Keith Rabois: Israel, OpenAI, Opendoor, and DOGE

Chat GBT becomes a monopoly. It is

transforming how everybody, every normal person basically does their work, funds their life. The thesis of AI is too

their life. The thesis of AI is too important to the future of nations to allow an American company to dominate in certain regions. I think is going to

certain regions. I think is going to prove to be true. I actually believe you can probably cut 50% of the federal government. What does the commerce

government. What does the commerce department actually do? People are like, "Where do you get your contrarian ideas?" I was like, "I read books." Like

ideas?" I was like, "I read books." Like

all the greatest thinking of all time is available to anybody. You just have to read.

>> Yeah.

>> Keith, welcome to the podcast.

>> Pleasure to be with you.

>> It's been a long time. Excited to

excited to have you back. It's an

exciting day to do it. Big day for the Middle East. You This I feel like this

Middle East. You This I feel like this is something you've been predicting for a while.

>> Well, if you read uh actually if you read uh Jared Kushner's autobiography.

>> Yeah.

>> All you have to do is like quote he quotes you know the Saudi uh king says you're going to bring peace to the Middle East. And it turns out to be

Middle East. And it turns out to be correct. Um it was pretty obvious like

correct. Um it was pretty obvious like this would happen. Um if you went to visited Israel recently in the last 69 months you could feel the Tatonic plates shifting. It was just a question what

shifting. It was just a question what would be the trigger and everybody's looking forward to the new Middle East.

You're going to see lots of countries you know make peace explicitly with Israel which is great. Um whether they join the Abraham Accords directly or indirectly it's all going to happen in the next six months. Is is your view

that Iran is neutralized that this leads to some sort of durable um non violent pack?

>> Everybody off the record wanted Iran to be to you be neutralized and they were basically blocking any progress. People

were scared, terrified and now that they've been neutralized. I think the natural arc of human history is for there be basically progress innovation technology innovation actually in the

Middle East driving piece AI data centers. you're going to see all of

centers. you're going to see all of this. Uh it's it's really an interesting

this. Uh it's it's really an interesting and fascinating future.

>> Yeah. Are are you bullish on sovereign AI sort of that these are you sort of you know think that you might invest in that type of >> We have at KV we invested in a sovereign AI company in Japan called Scono. The

thesis of AI is too important to the future of nations to allow an American company to dominate in certain regions I think is going to prove to be true. I

think you still need a marshall the hard part that's easy to say at a conceptual level to implement that though you still need a marshall a critical density of talent of AI researchers and there's not

that many world-class AI researchers across the globe. I saw you know public presentation by Jensen where he said there's 150 people on the planet who could actually build a foundational

model. He's probably more right than

model. He's probably more right than wrong. And so you still, if you're going

wrong. And so you still, if you're going to build one for Germany or Europe or Israel or wherever, you're still going to need a critical density of those 150 people to be able to compete at the

cutting edge of frontier models. But I

think most countries are going to try.

>> Yeah. Before we get to tech, just to close the the the politics front, do you think that this will end up defining Trump's legacy or what what do you think his second term will be remembered for?

>> Well, you know, I was kind of thinking last night, you know, he's going to solve all the problems he inherited in the first two years. Like if you think about it, immigration basically solved.

Uh if you think about the Middle East on its way to being solved, he'll get Russia and Ukraine solved. I'm pretty

sure tariffs are bringing down the debt.

The growth rate is going to accelerate.

We're going to have 4% or more growth all of next year. That will make the debt irrelevant. You can grow your way

debt irrelevant. You can grow your way out of deficits. Um interest rates still need to come down. Trying to fix the Federal The Federal Reserve has been obset. That'll eventually get fixed. He

obset. That'll eventually get fixed. He

will replace Powell at some point.

Bess's going to continue to be outstanding. So, I think after the next

outstanding. So, I think after the next year, it's going to be all upside.

>> And and why doesn't Powell want to reduce rates? What is the seal man for

reduce rates? What is the seal man for what?

>> Well, his argument Well, I don't know that he has a good argument. I don't I think he has Trump derangement syndrome.

He just hates Trump. That's why he artificially lowered rates to try to get Camala elected. It is indefensible

Camala elected. It is indefensible cutting 50 basis points off in LA, you know, last fall. But he does see employment is running pretty hot. But

the the difference is with AI and productivity gains through technology.

Hot employment does not necessarily yield inflation. It's not a it's not

yield inflation. It's not a it's not just wage growth that's fueling GDP growth. And so I think you're seeing

growth. And so I think you're seeing some of the substitution where productivity gains can be made. GDP can

run four 5% without triggering inflation because it's not just you don't grow GDP just by paying humans more which is the historical precedent.

>> And again before I segue what's sort of reflection post Doge like what did we learn from that experiment?

>> Well actually the funny thing is I was watching some political polls and there's not that many pollsters that I find accurate but there's a few and until this week Trump's height of his popularity was when Doge was at his best. The American people really do want

best. The American people really do want to cut the size and scope of the federal government. You can see like look at the

government. You can see like look at the government's officially shut down and Trump's fixing everything. It it does suggest like why do we need the rest of the government? Like everything has been

the government? Like everything has been better the last two weeks. Like can you name one thing in society across the globe that's got worse in the last two weeks with the government >> can't go public. This is the problem.

Yes, I agree.

>> But yeah, other other than that well fortunately my companies will be right good enough to go public whenever they want. It will be eventually but um you

want. It will be eventually but um you know ramp can be public whenever it wants. It doesn't need like a timing uh

wants. It doesn't need like a timing uh you know uh move and manipulation but fundamentally that'll get fixed. But the

government being shut down doesn't seem to be interfering with the rate of progress. And I think maybe Americans

progress. And I think maybe Americans wake up one day and say like, "Wait, why do we need the you know this size federal government?" I pro I actually

federal government?" I pro I actually believe you could probably cut 50% of the federal government um ex-military easily.

