The Automation Endgame, VCs Returning Cash, and the OpenAI Wager | E2019

Jason and Alex kick off the show 0s

• OpenAI's valuation of $150 billion is considered too high, with a predicted 2X growth in 7 years, and the company is expected to go public and complete its transition from a non-profit to a for-profit public company within that timeframe 0s.
• If OpenAI grows at a 30% year-over-year rate, it would double every two years, resulting in three doublings in seven years 15s.
• The current investment in OpenAI is considered the largest traditional venture round ever seen, raising questions about the flow of real dollars, especially after discussions about the lack of DPI (Distributed Profit Income) 26s.
• The boldness of the investment is both worrisome and admirable 44s.
• The podcast is sponsored by Notion, a platform that combines notes, documents, and projects into one space with AI built-in, and Fidelity Private Shares, a service that manages cap tables and data rooms 47s.
• Kite, a car rental service that delivers cars to customers' doors, is also a sponsor, offering a 10% discount with the code "Jason" 1m23s.
• The hosts, Jason and Alex, will discuss the Port strike, its impact on labor and employment, and the startup opportunities in the ports industry 2m19s.
• The Port strike is a significant story that highlights the impact of technology on the real world, labor, and employment, and will be the main topic of discussion 1m55s.

The ILA strike overview and impact 2m34s

• Nearly 50,000 members of the International Longshoreman Association (ILA) are on strike, shutting down ports on the east coast of the United States and in the Gulf region, impacting 36 ports, 14 of which are considered major 2m35s.
• The strike affects the west coast indirectly, as it is under a different union, and without longshoremen, it is impossible to load and unload cargo from ships 2m48s.
• The dispute between the ILA and USMX, a business conglomerate for the shipping industry, is primarily about money, but the union is also vehemently anti-automation, which is a major sticking point in the negotiations 3m10s.
• The ILA is not only seeking more money but also resisting automation and semi-automation, which they believe threatens their jobs 3m32s.
• The situation is reminiscent of the classic tale of John Henry, who competed against a steam engine, symbolizing the human resistance to being replaced by technology 3m49s.
• The ILA strike is a significant example of the impact of automation on jobs, which is a concern that will not be limited to blue-collar workers but will also affect white-collar workers in the future 4m31s.
• In contrast, other ports around the world, such as those in China, have already implemented high levels of automation, as seen in videos shared on social media platforms like X (formerly Twitter) 4m40s.

Technology and efficiency in global ports 4m59s

• A video showing the current state of automation in ports has gone viral, featuring human operators using joysticks and buttons to control automated shipping containers in an office setting with multiple monitors, highlighting the potential for increased efficiency and safety in the industry 5m7s.
• The automation technology is particularly well-suited for contained areas like ports, where the environment can be controlled and there are fewer variables to account for, making it easier to implement self-driving systems 6m9s.
• The use of automation in ports is expected to save lives and increase the speed of operations, but the longshoreman union has expressed resistance to increased automation in the US 6m44s.
• Despite being a major player in global trade, the US is behind other countries, particularly in Europe, in terms of automating its ports, with many European ports, such as those in Rotterdam, being highly automated 7m25s.
• A list of the most efficient ports in the world shows that American ports rank lower than those in Asia and Europe, with the first American port appearing far down the list, highlighting the need for increased investment in automation technology in the US 7m51s.
• The United States has a large number of large ports, but only one American port, Philadelphia, ranks in the top 75 globally, at number 53, according to World Bank data on major global shipping ports. 8m41s
• The ranking is based on the total container ship in port time, which measures how quickly a ship is unloaded after arriving at the port. 8m56s
• The United States performs poorly in this metric, while other countries such as Singapore, Hong Kong, and Japan excel in quickly offloading ships. 9m23s
• Some European ports, including Rio de Janeiro, Colombo, Barcelona, and others, also perform well in this metric, with Barcelona ranking 34th globally. 9m37s
• The data contradicts common stereotypes about certain countries and regions, highlighting the importance of relying on data rather than preconceived notions. 9m54s

