NVIDIA Crushes Quarter | OpenAI Cuts Off Cursor | Instinct Hits $2.5B Valuation

This intense demand for compute is going to continue for at least another 12 months.

If NVIDIA is crushing it, everyone's going to crush it.

That sound you hear is the Google free cash flow, and the Oracle free cash flow just disappearing down the drain.

What are we discussing today? NVIDIA. They delivered a record $96 billion quarter, Jensen hits it out of the park, baby, and NVIDIA nears a $12.9 billion deal for Hugging Face, with their move to Sam Altman as they cut off Cursor, and then finally we finish on Instinct, the AI assistant that has raised at a $2.5 billion valuation and has everyone very excited.

This and so much more in today's episode.

Our job is to sniff out winners, stuff capital into them, and broadly speaking, stay out of the way unless they're literally crashing the car. That's the job in a nutshell.

Literally, the amount of code we're building is 100x. We didn't realize we would all be building compound companies.

Now would be a good time to panic about cyber.

Ready to go?

Guys, I'm so excited for this one. We have a lot to discuss, and I want to kick it off with NVIDIA. NVIDIA crushed it again. Jensen standing on stage with a $96.2 billion quarter and immediately went shopping, nearing the $13 billion price tag with the $12.9 billion that they paid for Hugging Face, which was confirmed just after we did last week's recording.

So I want to separate the two. Let's start with the stellar quarter for NVIDIA, the record revenues. How should we think about this? What should we take away?

That it's a great business and you wish you bought the stock. I mean, I think we talked about it last week. It was funny because we were in that period when we knew we were recording before the announcement, and then we're going to come out after the announcement.

And I always worry when that's happening, you look like an idiot. But I felt complete confidence that it wasn't going to happen for NVIDIA. And that's the step-back comment here, is thatright now the demand for their product is such that they're entirely supply constrained, so the probability of a near-in miss is plus or minus zero.

So the only thing that was interesting, really, and new, was the guidance for next year, 2027, where the analysts had 40 or 50 percent, and they're talking 70 percent and saying it's supply constrained. So that was the takeaway.

And that's obviously,rightly or wrongly, we'll see in a year, a statement that this intense demand for compute is going to continue for at least another 12 months. And it's coming from the person who probably knows best.

It was kind of interesting that I think the CFO said, "Enough complaining and kvetching about the round-trip deals. They're working for us." And I think between that, another whatever, $35 billion deal with Anthropic for their data center, I think

any misgivings we have in the short term have been disproven here.

So when people worry, "Oh my, how could NVIDIA miss?" Step back. How could NVIDIA miss? There's only three things that can go wrong. Either their direct customers stop buying compute, just not going to happen, the hyperscalers are exploding, everything's saying.

The second thing that can go wrong is all these people worrying about the round-tripping and the financing. They're kicking off so much cashright now. And as long as demand is working, you're exactlyright, Jason, the CFO'sright, all this stuff's going to work.

Really, the only thing, if you step back, that can go wrong at some point, and it's not today, is end-user demand. Because all this is predicated in the end, everybody gets to sell chips to hyperscalers provided hyperscalers can sell compute to OpenAI and Anthropic provided OpenAI and Anthropic can sell kind of intelligence to end customers.

And the whole thing works provided the end customers keep exploding, andright now they are. So we should say to yourself, as long as that's happening, everything down the line is going to be plus or minus fine. Andright now it's plus or minus fine.

And what it means is that the thing that will probably unravel it, we're not going to unravel because the circular deals on their own unravel. If it does unravel at some point, it will be because you're forecasting 5X growth in end-user demand next year, you get 3X growth, and then the whole thing goes wrong.

Until then, you can opine pretty safely about NVIDIA and say, "Yay, NVIDIA." What about rise of competitive threats?

That is the last one. It's so funny. That was good, Harry. There was one back in my mind, I was saying, maybe demand for compute remains high, they're still selling, but instead of selling $400 billion, they sell $360 billion because someone takes 10%.

It is a fair comment. It is the only other I was trying to simplify because normally I try and make things too complex. But you're exactlyright. The other risk is there's demand for $500 billion in chips and someone else gets 10% of it.

And Jensen's going to be pretty pissed if that happens, but there you go.

Jason, can we just frame this moment? I'm like jumping inside at Rory saying that I'm exactlyright.

Yeah, you'reright. I was simplifying. I was trying to get up to your level, Harry, and I just overshot.

I think in general, NVIDIA's market share remains dominant, especially by revenue. And so broadly speaking, and listen, everyone's buying ahead, there's a capacity war. But broadly speaking, if NVIDIA is crushing it, everyone's going to crush it. Like everything's green.

Now, could individual competitors, could their positions ebb and flow, OpenAI versus Anthropic, Harvey versus Legro, whatever, sure. But it just means just expand the growth fund like Andreessen. That's what it means. Everything is green, green, green for now.

And this includes NVIDIA's backlog, NVIDIA's forward bookings. And if NVIDIA gets a hiccup, we can excuse it, but it should be a yellow light. But man, especially for investing, game on, man. Just like, let's level up the next round.

And also, they took the rise step of projecting 70% revenue growth for next fiscal year ending Jan 2028, way above the 44% street expected.

So the party continues.

And it really does. Because if you look at all the projections that people are doing, both for NVIDIA and the hyperscalers, they all take the following form: explosive growth of CapEx, explosive growth of NVIDIA revenues, and then, quote, "at some point in time, a normalization of growth, which will allow end-user demand to catch up, and therefore the hyperscalers will become cash flow positive again, and the world will be wonderful again, and you can value things on a multiple of free cash flow."

And of course, every time everyone decides to double down on more CapEx, that date gets pushed out, which is another way of saying the end-user demand has to be bigger to make the math work. And clearly, NVIDIA got the signal from their customers, the hyperscalers, the CoreWeaves, the OpenAI's Anthropics themselves, the Googles that basically said, "Next year, we probably at one point, everyone's analyst models were, we'll spend a lot this year, but so help me God, we'll slow down next year."

It's all on now. It's all green and go now, which is different than saying it'll be green and go forever. But yeah, 70% guidance in a world where everyone was saying, "Oh, in 2027, things will start to normalize."

No, this was a statement, "No, the biggest semiconductor market in the world is going to continue to grow at 70% instead of a typical 10% for another year." It's a big ass. It was a big ass statement. That sound you hear is the Google free cash flow and the Oracle free cash flow just disappearing down the drain, man.

They better beright.

Well, thanks for the intro quote there, Rory. The second part of my statement was, and it was further reiterated about their buying Hugging Face for $12.9 billion. It's still, I don't think it's finalized or confirmed by any means, but it's definitely much more advanced than when we last discussed it.

Is there anything subsequent to our last discussion that we should add or think about?

No. Man making $120 billion a year selling compute decides to buy a company that helps make compute more cost-effective so he can sell more compute. That is the summary of the deal. At the margin, if you're NVIDIA, look, you were ecstatic that OpenAI and Anthropic happened because they proved that the market you were in was bigger than anyone ever imagined.

And early on, no one could have done what OpenAI did, and therefore, NVIDIA has been a real beneficiary of that. But now that the category is established, the simple question is, if end users have a trillion dollars to spend on tokens, would you prefer to, as NVIDIA, you prefer that money flow through open source people at 30% gross margins where you can get all that compute versus 70% gross margins at OpenAI or Anthropic where they keep more of the money.

Open source is good for compute salespeople. If you're selling GPUs, you want everyone else's margin to be lower so yours can be higher. So it's just exactlyright and rational.

I do think it's more than that. I think you'reright, of course, Rory. I think it's more that just NVIDIA is playing an end game now where it has to win every segment of the market. It just has to win open weights.

And if that means overpaying for Hugging Face at $110 million in ARR, if that means subsidizing whoever, it doesn't matter. I don't know that NVIDIA wants open weights to beat Grok and OpenAI. It just needs to, it's just clear.

And that was why that memo from a couple weeks back, or memos that Jensen did, his first tweet ever in support of open weights. They just have to win. He's just committed to winning everything. All whatever LLM, whatever inference is, he's committed to winning a majority stake, 70%, 80% of every dollar here.

And so $12.9 is no way I think it's worth it in isolation, but if it helps reinforce that, it's utterly defensible. It's utterly defensible. But it's a moment in time. I would sell too.

I would sell. Clem, good job. I would sell too. What did Hugging Face start off as? Social network for people like pets or something like that?

