entering a very interesting era in cyber. What do you make of all this?
00:32:38 · Martin Casado
[00:32:38] S1: I lived through on the ground with formal studies in security. I lived through the internet and it was way worse than this. Like by this time with the internet, we had worms that had caused billions of dollars of economic damage. We'd taken out critical infrastructure. Remember Windows 95? You're probably teasing. No. I remember. Okay. Remember Windows 95? Just barely. It used to be that if you took Windows 95 and you installed it and it was connected to the Internet, before the installer was done, it'd be infected. Like, this has been taken away. Like, not a joke, right? Like... So like you didn't even have time to patch it. It was so chaotic and there was so much mayhem and this is what happens every time you've got a new technology that changes the nature of how we run computers in the security posture. And we're definitely dealing with another one of those moments. And so I think we can look to what happened with the internet, is like there's a few years of mayhem. You do have breaches that cause real issues and then the industry evolves. And normally, way you think about security is like, will the good guys be able to spend more money than the bad guys? If the answer is yes, which is typically the case, you will come up with a technical solution and I think that will be the case here. And you're already starting to see it. These vulnerabilities that you see showing up, this is good. That means that somebody used the model to make things safer by pointing out the vulnerabilities. I think that's going exactly like you would expect it to go. But I think the net impact at software will be much more secure because AI is also securing it.
00:34:05 · Patrick O'Shaughnessy
[00:34:05] S0: Can you talk about capital? There's very interesting things happening in capital markets. There's clearly lots of demand destruction happening. We're not funding things that we would have in a different environment because the cost of capital to fund them is too high and the cost is rising because the returns are so high on anything AI. So you've got these, I was looking at this company this morning where if you and I had seen the deck five years ago, we'd be like this is an amazing software business and we should fund it. And now it seems to pale in comparison to other things that we could put our capital to. The capital itself feels like this interesting variable in this whole equation as a constraint. I'm curious how that feels to you.
00:34:40 · Martin Casado, Patrick O'Shaughnessy
[00:34:40] S1: I sit on the boards of a lot of great companies that have the problem that you have. Profitable, growing 40, 50, 60% at scale, $304,105 100,000,000 in ARR. What do those companies do? You can't really IPO because they're subscale but they're great companies and I think about my own personal portfolio, I'm like, I'm in muni bonds, man. I'd rather be in these companies, right? And so I think that everybody would be happy with an asset that grows 40%. Like you'd be happy with your personal money being in there And if you could guarantee so I still think these are very good companies. I feel it's more a question. Again, this is my naivety of not understanding this of like, are we gonna see a shift in the market so that people can get exposure to this asset class? Because I think the risk profile is very, very different than AI. Nobody knows what's gonna happen to AI when the market slows down. Nobody knows. It could be easy come, easy go. It could keep going forever. Like nobody really knows. And so the only free lunch I've ever seen in investing is diversification. And I would love to personally have Ask it. A basket that includes these slower growing but these assets that don't disappear. [00:35:46] S0: Are most of the ones though that are in your mind extremely subjected to this disruption risk? There's lots of companies with that rough profile which seem terrifying in the face of how easy it's gonna be to create software.