00:00I said in the last segment, the AI-Doomerism debate spans many recent news stories and impacts lots of Frontier
00:08Labs and others in different layers of the stack.
00:12Where's your head at with this right now?
00:14First of all, Shanatov, it's great to be here.
00:16You know, I heard you talking about it in the previous segment, and I thought to myself, when we invented
00:22the car, naturally car killed people.
00:26Did we abandon cars?
00:28No.
00:29What I think we did, we united together to figure out the risk, the values of the cars, and, you
00:34know, moving people, moving goods, and start creating standards that allow us to actually use car in the most safe
00:40way.
00:41Still, by the way, unfortunately, we're losing people.
00:43Well, so in that parallel example or analogy, you know, the seatbelt was the technology solution, and regulation was done
00:53by regulatory bodies.
00:54Yeah, exactly.
00:55What's the equivalent here?
00:56Yeah, I mean, I think we definitely need to have some sort of a relationship between the private sectors and
01:01governments of how to set some regulations and how to create a safety belt and airbags and things that we
01:09invented for the cars for the world of AI.
01:10The reporting, you're not directly invested in the Frontier Labs, right?
01:14But obviously, like, in the portfolio, there's exposure to them.
01:17We work with them, yeah.
01:17Yeah, you work with them.
01:18The proposal that was reported overnight from Sam Altman is that, well, we could pull back at the Frontier, but
01:24it would only work if the other Frontier Labs agreed to do the same.
01:27Yeah, I think I'm a big fan of the idea of actually collaborate here.
01:33Although we compete with each other constantly, I think it's too big of a topic to not united.
01:37We also need to remember that if we will not do it, our competitors, like China, are going to take
01:44the lead.
01:44So we absolutely need to work together in the private sectors and our leadership in Washington, D.C. to make
01:51sure that we are aligned on how to do it in the most safe way, but not lose the cutting
01:56edge.
01:56Physical AI, that could be robotics, it could be other forms of physical AI, is probably where you are most
02:04concentrated, would you say?
02:05Where's the opportunity with that right now?
02:07Yeah, I mean, we started 11 years ago innovating in the physical world because we believed 85% of the
02:14world's GDP is in manufacturing and semiconductors and defense and whatnot, and today the world's called physical AI.
02:21We build many companies and we invested in many companies in that area, and it's exciting to see how AI,
02:27automation, and autonomy is meeting each other.
02:30We are seeing the economy here is growing faster than ever.
02:34And I think, you know, there is a real shot to go back to grow five plus percent, similar to
02:39what China is doing here right now in the U.S., leveraging physical AI.
02:44If the Frontier Labs go down the route of pulling back development at the absolute cutting edge, how would that
02:51impact your portfolio of companies that are working on physical AI?
02:55They might rely on the underlying model or as an example.
02:58Yeah, I mean, I think we need to make sure that we are a continued lead as a country in
03:05the global race, and I think we need to do it in the most safe matter, and I think we
03:09need to collaborate.
03:10I think that was Sam asked yesterday that I'm completely aligned with and I'm going to sign up for.
03:17I do think we are seeing companies in the semiconductor space, in the energy space, in the robotics space, becoming
03:25a very large businesses in our country, first time ever, and it's just exciting to be part of it.
03:30You published some metrics around how some of your funds have performed.
03:35You did DPI, which basically, you know, doesn't include the paper gains.
03:40When we report on the performance of different funds, we go with TVPI, just explain which vintages those funds are
03:47and where you've seen some performance, and then I guess we could talk about valuations.
03:52Yeah, I mean, we definitely have a few of our vehicles crossing the double-digit TVPI that will be best
04:00in class.
04:01That was not actually the point of the post.
04:04The point of the post was like, this is the best time in the history to build.
04:07The opportunity cost is so high.
04:09Me, as an entrepreneur in this country, I think we never had that type of an opportunity.
04:15And I also talked about the sacrifice of being an entrepreneur right now, of spending our weekends and our nights
04:21building companies instead of being with our families.
04:24There is an astonishingly well-read story on Bloomberg this morning.
04:28I shared it with you, but it's about the idea of sudden wealth syndrome.
04:32So if you're a founder and you do a seed round and within months you're raising so much more capital
04:39and your own personal net worth rockets, how does that feel?
