A quiet investor’s $10 billion bet on AI, chips, and defense

I'd love to start with a two-parter here. What do you see as the biggest opportunity in tech investing right now, and where do you see the risk? Yeah, I think Mueller's a bunch, and it's loaded, but I think no doubt there's a huge opportunity in US open weights. You see this massive driving ecosystem in China that doesn't yet exist in the US, and it's starting to, it's starting to percolate that has to be one of the largest because there's no US company or westernized company that doesn't want to see the ability to own effectively your own stack when it relates to AI, and to see competition to the close models. So it's definitely a very big one, and I think the other one is probably on just this massive compute shortage that's very prevalent that everybody knows about, but that a lot of it needs to run through folks that know how to stand that compute up, and that's really what's going to help to keep the ecosystem thriving. So I think, you know, NeoClouds, well, you know, getting hefty valuations and things like this, I think are ultimately incredibly prevalent, and then obviously the financing and one that goes behind them, I would say those two things. You're announcing a $10 billion fund, which is a lot of money, to do growth investments, and that suggests you see a lot of opportunity in growth and light stage, but I'd be curious to maybe double-click on, is there anything that gives you pause about? It feels very frothy right now. Faluations are crazy. I haven't been an investor for that long, but I'm told it's a very unusual time to be trying to make investments, and I'd be curious to hear you talk about the timing of this, and not only like what it means for you and the firm and what you're doing at disruptive, but how you think it maps to where we are in the cycle. It's a lot about sort of halves, and have nots, and I think it's the perfect time to be a concentrated investor, and so if I were to look at, you know, when I first started investing in maybe 2011 or so, I think there were a total of like $10 billion venture-backed private companies, or unicorns, and no one was saying unicorns, then now I think there's, you know, I don't know, five, six thousand, and the number has gone, you know, parabolic, and so it's become harder, I think, to field the calls. In the longer, look, we've been around for 15 years, and I think we've learned over 15 years to not take all of the pitch decks that nobody can possibly cover, you know, 6,000 companies, public investors don't do that, but if you really dumb it down, I think, to the top, you know, half a dozen, 20 companies or so, I think those opportunities exist. And what's happening with those is they've gotten so big, and they've stayed private longer, which is, you know, nothing new probably to, to, you know, folks who talk to your audience, who's an investor, but the need for capital for the very best companies in the world as they stay private is abundant. And I think they deserve the capital, and so therefore people like us should be writing, you know, larger concentrated checks, which is always what we've done, and it's what's worked. And I think where we have not done well in the past, or where we've seen others, is that they have these sort of free and spray mentality where, you know, ultimately, you know, there's too many things to cover. It's too hard to find an unfair advantage, and you're really just playing defense. What we got to do is play offense and say, look, these are the companies. Like this is an N01 company that deserves to be raising five, ten, maybe a hundred billion dollars a capital while it's still private, and it needs folks like us to help gel that, that part of the ecosystem. And so I'm not saying that we could write 20, 30, 50 checks a year that would allow us to write, you know, 500 billion dollar checks and whatnot. I think there's, there's very few. But I definitely think there's a market where it's an unfair advantage for us to gather a lot of capital and to place it into those top several companies that are N01 in their space. And that's ultimately what we've decided to do. And I think the froth occurs that you're seeing so many companies with massive valuations. And it's ultimately not the fault necessarily of those companies. It's really this idea that you can't, and we've talked about it before, you can't, you can't start a company that needs compute anymore out of your garage. And, you know, and cobble together some family money and and have the story of, you know, $10,000, $20,000 of savings, you know, not to go by a hundred or fifty thousand GPUs. You can't do that. It doesn't, it doesn't math out. And so I think there's this giant disparity between the companies that are the haves and will own effectively everything and have knots, which might get acquired and whatnot, but it's going to be a long way for them to be able to make it. And so that's where I question sort of venture versus like what I say we do, which is more of investing in growth and sort of picking those, you know, five, six, seven, what we think are our winners every year and, you know, and it's on more than that. This episode is brought to you by granola, the AI notepad for people in back-to-back meetings. It works everywhere you do unless you focus on what matters. Try it at granola.ai/sources and use the code sources for three months off. This episode is also brought to you by Mercury, AI native banking that's loved by more than 300,000 entrepreneurs, including me. Visit mercury.com to learn more. Mercury is a fintech, not a bank, check the show notes for details. This episode is brought to you by Jira by Atlassian, where teams get the context, visibility, and control to move work forward. Try it free at Jira.com. That's J-I-R-A.com. Does the compute constraints you're talking about incentivize you to look for investments that could change the order of all this, so that this isn't a thing that every company now needs to deal with. Like you're saying, like, do you see any way in the future where the cost of capital as it relates to compute can come meaningfully down? Yeah, well, I'm seeing terms like compute efficiency starting to weigh in, starting to be a thing that the model makers and whatnot are talking about more. They should be, so how much utility do you create out of either what compute you have or what compute you have access to, but I don't see a way where it becomes inexpensive to be running models that are trying to compete at the frontier. Trying to compete at the frontier is a very real thing, whether it's in China, whether it's in the US, the numbers are off the charts, and they are public-like, so the access to these dollars absolutely need to be public-like, whether it's equity, whether it's debt, but for that trip period of time where their private company is, I just don't see a period where they can do it for nothing, or they can borrow compute for equity, maybe in little pockets and whatnot, but it's hard to be creative when the out of pocket cash and the lenders and whatnot are so prevalent right now. I just keep thinking about is there anything in the architecture of these models and how they're trained that could lead to a much more efficient compute environment, where you could maybe have a frontier model that only needs a tenth of the compute. We've heard about it. I think there's these great statements, and I'm not a big social media guy, but I constantly get sent things on X and so I see there's folks using 10,000 times less the amount of compute to get to the