Like what does the commerce department actually do? Like literally I mean

actually do? Like literally I mean Howard does a lot of work. He's at the forefront of everything like negotiating tariff deals.

>> But like all the thousands of bureaucrats what department why do we have a department of agriculture? This

is actually an interesting question. Why

do we actually have thousands of people probably I haven't looked at it recently but probably 30,000 people work at the department of agriculture what world does that make sense like

even like the state department there's like three or 4 thousand uh economic officers over posted overseas this is like back in the day when you count the ships you know kind of an artifact of history where you count the ships

showing up at a port and then report back to DC this economy is growing Poland's growing the UK is not where obviously you can just log into like a Bloomberg terminal and track that probably more accurately >> but if Elon couldn't do it to some

degree does it speak to the intractability of actually >> well you need political will but I think one of the things the last two weeks is showing Trump's going to be more popular than ever he's literally posting the highest popularity and approval rate of

his career right now and the government shut down one of the reasons why there hasn't been political will is when you have sort of a diffuse benefit when and and concentrated aggravated people

politicians elected officials are afraid so when you cut something. The people

who like whatever that program is, they may only be 1% of the population, but they're very loud and annoying. And the

99% of the people benefit are quiet typically. But if you can convince

typically. But if you can convince people that, hey, we don't need all this stuff, and the 99% people are like, hey, why do we need all this stuff? Why am I paying all these taxes? Then the 1% you can safely ignore. And because the 1%

have historically been channeling through the legacy media, which is no longer relevant, it they're going to need to find a new megaphone. like

whether you know New York Times or the Wall Street Journal writes some attack piece, nobody on the Republican side cares anymore. We've learned that that

cares anymore. We've learned that that stuff is just garbage, it's fake and irrelevant. And so if you have the if

irrelevant. And so if you have the if you're on the right side of history with the right evidence and the right ideas, you can just ignore the legacy media. So

I think it's going to be a lot easier to cut things.

>> Do you think uh Elon and Trump are going to make up in a material way or that Elon is going to support the Republican party and >> Oh yeah. Um I think it's obvious. I

mean, I think the Charlie Kirk funeral, you know, was like ceremonial.

>> He must get back into politics in a material.

>> I don't know if he'll get back into politics, but he's not going to fund non conservative parties. Like, I think

conservative parties. Like, I think that's dead. I put a stake in the ground

that's dead. I put a stake in the ground in it on the All-In podcast. I think

after my comments, I think it was dead anyway. But I think now they've

anyway. But I think now they've reconciled, which makes sense. Like,

ideologically, they mostly agree. Yeah.

>> Um, you know, I think the debate, the funny thing is the divorce was kind of weird in a sense of Elon's kind of a perfectionist of like, why can't you do this? Why can't you cut more faster? And

this? Why can't you cut more faster? And

Trump was like the political realist in that case where he's like, I just don't have the votes in the Senate to do this and you've got to give me some, you know, over time I'll get there, but you got to give me some rope and you got to

give the Secretary of Treasury some rope. And it was really a not a fight

rope. And it was really a not a fight about the idea, but a fight about like the prioritization, sequencing, timing.

And you know, Trump's a pretty astute politician, so I would trust his judgment on the timing. He's pretty

aggressive and assertive. And if he doesn't think he can move that fast, he's probably more right than wrong.

>> It also just feels like there's this question of do you grow your way out of something or cut your way out of something. The greatest entrepreneur of

something. The greatest entrepreneur of all time and you can quintuple I mean, I'm making this up, but imagine you can quintuple GDP with AI and everything else versus, you know, cut us even more

or whatever, right? Yeah. You know, you the the growth mentality for the greatest entrepreneur of all time probably makes more sense. But

>> yeah, the grow the growth mentality is almost surely right. The austerity

mentality probably doesn't work. Which

is funny because ironic as you point out, the greatest entrepreneur of all time should understand the concept to lift. Growth and lift are basically the

lift. Growth and lift are basically the same thing. And you need to create value

same thing. And you need to create value and that growing GDP sustainably durably is the way to solve America's problems. Austerity is like a temporary hack.

You're kind of holding everything together and making life painful. It's

kind of like a startup trying to save its cash for the last 12 months, but you're not really achieving anything.

>> By the way, Keith, what's your mental model prediction of what AI will do to GDP? Some people are, you know, Teran is

GDP? Some people are, you know, Teran is more conservative and just expressing a mild, you know, step up. Some people are saying, oh, if we actually have AGI, you know, should be 10% or like some >> Well, I think you can run four to 6%

durably without inflation, which is magic. Like, so we used to do this like

magic. Like, so we used to do this like some sometimes I tweet about like 4% growth and people are like that's crazy.

from 1950 to 2010 on average in a normal decade we had 4.6 years per decade of 4% growth or higher. So we used to do this all the time and expect it and then we

stop for a variety of reasons. And if

you grow that fast a incomes real incomes grow but b if you have a debt if you have a deficit you can solve these problems without cutting essential

services and you can probably expand the influence of America across the globe.

what what you know what Howard Lutnik articulated to me is basically post World War II we sort of intentionally

sabotaged our growth and harmonized it with let's say Europe people rebuilding and made an explicit tradeoff to do that and then just forgot that 50 60 70 80 90

years have gone by and that makes no sense. America should be leading the

sense. America should be leading the world and we should be dominating in technology. we should be dominating in

technology. we should be dominating in growth and that creates more and more influence. So it's it's it it's it's

influence. So it's it's it it's it's profound in every way.

>> Yeah. Let's get deeper just on the effects of AI in the economy. If if

scaling laws hold to to some degree, do you know will it show up in the productivity statistics directly? um you

know what does it do to uh wages?