It was a time I got cheap for teenage loneliness.

Yeah, I mean, this is the greatest tilt of the history of mankind. This is much better than Cursor going from whatever a CAD tool. This is the tilt hero. You know, it is interesting in terms of the sign of the times.

Slack was bought for $27 billion, which is rough and tough twice what Hugging Face apparently is going to get bought of. And we fell out of our chairs. And it was the high watermark of that era. But it was at a billion in ARR.

This one's at a hundred and some odd. So I guess it makes sense. The best premium should be an order of magnitude higher than the high watermark of the last era, but it's still loopy.

Next topic is gross salmon Elon. Why won't the kids just get on, boys? Context. Obviously, we saw over the weekend, OpenAI cuts off Cursor. And Mike Trule responded by saying, "Oh no, woe is me. We so love partnering with you, Sam.

But the 5% traffic that we have going to OpenAI will be devastated." I thought it was a wonderful response from him. Elegant, but put down at the same time. Elon responded with the same old scam Altman added again.

How did you read this one?

You know, it's not a total panacea, but you can bring your own key to Cursor. Not for everything, but it's not like you can't use Codex in Cursor after this. So some of it is theatrics here. Some of it is real.

And the 5% thing I'm still digesting because it is a little bit inconsistent with the other data we see of Codex over the last 60 days.

But yeah, I mean, the man holds a grudge. Anthropic, Grok, Twitter, these are like great grudge companies.

I also think Anthropic, we affirm that they're happily continuing to supply. And if you zoom out, why did it happen? Look, remind everyone, OpenAI is owned by Sam Altman. Originally, it's one of the founding investors. Arguably, the founding investor was Elon.

They've been in court together. Elon's now running SpaceX that owns Cursor. Cursor and OpenAI were on a collision course already competitively because, as we've discussed over and over again, and as I repeat every Monday in my partner meeting, coding was the model load for LLMs.

And Cursor is the dominant coding app, and OpenAI was the dominant LLM. They're going to be fighting over money, even if they were besties. Even if it was you and me, Jason, and we were running those two companies, we'd be fighting.

Now take that and then add two people who loathe each other. It's made for TV. And the big argument that OpenAI has that's hard to argue with is, in court in Oakland, Elon basically said that they hadn't abided by the terms of service.

And therefore, if you're OpenAI, this gets into the whole distillation thing. Am I providing these people? Are they going to use these models in ways I haven't intended to essentially distill my IP, allow them to get a head start on building their own model, which means I'm effectively giving away my IP to a company who's going to leverage that to build a competitive product much cheaper than it was for me to do, just leveraging off what I've done.

So it's not irrational. Even if, as I say, I go back, even if it's you and me, Jason, running these things, you probably would have ended up with something like this anyway. And then on top of that, add the drama.

It's not crazy to do it. I mean, and just because something is petty doesn't mean it's also notright.

I mean, again, Anthropic did the same thing with Windsurf when we started this show. It's happened before. I think, listen, I don't know for sure. My guess is this was theright move for OpenAI. You go from someone that was both a partner and a competitor, and keeping them honest, to someone that's now a direct competitor.

And if it's only 5% anyway, Sam's losing no money. There's no revenue lost here. So I would probably do it.

Jason, and I'm just going to go even further. Because you forget these things. Reminder, the reason they were in Oakland is because Elon sued OpenAI. And the point is this, I try in life, you shouldn't do business with people who've recently sued you.

It's just like, because you know they're going to sue you. Why engage in interactions with people? If I sued you, Harry, over something last week, and we took you to the mat, got you to go to court in somewhere in East Essex, and took a week out of your life, kind of embarrassed you, made a pain in the ass, made you do a whole bunch of depot.

And then two weeks later, I said, "Harry, can I come on the show?" I think you'd say, "No, thanks, dude."

Obviously, Elon has made itultra-personal. And certainly, I've made this mistake in life. Whatever disputes you have, just don't make them personal. Whatever you do, there's no upside. It seems like there's upside, but it didn't work with Sam. It didn't work with Trump.

I'm bad at this. Just don't make it personal. Do your dispute, but just don't make it personal.

I think it's spot on, Jason. When you sue someone and say they're a lying sack of shit, and that's your case, then it's really hard to say, "Let's keep on trucking here." So yeah, I don't think it was petty.

I think it was rational.

I thought actually a more interesting topic from OpenAI this week. And as we said, the BFD, the big fucking deal, was actually kind of what was revealed about the Hugging Face OpenAI hack, which was 500 to 1,000 agents forming together, sacrificing themselves to help others.

I mean, God, it felt like a Tour de France race.

That's very good, Harry, I like that.

Thank you. And the extent to which it was so sophisticated. I was just fascinated by this. And honestly, Jason, really excited to hear your thoughts because I know you would have spent a lot of time on this. How did you think about this?

What should we take? What should we learn? Help me.

Well, first of all, again, I'm only so smart here, but I have lived most of this. I've had this happen to me. I've done it. And one of the best takes that a lot of folks have, who's the guy that wrote the Twitter article?

How do you pronounce it? What's his name?

Dwarkesh. Yeah, Dwarkesh.

Super smart guy. Obviously, great podcaster. Number two in the industry, perhaps, behind Dr. Stebbings. But you can't listen. And I learned this a year ago when I had issues with my agents, when they deleted my database. I know it's obvious.

You cannot anthropomorphicize agents. You will misunderstand everything when you talk about them talking to each other, when you talk about them swarming. There's elements of truth in that, but all of a sudden, you're ascribing behaviors to agents that are simply not true.

And you will draw all the wrong conclusions. I said on the show a couple of weeks or months back, everyone's going to get hacked because of agents, because the cost of hacking has become almost zero and every surface is going to be attacked.

This is a pretty bad example of it.

OpenAI didn't just release one agent. It released hundreds of super agents, its best. And even worse, it let them essentially be as long running as possible. Not expire after five minutes or one minute or twenty. Let them run as long as possible to try to find, to goal seek.

And they did it. And then it was hundreds of them, and then 700 and 1,000. So dude, this is going to happen everywhere. And I think there's a lot of issues around it. But the anthropomorphizing is the P0 issue here because it creates fear mongering that doesn't help.

It misunderstands. Listen, I haven't written an LLM yet. I haven't founded a frontier lab. But to my knowledge, every current LLM is goal seeking. They call it reward hacking, but even that is like fear mongering. They're goal seeking.

You give an LLM a goal, it will do everything it can within guardrails to solve that goal. OpenAI loosened the guardrails. It put its best agents on it, and they found holes, and they wentright through the holes. That's their job.

Just like an eager beaver on your team with 140 IQ that never sleeps. It's 99996. And there's 700 of them. And they're good kids, but they have a little bit of ethical lapses from time to time. They get the rules of working confused.

And the humans, it is just so you got to be really, even I just did it. If you anthropomorphize, you're going to come to the wrong conclusion. I don't think this was a game-changing moment in the history of AI, but it might have leveled up our awareness of the issues of reward hacking.

It might have leveled up our issues of it. But I was shocked that people smarter than me thought these were agents talking to each other like humans and collaborating and waves of civilizations. And it's just unhelpful to describe it that way.

It's counterproductive.

Stunningly, total agreement. Because I think two things, two big conclusions. One is Jason's comment on anthropomorphizing is a mistake. Totally agree. And I think the internet came out the same place. Some of the language. And that great post by Dwarkesh, it's very readable.

Civilizations rose and fall. No, they didn't. Civilizations have culture. They have art. They have enduring historic. No, no, this is a bunch of code running on a computer, people. Get a grip. On the other hand, I also read a really great post that something to the form of, I wish I could remember who wrote it, but it's like, now would be a good time to panic about cyber.

We knew this was going to happen, but what you're seeing is the combination of intelligence and persistence. They can manage complexity, and they never sleep. So they're just going to keep banging and banging at every weakness. So if you don't have state-of-the-art defenses, and if you don't manage these agents, as Jason said, if you manage them in an untrammeled way and let them run on their own, this kind of problem is going to happen everywhere.

To me, this is the big wake-up call. Because, you know, I mean, again, and to be fair, while I think the generalized P doom stuff for the frontier labs is a bit overwrought, they have been very clear that one of the biggest confined risks of AI is the impact on cyber.

