Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy
[00:00:00] S0: We haven't talked about the power other than alluding to it through the space thing. I haven't talked about power very much. Power was the most uninteresting topic. Nothing really changed for a really, really long time. All of a sudden we're trying to figure out how to get gigawatts here, there, and everywhere. How do you think about, are you interested in power?
· Gavin Baker, Patrick O'Shaughnessy
[00:00:00] S1: I'm very interested. I do feel lucky, in a prior life, I was the sector leader for the telecom and utilities team. So I do have some base level of knowledge. Having watts as a constraint is really good for the most advanced compute players, because if watts are the constraint, the price you pay for compute is irrelevant. The TCO of your compute is absolutely irrelevant because if you could get 3X or 4X or 5X more tokens per watt, that is literally three or 4X or 5X more revenue. If you're going to build an advanced data center costs 50 billion, a data center with the ASIC maybe costs 35 billion. If that $50 billion data center pumps out 25 billion of revenue and your ASIC data center at 35 billion is only pumping out eight billion, well, you're pretty bumped. So I do think it's good for all of the most advanced technologies in the data center, which is exciting to me as an investor. So as long as power is a governor, the best products are going to win irrespective of price and have crazy pricing power. That's the first implication that's really important to me. Second, it is in the only solutions to this, we just can't build nuclear fast enough in America. As much as we would love to build nuclear quickly, we just can't. It's just too hard. NEPA, all these rules, it's too hard. Like a rare ant that we can move and it could be in a better environment, can totally delay the construction of a nuclear power plant, one ant. That is America today. [00:00:00] S0: So is a frog.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: So is a frog. [00:00:00] S1: It's crazy actually. Humans need to come first. We need to have a human-centric view of the world. But the solutions are natural gas and solar. And the great thing about these AI data centers is apart from the ones that you're going to do inference on, you can locate them anywhere. So I think you were going to see, and this is why you're seeing all this activity in Abilene because it's in the middle of a big natural gas basin and we have a lot of natural gas in America because of fracking. We're going to have a lot of natural gas for a long time. We can ramp production really fast. So I think this is going to be solved. You're going to have power plants fed by gas or solar. And I think that's the solution. And you're already, all these turbine manufacturers were reluctant to expand capacity, but Caterpillar just said, "We're going to increase capacity by 75% over the next few years." So the system on the power side is beginning to respond. [00:00:00] S0: One of the reasons that I always so love talking to you is that you do as much in the top 10 companies in the world as you do looking at brand new companies with entrepreneurs that are 25 years old trying to do something amazing. And so you have this very broad sense of what's going on. If I think about that second category of young enterprising technologists who now are like the first generation of AI native entrepreneurs, what are you seeing in that group that's notable or surprising or interesting?
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: One of the reasons that I always so love talking to you is that you do as much in the top 10 companies in the world as you do looking at brand new companies with entrepreneurs that are 25 years old trying to do something amazing. And so you have this very broad sense of what's going on. If I think about that second category of young enterprising technologists who now are like the first generation of AI native entrepreneurs, what are you seeing in that group that's notable or surprising or interesting? [00:00:00] S1: These young CEOs, they're just so impressive in all ways and they get more polished faster. And I think the reason is they're talking to the AI. "How should I deal with pitching this investor? I'm meeting with Patrick O'Shaughnessy. What do you think the best ways I should pitch him are?" [00:00:00] S0: Yeah, and it works.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: Yeah, and it works. [00:00:00] S1: Do a deep research thing. And it's good. "Hey, I had this difficult HR situation, how would you handle it?" And it's good at that. "We're struggling to sell our product, what changes would you make?" And it's really good at all of that today. And so, and that goes to these VCs are seeing massive AI productivity in all their companies. It's because their companies are full of these 23, 24 or even younger AI natives. And they're impressive. I've been so impressed with young investment talent. And it's just part of it, like your podcast is part of that. There's just very specific knowledge has became so accessible through podcasts and the internet. Kids come in and they're just, I feel like they're where I was as an investor in my early 30s and they're 22. And I'm like, "Oh my God." Like, I have to run so fast to keep up. These kids who are growing up native in AI, they are just proficient with it in a way that I'm trying really hard to become. [00:00:00] S0: Can we talk about semis VC specifically and what is interesting in that universe? [00:00:00] S1: One thing I just think is so cool about it and so underappreciated is your average semiconductor venture founder is like 50 years old. Okay? And Jensen and what's happened with Nvidia and the market cap of Nvidia has like single-handedly- [00:00:00] S0: Ignited.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: Ignited. [00:00:00] S1: Ignited semiconductor venture, but the way it's ignited, it's ignited in an awesome way that's really good for actually Nvidia and Google and everyone is like, let's just say you were the best DSP architect in the world. You had made, for the last 20 years, every two years, because that's what you have to do. Semiconductors, it's like every two years you have to run a race. And if you won the last race, you start a foot ahead. And over time, those compound and make each race easier to win. But maybe that person and his team, maybe he's the head of networking at a big public company and he's making a lot of money and he has a good life and he's 50 years old. And then because he sees these outcomes and the size of the markets in the data center, he's like, "Wow, why don't I just go start my own company?" But the reason that's important is that I forget the number, but I mean, there are thousands of parts in a Blackwell rack and there's thousands of parts in a TPU rack. And in the Blackwell rack, maybe Nvidia makes two or three hundred of those parts. Same thing in an AMD rack and they need all of those other parts to accelerate with them. So they couldn't go to this one-year cadence if- [00:00:00] S0: All that stuff didn't keep up.