>> But you do have the I do believe in the ball you know sort of the ball cost thing where like the limiting step is the most the most difficult most human

things actually put a constraint on like uh AI growth or jobs going away. I think

that is actually true. Like someone

still needs to construct all these power plants or data centers and as long as there's manual electricians and as long as there's man maybe you don't need manual architects but you probably need

manual plumbing for a while manual electricians I don't think robots are building the next data center at least not right away and so that is going to be the constraint and so these jobs are

not really going to go away. So some if you read the bomb, you know, curse of the bomb stuff, I think we're not going to see radical disruption. We're just

going to see the golden age that Trump talked about in his inaugural address.

>> Yeah. The We just had Sam Alman here last week on the podcast. We were Yeah.

both investors.

>> I wore a much more subtle shirt.

>> Exactly. Um what is your mental model of OpenAI as a company? What what what is it doing right now? What is Yeah. How do

you sort of see it going forward? Well,

I I think there's several things they're doing. Obviously, it's a phenomenal

doing. Obviously, it's a phenomenal company. It's the most important company

company. It's the most important company of the last decade. I think Chat GBT becomes a monopoly. It's the fastest growing consumer product of all time. It

is transforming how everybody, every normal person basically does their work, runs their life. And so that product alone is a several trillion dollar company. Then they do all these other

company. Then they do all these other things. And some of them may pay

things. And some of them may pay commercial dividends, some may pay societal dividends, but Chad GBT alone there is no competition for. It's not

like anthropic or all these other companies have any competition for that.

There are vertical applications where some foundational models or some geos where some foundational models may thrive and AI may be important enough that even having a vertical application

like coding or having a vertical a geo application may be worth tens of billions of dollars. But open AI is the few trillion dollar company.

the what happens to Google?

>> Good question.

I know it doesn't show up in all their metrics. I know they're good at spinning

metrics. I know they're good at spinning like, hey, it's not having effect on this and that. But if you just survey, you know, walk outside your office and just ask 10 people like how how often

you go to Google versus how often do you use chatbt? And yes, maybe you grow both

use chatbt? And yes, maybe you grow both for a while, but I don't use Google for anything. Like I can't remember the last

anything. Like I can't remember the last time I used Google versus chatbt.

Like it's just so inferior.

>> Yeah. Uh Alex, I know you've thought a lot about Google as well. What

>> I know their strategy. So their strategy is going to be at some point they're going to try to take advantage of all this personal data from your Gmail, from your YouTube videos, you know, from all the different products they have and

then therefore make a much better personalized experience. And I think the

personalized experience. And I think the tradition the company being a conservative institution and a legacy sort of institution, they've moved very slowly on that. But there is a lot of data there and you could create a power

a very powerful personalized assistant sort of proactive product and that's what they should build.

The question is, can you get can chachib get enough of my prompts over enough period of time that they're creating an equivalent data set about me that allows them to compete on the personalization

basis. And the longer Google waits to

basis. And the longer Google waits to ship something like this that's robust, the more time Chad GBT has to develop, you know, sort of my personalized prompt history which can inform the future and

then they can ship, you know, better products, personal assistants, devices.

There's also a question around devices.

Does someone do you need a device? Is AI

driven by a new computing device and who's going to build that? Obviously,

OpenAI made an acquisition to try to get down that path. Google's been terrible at devices historically.

We'll see if they can get any better, but someone, you know, Apple is great at devices but bad at AI. Someone is going to build a device. Where are we going to be using, you know, your iPhone as your

personal computing device 5 years out?

Maybe 10 years out almost surely not.

>> Do you do you know what that device might be?

>> I personally am a fan of putting something in your ear. Um I think first of all I believe in the science fiction movie adoption of like like Mission Impossible. It's always in his ear. The

Impossible. It's always in his ear. The

glasses have done reasonably well, but if you know I have Lasix, um I think most people who wear glasses try to get Lasix at some point and so I think putting another device here all the time, the bar on the value

proposition goes up versus put something in your ear, it might actually go down.

Um there are people with like pendants and necklaces which have some value and you may have multiple instead of having a phone maybe you have something in your ear and something here, something here.

Depends what the use case is, what the ideal form factor is. There's issues

around battery innovation, too. Like

some of the stuff's really hard because you need power, constant power.

Depending on where something's located, it may be very difficult to power it or not. So, I I don't know how to do it,

not. So, I I don't know how to do it, but if I had a vote, if I was running a company that's doing hardware, I'd try the year first. Interesting.

>> Alex, any reaction to this either on the on the Google side or on the device side?

>> Yeah, I mean, I think on the Google side, I mean, you and I have talked about this a bunch. Um, I don't think Google's going to get hit for a long time on the monetization part, but I agree like all of the non-monetizing

searches go away first. It's like, you know, how do I get here? What should I prepare for this interview? Like all of these things that aren't commerce related, but like where do I buy a like I want to buy a tennis racket right now?

Like that's Google until it isn't because >> So it isn't until you say show me the best five tennis rackets for me.

>> Oh yeah. Yeah. cuz like if you try try that right now top 10 top five racket choices for me on cha ch versus Google search >> right >> I think even already now cha chibi would be better

>> well it's it's where it will really be better is um I kind of think it's like there's impulse buys which won't really be be hit by either because that's just like I'm looking at Instagram I see something that I shouldn't buy anyway and then there's highly highly

considered purchases like buying a house we'll get to that later with the door and everything else but and then in the middle um this is something where I think AI eventually will do a phenomenal up, which is like, I want this skew, this tennis racket. Buy it for me right

now at the lowest price. You're not

going to go through Google and like look at coupons and like all that crap is going to go away. You will just go to chat GPT or to your point, like it's possible that the Empire Strikes Back, but like the like, all right, I I

already have my calendar, my Gmail, everything else. That personalization

everything else. That personalization potentially makes it better. But the

execute on this skew and buy it for me.

If chat GBT get it gets that going, which I think is one of their top priorities, then like that's that's going to really steal the monetization engine by from Google because like that's where they make all their money.