Notion - Try it for free today 10m10s

• There are numerous AI tools available to help with daily tasks, but switching between them and other tools can be a chore, resulting in decreased productivity 10m11s.
• Notion is a tool that helps to simplify tasks by providing an all-in-one space for tables, documents, project management, and more 10m30s.
• Notion is used for various tasks such as show notes, guest calendars, and digital assets, making it an essential tool 10m34s.
• Notion has recently integrated AI tools, eliminating the need to use third-party tools or cut and paste information 10m47s.
• The new AI tools in Notion enable users to summarize long pages, ask questions about project management pages, translate documents, and brainstorm ideas 11m1s.
• Notion's AI tools also allow users to draft outlines, emails, meeting agendas, and more 11m16s.
• Users can try Notion for free and access its AI tools by visiting notion.com/twist 11m25s.
• Using the provided link to try Notion supports the show and is considered a total game-changer 11m38s.

Labor, supply chain fragility, and union perspectives 11m43s

• A two-minute video highlights the fragility of the global supply chain, which was also demonstrated during the COVID-19 pandemic, and how humans can adapt to disruptions by finding alternative solutions, even if they are more expensive, allowing things to return to normal relatively quickly 11m46s.
• Harold Daggett, the leader of the International Longshoremen's Association (ILA), describes a hypothetical scenario where a strike by his union would cause widespread disruptions to the US economy, including the closure of malls and the layoff of construction workers due to a lack of materials 12m32s.
• Daggett claims that the strike would have severe consequences, including the shutdown of ports, the inability to sell cars, and the closure of businesses that rely on imported goods from China 12m43s.
• The strike would also lead to a significant economic impact, with the potential for widespread job losses and economic instability 12m49s.
• A proposed strategy to deal with the union's demands is to give in to their requests and then automate the ports, potentially leading to job losses for the union members 14m30s.
• The union members' salaries are reportedly high, with some making $150,000 per year, and starting pay ranging from $30 to $40 per hour 15m37s.
• The current cap for Longshoremen activity is $30.99, but with overtime, they can make a higher rate, and the union is seeking a 77% pay bump over seven years to reach $69 an hour 15m56s.
• Factoring in overtime, Longshoremen can earn over $100,000 per year, which is seen as a positive, but the issue is whether this is extortionary and slowing down the adoption of efficiency and cost savings for consumers 16m26s.
• The union's monopoly on the ports is compared to AT&T's monopoly on broadband, where they can charge high prices due to a lack of competition 17m1s.
• The high cost of union labor can trickle down to consumers, making goods more expensive, and the lack of competition in the port business makes it difficult for non-union ports to compete 17m42s.
• The use of air freight is not a viable alternative due to its high cost, which is four to 10 times more expensive than shipping through ports 17m53s.
• The issue is also seen as a preview of what may happen in white-collar industries, where automation could replace jobs, and the question is whether it is fair for unions to seek high wages before automation takes over 18m27s.
• One perspective is that unions with monopolies are not as problematic because the money goes to individual workers, who can then achieve a solid middle-class lifestyle 18m49s.
• However, port automation is inevitable, and it is rational for the union to try to get as much as they can before automation replaces their jobs 19m7s.
• The concern is that the workers who replace the Longshoremen, such as those operating automated ports, may not be highly paid union workers 19m25s.
• Startups may experience a shift in team size growth, where instead of doubling the team size to double revenue, the team size may only increase by a few people each year, resulting in greater efficiency 19m36s.
• This change could lead to a reduction in costs and lower prices for consumers, potentially allowing companies to move up in rankings from around 50 or 75 to the top 25 20m1s.
• This new efficiency is only expected to affect around 50,000 people 20m10s.