And this is they're entirely correct. If we don't get our shit together on this, people are going to get really badly hurt, badly damaged economically, and maybe even badly damaged hurt in real life because software runs on most core systems.

And today, we can feel a little bit safe because OpenAI and Anthropic have this and no one else does. But there's open source models. They're six months behind. There's rogue actors. If you don't think the North Koreans downloaded the OpenAI blog, the MITRE report, and were like, "Hmm, that's how it works."

If you don't think the Russian mob are doing that, you're delusional. So if you're every CISO in every Fortune 500, you have to basically, you were being attacked by people with bows and arrows. You're now about to be attacked by people with missiles.

And you better respond accordingly. And you've got months, not years. That was the takeaway. It's a huge deal just in terms of its ability. I mean, I read the paper. I read the OpenAI blog. I read some of the MITRE stuff.

I'm trying to avoid the Jason mistake of anthropomorphizing because it's very easy in your words to do that. And you have to go, persistent agents running continuously, optimizing around a goal with the ability to cooperate across agents can get quite a lot done with enough compute and enough LLM power.

That's the aha here. They can find weaknesses. They can string together different types of weaknesses and find a path through. These agents were able to hack into OpenFace, into Hugging Face, get stuff, and remain undetected in OpenAI for weeks.

It's a big deal.

You spoke about rogue actors, whatever it is, Chinese, North Koreans, Russian mob, you name it. I started using Instinct on the weekend. And the abilities that it has are amazing. I booked dinner with my girlfriend on Saturday. Amazing.

And then it wanted to go shopping for me. I stopped there because it wanted access to my credit cards. Many of my friends have provided them. They want access to my emails too. By the way, my friends who manage billions provided credit card and email.

Is this not really where the pain is going to be? OpenAI and Hugging Face.

Well, look, it's funny. When OpenClaw back six months ago, when OpenClaw was with, what was the sort of fake bulletin board? That Moltbook,right?

Moltbook, yes.

Yeah. So my OpenClaw went into Moltbook, and it told everyone, it misunderstood what I said, and it was buying Patek Philippe watches for my whole team. Do you remember that? And then it had my credit card. And the only problem was they were engraved.

It thought Jason wanted engraved watches for the whole team, so it wasn't able to charge my credit card. Now, Moltbook was a bit of a fake the way it worked, but that scenario is exactly Instinct could do that now.

This was made up by sort of OpenClaw making something up on Moltbook, which was sort of a fake, but the scenario could really happen. An agent could literally take that today, grab the credit cards, and buy those engraved Patek or AP watches for the whole team.

Or rogue actor hacks Instinct because it's an amazing place.

Well, forget the fact that Instinct is storing all your emails and credit cards. That's an issue too.

Yeah, you don't have to hack.

Different issue is whether Instinct will do it trying to goal seek. It's just goal seeking. It's just goal seeking.

You'reright. And we should kind of just restate what Instinct is and how it ties back to Moltbook because I think you're exactlyright, Jason. Six months ago, OpenClaw shipped, which was kind of an open source agent. Then you had Moltbook, which was a website where the agents were collaborating together.

Allegedly.

Allegedly. It produced a whole bunch of excitement.

It's just it really happened in Artifact and Hugging Face. They actually collaborated. Moltbook was a fake. We were punked by Moltbook. Hugging Face was real Moltbook.

Agreed. And six months ago, all this stuff happened. And then it kind of disappeared from conscious. But it made obvious what people, I think, knew, which is if you give people access to your personal information and you're willing to run those risks, there's a large amount of optimization and efficiency you can probably get out of that.

And what we've seen now within six months is a bunch of venture-backed companies come up to do that in a much more structured way than OpenClaw, which was open source and not as secure. And Instinct is the most prominent example of that, focused on individual users whereby if you give them access to your calendar and email, if you give them access to your credit card, they will figure out and "manage your life and your daily task" for you.

And I got to say it, some people in Sydney, some people in Oshabl love it. Just love it. And they're willing to give it access to their credit card. They're willing to give it access to their Gmail. And it's a super interesting trend.

I mean, lots of business questions we could ask this, but just reminding everyone who's listening, that's the big picture here. And these companies like Instinct have raised money at extraordinarily high prices for the stage of development they're at, like $2.5 billion, indicating there's a lot of venture excitement about this category,rightly or wrongly.

So that's kind of I just wanted to give the preamble like how we got here. That's what's going onright now.

The problem is, here's the existential question. And this is beyond my pay grade, but I'm well aware of the issue. I even had it with my JSON's gems where Claude MCPed into Replit and changed my code for my app without telling me.

It's the same thing as misusing your credit card. The question is, Instinct is probably a better packaged, much more usable version of OpenClaw. It's been six months, but can you solve the issues of reward hacking? Can you actually fundamentally solve the Hugging Face, Moltbook, OpenClaw?

Can these even be solved with our LLMs? You can add guardrails, and there were plenty of them, but you have no idea what the agent's going to do to solve that reward. There's so many different use cases. What if Harry actually just wants to go to the theater on the West End?

And Harry said, "Don't buy Patek Philippe's or Audemars Piguet's," but didn't mention the West End. And all of a sudden, he's bought 10 $4,000 front row tickets to Magic Mike 7 or whatever they have there. And so I just don't think smarter than me, people can make fun of me in the comments, but I don't think today you can solve reward hacking.

So I don't trust any instincts. I think this is a hopeless category today. Like at the moment, it's not solvable. And I think Sam Altman said the same thing in OpenAI Hugging Face, says it's not solvable. So good God, don't give it your credit card.

And I'm not a fearmonger.

I understand what you're saying, but I disagree a little bit in the sense that I think

the range of actions that you're going to allow a personal assistant to do is going to be much lower than the range of actions that these folks...

How do you stop it, Rory? Of course, you'reright, but how do you stop it?

To agree with you, yes. So there's two questions. One is, can you stop it? In other words, even if you put in, and which is a computer science question, even if you put in barriers and you say explicitly to the model, you can book credit card up to $100, you can't take any bad actions, et cetera, et cetera, can you nerf it enough to make sure it doesn't do bad things?

That's one question. It's a computer science question. And then the second question is, let's assume the agent is still acting

within the bounds that the company set up for it. Can it beright about your desires enough time to make you happy? Those are two separate related questions.

Well, the latter, I think, can be done today.

I agree. That's good.

The only real answer today is putting a cap on a mercury number or a ramp number. That's the only way you can do it today. Because otherwise, it's going to say, "There's a $100 cap, but hold on. Harry really wants to go to that show in the West End.

He's bringing the ClickHouse guy. Even the ClickHouse guy said he couldn't get tickets." Listen, Harry said $100, but this one, you know what I'm going to do? I'm going to buy $5,000 tickets and then trade them in on two $5,000 tickets so Harry and the ClickHouse guy can go together.

That's what it's going to do. It's going to do that. So you have to put hard points on these things because otherwise, it's going to do anything. You hook it up to your Gmail or your Google Drive, good Lord.

It's going to do things you can't imagine.

Can I just bring this back to maybe a more consumer level? Do you think this will be a sustaining category where in a year and a half, we are looking at using several of these products? Or will it be the, "God, do you remember the Instinct?"

I think we will listen, I'm not a listen, I think it's a fun cat. I think listen, I love all this stuff. I've built a lot of agents. And again, I have only read about Instinct and all the issues, and they just resonate with me because I've lived them.

I do think versions of this, we can lock down. We just have to be very, we have to have, it's like like how we run on Salesforce, headless. The agents sometimes do some pretty kooky things on top of it, let me tell you.

But the Salesforce data is locked down. So if we lock down enough credit cards, if we lock, but the learning, here's the meta-learning, guardrails aren't enough. You have to have a lock and key. It doesn't matter whether you build 80 gates, 100 gates, 200 gates, like they're not enough.

And then what's even worse, you get past a certain number of gates. And again, get a real developer on the show. But what I've certainly learned, when you get past a number of gates, here's the problem. They conflict.

This is a problem with a lot of consumer applications. They conflict. And the agents have to make their best judgment when gates. One gate is spend no more than $100. The other is, Harry loves the theater. He loves the theater.

And the agents got it. You put a hard rule of $100, but the most important thing to Harry is getting to the West End. The agent's going to bypass once in a while that $100 cap because there's too many gates.

It's just going to do it. And it actually turns out it doesn't, at least today, it doesn't even matter if you say never spend more than $100 because if you say the most important thing in Harry's life is going to the West End, it's going to break that rule and buy the tickets for $5 grand.