>> I mean, but imagine a couple things. So,

first of all, like the example, if you have Gmail, you probably can figure out what tennis rackets I purchased previously. I mean, if I

purchased previously. I mean, if I bought in the real world, maybe not. But

if I bought them online in my receipts, you know, they're going to be in my Gmail. Um, but then the other hand on

Gmail. Um, but then the other hand on Chad GBT, you know, I could say I prompt like, you know, I'm this ranked tennis player, better at forehand than backhand, blah blah blah blah blah, you

know, etc. Which racket's best for me.

And I can't even fathom like how to do a Google search that would be something like that.

>> It's more of like Google has this like complete inventory, but I I think that advantage will not hold for long. And I

think the metrics that they're kind of faking right now is it's like what percentage of our users are using AI and that's not using Gemini as a DAOU. I'm

sure of that. It's just like they had like an AI summary something something in there but they're losing all of the free in the premium sense searches to chat GPT.

>> So eventually that's going to catch up with them. Well, also Chhatty Boutique

with them. Well, also Chhatty Boutique is uh fixing the first sin of the internet, which is they charge subscriptions. And so to some extent,

subscriptions. And so to some extent, you may not have to rebuild an advertising model if your subscription revenue is excellent. Consumers are

basically learning that they should pay for things that create value, which has always been true offline. Like there's

almost nothing you consume offline except oxygen that you don't pay for.

But online, the first generation of internet entrepreneurs assumed you had to make things free. They sort of equated the marginal cost reduction with the value reduction and it was just a massive mistake. And Chad GBT is now

massive mistake. And Chad GBT is now fixing that where people are going to pay for AI products directly whether it's $200 a month, $20 a month or even $2,000 a month.

>> And yet at the same time, merchants will still pay for traffic.

>> Yeah. So you can do hybrid, but then you can offset some of Google's advantages if you're already monetizing users through subscriptions successfully.

>> Yeah.

>> Let's let's talk more broadly about how incumbents are are going to be affected.

You we just talked about Google Keith.

I'm curious to hear your thoughts when we look at the next 5 to 10 years like how d you know companies like Amazon, Meta, Microsoft, how do you think they're going to handle?

>> It's a great question. I I don't know what Amazon's going to do. Um it has the selection and the delivery. I mean still you're there's a fulfillment one way or the other's a fulfillment aspect which

is never been Google's strength. They've

tried various initiatives none of them work. uh never been it's not going to be

work. uh never been it's not going to be chatbt actually fulfilling most likely >> well most of their gross profit is AWS like that is the

>> vast another issue too structurally like maybe they don't even care to some extent at some point but um I think the fulfillment's very real and Amazon is actually on fulfillment not that many

people are although e-commerce fulfillment is somewhat distinct from traditional fulfillment so we'll see if there's room for innovation there but they could hold on for a long time

of being the reliable delivery mechanism. Um, you get satisficing, you

mechanism. Um, you get satisficing, you get a reasonable price and quality experience and that's good enough. So

maybe that sustains them for a bit.

Microsoft, I don't know. I think you know people gave them a lot of credit up front for their investing in AI, forging this relationship and partnership with Open AI before it was obvious that Open

AI was going to transform all of our lives society industries etc. But over the last two years, it's not clear that they have been able to

preserve that advantage.

>> And now if you think about business applications, do you really think that Microsoft has an advantage in business applications?

Not in LinkedIn, not in Word, probably not in Excel. They're holding on to Excel, but there's a lot of startups, you've probably funded a few around here, that are, you know, AI for Excel and things like that. Keynote or

PowerPoint. I doubt they can hold on to that, you know, cloud revenue. Sure, for the point about AWS or Google Cloud, um, but that's not really why Microsoft's valued

the way they are. So, I don't know what their advantage that's going to sustain through the AI AI wave is going to be.

>> Well, historically, it's always been a distribution advantage where they've just crushed everybody and it's like you go back to Lotus 123 or whatever. pick

your pick your company and it's like they just have this dominant browsers.

>> They will just they'll clone you, they'll crush you and then they'll distribute the heck out of their shittier product and then >> Teams. >> Yeah, Teams is a perfect example. It's

like Zoom had a higher market cap than Exop. Yeah.

Exop. Yeah.

>> Right. And then they like totally flipped after like COVID reversed and Teams is just but it's actually not because of Exxon, right? It's it's

because of it's not even because of CO restrictions or interest rates. They're

losing but they started with they started with an advantage in coding co-pilot etc. they're losing that cur cursor or cognition and maybe others.

>> But it feels like developers are much more attuned to like I want good software whereas if you're like an Oompa Loompa at a big company and you're just like you're using Microsoft Office, it's just like you're using Microsoft Office

whereas like developer like really really high-end developers like of course they're going to use cursor over like Microsoft Copilot. But I wonder if office even has a future like this is

where you know when people write stuff I mean obviously Microsoft Word was default way most humans have been writing stuff for like 20 years although I grew up with word perfect but the

point yeah >> um but um are people with the way you know AI writes chatbt writes for you and increasingly better and are there specialized versions of that do people

draft documents in word in three four five years probably not well >> it's also like this classic disruption theory of like Microsoft Word has overshot the market, right? It's like

there are 9 million features in Microsoft Word that I never use. Like do

I need to make a table of content contents generator for my book? Like no.

