Uncapped with Jack Altman
00:00:00 · Jack Altman, Ev Randle
[00:00:00] S0: I think I could joke about being just, like, a little bit bored of... It's like I interviewed everybody. [00:00:05] S1: Just shit on just shit on all the VCs you've interviewed. [00:00:07] S0: We could joke about that, though. [00:00:09] S1: Yeah. [00:00:09] S0: They're great. But I asked them all the questions and, [00:00:12] S1: you know Learned all the lessons. [00:00:13] S0: Maybe we come back, but it was time for time for an update. Alright. Well, this is the beginning of a new iteration of the pod where, I guess, you know, at some point... I mean, I've learned a ton. But at some point, you've interviewed a lot of VCs, and you say, it's time to just talk to a VC that you talk that you talk to 10 times a day instead. But, just changing it up a little bit. So now we're gonna do this thing, Benchmark Breakfast, we're calling it, where we're kinda gonna, I guess, I don't know, mock, you know, a little bit of the time that we spend on Mondays. And I guess, you know, what we what we do on Mondays at Benchmark has basically been no agenda. We get together as the five of us, and we sit around talking about whatever came up that week or whatever we're thinking about. And Ev and were just saying, well, that'd be a fun new version. And if I'm losing steam on the current podcast, let's take a new rep. I'm excited to be doing this.
00:00:13 · Jack Altman, Ev Randle
[00:00:13] S0: Maybe we come back, but it was time for time for an update. Alright. Well, this is the beginning of a new iteration of the pod where, I guess, you know, at some point... I mean, I've learned a ton. But at some point, you've interviewed a lot of VCs, and you say, it's time to just talk to a VC that you talk that you talk to 10 times a day instead. But, just changing it up a little bit. So now we're gonna do this thing, Benchmark Breakfast, we're calling it, where we're kinda gonna, I guess, I don't know, mock, you know, a little bit of the time that we spend on Mondays. And I guess, you know, what we what we do on Mondays at Benchmark has basically been no agenda. We get together as the five of us, and we sit around talking about whatever came up that week or whatever we're thinking about. And Ev and were just saying, well, that'd be a fun new version. And if I'm losing steam on the current podcast, let's take a new rep. I'm excited to be doing this. [00:01:10] S1: 100%. And I feel like whenever we tell anyone about our Monday morning or just our our Monday partner meetings and the fact that they're typically five to six hours, The two... I mean, the two responses we get is like, that is absolutely insane. [00:01:24] S0: It's a [00:01:24] S1: little long. It's like, you know, I I... You know, people will be like, I can barely stand our hour long partner meeting. And then the second question is like, well, what's the agenda? And I think that's the really important thing about our Mondays is You [00:01:33] S0: review the pipeline.
00:01:33 · Jack Altman, Ev Randle
[00:01:33] S0: review the pipeline. [00:01:33] S1: Yeah. Yeah. Yeah. Their agenda is like, you review a very strict list, and it feels like you're a corporate vice president at Microsoft or something. But our answer is always there is no agenda. We just think about it's a continuous conversation, as I think our partner Eric says, from one week to the next. And I think we thought it'd be fun to open source or make public the form factor of that conversation. [00:02:00] S0: So one thing we talked about, obviously, is big news is Anthropic dropped an S-one, which is pretty critical to the industry. So as somebody who can actually read an S-one of our mostly early stage group, what was your reaction? Yeah, [00:02:17] S1: it was amazing timing because I feel like leading up to the S-one day, there was a lot of market turmoil. There was a lot of carnage in the public AI trade, a lot of fud about Anthropic, like are they going to IPO or are they going to delay it? And then they come out with this S-one, and on its face, this is everything that you want from a technology business. And it's funny because most of the numbers in the S-one had been leaked at one point or another. There wasn't that much new information. [00:02:46] S0: You mostly could have stitched it together from... If you believe the right things on Twitter. As you always say, Twitter is making us all dumber. But it was almost there.
00:02:46 · Jack Altman, Ev Randle
[00:02:46] S0: You mostly could have stitched it together from... If you believe the right things on Twitter. As you always say, Twitter is making us all dumber. But it was almost there. [00:02:53] S1: But it was like, if you really were good at parsing through, it was all basically there. But I think it was another thing entirely to have all the numbers put together in one place. And again, it was on its face. What you want out of a technology business typically is you want immense growth and you want operating leverage. Operating leverage is the sense that you have this big upfront investment in R and D, or sometimes with software businesses, you pay a ton for salespeople upfront, and they take some time to pay themselves back. But you invest all this money upfront, you have fixed costs, and then your revenue grows so much that... And your incremental margins are so good that you become very profitable very quickly as you scale. Yeah. And we don't have to go through every number in stat. Obviously, it's all over x. It's all over the Internet. But I think the most important visual from the S-one, in my opinion, there's a chart that I'm looking at that you guys can't see. [00:03:44] S0: No, no, no. We'll put it up. We have the power of technology.
00:03:44 · Jack Altman, Ev Randle
[00:03:44] S0: No, no, no. We'll put it up. We have the power of technology. [00:03:47] S1: That's true. The power of maybe Some believe it's But the chart is showing the relationship between their revenue and their total compute expenses per quarter. And so it's both the compute expenses for serving customers, but then also training. And in Q1 of twenty twenty five, Anthropic had $400,000,000 ish. They only... They do it in billions, and so it's only 0.4. So it's like $400,000,000 ish of revenue against 900,000,000 of compute and infra expenses. And so that's, like, a point four x ratio where, you know, compute is larger than revenue. Fast forward six quarters. In Q2 of twenty six, they had $11,600,000,000 of revenue against $5,600,000,000 of compute and infra expenses, so a 2.1x ratio of revenue to compute. So that... The entire concern that everyone had is like, Oh, are the labs or all these AI companies selling $1 for zero nine zero dollars or $0.50 Are they ever going to be able to turn a profit? Anthropic, in six quarters, did what it takes a lot of software and technology companies a decade to prove out, which is like, no, these are money printing machines [00:04:58] S0: They're money printing machines. [00:04:59] S1: In a huge way.
00:04:59 · Ev Randle, Jack Altman
[00:04:59] S1: In a huge way. [00:05:00] S0: Yeah, and it's like the revenue just turned out that it's big enough to make up for all these fixed costs of training. And the other surprising thing and this has played out throughout inference and all sorts of areas of the AI stack but price per gigawatt has just surprised everybody. Like, I don't think anybody Like the monetization? Yeah. Yeah. Yeah. And just what the value of the Frontier tokens are [00:05:23] S1: That's right. [00:05:24] S0: Made Has it all work.