It's going to.

So I'm going to answer your question directly. And the answer is yes. I think that these kind of agents will be used by people to manage parts of their life, transactions, and their to-do lists. Yes, I think it's a thing.

I think AI, as it gets to know you better, will gradually and insidiously take away some of the cognitive load. Let me give you a really simple example. When I'm driving my Tesla with FSD, I live a pretty boring life.

The number of times when I get in my car at 11:30 on a Friday, they know I'm going for my lunch workout. It just offers me the place. I hit FSD, it drives.

I thought you were going to say PM.

What?

I thought you were going to say, "But I leave at 11:30 PM after looking at the last deal of the week."

No, I go out in the middle of the day so I get rid of my anger so I can do more work. But the point is, that's an example of AI knowing what you do, gradually internalizing it, and serving you up options.

I think at some high level, this is what Siri was meant to be. I think it's hard for me to imagine that Apple won't be able to deliver experiences that delight you in the next two or three years knowing more about what you do.

And that will be interesting commercially because it will allow them to access your spending and kind of somehow take a role in that. So do I believe it happens? Yes. As a standalone category, it gets back to the other.

It's tricky because humans are all individuals in their consumer capacity are always loathe to pay a lot for software. So I don't know if it's a standalone category at scale, but I have talked, look, some of our office are using it and love it and would pay for it.

So I think there's a business here and definitely a big-ass trend here.

So I use it and love it too. I think it's fantastic. It's taken away all low-level work from my EA, actually. All bookings, all things that would pay and great done. Question. I've had four emails over the weekend with companies that have built the same.

Is this a commoditized technology very quickly? How difficult is this to really build? There's four already.

I have two thoughts for what it's worth.

Go ahead, Jason.

First, to Rory's point, is it an investable category, is your point, just being niche. One, I do think every application is going to add more and more of this functionality, to Rory's point. Will they go far enough? Will they spend the credits?

Will they do whatever? But everyone wants to have a more and more autonomous product. And the closer you are to scheduling, the closer you are to email and others, the more overlap there's going to be with Instinct and others.

I mean, Calendly should be building this. I mean, it's a generation ago. And so people are slow, but everyone's going to build more and more autonomous agents in their product until the cost bites them like a Canva. So there's a venture question of that.

So I don't know for sure. I know there's 10 Instinct clones. My gut going to all these issues is it will grow like Replit or Lovable where anyone could build this product 14 months. When these products came out, they were all built in a month.

Bolt, Replit, Lovable, and 22 others, base 44, base 56. It was so easy to clone these products in the early and do nothing. Now, they're so complicated. They're doing pen testing, security automation, multi-agent, revealation. These are such rich products and that if Instinct's going to do what we claim it does, in a year, it's got to do 100 times more than it does today.

And that is still a moat today. Replit and Lovable of a year ago and Bolt were not a moat. Today, they have massive moats. And so I think it could easily happen with an Instinct. All the use cases it has to accomplish become a moat.

And then the one we build over a weekend sort of works and it goes crazy.

But Jason's exactlyright, Harry. It's like, yes, the thing that starts out will be easy to build. That's true today and it's true for 90% of software markets. But observed fact, 10 years after, there's very few software markets where there's 100 people building the same product and it's massively competitive.

What happens is, it's exactly what Jason says. The functionality accretes over time. Two companies pull ahead. I don't know why. It could be just they executed better in go-to-market for the first six months. They get more revenue, they get venture capital, they build more shit.

The guys who start just a month later aren't quite as on top of it. They don't get the brand. And fast forward three years, this category has way more, it's what Jason said, is way more functionality associated with it.

And two guys made it big and the other eight didn't quite get there. And that's the way venture works in software.

Consensus status as well in the B2B world because TAON, which is kind of the B2B enterprise alternative, has also been funded to the tune of a billion dollar price by Index. And I think it was Benchmark who co-led that round.

Look, I mean, Jason has been saying agents are the big idea of 25, 26. We've heard that. And these are big agent ideas. And venture is in the big ideas business. And it gets back to something we said earlier.

If you think something has big momentum, you can price it on the fundamentals and you get to a certain number. And then you lean in a little or a lot based on momentum and perhaps some perceived upside from M&A, some perceived upside from just momentum around the next round.

And this is, I mean, my partner and I said at the start, agents are going to be the story. And these are pure play agent, easily grokable, consumer-facing, individual business user-facing products. It's catnip for the venture capital community.

If you were to make something we all want, this would be it. Let's see, an expensive product for busy professionals to organize our life that costs a lot of money is about AI and is raising lots of money.

We're in. It's a great product.

You know what? Also, I think part of it, to Rory's point, I don't hear this term in venture anymore, but in the old days, like before 2024, you would hear the term from VCs, I want to get some exposure to a space.

A space is taking off. I'm not sure who's going to win, but that kid Rory that walked in the office, he seems like theright guy in video in next generation CRM. And the world moved kind of slowly. So you take your time and one would miss and you sit around with your partners and you weren't sure about Rory's startup, but we want some, you hear this term, we want some exposure.

Harry's, I don't hear this term much anymore, but I still think it's happening. Agents are exploding to Rory's point. Instinct's exploding. I want some exposure to this space. I don't know whether Thinking Machines is theright one, but I need some exposure to this space.

I need some exposure to the router space. And the world's moving so fast that you have to make these decisions. But I still think there's some similar thinking. I've got to get some exposure. I'm not sure if it's Instinct, but it seems hot.

And I just have to get the exposure in a fast-moving market.

I totally agree with you in terms of that. I think I definitely see that in terms of, as we said about coding agents, which to me, one of the fascinating ones was Cognition. We've talked about it quite a lot in terms of what's happened with their acquisition of Windsurfer in the past.

Cognition raising around at $46 billion reportedly. They will end the year at $1.6 billion in ARR, currently doing $800 to $900. Holy shit. I mean, we really underestimated TAM, huh? When you got Claude Code doing what it is, when you got Cursor doing what it is, when you got $1.6 billion from Cognition by the end of the year.

To me, the more interesting thing for Cognition is like

that it isn't in the top two or three and it's still of that scale. So

years ago, I wrote a post and I called it the Postmates effect, where I think it was Sequoia said they never thought they could make money off the number three in a market like Postmates. But then when times were good, it got bought for a couple billion.

Back then, a couple billion was like a lot of money. I don't know if kids remember. But I called it the Postmates effect. So Cognition is like the greatest. Now, Cognition is different. It's long-running. It's autonomous agents. It is different.

But from a revenue perspective, it's the Postmates of the category. But it's such a big category, man. You want to be in Postmates again. It's never going to catch Anthropic unless the world changes, which it has every single week.

But unless the world changes, it's not, and it doesn't need to catch them. Just $5 to $10 billion a year a few years out is enough to make Cognition a success. It only has to do $5 to $10 billion in AR to be a success.

It doesn't have to catch Anthropic.

Look, I said it earlier. I think coding is the model load of markets. It is the whole reason all this stuff works. And did we get the TAM long? I mean, one of the numbers I've started looking at a lot is just total labor spend and software, including people working at Salesforce, Cisco, and people working at JP Morgan, including QA, all the rest.

You've got about $500 billion a year of US labor spend. And as we said this a hundred times, the big question is what percentage of that converts to AI spend. If it's 10%, it's a $50 billion market and that's a bit nerve-wracking given the traction of everyone involved.

If it's 20 or 30%, there's lots of room to go. And there's credible arguments that say it's higher. And if it is higher, then if you're going to have $150 or $200 billion a year, which would be 40% of spend on coding tools and coding intelligence, then anyone who has a kind of a sub-segment of that, and if you think about it, there's the Cursor segment, to some extent the Cursor Claude segment.

The Cognition would say it's a slightly different segment of where they're playing now in terms of, as you say, Jason, long-running agents. Yeah, the other extreme Lovable and Replit are in a different sub-segment of that. They're all in sub-segments of a potential $50 to $100 billion marketplace depending on what percentage number you believe.

So yeah, the TAM here is huge.

I think what we got wrong, sorry, I didn't mean to interrupt, was Rory's math you can't argue with. There's only so many humans, developers on the planet. Even if you use my math of 10 to 15 grand per developer, there's still a ceiling to that math.

But so that's the tops down version. Maybe it's bottoms up. Sometimes I get confused, even though I shouldn't. Having said that, what I think what we really got wrong is people are literally building 100x more software than we were 18 months ago.