And like to a certain extent like Google Docs like that was pillaried when it came out because it's like oh it doesn't do the table of contents generator or whatever. But like Microsoft Word has

whatever. But like Microsoft Word has overshot the market but they do have the distribution which is which I think is the hardest. Chachi is going to be in

the hardest. Chachi is going to be in every it's going to be on everybody's phone or device and like so for example I was considering writing a book everybody's always like you should write a book so I was like chachi write me a book

>> and it's a pretty good you know sort of first draft I'm not that book's not going to get written in Microsoft Word as far as I can tell >> if it's ever written >> it's crazy to think that for a day Sam

Alman was conceivably going to join Microsoft or like >> yeah for like 24 hours until Venode and some other friends intervened a fair amount >> I guess I asked to ask did Microsoft

sort of drop the ball on their relationship with like could they have capitalized in a much bigger way or was it just >> I don't know you know the talent there's a complexity around talent like you know individual people if there's only 150

people that could build research models successfully talent's going to have a lot of power and if the talent doesn't want to work for Microsoft there there may not be economics there I

mean meta's trying this of like can you use economic leverage to force people to work there um you know and we'll see we'll see what the results are. It's not

a bad idea. Like I actually think Mark's clever. He mints more money than most.

clever. He mints more money than most.

Take the money and use it. It's like

imagine you're competing in sports.

>> Yeah.

>> Mark doesn't really have a salary cap.

>> Yeah.

>> So why not try to pay the highest salaries? Now there are issues when you

salaries? Now there are issues when you do that and he's running into some of those, but it's a relatively coherent strategy for Meta to try it.

>> I just worry I I wonder I shouldn't even say I worry like the moral hazard of it's like I mean this is kind of what went wrong with like crypto 1.0. Yeah.

where it's like I'm gonna give you tons of money upfront and normally the way that you build a startup is you build the startup, you work really hard and then at the end you get the Ferrari.

>> And if you get the Ferrari first, will you still build the hard start? And like

the people that are in it for the love of the game, they will.

>> They will. But then can you tell the difference? Can you discern the

difference? Can you discern the difference? In sports, it kind of works

difference? In sports, it kind of works where you guarantee contracts in some sports. Um, but maybe that's because

sports. Um, but maybe that's because there's such statistical measurements of people's performance. Um, and a lot of

people's performance. Um, and a lot of people who are in sports are just so dedicated, love the game. whatever so

passion about what they do they can't imagine doing anything else but I I think this could backfire but it is a coherent strategy for a company that was losing AI race to try something

different leveraging that they make probably other you know the Apple could have done this but so culturally foreign Apple could have competed on dollars they made more money than anybody else like their profits are greater than like

Google's revenues or something um something like that I haven't done the math recently but it's pretty comparable but culturally that just wouldn't work at Apple and so it became a non-starter but they're going to have to figure out something or they're going to be

irrelevant at some point too, >> right? Once the device question comes

>> right? Once the device question comes into play.

>> Yes. Well, that that's what's saving Apple right now is the combin the vertical integration required to build a device successfully is something that no other company at least in the west knows

how to do because you do need software, you need hardware expertise. You also

need like the ability to compete on batteries and chips and like there's four or five different things you have to be pretty excellent at. But someone

will figure out a solution at some point.

>> Well, it feels like they're looking at it like you know every Samsung phone when it comes out has a better camera for like you know a week or a year or whatever than Apple or like you know now the Samsung phone folds in half or it

has all these advanced features that really aren't for the mainstream and Apple has always been like we're going to wait. We're going to make it better

to wait. We're going to make it better but like they're not the first.

>> Yeah. And like AI strikes me as a little bit different than that because number one it's software. Um so it's not like we have to go get the world's greatest AI right now and put it in in day zero.

And this whole we're going to wait three years. I mean it's just such a lost

years. I mean it's just such a lost opportunity. I'm convinced that like

opportunity. I'm convinced that like traffic fatalities would go down in this country if Siri actually work. Yeah.

>> Right. Like there's so many things where they could make it better but they're treating it I mean at least from the outside in like oh this is like you know Samsung has a 400 megapixel camera or something. We're going to wait on that

something. We're going to wait on that one and not get it right. And like they just announced like you know why doesn't Siri work? It's an embarrassment in 2025

Siri work? It's an embarrassment in 2025 when chat GBT is like AGI like I mean maybe not by like current researchers but like 10 years ago we would have said this is AGI and like Siri is just as bad

as it was in 2015. It's just remarkable.

>> Yeah. Uh just to close the loop on this Keith what's your perspective on Meta's um sort of durability or defensibility or strategy going forward?

Well, as I mentioned, I think the approach is interesting because when you want any strategy, whether you're a venture capitalist or an entrepreneur has to take advant you want to leverage

the advantages you have and maximize those. And so cash is one that Meta has.

those. And so cash is one that Meta has.

And so trying to leverage that smart, but they still need the ability to ship products. And so for Google's weakness

products. And so for Google's weakness has always been they just don't ship products. like they have ideas, they

products. like they have ideas, they have researchers, they have lots of money flushing around, but when is the last time Google launched an interesting product?

>> Gmail was pretty good.

>> Yeah. 2008.

>> 2004.

>> Before Yeah, actually that's right. So,

um yeah. Um and then you know when did when did they do maps? Like 2005,

something like that. Brett when did Brett do maps? Like it was something like that. Um and then you know they

like that. Um and then you know they acquired some things like YouTube whatever but like launched a coherent product. No, actually Whimo would in

product. No, actually Whimo would in some ways count, but it's it's actually won't help with this problem. Um, as far as I can tell. Um, but like a a true

sort of consumer product. I'm not sure they know how to do it, >> right? That that's Google and the meta.

>> right? That that's Google and the meta.

The question is how defensible is their the graph that they've built?

>> Well, I don't think the graph is defensible. I think there are other

defensible. I think there are other assets that are. I think the graph has kind of been weakened by like Tik Tok has kind of shown that on social products the graph may certainly isn't

in is not indispensable to success and may even be a handicap. Ax is you've moved from a people you follow to a for you feed which is the default and probably how all of us engage with axe

has also made the graph fairly irrelevant. Well, there there's a

irrelevant. Well, there there's a question people are asking with Sora, which is, hey, if your friends can make as good content as, you know, professional content makers, which is a big if, but maybe you want to maybe you

want the best of both worlds, which is you want the social and you want the highest quality stuff >> ideally, but also Reddit, like Reddit's a 42 billion or $40 billion market cap company. No graph,

company. No graph, >> right?