Future of port automation and union demands 20m12s

• There's an argument that it would be more cost-effective to overpay the 50,000 union workers and deal with the issue once and for all, rather than risking a shutdown that could impact millions of people and lead to job losses or temporary layoffs 20m12s.
• The union may be trying to get as much as they can, but it's unclear how much they will hold fast on the automation point, as they may see the potential for automation to lead to job losses and want to avoid it 20m44s.
• The use of automation in the economy is leading to savings, but it's also having a negative impact on labor, particularly in industries where workers have carved out a portion of profitability for themselves 21m8s.
• The implementation of automation is often targeted at the "underbelly of the economy," where labor has been able to secure better wages and working conditions, and this can have a disproportionate impact on certain groups of workers 21m11s.
• Some people are criticizing the union for trying to negotiate better wages and working conditions, but this criticism is seen as hypocritical given that corporations are often allowed to engage in rent-seeking and profit-grabbing behavior without facing similar criticism 22m3s.
• The union leader, who reportedly makes $900,000 a year, is seen as putting out a tone that may work against the union's interests, and it's suggested that they should instead focus on negotiating a plan for retirement and retraining for workers who may be displaced by automation 22m20s.
• A more compassionate approach to dealing with the impact of automation on workers would be to offer retraining and severance packages, such as two weeks of pay per year of service, to help workers transition to new jobs 23m1s.
• The decline of certain industries, such as coal mining, has led to a loss of electoral power for workers in those industries, despite their continued influence in certain regions, such as West Virginia 23m25s.
• The concept of automation replacing jobs is discussed, and the idea of providing retraining for those affected is proposed, with the possibility of offering a salary during the retraining period 23m59s.
• A list of potential future careers is mentioned, including solar panels, nuclear, data center, and podcasting, with a note that the latter is joked about but still a viable career path 24m21s.
• The topic of influencers and their salaries is brought up, with a data point from a Q&A session with future founders, where it's mentioned that eight people at the top of the influencer market are making a significant amount of money 25m23s.
• The number of people working as influencers globally is estimated to be around 5 million, a profession that didn't exist in the past, but has grown with the rise of social media and online platforms 25m29s.
• The idea of providing a "soft landing" for workers who lose their jobs due to automation is proposed, with a possible retraining period of up to two years, and a salary that tapers off over time 26m21s.
• The concept of a "soft landing" is compared to CEO exit packages, which often include a couple of years of salary and a significant amount of money, and it's suggested that a similar approach could be taken for rank-and-file workers 26m43s.
• The idea of unions and their potential interest in the concept of retraining and "soft landings" is discussed, with a note that it may not be a priority for some union leaders 26m57s.

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• Fidelity Private Shares offers events for founders and VCs, and users can receive 20% off their first-year paid subscription by mentioning the podcast at Fidelity Private Shares.com 28m20s.