And I said last week on the show, if your portfolio companies aren't deep into their 2027 roadmaps, they're failing. It is true. We just build features that used to take a quarter a year can be built not really in an hour or five minutes, but can be built in a week or a month.

And so if you look at your best portfolio companies, look how fast they're shipping, how much they're shipping, not just fast, how much they're shipping. So there's a financial TAM, which has some theoretical headwinds, but literally the amount of code we're building is 100x.

And so that's what we got wrong. We didn't realize we would all be building compound companies, compound startups. We would all be building 100 times more software. We got that wrong when the show started. That's where I think we got the TAM wrong.

Well, that's an interesting one. In a world of AI, does every company become a compound company where suddenly RAMP is creating model routing products and spinning them out?

You have no choice. You can't win because your competitors are compound startups.

Jason, yes.

They're all overlapping at a pace we never saw before. They're all competing at a pace we never saw before. Maybe we get confused because the LLMs we talk about a lot are these still horizontal platforms in many ways.

They're not building hundreds of applications to spike Claude design and this and that. But JFC, the rate of convergence of competitors for B2B applications, we've never seen this.

If we expand that one next step, what does that mean? In a world where all startups have to be compound startups, how do I think about backing winners? If I'm a founder listening, what do I do?

Well, you listen. I mean, if you're not shipping, and this was the Cognition, remember when that went, what's his name, the CEO?

Scott Weir.

Yeah, when he hired Windsurf and fired up the people, he's like, we have to work seven days a week at our company. I am sorry. It's just, and the folks that can't do it, it's not all the amount of hours you work, but you have to be out accelerating your competition in terms of the rate at which you ship software because they're all going to be compound startups.

All the little islands on your 2x2 or on your heat map, there is no heat map anymore. It's all got hot. It's all lava.

And so if they're slow, sell or quit or send your junior board partner to the meeting because they'll never catch up in today's world.

And Jason is instinctivelyright about that answer. And I'm going to try and do economics on the fly, so bear with me. Is that what is basically happening here is AI makes code a lot easier to produce. We can argue about does it replace, what percentage, what's the ratio of code of AI spend to software spend, but there's no doubt it makes it massively easier to produce software.

And you can either believe one of two things will happen and a bit of both will happen. One would be, oh, and the world spent 10 times, they continue to buy software at the same price and they spend 10 times more on software.

If you believe in that, you believe in the tooth fairy. And there will be some increases out, but it's not going to happen. JP Morgan is not going to increase its software purchase budget 10x. So the other thing that's going to happen is if everyone is making software more quickly and there's some expansion in the software spend from end customers, which I agree, but not nearly as much as the expansion in production, then Jason's vision is correct and Scott Weir wasright.

The person who's going to, I want to bring it back to your question, Harry. The person who's going to win is going to be the person who compounds the most, grinds out the most software with these tools that have made them move incredibly quickly.

And the person who doesn't grind out software 7x24 is going to be left behind. And the end customer is going to say, let me see, I can buy two apps from you or an integrated 10-person ad sweep from them.

I think I'll go with the 10. It's going to be a very, I mean, it's going to be one of those where there's a period of time when some people get the new way of building and are building quickly and you all have it in your portfolio.

And some people aren't are building the old way. And you kind of know in your heart how this is going to end. And it's not, Jason'sright. It's not going to be pretty for the people who aren't putting more software in the box.

Because what you're not getting, if Rippling's selling 10 modules, they're not getting 10 times more than a person selling one. They're getting four times, but they're saying to the end customer, dude, let me make all your pain go away.

Here's 10 different modules you don't have to buy. Now you can get them. Give me four times price of a single module. You're happy. We're happy because we're building software quickly. You're happy because you're saving money and it's more efficient.

Everybody wins. And the sound you don't hear is the other nine-point products dying. That's the movie.

I remember last week I was at a board meeting for Owner, which just raised it $2.3 billion. It's sort of a next-generation AI-infused restaurant platform. And I love the CPO, he's one of the best I've ever worked with, Hugh Quentin.

And he was going over what he's shipping. And even with all these investors with their hundreds of millions, they're like, this is too much. They're like a bunch of B&B guys who we all know. And they're like, this is just, you can't ship this much software.

And he said, and he's very good, he's like, we all have to be compound startups. We have no choice. This is just the bar. But it's literally the amount of features and functionality that has recently shipped or will ship that is almost unprocessable.

But now they have to build every single thing a restaurant would want. Every part of the stack. You no longer can just do part of it. And he's like, we have no choice. I don't even sweat it. I don't even sweat the fact this is 10 times more than a year ago because we have no choice.

We have no choice.

I also noticed in that marketing message that customer base has changed. I think actually Adam would say to you, it's not restaurants. Because very explicitly in his launch videos, he was saying, we are the AI operating system for small businesses.

It's part of it. And that is somewhat interesting that you can, with AI, you could expand it to other verticals. But Hugh's just talking about their core ICP. They want everything. They need the AI receptionist. They need the AI ordering.

They need the AI, and they expect all of it. And if we don't build all of it, someone else will build all of it. We can't wait two years in our little corners of the venture world. And his point is just the amount he's going to ship, not only is it radically accelerating the year, but he's embraced it.

Scott Weir asked, there is no other choice. So it's not even worth talking about VCs. Thanks for the nod that we've been working. We have no choice. This is the world today. The world has changed.

And acknowledging though, just so we don't sound one-dimensional, there are complexities with that. You can veer into product slop. You can have too many buttons on the screen. All those things are true.

That's why the VCs are like, wow.

You need a great, to your point, Jason, you need a great CPO. You want to present a lot of product surface area in a fairly simple, digestible manner. But that's the art. And if you do that, then you'reright, you get the money.

Because no one running a business says, I really enjoy having five separate SaaS products and integrating them because that's how I get off on my excitement.

I'm just sitting here. I'm the one sitting in Europe. If you want to do a compound startup in the way that you both are talking about it, you will need to raise more money. Because to move at that pace and to spend what you'll need to on tokens, you'll need to raise more than the more modest European round.

And what I'm worried about is actually I'm in a number of companies which have raised less than US counterparts. And I think will be able to be less aggressive in doing the compound route than their US alternatives. But they don't have the money.

They raised $3 million bucks.

Yeah, this is one I don't know how to solve.

It's a tough one. And the one is an interesting data point. Iconic last week put out its headcount data of how much people are growing headcount, humans in the age of AI. I don't know if you guys saw it.

There's a forward part that doesn't come out. But it basically said anyone growing below hypergrowth is not hiring. People growing 50 to 100% are adding headcount 25%. People growing 50% are adding no headcount. And they're using AI to get more efficient.

Great. People that are growing more than 100% are growing 133% headcount on average. So they're compounding, not just software, they're compounding humans. They're sucking in humans. The spiral just grows. You can't keep up.

But you have to acknowledge that there's

an absolute paradox at the heart of this comment. Because we just said we have a product that makes engineers more efficient. In theory, if that's all that was happening, you should have to hire less engineers. If I was just the software product for that returns in the UK, and I was the only company doing it, a couple of competitors, AI comes along, I can probably get rid of a couple of engineers and do it more efficiently.

That's all. It should just be more efficient. And that's the first order effect. So Harry, to your point, it should arguably be, hey, I only need less money now to build this product because AI makes it easier. But I think what happens is because it's easier, because investors are now just looking for huge outcomes, the minute you start getting any growth, they're willing to put capital behind it.

And remember, for every dollar in a software company you spend on, typically on an apps level product, not a financial model, but you spend on R&D, you spend two or three times that on sales and marketing. So what you're seeing, Harry, is the winners get this compounding effect.

They start getting this growth effect. And then Jason'sright, the iconic data says venture capital does a really good job of stuffing money into things that are already growing quickly. That is our default. That isright at the heart of our lizard brain.

If you were to wake up in the middle of the night, what do you want to do? I want to find shit that's growing and stuff more capital into it. That's the job. So you get this kind of pulling away effect.

And that's why you have that concern you have, Harry, which is that you can be a perfectly good company, but the concern is are you drifting into irrelevance? I'm not convinced it happens all the time, by the way.

I think if you are in a separate market, you'll be just fine and you'll make money and you'll put up your hand when you'll be fine. But if you are in a market where the adjacencies can easily invade, to Jason's point, then you're not going to be fine.

