Invest Like the Best with Patrick O'Shaughnessy
00:56:33 · Neil Movva, Patrick O'Shaughnessy
[00:56:33] S2: Okay. So I said I want 95 uptime on my data centers. Could I even take 80% uptime at the right price? Probably. And what does that mean? Well, I'm a son of California. I love solar and wind. I think solar and wind power is way under tapped in The United States and the challenge has always been this intermittency. You wouldn't even consider solar and wind unsuitable for data centers because you have a persistent base load and the intermittent power source. What are you gonna do? Well, I think we're actually not that far from solving that problem. I am totally capable of tolerating a outage from a data center that's measured in even days or weeks, which is like the worst case nightmare scenario for a data center is that we're gonna have long term outage because the wind doesn't blow and the clouds are in the sky. Fog is hanging over the valley for some time. That's worst case scenario. It's in fact highly predictable and I can just call in capacity in some other place of the world whenever that happens. I'll just model the weather and figure out when my data center is gonna be offline, move my network with somewhere else and it's fine. The trick is that it's gonna give me better access to power that no one else is gonna touch because it is so annoying to deal with that kind of outage. And if my chips are cheap enough, they're probably not gonna be NVIDIA racks. But if my chips are cheap enough, I don't mind the capital cost of having idle chips. [00:57:41] S0: I've heard you describe this entire system as like a scavenger strategy.
00:57:41 · Patrick O'Shaughnessy, Neil Movva
[00:57:41] S0: I've heard you describe this entire system as like a scavenger strategy. [00:57:45] S2: Yeah, that's right. [00:57:45] S0: Unpack that analogy a little bit. [00:57:46] S2: Well, first we scavenge chips and then we scavenge power for those chips. The idea is in both cases, I do not wanna be bidding against Anthropic or OpenAI for compute capacity. I'm not gonna win against them and I don't want to. I want to be more creative and use the supply that they don't find legible today. And over time, I amass enough aggregate supply. I'm never gonna get concentrated supply. I will only get aggregate supply. And over time, I build my aggregate factory that is unbeatable in economics. We are building a factory. We're trying to build the best steel factory in the world, but it will come through mini mills, not through large monolithic steel plants.
00:57:46 · Neil Movva, Patrick O'Shaughnessy
[00:57:46] S2: Well, first we scavenge chips and then we scavenge power for those chips. The idea is in both cases, I do not wanna be bidding against Anthropic or OpenAI for compute capacity. I'm not gonna win against them and I don't want to. I want to be more creative and use the supply that they don't find legible today. And over time, I amass enough aggregate supply. I'm never gonna get concentrated supply. I will only get aggregate supply. And over time, I build my aggregate factory that is unbeatable in economics. We are building a factory. We're trying to build the best steel factory in the world, but it will come through mini mills, not through large monolithic steel plants. [00:58:20] S0: And if I imagine the different versions of this, how vertically integrated you can be, the extreme would be you own everything. So that's a very capital intensive business. You own the power source. You build the data centers. You design your own chips, you control the software that eats the most out of those chips and you sell the endfinished token to your user. Your user is me and you just own the whole stack. But you can imagine many other permutations of the business where draw the line anywhere, you could be incredibly capital light, own nothing, and just be like the coordination plane across all this stuff, the virtual scavenger. How do you think about that question of which type type of these businesses to be?
00:58:20 · Patrick O'Shaughnessy, Neil Movva
[00:58:20] S0: And if I imagine the different versions of this, how vertically integrated you can be, the extreme would be you own everything. So that's a very capital intensive business. You own the power source. You build the data centers. You design your own chips, you control the software that eats the most out of those chips and you sell the endfinished token to your user. Your user is me and you just own the whole stack. But you can imagine many other permutations of the business where draw the line anywhere, you could be incredibly capital light, own nothing, and just be like the coordination plane across all this stuff, the virtual scavenger. How do you think about that question of which type type of these businesses to be? [00:59:01] S2: You know, there's actually two parts to me to receive that question. One is the CEO of a company that needs to work every day and grow sustainable and as quickly as it possibly can. The other is the founder. And the founder is much more imaginative and loves this stuff. The founder in me wants to do everything. This is my entire life. I spent my entire life thinking about chips, power, energy. All I care about is this stuff. So of course, I wanna be maximally ambitious. I don't wanna stop ever. I will never stop until I have built the most efficient system from soup to nuts. [00:59:27] S0: You're doing real life factorio, basically.
00:59:27 · Patrick O'Shaughnessy, Neil Movva
[00:59:27] S0: You're doing real life factorio, basically. [00:59:29] S2: Very much so. For intelligence. Very much so. So that's like the emotional from the hard answer. On the CEO side, I think we had to be more pragmatic. The capital we're looking at for owning everything is insane. Software has high leverage, so we have to start with software. But ultimately, do we own power generation or can we get great power purchase agreements with utilities? I'm more inclined to pursue letting other people specialize in the things that they're historically good at and then see if we can get to the scale. I think of it as like, I want to get to the scale where I earn the right to take this under our wing. I absolutely think that there is efficiencies to be gained everywhere in the stack if you can break the assumption that people I would be buying from, they made assumptions about who their customers would be and I maybe break those assumptions. It's a pretty optimistic view. I think it's only possible because we're actually trying to underwrite the largest market for compute in the history of computing. We're actually gonna build so many billions, trillions of dollars of investment into inference. Because of that focus, it makes sense to build a lot of things that are custom for inference. And it's my job to seek all the places where that's possible. And then as as it become obvious to me and my partners, I look at my partners to build custom things for me. And if they can't do it for me, I will do it myself. [01:00:40] S0: If you had to just zoom out on this entire system
01:00:40 · Patrick O'Shaughnessy, Neil Movva
[01:00:40] S0: If you had to just zoom out on this entire system [01:00:43] S2: Yes. [01:00:43] S0: Software, hardware, energy, etcetera and stack rank the places that you think that we are the most inefficient today at producing useful intelligent tokens, what does that list look like?