Societal impacts of potential future labor changes 28m27s

• Automation and AI are increasing productivity per worker, but this may lead to fewer total jobs, raising concerns about full employment and the impact on people whose jobs are automated at a lower cost 28m36s.
• Historically, the US has recovered from technological disruptions, such as the internet and personal computing revolutions, with low unemployment rates, but the current situation may be different 28m49s.
• The idea that AI will displace jobs, particularly in the US, is possible, but it's uncertain whether new work will be found for those displaced, and there may be a period of massive job dislocation before eventual full employment 29m29s.
• Automation can increase quality and productivity, as seen in podcasting research, where AI tools like Claude, ChatGPT, and others can assist with research, potentially increasing quality without firing team members 29m55s.
• While it's possible that AI could automate entire jobs, including production and editing, it's considered unlikely in the near future, and even if it happens, it may take 20 years to reach that point 30m20s.
• The improvements from automation can be significant, as seen in Shanghai's automated port, which resulted in a 70% reduction in labor costs and a 50% boost in productivity 31m7s.
• The transition period between job dislocation and full employment may be a concern, potentially leading to societal unrest in the US and worldwide, as significant automation is expected in the next five years 31m27s.
• There may be other work available for those displaced, such as plumbers and nurses, as discussed in a previous episode on generation tool belt 31m50s.
• There is a need for various professionals such as doctors, construction workers, waiters, and people working in the service industries, and it's possible that people may need to move around for these jobs 31m57s.
• On the other hand, there's an argument that robots will become common and perform tasks such as building homes, cleaning laundry, and changing diapers, making certain services cheaper 32m13s.
• This could lead to a decrease in the amount of money people need to sustain themselves, as transportation, entertainment, medicine, and healthcare become more affordable 32m46s.
• As a result, people may choose to work less, such as three days a week, and have more time for leisure activities, which could be a challenge for capitalism 33m11s.
• Geographic arbitrage, where people take advantage of lower costs of living in certain areas, could become more common, and people may choose to live in self-sustaining communities 33m30s.
• The average household size in the United States is 2.5 people, but in other parts of the world, such as Asia and the Middle East, households are often larger, with multiple generations living together 33m47s.
• In the event of an economic downturn, people in the United States may need to consolidate and live together to lower expenses, similar to the FIRE (Financial Independence, Retire Early) movement 34m19s.
• The FIRE movement emphasizes saving money, investing, and achieving financial independence, which could become more popular as people seek to work less and have more options 34m35s.
• The idea of working less and living a lower consumption lifestyle may become more appealing, and it's possible to have both a successful career and a more relaxed lifestyle 35m20s.
• There is a movement called homesteads, where people are building their own communities, and it's possible to find affordable land and construction outside of cities like Austin, with land being "close to free" an hour outside of the city 35m49s.
• The cost of living in Austin is relatively affordable, with homes available for purchase for around $250,000, making it possible for people with two internet salaries or decent salaries to own a home quickly 36m52s.
• The median rental price in Austin is going down due to the construction of a large number of houses, making it possible for people to afford housing in the city 37m11s.
• In contrast to other cities like California, Austin's housing market is more affordable, with some people even complaining that there are too many houses being built, causing the value of their homes to decrease 37m35s.
• Despite some complaints about overbuilding, Austin is still a desirable place to live, with new skyscrapers being built and a relatively low cost of living compared to other major cities 38m3s.
• The idea of building a community in a place like Austin is appealing, with the possibility of creating a "Ty the spear Community" where people can afford to live and work 36m24s.
• The concept of the "American dream" is still achievable in places like Texas, where people can own their own homes and live comfortably 37m5s.

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• The service can be managed entirely through the Kyte app, allowing customers to avoid waiting around while their data is entered manually 39m0s.
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Startup opportunities in port automation and technology resistance 39m38s

• Startups should explore opportunities in port automation, as research has found adjacencies but not much in the core automation space, and state-owned companies like Guang Joo are likely building their own technology 39m38s.
• Only 62 of 1300 global container terminals were automated or semi-automated by the end of 2021, according to research by GATS and others, indicating a lot of room for growth in this area 40m12s.
• The process of automating ports involves moving containers around, getting them off boats, and getting boats to shore, with many pieces to consider 40m37s.
• A graphic from the GAO shows the different areas of port automation, including gates, ships, container movement, tracking, and loading onto trains, all of which can fall under the automation umbrella 40m48s.
• Contractual negotiations between the ILA and their employer group broke down in June due to the automation of gates, with the union wanting to protect jobs by having a human at the gate 41m11s.
• Advanced gate technology is available for homes, allowing for automatic opening, license plate recognition, and alerts to unknown or suspicious visitors, and could be applied to port automation 41m42s.
• The cost of such technology for home use is around $1,000, which is relatively inexpensive for the features it offers, and could be scaled up for port use 42m21s.
• Facial recognition and database recording could also be implemented in port automation, similar to home security systems 43m0s.
• Facial recognition technology is available for consumers and can be used for various purposes, such as identifying unknown individuals on a property and sending alerts, with the ability to record and store information in a database 43m9s.
• The use of automation and artificial intelligence is expected to increase efficiency in various industries, such as logistics and transportation, with the potential for automated trucks, self-driving vehicles, and robots to handle tasks such as loading and unloading containers 43m42s.
• The implementation of automation in ports could significantly reduce the time it takes to clear containers, potentially eliminating the need for human labor in the process 44m24s.
• The increased use of automation and artificial intelligence raises concerns about job displacement and the potential impact on individuals who currently work in industries that may be heavily automated 44m41s.
• There is a debate about the potential consequences of automation, with some arguing that it will lead to significant job displacement and others believing that new jobs will be created and that workers can be retrained to adapt to the changing job market 44m57s.
• The use of automation and artificial intelligence is expected to continue to grow and evolve, with potential applications in various industries and aspects of life, including consumer technology and logistics 44m0s.

