All-In with Chamath, Jason, Sacks & Friedberg
00:02:28 · Chamath Palihapitiya, Jason Calacanis, David Sacks
[00:02:28] S2: It was a... It was really fun, though. It was really [00:02:31] S0: And Chamath Palihapitiya, everybody's favorite enterprise sales executive from the eighty ninety corporation. How'd you do this week? Did you hit did you ring the gong? Did you hit your quota? Or are you gonna have to work this weekend? [00:02:43] S2: Q 4 is off to a good start, but I never wanna count the chickens. [00:02:46] S0: Okay. That's that's good considering you whiffed Q 3. [00:02:50] S2: No. No. No. Q 3 was okay. We whiffed Q 2. Butchered it. Butchered it. Butchered it. [00:02:56] S1: That's why when I invested. [00:02:57] S2: All my fault too because I I forced forced these poor sales people to just only focus on the gigantic deals. [00:03:07] S0: You're learning. You're learning. [00:03:08] S2: I had to learn the hard way. [00:03:10] S0: You wanna get those singles and doubles and the people who pay on time and and who Will start projects. On time. [00:03:16] S2: We'll see in Ancest One, but like, you know, you can build a ginormous business with singles and doubles.
00:03:20 · Jason Calacanis
[00:03:20] S0: Absolutely, you can. Speaking of gigantic businesses, Anthropic, Ant dropped their s one, that's the document that outlines the nature of the business for an IPO, an initial public offering. And gotta ask the question, this seems to be the greatest business in the history of entrepreneurship. Goldman and Morgan Stanley are gonna lead the round, and they are targeting November 16, right before Thanksgiving for this IPO. We've been waiting for a long time. It's been delayed. The ticker will be ant, a n t, and they're aiming to raise, wait for it, $100,000,000,000. In other words, like, three months of compute and that would make it the largest IPO ever, suppressing SpaceX. They raised 85,000,000,000 back in June if you remember. And Polymarket says, our great partners at Polymarket say 78% chance Anthropic raises at least 95,000,000,000. The valuation, 1.5 to 2,000,000,000,000. Here's your Polymarket. Right now, it's saying between 1.75 and 2,000,000,000,000, market cap 31%. So, yeah, assume it's gonna be slightly under 2,000,000,000,000. The revenue is the story, Sacks, 16,300,000,000 in the first half of twenty twenty six. That is 14 x year over year. So in other words, the first six months of twenty twenty five, one fourteenth of what they did in the first six months of this year. Q two is gonna be a whopping 11,600,000,000, a 30 x jump over the last five quarters and almost as much as they made in the first half of the year. They say the TAM, the total addressable market for their tokens and services is 40,000,000,000,000. That's extraordinary. I don't know how they backed into that, but we'll talk about it. And they're projecting a 100,000,000,000 of ARR by the end of the year. Now, unspecified if that's annual reoccurring revenue or their annual revenue run rate, which is ARR, like a pirate. They've got a $112,000,000,000 in cash and a very unique ownership structure. Seven founders, yes, they have seven, are gonna hold 50.1% of the voting power through a single class f share. Sacks, is this the greatest business in the history of capitalism?
00:05:51 · David Sacks
[00:05:51] S1: It could very well be. I mean, I think this is probably gonna be the biggest venture outcome of all time, especially given the time in which this was created. I mean, is only a six year old company. I think the exit here is going to be on par with SpaceX's IPO, but SpaceX has been around for like twenty something years. So this is probably the fastest value creation of any venture backed company in history. And I don't know if you saw, but there was a tweet this morning about the distribution of wealth this is gonna create among the employees. Hundreds and hundreds of employees are gonna be making hundreds of millions of dollars and then thousands of employees are gonna be making $10,000,000 plus. I mean, this is gonna be an enormous wealth creation event like San Francisco and maybe all Silicon Valley has never seen before. Now, there's a few other data points in this s one that I think reflected the strength here. So number one is that this $80,000,000,000 loss number that we've heard so much about that the media's constantly been pumping and harping on as proof that Anthropic was either a fake business or that we were in this sort of whole bubble, That narrative basically just got completely refuted because it turns out that that $80,000,000,000 loss is a phantom number. It resulted from the fact that Anthropic had issued convertible notes So basically their infrastructure partners like Amazon and so forth. And as Anthropic's valuation increased, those convertible notes got recorded as a loss on the balance sheet and that flowed through into the income statement, but it's not a real loss. If they had just issued equity, that loss wouldn't be there. So it was not a cash loss. It's basically a fake number. And in fact, what was revealed in this s one is that Anthropic has been an extraordinarily capital efficient business. So they've raised something like, I think it was around a 110,000,000,000 roughly, and they've only spent about 9 or 10,000,000,000 throughout the entire course of this this business. And they still have, like you said, Jay Cal, about a 100,000,000,000 left of cash or cash equivalents on the balance sheet. So everyone thought based on the previous reporting that this was a huge loss making business. In fact, it ended up being a very capital efficient business.