04:45How does that go for the founders that you back?
04:48And how active are you in sort of counseling them on this?
04:52Yeah, I don't, there's no school of preparing you for fast success.
04:57Right.
04:57I view our job as now older-ish entrepreneurs.
05:02I'm 42, so now I'm not, as my 20s when I started my first company, is to actually work with
05:09those young founders and explain them that even if the wealth creation happens so fast, what matters is substance and
05:16principles.
05:17And we need to remember that we need to do good for others.
05:21We need to remember that we need to build companies for the long run, kind of ignore valuation and focusing
05:26on the substance.
05:27Team, let's bring that article back, just show it on the screen for the audience.
05:31A part of what they're discussing is the post-exit ecosystem.
05:37In your world and realm of physical AI, you know, there's a lot of M&A where an exit isn't
05:42necessarily an IPO or sale in the secondaries market.
05:45It's being acquired by a bigger entity.
05:47What would you counsel a founder in that context?
05:50You know, sometimes people want to get the return on their work.
05:55Yeah.
05:55And I think, you know, my first company was being bought in a big company.
06:00It was a journey and I was young.
06:02I think, you know, what we're advising those founders is you can do a very good work post-acquisition inside
06:10a big company.
06:11You can be the next generation leader in that business.
06:14You can have a much more resource than you might have when you build a standalone company.
06:18But I go back to the opportunity cost.
06:21And what I work with founders is to make sure that they understand the opportunity cost.
06:26Do you mind to define opportunity cost?
06:27Yeah, I think opportunity cost is like you're a very talented person.
06:30You can do many things.
06:31The opportunity cost of not going and starting a company right now with the resources that we have around us
06:36is very, very high.
06:38And we want to have a mark on the world.
06:41We want to have a mark in our society.
06:42We want to have a mark on our economy.
06:44So the opportunity cost of not doing that is very high.
06:47Just very quickly on the three vehicles that are outperforming or you say will sort of be the benchmark for
06:52industry.
06:53Are there any single sectors or names that are driving that performance?
06:56A lot of our companies, naturally, in the compute, is doing extremely well with the growth of AI.
07:02Same with energy.
07:03Same with defense.
07:04Same with manufacturing.
07:05So I don't know.
07:06It was like necessarily a one event.
07:08Naturally, the Cerebrus IPO helped us a lot.
07:11And it's a phenomenal company that's growing extremely fast.
07:13But there is a bunch of others.
07:15So Cerebrus is really interesting.
07:16That was a big moment for the firm.
07:19You also back other computer specialized inference platforms.
07:22And as you will have heard earlier in the show, right now, data centers are divisive in this country.
07:29How much do you model for that when you make an investment?
07:34I think we did, Ed, as an entrepreneur, not a great job explaining our society, the value of data centers.
07:42And I think we let...
07:43So you agree with the Treasury Secretary and with Sam Alton?
07:45100%.
07:46We need to do a better job of explaining our communities, how many jobs we are creating, the cost of
07:52power that we can take down.
07:54We need to share with them some of our profits of those data centers and not let only social media
07:59turn by our adversary of maybe influence people's mind of if data centers are good or bad.
08:06Data centers are good for our countries.
08:08But we need to do a much better job of sharing the profits and safety and energy with the communities.
08:15Is it a risk factor for you?
08:18You know, I posed the question earlier about the midterms.
08:21But I guess in aggregate, regulation forces the slowdown of data center build out, too.
08:27I think regulation generally, it's a risk for the economy.
08:31And that's why we need the private sector to work faster and spend our calories with a different administration to
08:40work with them rather than go and block by them.
08:42And I feel much better in the last two years about some of the activities that I'm seeing between the
08:47private sector and the governments of how to actually set regulation right.
08:51Because if set wrong, it will slow down the economy.
08:54Let's end just very quickly on venture as an asset class.
08:57You know, you've raised funds over the last year.
09:00You've hit a pretty large critical mass.
09:02Is it easy to go out and convince LPs to raise new funds right now?
09:06I mean, I think LPs see the opportunities.
09:11I think, you know, the physical industry is having a moment of transforming from analog to a digital.
09:18As a result of that, you're seeing in IPOs like SpaceX and Cerebrus.
09:22And as a result of that, LPs want to have more access to those sectors.
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