Innovations in port tech 45m13s

• Commercial shipping containers cannot be run into ports due to the dirty fuel they spew, and they need to be turned into batteries or nuclear reactors at some point, with companies like Open Tug working on this issue, having raised $3 million and developed a service called Barge OS 45m13s.
• Identec Solutions does automation tracking for refrigerated containers, but there is a massive opportunity for startups to build the next generation of automated port tech, possibly in Europe, Asia, Latin America, Africa, or Australia, rather than the US, due to union control 46m13s.
• A startup was found that plans to do delivery with drones from ships to consumers, which could be a first-principles way of looking at port tech and going faster 47m0s.
• Thinking from first principles could lead to innovations such as different sizes of containers, containers with more autonomy that can unload themselves, or smaller, robotic containers that ship more efficiently and need fewer people 47m36s.
• The shipping industry has reached the limit of what can be done with large containerships, which are now too big to fit through some canals or dock at certain ports, similar to the Airbus A380 problem, and may need a new approach 48m54s.
• The current containerized shipping system has unlocked a lot of efficiency and cheapness, but may have run its course, and something new may be needed to replace it 49m26s.
• Shipping is a big issue that intersects with geopolitics, and the upcoming battles between labor and automation in the industry will be significant 49m48s.

Broader impact of automation on employment 50m11s

• The automation of jobs will continue, with truck drivers, Uber drivers, taxi drivers, and livery drivers being among the next professions to be affected, following the automation of cashiers, who have largely seen their jobs replaced by kiosks and apps without significant public outcry 50m11s.
• The rise of kiosks and apps in fast-food chains such as McDonald's and Starbucks has reduced the need for human cashiers, with many restaurants now encouraging customers to use these technologies to place orders 50m50s.
• The iPad's release was a catalyst for the development of kiosks and apps, as founders were inspired to create solutions that would allow customers to order food and other items without the need for human interaction 51m9s.
• Many fast-food chains now use kiosks and apps to streamline the ordering process, with some even offering incentives for customers to use these technologies, such as skipping lines 51m43s.
• The automation of jobs is not limited to low-skilled or low-wage positions, but will likely affect a wide range of professions, with the goal of increasing efficiency and reducing costs 52m45s.
• McDonald's is an example of a company that has automated many of its jobs, but it is also a place where many people get their first work experience, often while still in high school, highlighting the need for a balance between automation and human employment 53m28s.
• There is a concern that automation could eliminate the first rungs on the career ladder, making it difficult for people to learn how to be employees and gain work experience, with jobs such as being a barista or working in retail serving as common onramps to labor 53m35s.
• Some people, including the children of well-known venture capitalists, still work in low-level jobs, such as at an ice cream store, to gain work experience during the summer, but these encounters could potentially be automated 54m11s.
• Despite the potential risks, it is essential to leave some inefficiency in the labor market to ensure people can have a career path and afford to live, rather than only a select few being able to do so 54m23s.
• Automation is an unstoppable economic force that is approaching every economy in the world, and it is crucial to find a balance between its benefits and drawbacks 54m40s.
• There are opportunities for startups to address these challenges, and funding is available for entrepreneurs with great ideas, with options ranging from $25,000 to $125,000 in initial funding 54m58s.
• The conversation is set to move on to discuss OpenAI and a Venture Capital firm that is returning $275 million to its investors, with the latter being the more unexpected story 55m30s.