00:08:12 · David Sacks
And then the other thing that you saw was that their margins have been improving. I think their gross margin is now something like 85. And what you see is that for a given task or capability, they're showing roughly 10x improvement year over year in their ability to deliver that task, the cost effectiveness of that task. It gets 10 x cheaper year over year and that allows them to cut the cost of that model or that task by let's call And it 50 so the consumer recognizes a huge cost savings, but they are able to realize an even greater savings because they're they're able to capture the rest of that efficiency in their margin. And that's what we basically saw is that, again, they're cutting the cost of their tokens significantly, but their margins are going up even faster because they're able to produce these models that are more and more efficient. And they call them compute multipliers. It's very interesting the way that Anthropic sees their business. The framework that Dario has is that there's raw compute, which are scaling very rapidly as well, as a result of better and better chips and more and more of those chips. And then there's the compute multipliers which are things like algorithmic improvements or better curation of the data or it can be things like better architectures, more, you know, MOE architectures, things make Yeah. All these models So they're able to give you the same answer for one tenth the cost or they can take those efficiencies and create greater capabilities. So this is what we're seeing is that that business is actually improving. And I think it is a little bit of a refutation to all the people who've been saying over the past year that they're getting commoditized away, that open models are basically putting them on a hamster wheel where they're basically going to zero on gross margin or that it's a business that only works because it's heavily subsidized by venture capital. In fact, I think there's a lot of reasons to believe that Anthropic has a pretty big lead. And if you believe that recursive self improvement has kicked in as they are claiming it has, then their lead could actually grow.
00:10:22 · Jason Calacanis
[00:10:22] S0: Friedberg, your thoughts on the impact of this massive deluge of capital coming in to Silicon Valley and then this corporate structure, 51% ownership, and what impact this might have on the technology industry, the venture capital industry, and then on democracy here in The United States. We've never seen this much capital flow through to a nonprofit organization or whatever they're calling this Anthropic nonprofit entity, but 80% of the seven founders shares are going into this nonprofit entity of some type. Benefit Corporation, who knows what it's gonna be structured as. It's optional, but that's another interesting shoe to drop. So take it whichever way you like and whichever order you like. Can I just comment on the the economic value that's arising from AI that, of course, kind of perhaps revealed a little bit in this? So in the s one, Anthropic shows how many customers they have that are spending a 100 k or more. If we take a look at the image here, it's a pretty remarkable ramp in customers spending a 100 k or more. 200 customers in 2024 end of year, 1,500 end of twenty twenty five, and at the end of September, 11,900 customers spending a 100 k or more. So I asked the question, you know, how many customers are there for which a $100,000 annual spend is less than one percent of their total annual spend? And the answer is in The US, it's about 200 to 300,000 businesses. Globally, it's a bit over a million. So, you know, if you just say, hey. Look. Anthropic's customers that could spend a 100 k or more and have it be less than 1% of their total spend, the addressable customer base is about a million customers. So they're only at, call it, 1% of total customer penetration potential. Now the question is, is there real money to be made here? So I took a look at the kind of AI value stack to try and identify who's making money where, and it turns out everyone's making money. So I... And I think we've talked about this quite a bit, and I know Chamath's got some views on this as it relates to the Neo Clouds. What is a shard? Is this, like, AI output or that... Or you made this? I had I had Claude make this for me as an image. Cool. Or I should just say my analyst made this for me in my shop. You're bot. And so, you know, I basically said, like, start with Nvidia.
00:12:43 · Jason Calacanis
How much does Nvidia spend to make the chips, and then how much do they sell the chips for? So for every dollar of COGS, every dollar that NVIDIA spends, that turns into $4 of revenue for NVIDIA, 75% margin. And then that gets sold to SpaceX, and then SpaceX turns around, and they're making, you know, an 83% margin on that chip spend because they're kind of looking at a five year depreciation. So they spent 10,000,000,000 on Colossus one, five year life, 2,000,000,000 a year depreciation. And so that's kind of the cost per year, but then they're making 1,250,000,000 a month on Colossus. And then Anthropic is showing in this s one pretty remarkably to Sacks' point that they're making about 85% incremental gross margin on every incremental dollar coming in. It's obviously a baseline of compute spend, but 85% is kind of the incremental gross margin. So at the end of the day, a dollar that NVIDIA spends turns into $18 that Anthropic is making selling to customers. And the question is, are customers making money? So if we're seeing the customer ramp as it is and the spend ramp as it is, and the customers are making, call it, on the order of two to 10 times the money they're spending because, otherwise, there there would be probably a retention issue and a decline in spend. Maybe I'm wrong. Maybe it's early days of exuberance and people are losing money, and we could debate that point a bit. But generally speaking, if AI is delivering value to the customers, I think this shows that there really is true productivity arising from AI, that across the whole value chain, there is such margin to be had. There's so much value being created all the way through to the customers, and we're only 1% or Anthropic is only 1% penetrated on their customer potential and probably less than 10% of the spend potential per customer. That this really is what I think Eric Schmidt a long time ago in the early days of Google used to say Google's total addressable market is global commerce. And I think for the first time ever, we're seeing a business actually potentially starting to realize that theory that if you can create enough productivity gain for your customers, that your TAM is commerce. And it really highlights that maybe, you know, we're almost growing the equivalency of the human working population by a 100 x or a thousand x or a million x with this technology stack.