>> So, I I think the graph was very valuable to be clear.

>> Yeah.

>> I'm just not sure it's valuable in the future.

>> Let's get into real estate. Let's get

into open door. Um, a lot we recently had Cass on as well. Why did open door lose its way? What were the mistakes that were made? And let's talk about how we're going to fix.

>> Well, there was two. One was

predictable. Venode actually warned Eric and me about this in 2015 that real estate has a cycl cyclical nature to it and you need to make sure

that your cost structure will be acceptable when you hit the lows of that cycle. So he's basically get as many

cycle. So he's basically get as many variable costs built into your company culture and as low fixed costs as possible and then you don't care like so real estate residential real estate

people's intuition on this is very very off the low market like when people think real estate's dead 4 million homes transact a year high in the market six so you have four to six million

transactions a year you need to build your cost structure that you can be break even or not you know incredibly unprofitable at 4 million transactions a

and Eric and me collectively did not do that from 2015 2019. So when the Fed started raising interest rates and it actually did raise interest rates six times in a very compressed period of

time which is the fastest rate of interest rate uh hikes the company then went from 5 a.5 million

transactions a year as a market as a TAM to four and immediately started burning money.

An extreme example of this that clarifies my point I think is what happened to Airbnb co the first month Airbnb is a wonderful business one of the best network effect businesses maybe

the best of all time 13% kind of margin take rate whatever and all of a sudden COVID happens and nobody's traveling anywhere companies had a very bloated cost structure too but nobody noticed

because they're minting money nobody travels guess what all that gna is pure burn and they almost went bankrupt until they structured this very complicated deal with silver which saved the

company. Open dooror had that problem

company. Open dooror had that problem but less excusable co is kind of these true black swans that you really don't have to typically build your business taking uh taking account for in real estate you should take account for the

idea that this would happen so anyway basically that's what happened openor then secondly as Eric decided he didn't want to be CEO anymore the board for a variety of reasons promoted this

completely mediocre CFO which is almost always a bad idea to be CEO and she went from mediocre to like the worst CEO on the planet. Um, so the company for 3

the planet. Um, so the company for 3 years did every possible thing you could do wrong. It still survived barely, but

do wrong. It still survived barely, but um, like literally the dumbest possible things, partnering with agents, shutting down innovation, hiring people overseas, adopting DEI writ large, every possible

mistake, stupidass capital markets decisions, underinvesting in uh, what we call AVM, automated valuation, every possible mistake. So, the good news is

possible mistake. So, the good news is you can get like 10x value just by unwinding those mistakes, which Cass is definitely doing. Um, you know, even his

definitely doing. Um, you know, even his first month, I think he'll get half of those unwound, maybe even more, like just in one month because he, you know, faster. Um, but, uh, it's just like

faster. Um, but, uh, it's just like literally the more you dig in, it's kind of like Biden. Um, you know, Trump trying to cover Biden. It's like if I just stopped doing every stupid thing that Biden did, like the world would be so much better. And like I don't have to

really do any innovation. I just have to stop doing stupid The immigration border is a perfect example. Like

literally on day one he's just we're going to stop like enticing people to come here and all of a sudden like border crossings go from like here to here like in 24 hours. So like that's like open door. It's like basically

border crossings like we had Biden running the company about about as competently.

>> So what's your what's your wish? You

know uh in our last episode with Cass Alex fleshed out kind of his Amazon for homes thesis why he got so excited about you know leading our investment in the company. What's your um where where are

company. What's your um where where are you excited? Well, here's my I'll give

you excited? Well, here's my I'll give you the top down thesis which I've shared publicly before is in 2017 I had dinner with Yuri and Max Lein and Yuri asked this question. He's like what's the largest market cap company on the

planet in residential real estate?

And I assume there must be something outside the United States and that's why he was asking the question. Turns out

the time the answer was Zillow at 18 bill and it's insane. the largest asset class period that of 30 we've basically been innovating a technology consumer

technology call it 30 years like 1995 let's say to now 30 years that in the largest asset class in the world for consumers that the largest market cap

company that would take advantage of any technology would be $18 billion makes absolutely no sense like that's like insane. Um, so our goal is to reinvent

insane. Um, so our goal is to reinvent the process of buying and selling a home. And if you do that, you're going

home. And if you do that, you're going to be worth hundreds of billions of dollars. Now, it's difficult to do that

dollars. Now, it's difficult to do that successfully, completely reinventing the process of buying and selling a large asset. But it's not impossible. Um,

asset. But it's not impossible. Um,

things that, you know, eBay did back in 1995 to 2003 apply to homes. Carvana has

mastered this applied to automotive which for a normal American there's actually sometimes people are like oh there's nothing like in common between autos and homes but that's often very wealthy people who have like a $40

million home in Palo Alto or Athetherton and they drive you know if they drive at all like a 100k car or something like that Tesla or something

most Americans have a 5 to10 ratio more like 10 now but like a reasonable ratio between the cost of the value of their car and their home. So, you're only talking about an order magnitude

difference. And I think that we should

difference. And I think that we should be as valuable and some of the things we do are very comparable to what Carvana does. We actually have less competition

does. We actually have less competition than Carvana. Carvana actually has been

than Carvana. Carvana actually has been incredibly successful given that there were very significant competitors that were innovative that they were competing with, but it's a plus or minus a $40

billion company. And if we just get the

billion company. And if we just get the same multiples on what they do, we'll be worth tens of billions to 50 billion.

That's like the base case.

>> I want I want to segue to fintech. You

guys are among two of the best fintech investors and, you know, founders, operators, uh, in the world. What is

the, you know, what is the state of fintech in terms of where are we actively looking for for for investments? Um, and how we think about

investments? Um, and how we think about it. Keith, why don't you start?

it. Keith, why don't you start?