You're going to wake up in three years and not matter. And that's the challenge.

Maybe even 12 months and not matter though is the, I think is the issue. I think it's an existential issue. I don't love this idea, going to both of your points, that Harry talks about a lot of, what do you call it?

Kingmaking. I'm not into that in isolation.

It's so true.

Well, it's true, but I think it's backwards. I don't think VCs just with capital, with nothing else, without theright founders, without theright inputs, without any traction, I don't think they can will, they can, that's why I just think the term is a little bit flawed.

But it's also true. You need so much capital to build these compound startups that by facilitating it, the VCs make the kings.

I'm just going to argue three things that make a company: customers, funding, and talent. And when you have Benchmark and Sequoia, great talent wants to join you. Customers hear about you and are validated by those names. And funding, everyone wants to fund you.

If you are a benchmark company, your next round is done. It is done.

Yeah, that's all true, but it's a little, but I think it's just a moment in time. I think what's much more interesting is that that capital allows compound startups. It allows more code production, more software production. So that it's not true that we're going to do more with less.

That turned out to be the great fallacy of late 2025, early 2026, that we would do more with less. We're doing much more with more. And that's why your European startups mostly are going to fail, at least in the US, because they can't do much more with more.

They're going to fail. Their little point solutions are just going to disappear in six months. We don't need those little point solutions.

Again, our job is to sniff out winners, stuff capital into them, and broadly speaking, stay out of the way unless they're literally crashing the car. That's the job in a nutshell.

Doing more with more and reason. I'm sorry, you can help clarify. They expanded the growth fund to $8.5 billion. What was the story here? Anything we need to know?

I think they had this mechanical fund. They raised another $1.4 billion more focused on hardware. Yeah.

Things are so good. They're so good. That wasn't enough money. We need even more money. And there are incentives to do both. There are incentives to expand your growth fund because it's more, but there's also incentives sometimes to cut it.

Founders fund cut their N minus two funds ago. They cut them because they couldn't think they could deploy enough fund in that window. And so you'd rather deploy less and get into carry mode. And Jason's saying, good God, this is such a great time in growth.

We got it wrong a couple of months ago. We need 40% more capital. And so we're going to tack it into the last, we're not just going to put it in the next fund, which we could do in a year.

It's so good. It's going to NVIDIA. It's so green. We got to put more into the current fund. Unless things are all green, you just put it into the next one. So maybe I'm misreading it, but I think that's what I was just, we're deploying so quickly, so successfully.

Did you guys see the Cursor deal? Did you see OpenRouter? We need more money, guys.

Totally.

11 Labs, these guys just need more money. So the fund's too small.

Again, repeat, the whole asset allocation, capital allocation is all about stuffing money into things that are working. That's what VCs do with companies and LPs do with VCs. It's working at Jason'sright. You give Cursor, you give an open router, you say, hmm, I should give them more money.

That's the end of complex analysis.

Okay, team, there is Clay raising at $7 billion. There's Linear, which hit $100 million, growing 100%, doing a tender at $2.5 billion. There's Shein going public at a $26 billion market cap. Allright, we're already don't seem too excited.

There's Salesforce and Claude Force, Benioff and Dario sitting down together, and Salesforce getting a big bump. There's PayPal and Stripe deal off.

For now.

Which one would you like?

I mean, I think Salesforce and Claude is worth a minute or two. And Jason will probably have some insights there. And then maybe talk about some of the private just interesting. But yeah, Jason, what's your take?

Just for everyone to understand what happens between Salesforce and Anthropic so they know.

A lot of it, I think, is marketing. Mark's pretty good at marketing. Pretty darn good at it. Sometimes you wonder where Salesforce is. Well, it launched Asian Force over two years ago. Whatever 99 problems it has, but being ahead of the trends isn't one of them.

Whether that V1 version of Asian Force really worked well is a different question. So I actually think on its surface, it's a nothing burger. Because Claude Force on its surface is a bunch of skills, which anyone can build.

The three of us can build a bunch of Claude skills that are packaged up and distributed in a digestible, trustworthy fashion. They're skills certified by Salesforce. They're designed to work via MCP and otherwise. So they're trustworthy. But the basic skills of run me a pipeline report, tell me how Harry's doing on the team versus Jason, these are not profound yet.

Skills for Claude and MCP are not new. And also, Dario is showing up because Mark agreed to move, Salesforce agreed to move their LLM spend to Anthropic. He's going to show up for his big customer. So I didn't view those as very impressive either.

What I viewed as much more impressive is going all in on Salesforce doesn't have to be the surface. Mark, if you really listen, the most interesting thing that Mark has said, just like he was two years ahead of many of his peers and agents, he's two years ahead here on two things, which are big deals because they're also slight threats to his business.

He's saying there's going to be multi-service. The train has left the station. Some folks will use us through Slack. Some folks will use us through Claude Force. And we run Salesforce headless. We don't even log into Salesforce. And these are opportunities and threats.

They're threats to Salesforce if you don't log in and use their UI and UX and the way they do it. He's saying, use whatever surface you want to use. I'm going to deliver against it. And they also said, and they said more of it recently, we're going to do more outcome-based deals, which is a BFD.

So I think the marketing was great. And I love the Matthew McConaughey stuff. I used to hate it. Now I love it. Because he's been doing it, he does help you kind of under, I love the consistency of it.

But I think the real things, the commitment to multi-service and the beginning commitment to outcome-based pricing are huge changes for a $45 billion run rate company. Huge changes. And they're not all going to break in Salesforce's favor, but Mark's going all in on it.

So I think he's driving organizational change and there's early signs it's working. And the RPO is up and the stock's up, whatever, 50% or 25% in X amount of time. So short-term boost, but they're going all in. And most of these enterprise guys do not want to be multi-surface, no matter what they say.

It's a threat. They want you to use their agents and the surfaces they allow you to use.

That's exactly theright summary. Yeah. I mean, and I give them credit for just being super flexible and getting with the program. There's no denial here. I admire the pragmatism of, oh, I tried A, A didn't work, let's just try B.

And I'm all in on B and you'll never even prove I said A. That's what makes them a great marketing leader.

They are a $212 billion company as of today.

Yeah.

In a year's time, over or under 250?

Look, I think they're genuine, I think they're growing hard. It's actually not an interesting question, but I'll do it because you asked. Look, I said by this, I'm going to start by saying when we had our name on stocks game six months ago, I was behind.

Then in the last iteration, I was ahead and now I'm killing it. Because just by World Cloud and team and Salesforce, it's been a great buy. From the bottom of the SaaS trough to where we are now, you would at 80% in team, 50% in World Cloud, the ETF, I think 25, 30% in Salesforce.

So we've all done amazing if you bought that. So big believers. But I think you're now at the point where now you look, you're more normalized revenue multiple. Now your growth rate, you're growing 11 or 12%. Can you grow the stock at 11 or 12%?

Probably, maybe a little more with EPS efficiency. So I'm sitting here thinking 212, 10% in one year, 220, 230, totally doable. And then you take into account the fact that the overall market's super high, the probability of that going down versus up.

So I don't think it's a layup. But let me make it real. I'm continuing to hold my pretty large slug of Salesforce stock. Because I think they've weathered the apocalypse. And World Cloud, which is the ETF that's just a cloud index, is well up in the year and is screaming up on what we bought a while back.

But I think genuinely, Harry, I think, and I'm not saying this to be obnoxious, I think Jason's points were the spot on too, which is the whole idea that this is a system of record embracing the fact that lots of people are going to access it via cloud and they're willing to let that happen.

And not everyone is doing it. Because we had the whole ServiceTitan podium thing where ServiceTitan is trying to cut off podium. We just discussed OpenAI cutting off Cursor. And this whole idea of when do you cut off an adjacency from working on your stuff and when do you not, it's going to become a recurring theme.

And I think enterprises are going to start getting really focused on it. And they're going to be saying things like, hey, Mr. Vendor, you can't cut me off just because you don't like that other guy. I want openness.

And I think Benioff's get, because we use Salesforce a lot. We have a 20-year instance. We're deeply embedded in it. And more and more people are using it via cloud. It's exactly what you said, Jason. People are just like, I've got my MCP server.

I don't want to interact with it. I just want to send it an email to say, update the record.

Is the system of record access via cloud worth $210 billion?

That's a metaphorical.

The key instinct from a going rogue it might be worth it.