CRV's $275M return to investors 55m39s

• CRV (Charles River Ventures) is returning $275 million to its investors, which is half of its $500 million Select Fund, as the firm's partners believe market conditions have changed for the worse and valuations for startups are too high relative to their potential payoff 55m39s.
• In venture capital, a capital call is made to Limited Partners (LPs) to draw down funds as needed, and the marks for Internal Rate of Return (IRR) are set when the investment is made, not when the capital is called 55m57s.
• Some venture firms use a loan against their capital calls or General Partner (GP) commitments to delay capital calls and optimize IRR, which can be seen as a legitimate but potentially over-optimizing approach 56m50s.
• CRV's decision to return half of the Select Fund is likely due to the firm's focus on later-stage investments, which are currently less attractive due to high valuations and limited opportunities for returns 58m3s.
• The Select Fund was raised in 2022, and CRV has only invested $225 million so far, indicating that the firm is being cautious with its investments in the current market conditions 58m15s.
• CRV's partners stated that they do not want their LPs to think they are just sitting on their capital to collect management fees, and instead, they are returning the unused funds to maintain transparency and trust 58m57s.
• The decision to return half of the Select Fund may also be a focus issue, as CRV is trying to balance its investments across different stages, from early-stage to later-stage companies 59m3s.
• Other venture firms, such as Y Combinator, have also struggled with managing multiple funds and investment stages, leading to cancellations of certain funds or programs 59m57s.

Focusing on core strengths in venture capital 1h0m6s

• The key to success in venture capital is focusing on core strengths, as the limit is how many things a firm can be good at, and each stage has a different return profile 1h0m6s.
• Typically, seed stage investments have higher returns, around 20% IRR, while Series A investments have around 15% IRR, and late-stage investments have around 12% IRR, which is still better than the 7% market return 1h0m12s.
• Focusing on earlier stages can be beneficial, as it allows firms to concentrate on what they're great at and avoid competing with others in later stages 1h0m29s.
• This approach creates a better ecosystem, where firms focus on their strengths and let others do what they're great at, similar to how companies like Nike focus on their core business 1h0m50s.
• Nike's decision to become a direct-to-consumer company and eliminate its retail channel is an example of a company focusing on its core strengths, but also highlights the challenges of being good at many things 1h0m56s.
• The current state of late-stage investments, with high valuations in private companies and lower valuations in public companies, signals that the late-stage market is broken and may require entrepreneurs and board members to reassess valuations 1h1m25s.
• This situation is likened to a snake that has eaten an elephant, with low valuations at the beginning and end, but high valuations in the middle, creating a challenging environment for investors and companies to navigate 1h1m47s.

Current market conditions and lack of late-stage IPOs 1h2m16s

• The Venture industry is experiencing a pandemic-like tension, with VC distributions as a share of net asset value for funds aged 5-10 years having fallen to an all-time low of 5%, down from 33% in 2021 1h2m45s.
• This collapse in distributions is attributed to a lack of IPOs, with only five technology Venture-backed company IPOs in the last year, and two in 2022, making it the worst IPO technology Venture-backed company crunch on record 1h4m38s.
• The current state of the industry is comparable to 2009, but with a notable difference: in 2001, there were 21 IPOs, and in 2008, there were nine, whereas last year there were only five 1h4m27s.
• The tension between Limited Partners (LPs) and General Partners (GPs) is a significant factor, with LPs being cautious and GPs struggling to distribute returns, leading to a freeze in the mid-market M&A market 1h4m49s.
• Lina Khan's reign at the FTC is also seen as a contributing factor to the freeze in the M&A market, but not the primary cause of the lack of IPOs 1h3m42s.
• The industry is hoping for a turnaround, with potential IPOs from companies like Bill Gurley and Brad Gerstner's chip company, Strife, SpaceX, or Starlink, which could recharge the industry and lead to a resurgence in distributions 1h3m20s.
• The current state of the industry is a result of overheating, with companies going public too early, and investors getting too excited about speculative companies, such as Virgin Galactic and Joby Aviation 1h5m50s.
• Many companies are being compared to successful startups like Uber, Airbnb, and SpaceX, but the reality is that venture capital investing is not as glamorous as it seems, and the majority of investments can result in zero returns 1h5m55s.
• Public market investors often do not understand that zero is a possible outcome for venture capital investments, and they tend to think that stocks will always go up 1h6m32s.
• Venture capital investing is not for the faint of heart, as it requires a lot of hard work and dedication, and even successful investors can face challenges 1h6m59s.
• The job of a venture capitalist is mostly a sales job, involving sourcing companies, making investment decisions, competing for allocations, supporting portfolio companies, and deciding when to sell 1h7m36s.
• When investing in venture firms from a family office, it is essential to look for firms with great proprietary deal flow, the ability to make good investment decisions, and the capacity to support portfolio companies 1h8m5s.
• Venture capitalists need to demonstrate that they can pick successful companies, compete with other VCs for allocations, and provide support to founders to achieve successful outcomes 1h8m14s.
• The reality of venture capital investing is that it is a competitive market, and everything is hard, but this competition is a good sign of a healthy market 1h7m16s.