>> Well, I think there's lots of promising fintech companies. It's always been

fintech companies. It's always been difficult. Like the reality is I

difficult. Like the reality is I personally have a view that to be successful as a fintech innovation you want an underwriting advantage and a distribution advantage. If you have both

distribution advantage. If you have both then you can build a really epic company. If you have one you might be

company. If you have one you might be able to build a pretty solid company. A

firm which we were both involved in um had both underwriting mispric certain kinds of people were mispriced. We're

going to figure out a different way to underwrite based upon other things and a distribution a very clever distribution hack that other people have now copied but basically was very innovative at the time. And that's why firms, you know,

time. And that's why firms, you know, $25 billion company with still upside.

Um, but I think those are rare to find.

Um, if you find them, the world's still open for innovation. It's not like the world's incredibly efficient around financial services. Uh, we have some

financial services. Uh, we have some very successful ones that have been built over the last 5 years that now need to infuse more AI, but they're not they're not predicated on AI. And I

actually kind of like that because you could argue there's an AI overinvestment sort of cycle going on. And arguably one way to kind of create uh a portfolio

that's not as sensitive to AI valuations is financial services innovation which still requires distribution and innovation around underwriting. There's

also this kind of question of like there's bits and atoms like you mentioned vomals cost disease right it's like you know plumbing healthcare like all of these things that are so atomcentric that will be atomcentric for a long time until we have sentient

robots or something whereas every financial services product that I know of except for like the delivery of physical gold ingots like it's all bits so there probably is a fair amount of upside for for AI but you still have to

get the distribution which is really hard like consumer fintech products are so hard because like all of the I mean right now all of the the economic rent goes to Google or wherever you fund it from.

>> Um, but for the ones that unlock distribution, it's like number one, you could bring down the variable costs that you were talking about with AI. And then

number two, it's like there are I think there are so many things right now in the world, this is kind of my view on AI where it's like cost is here just for any any object, any delivery of service

and value is here. So if you just keep value here, like you're not trying to change the value equation, but you can bring the cost down. Now you've unlocked a new market that just didn't exist before.

>> Yeah.

>> Um and it's almost hard to articulate what those are until you see them. But

like it's like oh yeah like people wanted that. It's like um you know

wanted that. It's like um you know >> well Square was a quintessential example that everybody thought there was no market for Square like including very smart pe like lots of very smart people that we both know >> because you couldn't really prove that

everybody really wanted to accept like credit pay credit card based payments until you actually gave them real people the option to do it. It made it so simple, easy, intuitive that they didn't have to think about it. And then it's

massive market, right?

>> Or like it's I'm on the board of a company called Wise and Wise has shown that like the market this kind of makes sense in retrospect, but like the market for real-time delivery of cash is just so much bigger than the market for like

you get it two days later.

>> Yeah. Cash Well, Cash App, this is this is the monetization strategy beyond Cash App. Cash App makes money now. The

App. Cash App makes money now. The

reason why is people will pay for instant quote unquote delivery. This has

always been true in financial services.

By the way, this is the magic behind PayPal's revenue model. We basically

created an instant debit, effectively an instant debit or a product back before people knew those that language and then we just charge the fee for the instant receipt of the availability of the

capital. It's like FedEx time FedEx

capital. It's like FedEx time FedEx financial services, right? This is like, you know, Frederick Smith proved this with FedEx. It's like

with FedEx. It's like >> UPS. You pay 32 cents versus $10

>> UPS. You pay 32 cents versus $10 overnight. It's like some people need it

overnight. It's like some people need it before TED AO some and like it turns out that's true for like a large like countably infinite number of things. So,

but I think just in general for like fintech um there probably are going to be a lot of other service like the banks I I love something that you tweeted. I

think it was your pin tweet for a long time. It's like how to disrupt a market.

time. It's like how to disrupt a market.

>> Yeah.

>> Right. Like pick something with very low NPS and like you don't get better by delivering one particular service of that. Right. It's like oh here's a

that. Right. It's like oh here's a camera that attaches to your phone. No,

that that nobody wants that. you want

like the better fully integrated service so you vertically integrate and this was open door right you could just say here's a better AVM automated valuation model okay like if you really want to get the whole value I mean like would

you rather be like at the at the the heart of it is like would you rather be Amazon which has a very low gross margin on products that they actually you know store and sell or would you rather be eBay which has amazing high gross

margins but is the shittiest service in the world nobody wants to buy from eBay because you don't know if you're going to get the product on cloud you don't know if Eric Torber is going to ship it to me like you want to buy from Amazon and Amazon is worth $2 trillion and eBay

is worth like $40 billion. So like

obviously Amazon is better but you would misjudge that based on the gross margin classification like oh VC is only like doing high margin things and like I I think that's one of the things that I really respect about you. It's like do

something really hard. It doesn't matter what the gross margin profile is. It it

matters like how much gross profit are you generating.

>> This is the worst thing. There's lots of bad things you learn as a NBA like it's like in list. This is the worst one is like the gross margin especially percentage. It's one of the reason why a

percentage. It's one of the reason why a Amazon is successful. Stripe actually

back in the day took this model and back before more people understood this and said we only care about the sliver of contribution dollars not like the percentages. And everybody else was like

percentages. And everybody else was like oh you got to worry about this margin or that margin percentage. It's just like are we adding incremental layers of dollars actual cash? And that actually works really well.

>> Yeah. And so to the extent that VCs have soured on the or not been not as excited about the category in the in >> perfect just send them all to us.

>> Keep being soured. Financial service

terrible innovation.

>> It's a very small market. Nobody cares.

>> Nobody likes it.

>> Well, this is the point that I was getting to. It's like how many people

getting to. It's like how many people like their bank and like a lot of these the a lot of these companies actually work because of regulatory capture.

>> Yeah.