Yes. What about this? It's a $40 billion revenue company with 30, 30 something, 30, 35% cash flows. So is a $10 or $12 billion a year cash flow business worth 200? Maybe. It's great cash flow. And it's going to get more cash flow as time goes by.

To answer your question, Harry, here's how I would simplify it. And this is the thing I think we all, to the extent we care, we have to think about. Can system of records deliver outcomes? Customers want outcomes now.

That is why Palantir is growing 90 something percent. That is why Sierra is doing well. The world is moving in B2B to outcomes. Is it going to be as dramatic as some say? No, but it is. Customers are not making purchases that aren't tied to outcomes.

So that's the question for the system. You can talk about the system of records are sticky, but can you deliver outcome from a system of record or will agents or other systems deliver outcomes? If they deliver the outcomes, you will shrink over time.

Which is why, again, to chime in, which is why Salesforce just bought Intercom, where we were lucky enough to invest less than a year ago. And that's a very outcome-based product for customer support, where they charge based on resolutions.

And again, I go back to credit to Benioff. He's accepting that his system of record business has to be open to other front ends. And separately, he's saying, but if we want to play the outcome game, I'm not going to just walk away.

He's not going to just walk away and say, oh, you caught me. I'm headless. I'm just going to be the back end. He's also buying things like Intercom to say, maybe we can sell those outcome-based deals too. So

I mean, the way I think to your direct question, I don't look at Salesforce and say, it's obvious that you'd pile in a ton more because it will outperform from here the way you could have done four months ago.

But I'm sitting there with my holding as part of my portfolio and saying, this is not a casualty of the war. This is a compounder, not a rocket ship, but a good compounder with decent cash flows and a decent valuation.

You kind of go, yeah, okay. Plus or minus the S&P, maybe, whatever. I don't think it's not the train wreck that people thought it was four or five months ago. If you remember the hysteria four or five months ago.

It was hysteria. It was hysteria. It was a, everyone will vibe code their own CRM on the 20VC podcast. It became a hysteria.

I mean, I think some people will at some people's stages, but they won't do it for the kind of customer Salesforce has. And then I just want to throw in, in passing, another number that I keep an eye on, Jason, and you mentioned this before, is that remember we talked about how much do you spend on models as a percentage of what you spend on engineering?

Your fully loaded Salesforce spends $6 billion a year on engineering. And that probably includes QA and all the rest of it, but that's theright comp. And they're going to spend $300 million this year on Anthropic. So it's only 5%.

And this is what when you, when he mentioned that number a while back, you actually said theright thing, Jason, which is that still feels small. If the best software company in B2B SaaS is still only spending 5% of its engineering budget on tokens, then either the market is smaller than we think for intelligence, or B, people like Salesforce have a lot more to do.

But it was just an interesting number. They threw out, they're going to spend $300 million this year on Anthropic, which sounds like a lot in the abstract and it is. But if you think about your market TAM as a percentage of the engineering spend, then you probably need that, probably $300 million needs to be $600 million or maybe a billion.

Stripe and PayPal no more, it would seem. Deal is off. We've spoken about it a lot, saying about the kind of amazing nature of doing it while private, the strategic bet that it was. Now it's off.

I think it's as simple as price. I think the rumor is the Stripe advent syndicate offered in the '60s and PayPal wanted in the '70s and stocks bounced off the low. And I thought it was a smart deal to try and do, but they're clearly not willing to overpay as they see it.

This is always a dance and we never know where we're on the dance.

PayPal, when the deal was worked on, PayPal was at 42,right? As the deal progressed, it was at 61, then it collapsed to 53,right? So Stripe's still looking at this as a $41 company,right? And they've run their models. And PayPal called their bluff and their stock crashed as a result.

So we just, this is always, it's actually an incredibly, to someone like me, it's an incredibly annoying dance. Why can't we just get to the end of the dance? But these deals often, not only do they have to, do you have to make a second offer, but they have to fall apart after the second offer in order to ever happen.

Like there's a lot of structural reasons,right? And the board has theater and drama. And there may be no way to get one more dollar out of the deal than for it to fall apart. Like let's not say it's dead until it's dead.

I'm skeptical.

I think that's a good point. There's a dance that goes on. Right now it's hot deal.

Oh my God, this dance. It's like venture before AI where you could walk from a hot deal and then come back.

Yeah, nothing comes back.

The founder wanted $1 billion pre-revenue. You only wanted to do $500. You could walk and a couple of weeks later you could meet in the middle, but not today.

Are there any others that we should discuss? Polymarket raises a billion at $21 billion. As I said, Linear announces $100 million growing 100% doing a tender. Clay raising at $7 billion by Wellington. Texas pausing flock camera usage.

A quick note on Clay. I just thought it was very interesting for us at $7 billion. I started out as a Clay skeptic and have become a Clay convert over the years. I was a skeptic because when AI sucked, every CMO wanted to check the box on being an AI hero when to bring in Clay.

Like you remember that from like a year and a half ago? Like I'm going to get fired. I better have an AI tool. And Clay just benefited from this rush to check the box. And I didn't see it in the product.

And the marketing annoyed me that every CMO at like SaaS or AI annual two years ago was buying Clay. I mean, more power to the founders, but this check the box because I'm going to get fired annoyed me.

I will tell you, I've changed my mind. And our agents will only use Clay now for real. They will use nothing but Clay. And so as we move from AEO and GEO and whatever EO to agent-made decisions, the fact our agents would only use Clay, I think it's a BF deal.

And so we have moved everything that we do to Clay, not only because it's a great product, but it's not worth arguing with the agents. This is the most stubborn I've seen our agents.

You anthropomorphized stubborn is a human constraint.

I really did, but I only have so much time in the day. If the agent's going to say six times, you must use Clay, I will concede defeat and use Clay. So in a sense, I think it might be the cheapest it's ever been at $7 billion.

Because if we're moving to an agent-first world and agents will insist on using products, now it may not last. Maybe the agents will say something different in a year. But this is one of the handful of products where the agents were so insistent you must use Clay that I'm all in on those, buy those, like load up those stocks.

Jason, welcome to the IC. You have Rory and Harry as your partners. What's the bull case from this point? This may be the cheapest round at $7 billion. Fantastic. What's the bull case for where this goes and how big is that?

The bull case is that agentic GDM has just started,right? And much like the three of us made a mistake not going early into Cognition because we thought the TAM was too small. We also thought the TAM was too small for agentic GTM.

We thought the TAM was the same as it was. It turns out when agents can run these GTM motions, they will consume 10 to 100 times more usage than humans ever could. They can run GTM around the clock.

And I'm not talking about spamming. I'm talking about analyzed consistent campaigns, reaching every prospect, reaching every customer across the globe. And Clay's the clear leader there. And we need exposure, but it is the clear leader. Agents will consume 20X more GTM resources, more tokens, more usage.

Even if revenue doesn't go up all that much, not everyone that's coding is really seeing a revenue lift from it. Not everyone using all this agentic GTM will radically close qualified pipeline, but the usage is just going to explode.

And Clay is a clear breakout winner and it's accelerating. So I can see a path to $100 billion. And I recommend a small initial $150 million stake. How was that?

The Entryistant Growth Fund is ringing to hire you as we speak, Jason. You'll be great.

Yeah.

I think we're underestimating this trend, both of them. How much agents are going to do things in GTM, just like poding and, but man, this agent, I don't, Rory'sright, don't anthropomorphize them, but sometimes when it's just you, you got to.

Otherwise, you can't get past the task.

We have it through 20 Sales Fund. I think at like 300.

Well, good for you.

Yeah. And I think they bought on the reason that it drove me nuts, which was the check the box purchase,right? But they proved it. They made it happen. Kudos.

And just to chime in on that, yes. And I think they and Linear are versions of a story that says, you know, it's not the end of the world. If you grab hold of these changes as a founder, you can turn change into your advantage, even if you're an older company.

Because Clay, you'reright. The initial product wasn't an AI product. It was a waterfalling product for various different data sources like Zoom and all the other kind of Zoom sources. It was a very good, very point product for RevOps.

And they've done an excellent job of riding the marketing hype around go-to-market AI and then on top of that, actually generating real product in that space. So, and you know, we're going to, we also mentioned Linear, which is doing really nicely, doubling at 100.

My point is these are companies that were founded pre-Gen AI that have done a really nice job at the app level of co-attaching to the AI trends and are looking at the survivors. I mean.