Essential skills for venture capital investing and variability in VC fund performance 1h8m26s

• Essential skills for venture capital investing include having an impact on the outcome, knowing when to sell, taking advantage of secondary opportunities, and having a well-thought-out strategy for sales 1h8m26s.
• A venture capitalist's deal flow can be improved through various means such as attending events, being a public figure, and creating content, which can help attract potential investments 1h8m46s.
• Decision-making is a crucial skill for venture capitalists, and it can be developed over time through experience and learning from past successes and failures 1h8m55s.
• Competing for investments can be challenging, but building content and supporting companies through various means can help venture capitalists stand out 1h9m0s.
• Exits are an important aspect of venture capital investing, and having a strategy for selling shares, such as selling 10-20% on the way up, can provide "idiot insurance" and help mitigate potential losses 1h9m7s.
• As an LP in other venture capital funds, it has been observed that the lack of DPI (Distributions to Paid-in Capital) is a common issue, with most firms struggling to provide cash returns to their investors 1h9m49s.
• However, a few firms have managed to perform well, either by taking advantage of secondary markets or having a high-profile company go public, resulting in a "feast or famine" type situation 1h10m1s.
• The expectation is that out of 20 firms, 10-15 will return 2x or more, while 2-5 will have outlier performances that can make up for the underperforming firms 1h10m24s.
• The power law of venture capital investing means that firms make most of their money from a few successful investments, and using the returns from these investments to offset losses from underperforming firms is a common strategy 1h11m57s.
• Due to the lack of DPI, there has been a pause on investing in venture capital funds, except for one's own funds, as it is essential to recycle capital to create new funds 1h11m5s.
• The plan is to focus on personal funds and revisit investing in other venture capital funds in 2026, with the expectation that only a few firms will make it to their next fund 1h11m30s.