>> Right. Like if it was very easy for Keith and I to start a bank tomorrow.

Yes. Distribution is very hard, right?

And underwriting is very hard. I'm

pretty confident um at least in your ability and to a lesser extent mine like we would be able to get we could build a very valuable company but it's so hard like the regulatory overlay on these things is so high and that's part of what makes it challenging because nobody

likes Chase.

>> Yeah. Um and there there's a saying that I love which you've heard me use a lot which is the best companies have hostages not customers and like all the financial services comp all the the incumbent financial services companies they have hostages they don't have

customers and it just it turns out it's very even if you build a better product a 10 times better product it's still like the distribution is very very challenging but this is what the killer entrepreneurs can do it's like you find

and this is why like you know new bank did this for Brazil like in many cases it's geo by geo just because the regulatory overlay is so high versus you build a software for a product like Microsoft Excel is Microsoft Excel for

the world. There's no like Portuguese

the world. There's no like Portuguese version of Microsoft Excel that only is sold in Brazil and Portugal.

>> This is a it's a great opportunity. It's

one of the best investments I've ever made is a company in Europe uh called Trade Republic. It's actually better

Trade Republic. It's actually better than New Bank on any metric actually. Um

and but it could only be done in Europe.

It it it's not easy to translate what they do and why it's successful here.

There's Robin Hood's a poor comparison here, but like is the closest, but so you have to kind of arbitrage the geo too um because and it's because of the law and regulation. There's things that are easier actually to do in Europe.

There's a reason why Trade Republic's better than Robin Hood because in Europe actually it's more permissive certain things and then there's things that are much easier to do here. And so you need someone who understands like how to do the pro how to create a product and

value prop given the constraints and where are their gray zones and like how does it translate to customer value and so that's very difficult but there's a lot there's a modern generation of financial service innovation it's a little under the radar I mean people

definitely are paying attention to ramp y >> so you know like high-profile company but even a company in our portfolio that I've invested in many times called a most people still don't really know about >> it's a great company

>> another company is called imprint great still fairly under the radar, competes with two public companies. Um, actually

we sort of helped seed fund it back in a firm um back when they were starting the company. A firm did a corporate, you

company. A firm did a corporate, you know, sort of investment.

>> Cool.

>> Well, and that's the thing. It's like,

you know, software like I'm very confident that all of the banks cannot build software, will not be able to build software, will not build software.

>> We're going to use Devon. So, that's

their best shot.

>> That's their best shot. But they can't really like if if it turns out that software is at the core of everything.

software is going to eat the world. Like

why hasn't it eaten financial services?

It has around the margin. It's like the cool thing for ramp is like it's like a net new market where it was kind of like there was a shitty version of some corporate card something something but it's like that wasn't the software that was a financial product.

>> Once you marry it to a software product it's 10 times better. Like you have vertically integrated that >> and the incumbents can't do this. They

they're still like literally in cobalt often and their ability to attract talent is just like zero.

>> Yeah. That's why Devon is actually arguably over time a save for them because they won't need to attract talent. They can use software to compete

talent. They can use software to compete with software >> and the software can write cobalt.

>> Yep. Yeah. Exactly.

>> We'll take the conversation full circle.

We were talking about real estate. Uh a

real estate expert solved the Middle East. What does it say about the nature

East. What does it say about the nature of expertise that uh you know uh a guy who was a tycoon in real estate and private equity but didn't have a ton of

you know foreign policy expertise. you

know initially or a trained background in it could be more effective than you know trained experts.

>> Well at KV you know from Venode on down we don't believe in experts. You know

Vid has a whole speech about how no expert has ever created fundamental disruption in any field. You could argue that maybe in the last 90 years there's one or two exceptions but the fact that you have to argue about the one or two

exceptions suggests he's right. So like

for example I don't like experts like hiring domain experts in the companies I work with is pretty much a non-starter.

At PayPal, we had of the 254 employees we had in Mountain View uh when we went public, two maybe three had any expertise in financial services. At Square, if you

financial services. At Square, if you included me, which is I'm certainly not a prototypical financial services guy.

Of the first 300 employees, maybe two had any financial services experience.

So, it's a pretty common formulation.

Airbnb, I'm pretty sure Brian, Nate, and Joe did not have any hospitality experience. So I think if you're going

experience. So I think if you're going to reinvent industry, you don't want experts. So the same thing is true in

experts. So the same thing is true in politics. If you want to solve a problem

politics. If you want to solve a problem that's been intractable, >> at least since World War II, arguably for hundreds of years, but at least the modern era been intractable, you probably don't want anybody who's got expertise in the Middle East. You know,

as Jared, you know, was maligned for, he just read books, which is a great idea.

Actually, I talk about this all the time. Like people are like, where do you

time. Like people are like, where do you get your contrarian ideas? I was like, I read books. Like there's actually all

read books. Like there's actually all the greatest thinking of all time is available to anybody.

>> You just have to read. Um and the more you read, the sharper you are because what it what Jared talks about and I think is the common formulation and we definitely apply this at KV specifically and explicitly is asking the right

questions. Yeah. So what books prepare

questions. Yeah. So what books prepare you to do is to ask questions. So when

Jared went to the Middle East and got dispatched the first time, he actually asked the people who were influential and important in the Middle East like what do you care about and why? Once you

understand that, you can navigate and find solutions. And that's the same

find solutions. And that's the same thing we teach all of our investments at KV is if you ask the right questions, you'll make the right investment decisions. So when people join the team

decisions. So when people join the team at KV, we don't actually look at their output like are the companies great. We

look at the quality of their questions.

Venode is adamant about this, been adamant about this for like 40 years.

Yeah.

>> Just the quality of questions tells you everything you need to know.

>> That's a good place to wrap. You can

just do things. You can just read books.

Uh Keith, thanks so I'll give you book recommendations next time.

>> Amazing. Perfect. Love

>> Thanks for having me.