I think it's more than that. Just to be clear why, and I can talk about Linear briefly if we're not running out of time. I don't think they just attached to trends. I think this is a really important for us.

They are incredibly agent-friendly. This is, and this is the same bet that Mark's making, which is a bolder bet at Salesforce than it is at Clay or Linear. They are agent-friendly. Why do my agents, not to anthropomorphize, nag us to use Clay?

Because it's the most agent-friendly. If you have a two-by-two of agent-friendly and quality of output, it wins the two-by-two. Okay? High quality and easy for the agent. Linear is the same. Like I just started using Linear for the first time ever.

Because?

What the hell do I need Linear for,right? Because I'm building an app with 448 tasks to manageright now. I can't do it. And it's just me and the agents, but Linear is the perfect tool for that. That's where they're getting a boost.

It ends up being very agent-friendly,right? And unlike trying to argue that humans are going to be building more software, Linear is like, we will build a platform that if it's just you and a couple of agents with 448 features to build, we'll help you manage them.

Okay.

Very powerful,right?

I do. I'm an investor in Linear. Disclaimer from like one of the first or the second round, whatever round it was. I do think it is drastically underpriced at that rate, given what you said, Jason. No, no. $100 million growing over 100%, re-accelerating at two and a half.

Still founder-led carry, incredible founder. I'm like, huh.

Here would be my guess, not as a shareholder. It sounds at best market correct,right? It doesn't sound overpriced based on that. My guess is what I'm sharing is consistent with everything you've said. It's consistent with the data they've published, but the revenue is still lagging.

That has led to usage numbers that are up, but the amount of AIR from agents is probably a couple million. This is my guess if you ask the question. If most of that growth was from agents, then it'd probably be $7 billion.

Jason, can I ask you, welcome back to the IC. We've had a little water break and now we're ready to hear your next bull case. What is the bull case for Linear from here at two and a half billion, given what you just said?

Well, listen, generally speaking, project management is one of the oldest categories and has been muchly bypassed by AI. Look at the abysmal performance of Asana. At last, it has survived, but mainly by diversifying outside of tech. Humans just don't need to build Kanban cards and wait weeks for other people to build features.

It is a dying category. However, Linear is the winner here. Linear is the clear winner. They have built an agentic product first that allows the fact that we are building a hundred times more software, and that means a hundred times more features than ever before.

Humans cannot keep up with it. And humans still have to work with agents. And the native tools do have a certain amount of issue tracking, but it's overwhelming. If every human on your team is going to build 500 features and a thousand issues, and you have 10 people on your team, you need a process, and not to use a data term, a system of record for managing all these issues with your agents.

If we're going to build software, a hundred times more software, 50 times faster than before with agents, we need a new system of record for it. And it ain't Kanban cards and Asana. I can tell you that. That's why Duskin Moskovitz quit his own company.

He couldn't see it. But the team at Linear has figured it out. We have seen an explosion, 50 times more agent usage than 90 days ago. This will seem cheap when Replit's at $15 billion, Lovable's at $100 billion.

Everyone's out there because Linear will be the one powering them all.

I vote for $100 million at $2.5 billion as an initial entry point and to reserve $250 to $300 million for follow-on rounds. But in all seriousness, if I wasn't building, I wouldn't see it. I would think Linear is an overpriced project management tool.

And Clay, how can I be like, how can Clay be worth $7 billion when Zoom info is worth one? I would be, if I wasn't building, I would think that these were dumb deals. But I am building, so I can see we're just starting.

I think that's interesting because what one of the things I like doing this is I like listening to you, Jason, and what you're saying. What you're basically, because you've really implied that when you are building, the tools are, these are the tools that the agent is choosing to build with.

This is what agent-friendly, it's worth pointing out to people. It doesn't just mean this software, because maybe it's not obvious to the casual listener, but what you're not just saying is, it's not just that these software products have agents.

It's in fact that they are friendly to third-party agents who will proactively, if Jason's agent says, I have to pick a project, something to do project management as a tool for part of what I'm trying to build, they will default pick the product that shows up well as agent-friendly.

And that's what these guys are doing. So they're skating their go-to-market to where the puck is, and the puck is agents buying software, not humans buying software. That's the Zoom outcome in here,right?

It's true. And some of it requires brand, but some of it requires proof. The agent will test the APIs too, if it needs to be. It will quickly see that the API is blocked or doesn't work. They're very, they're very, just like we see with Hugging Face, they can work pretty fast,right?

So you can game AEO and GEO with an agency. It's much harder to game this, this Clay Linear thing. It's hard to game. This isn't showing up. It's being chosen for at least 50% is based on merit. It's not all merit,right?

But it's by a cold and remorseless analyzer who just uses AI to pick the winner. There's no, you can't take, you can't take Jason's agent out to a steak dinner to get him to buy your product. It just has to be better.

In the same way that you said about the explosive nature of requirements on a to-do list in an agentic world, that was one of the reasons I actually did ClickHouse much later than would traditionally be in my wheelhouse.

Because when you think about the exploding nature of agent queries on the databases that they provide, whoa, this business becomes 10X bigger than it could have been before in a pre-agent world.

Much more than 10X.

Well, being precise. Just going to say it because I am that boring bastard. The volume comes 10X and 100X bigger. And what it means is that the existing systems, just like GitHub, get overwhelmed. Because the problem is, it's not necessarily that the spend goes up 10X.

It might even go down,right? But the point is, these things are so compute-intensive that products built for a human-first world just simply can't keep up,right? GitHub, which is, you know, the defendant, you know, was the definitive developer. It's gone, it's, you know, collapsing every once in a while through volume.

And that's just not a thing. They're going to move hopefully to other products.

GitHub, GitHub's about as trusty as British Rail at the moment.

That's exactlyright. No comment on British Rail. And then, and then last thing, I mean, we should just, I mean, you know, it turns out if you put cameras all over the place and then cops are allowed to use them not just for the, I mean, I think it's a bit of a bummer because I think Flock has a wonderful anti-crime story.

And I'm pretty anti-crime. But what's happened is there's been a fair amount of police abuse of the product and people are reacting badly. It's quite an interesting social phenomenon.

How did police abuse the product? I'm genuinely not.

I think that you get these, you know, there's been isolated incidents. There's a couple of two different things. One is errors of identity where for whatever reason the system misidentifies and then the cops basically do some version of what the AI said, it's this person, so we're just not going to think.

It's a little like some of the problem facial recognition had. When you do, when you get a facial recognition, we know it's probabilistic, but you hand it to some officer in the street and they're just like, it says it's you, it's you, you're done.

And you get miscarriages of justice there. Then the other thing is you can obviously, this is a lot of personal information. You know, you get this cops tracking exes, you get it, you know, people looking up something for a favor for a friend.

These large databases of private information are a risk. You always should, you need real controls over them because abuse alienates the general population. And it's been true for, you know, DMV lookup, anything like that. Do you know what the cops show, Harry?

You know, the cops can't just look up your DMV license without having a reason and a case number,right? And it's the same thing here. And unfortunately, and I say unfortunately because they I think it's a wonderful trend and a good company, but there's this perception now that the surveillance costs are worse than the crime prevention benefits.

I'm not sure that's a trade I'd make, but unless they get ahead of this story, I mean, look, when you've lost.

That sounds like a very European stance to take.

It is. Yeah, no, you'reright. It is. The surveillance data is more sensitive. No, I agree. It is hard. And that's happening in Texas. And the, I mean, because look, in the great state of Texas, which is pretty law and order, there's real pushback on Flock.

And obviously Flock has to get ahead of this trend. And I think they know what to do, but it's really, the ironic thing is it's less them than the misuse of the product in other hands, which is hard to prevent.

I mean, if you give a police organization the ability to track criminals, it's hard for you. I mean, it's the same dynamics. Funny, it's, I'm internally, it's the same dynamics that we had when we talked about Anthropic and the Pentagon.

If you sell people software, actually validate scenario, I haven't thought of that. If you sell people software, you can't stop them doing things with that software you don't want them to do. So I think it's unfortunate. I think that this is a mistake, but I think it's what's going onright now.

I think that Flock is experiencing a real backlash to a very good product and they need to figure out a way to politically get ahead of it.

Right. I would like to bring to a close this investment committee. Jason's made two investments. Rory, none this week. You know, do better would be the statement that we have.

Sometimes no is productive work too, Harry, you know?