OpenAI closing its $6.6 billion mega-round 1h12m7s

• OpenAI's valuation at $150 billion is considered too high, with a potential 2X return in seven years, making it a less attractive investment opportunity 1h12m13s.
• Assuming a 30% year-over-year growth rate, OpenAI's revenue could double every two years, reaching $7 billion, then $14 billion, and eventually $30 billion in seven years 1h12m32s.
• With a 10 times price-to-sales ratio, OpenAI's valuation would be reasonable at $30 billion in revenue, but the current valuation is too high 1h13m8s.
• The investment opportunity is not considered a great use of capital, with a 50% chance of doubling the investment, 30% chance of doing slightly better, and 25% chance of doing slightly worse 1h13m50s.
• The investors in OpenAI's current round include strategics like Microsoft, NVIDIA, and SoftBank, as well as non-strategic investors putting in straight cash 1h14m3s.
• A more bullish case for OpenAI's growth potential suggests that the company's revenue growth rate could be higher than projected, leading to a lower price-to-sales ratio of around 5 1h14m54s.
• The investment decision ultimately depends on how bullish one is about OpenAI's ability to capture market share, hold onto it, and eventually become profitable 1h15m7s.
• Large funds like Thrive Capital may invest in OpenAI due to the need to put a significant amount of capital to work, with few other opportunities available to absorb a $1.25 billion investment 1h15m25s.
• There are very few companies that can put large amounts of money to work, such as Stripe, but even they may not be able to due to their primary deployment of capital being into human capital, and their need for 100 billion to build out their network of cars. 1h15m34s
• Top firms may engage in "logo chasing," where they invest in well-known companies like OpenAI to impress their limited partners (LPs) and gain exposure to the leader in the space, even if the investment may not have the best returns. 1h15m57s
• This can lead to high valuations, such as OpenAI's $150 billion valuation, which was actually a pre-money valuation that increased to $157 billion after adding the $6.6 billion investment. 1h17m30s
• The investment in OpenAI is seen as a significant moment, with the largest traditional Venture round ever seen, surpassing the $6 billion dollar round of xai. 1h17m54s
• The large infusion of cash into OpenAI is notable, especially after discussions about the lack of DPI (Distributions to Paid-In capital), and raises concerns about the potential risks and returns on investment. 1h18m11s
• The boldness of the investment in OpenAI is acknowledged, with some seeing it as a positive sign, while others may be more cautious due to the high valuation and potential risks. 1h18m20s
• The example of Instacart, which was bought at a $40 billion valuation and then lost 75% of its value, serves as a reminder of the potential risks of investing in highly valued companies. 1h16m46s

Audience Q&A 1h18m27s

• The automation of ports and containers could potentially reduce corruption, as computers are harder to pay off than humans, and could make it more difficult for contraband to be smuggled in 1h18m31s.
• The ports have historically had issues with corruption and organized crime, with characters like Jimmy Hoffa being involved, and it's possible that some of these issues still exist today 1h19m15s.
• Containers can be used to smuggle a wide range of goods, including stolen cars, which can be highly valuable and sought after in certain parts of the world 1h19m37s.
• In the past, there have been instances of organized crime groups working with people in the automotive industry to identify and steal high-value cars, which would then be shipped out of the country and sold for a profit 1h20m8s.
• The automation of jobs is likely to impact both white-collar and blue-collar workers, but it's possible that blue-collar jobs will be impacted first due to the more finite nature of tasks such as making a cup of coffee or taking an order 1h21m46s.
• The impact of automation on jobs is likely to be significant, with some estimates suggesting that 50% of jobs could be automated in the near term, and it's possible that white-collar jobs will be impacted second due to the more varied and complex nature of the work 1h21m43s.
• The automation of jobs is a concurrent process, with both white-collar and blue-collar jobs being impacted at the same time, and it's likely that the impact will be felt across a wide range of industries 1h21m20s.
• The automation of various industries has been observed over the last 10 years, with companies like Momentum Burger and others attempting to automate their processes, but none have successfully automated the entire process, except for companies like Cash that have eliminated the need for cashiers, achieving 100% automation 1h22m44s.
• The automation of certain jobs, such as dock workers, is expected to be 100% automated, whereas jobs like producers, attorneys, accountants, and writers may see their tasks compressed, with individuals expected to do more work, but with fewer job losses 1h22m59s.
• The impact of automation on blue-collar jobs is expected to be significant, with many jobs being fully automated and eliminated, whereas white-collar jobs will experience compression, with individuals expected to do more work, but with fewer job losses 1h23m37s.
• The concept of operating leverage is discussed, where companies like Meta and Uber have doubled their revenue while maintaining the same number of employees, resulting in increased revenue per employee 1h24m12s.
• The idea of static team size is mentioned, where companies may maintain the same number of jobs, but with individuals expected to do more work, resulting in increased productivity and efficiency 1h23m53s.
• The use of AI is expected to enhance the research process, allowing writers to produce better content and beat their competitors, with the potential to write more stories and newsletters 1h23m20s.
• The automation of various industries is expected to have a significant impact on employment, with some jobs being eliminated, while others will experience compression, but with the potential for increased productivity and efficiency 1h23m41s.