This Week in Startups
00:32:19 · Jason Calacanis, Thomas Tunguz
[00:32:19] S0: actual We'll have no business. [00:32:20] S3: Payouts. Yeah, there's just well, yeah. And so maybe you see the convergence of the self driving car company with the insurance business, but you just look at the I think maybe car insurance ultimately ends up looking like title insurance. We all buy title insurance when we buy a house. The redemption rates on those policies are less than 2%. What happens if car insurance, you only get only 2% or 1% of people actually who drive in a year actually get into accidents? We can get there, right? Waymo is at 93% or 95%. So I think it's pretty fundamental, and it's almost... There's this joke on Twitter, right? The most expensive Tesla, the most expensive car I ever bought was the Tesla full self driving because my spouse wanted one immediately, and so I had to buy two. I think there's almost It's a certain level a [00:33:05] S0: true joke too. [00:33:06] S3: Yeah, a certain level of personal responsibility. Like, I care about you and my family. I want you to have the safest driving experience. If you have a 16 year old, Where are going put them in? If you can, you'll put them in a self driving car so they can't hurt themselves or other people. [00:33:20] S0: I think being anti AI will become increasingly a losing position as consumers get huge value from it. It'd be like being against. I got
00:33:20 · Jason Calacanis, D.A. Wallach
[00:33:20] S0: I think being anti AI will become increasingly a losing position as consumers get huge value from it. It'd be like being against. I got [00:33:32] S1: a question for the group, which is, it's like AI is already quite cheap for the end consumer. I mean, just talked about how disproportionate the value you've gotten in your business is relative to what it's cost you, but it still could be cheaper. It could be free. And [00:33:53] S0: you [00:33:53] S1: think about how China's going at this, as I understand it, their national strategy is basically focus everything on getting AI out there into the economy because the real beneficiaries are going be the people like you who are using it in their business, making their businesses better or individuals making their lives better. And what I wonder is like, there's this thesis in Silicon Valley, the so called everyone wins thesis. And that is just to recap it, the memory makers can win, NVIDIA can win, the Neo Clouds can win, the Frontier Labs can win, everyone can win. That is basically an argument that there is so much profit to go around Yes. That everyone in the ecosystem has this opportunity to basically extract monopoly rents. And what I wonder is like, is that sustainable? Like, I don't know that that is at all part of the political conversation around AI yet. But I do have to say, like, it makes me a little uneasy to watch all of these companies making 80% gross margins. [00:35:02] S0: Yeah.
00:35:02 · Jason Calacanis, D.A. Wallach
[00:35:02] S0: Yeah. [00:35:03] S1: And that's not how capitalism is supposed to work. When you're... When you got to those fat margins, it's supposed to attract competition, the margins get pushed down, your competitive advantage period wanes. What's going on here? And, you know, we alluded to Elana Kahn earlier, like, is there anything that needs to happen here to either spur more competition or otherwise bring down these margins, which just seem unwarranted? [00:35:32] S0: Yeah. This is key question. And I think what we saw from Canva just this week, Canva cut 22% of their staff. That is a 100% AI taking and compressing down things people are paying for. How many people do you know who pay for Canva, who are moms and dads at home and using it? 1,200 people, I think it's 20% of their staff. I can't believe they have 5,000 people working at that company or 6,000 people working there. That's a large number. It feels like if Bending Spoons was running Canva, they'd have 400 people, like 10% or something. So yeah, I think a lot of this software is going to become free, Elana, and then a lot of this margin is going to get taken away, don't you think?
00:36:25 · Elana Gold
[00:36:25] S2: Yeah. I mean, if your business relies on third party inference, what happens when a lot of these customers demand lower prices and you have to continue to cut your margins? And I think a lot of these... I mean, Canva is great, but like they're almost a part of their business is this AI wrapper and they're relying on other AI tools and LLMs to be able to create what they want. They have to be able to cut their costs. And I think it's going be really interesting because in the future, I think a lot of AI is going to be discussing these economics. We've spent years talking about what these models are capable of, but now companies are starting to ask what is actually the cost to deploy them at scale. And so I think companies have been writing this, okay, we need to deploy as much AI as possible in all the different features and aspects, but now they really have to hone in on, hey, if they are using AI, how many people are really necessary to build the same thing that they're building today? And I think you were just saying it where you're spending 40 ks to do, what, 2,000,000 worth of work. I don't think AI could do everything, but I think AI helps a lot of these shops do things quicker and easier and not as many people.
00:37:36 · Jason Calacanis, Thomas Tunguz
[00:37:36] S0: Thomas, these were software projects internally that I wanted to do. I tried to do one of them, blew through like $100,000 and I gave up because I just couldn't make forward motion on it. I was like, this is to wind up costing me $1,000,000 and I'm going to get two fifty ks worth of value from it. So something has changed dramatically here. What's your take? [00:37:54] S3: Yeah, I'll take the other side, which is you've seen GPU costs go up 120% from about $5 to about $13 in the last six months. I think as a result of the election and [00:38:05] S0: just That's the the hourly cost of a GPU you're talking to. [00:38:07] S3: Yeah, for Blackwell 300, which is state of the art today. [00:38:11] S0: I think we're going get to [00:38:12] S3: a place where we won't have enough AI in 'twenty seven. I think for Muse, we won't have it. For other products, we won't have it. We will start to buy AI the way that we buy Internet. When you buy Internet, you buy a certain amount of bandwidth. How much stuff can I download? Then I buy it as a function of speed. How quickly does it come? We are going to start to buy AI in the same way, which is like effectively, how many questions can I ask and how quick is the response? [00:38:40] S0: Wow, it's going to be rationed is what you're saying. You're going to get an allotment, it's going to be rationed, and this all you can eat stuff is maybe going to go away.
00:38:40 · Jason Calacanis, Thomas Tunguz, Elana Gold
[00:38:40] S0: Wow, it's going to be rationed is what you're saying. You're going to get an allotment, it's going to be rationed, and this all you can eat stuff is maybe going to go away. [00:38:47] S3: Right, and so that goes back to the Canva point, which is, sure, today when inference is cheap and you can get as much of it as you want, vibe code whatever I like. But in an environment where GPU and AI is constrained, not everybody will be able to afford state of the art AI, not everybody will be able to afford a soda performance. And so instead of spending $100,000 to vibe code a custom app, I'll spend $30,000 and I'll make do with an app that I have to kind of shim and wedge in. And so I think we'll ultimately see a pretty big resurgence at the app layer as a result, just because of the supply demand will make bespoke application development and maintenance too expensive for most people. [00:39:28] S2: So do you think we're not going to find a cheaper GPU and a cheaper chip? Because right now, obviously, NVIDIA owns most of the chips or a cheaper way to get power.