frontier and whatnot, and if you really dig into what is happening on distillation or something else. Again, one of these things is like, can you put a model out that benchmarks is that you created for $10,000, perhaps maybe what happens then when I take that to a sovereign customer? Will it understand its fallacies? Can I use it? My assumption is you can't use it, and so you probably have to build that yourself. I don't think there's a shortcut. Look, I'm not trying to. I'm an investor. I'm not trying to solve that problem. I think it'd be really interesting to see it, but for now, I've seen great claims and none of them match up or actually think you could go to the sovereign customer where you can go to the big box guys or go to big institutions. The largest banks in the US and say, if they're going to trade this out for cost, when really I think everybody wants what's at the frontier and it's great. Let's talk about disruptive because you guys are very low-key. We're here in Dallas where you're based and you yourself have never done a podcast, so thank you. Which is rare these days to find an investor hasn't done a podcast before. What is the secret to disruptive? How did you start and how are you different? Appreciate that. I think what's different about it is we went into building disruptive with a different kind kind of mentality. Not one is like ex-bankers that went and worked in venture and then decided to build a fee-capturing business or something like that. Instead, it was, "Could you invest in private markets before they become public when companies seem like they're on that trajectory?" And then, you know, if you could for friends and for, you know, a few institutional, you know, call it friends and banks and things like this, could you actually like put that into, could you create a business out of it? I didn't really know if you could. But I think what we found is on one-off opportunities, like I said, the end of one companies, you know, whether it was in 2012, or if it's, you know, in the last year or so, that hasn't changed, right? And the desire for investors to want to invest in these really great companies that not only have that great upside think of like Amazon, you know, 25 years ago, you know, as a private company, I think was a $300 million company with a $60 million public flow in an IPO. And it seemed really expensive then, you know, and now it's, you know, at a $3 trillion business. And so to think about what happens over, you know, decades and whatnot, I think, you know, it's very clear, like if you could be an investor in some of these companies where your basis began well before they became public companies, I think that sort of sells itself. It makes a lot of sense. And there's a de-resking mechanism to it as to like, we're not doing the harder thing, the harder thing might be picking, not might be, but is picking companies that, you know, haven't proven any product market fit, haven't made any technical breakthrough and whatnot. I'm talking about if you could pick companies that are winning that, you know, look at, you know, if it's NFL fans and whatnot, see the, you know, a team that's undefeated with the game left in the season and are, you know, likely going to the Super Bowl. Could you pick that team as the one that's probably going to win the Super Bowl? Would you bet on them? And, and could you get great odds in doing so? Or there's really like no limited upside to me. The view is like, you could do something like that. But when you looked at the venture space, like at the time I started doing this, no one was writing really big checks. And so you couldn't make that much of difference. Maybe there were a few fidelity and black rock, but they had just started doing it. And so I think I was early in thinking about sort of later stage investing. And so just historically, that's done well. You know, have great access to the best engineers on the planet, right, typically they win because leadership's able to recruit them. And then if you sort of put that into a box, and this is what we, what we did, you know, really in the beginning is, you put that in a single vehicle, share that with investors, say you'll invest in it too. And ultimately you get these great short term outcomes because those companies would go public in any normal market. Now we've had ebbs and flows where there's, you know, times where you've seen these companies, like say private longer or there's periods where they just don't go public or, or at all, or their shift changes where yes, G becomes like a big theme. And then it becomes less of a theme now. It's AI. But what we've done for years is sort of just stick our heads down on that theme to your point, like, you know, not doing PR press, not focusing on what the other managers do, not, not fighting for competition, not even fighting for LPs, really just, you know, knowing our, our own investors well, but more than anything, like knowing that subset of companies, that list of 10, 15, 20 companies that are the best in the world that, like, we need to get to know them well. And then also see, like, what can we do for them? That's different. And that's how we built this firm, like how do we spend time with those companies where we get to do more, then just give them money. Everybody wants to give them money. And, and that, that, that was the, the son, how we built it. And then the, you know, the point of like, so how do you, you know, how do you dream up like building a, you know, a $10 billion fund or something like this? It's, you know, you need to understand your LP base, certainly. But, but in the case that we've, you know, been writing, I think some of the largest checks, you know, in valley companies or, or, you know, growth stage companies consistently over, you know, the last decade or so. Now it's been 15 years, but, but, but, but truly, like, certainly over the last five, six years, I think we've been one of the largest check writers, I think it's well within our scope to say, look, we need to do this in a more regimented way. And I think if we stick it to, like, we're only going to write a certain amount of checks. We only write a certain amount of checks every year, checks meets companies. And if you, if you dumb that down to, we're going to write 10 checks, we're going to invest in 10, the best companies in the world that we think we could be helpful to and break it up into what's our average check size. Well, like, theoretically, there's no reason we shouldn't be able to deploy $10 billion. So that's a good goal. But I sort of put a range of like five to 10 and found that, you know, the LP base would lean, you know, towards the top end of that. And, you know, under the auspice that I could, you know, find, you know, it continued to be, you know, the great outlier companies and, and continue to create the behind the scenes types of things that I think you could see we do with our companies that's probably a little bit unusual. I don't see a reason, and I didn't see a reason why, why we couldn't put a large fund together. There'd be no, you know, greater steward. There's other great stewards for large amounts of capital, but they might do different things. I think we're really good stewards of capital for being able to deploy, you know, a billion dollars into 10 companies over the next year and a half or two. But why shift from the model you've had, which when we first met, you were describing to me and felt very unusual and obviously is of doing individual deal by deal investments that your LPs have full exposure to. You were telling me about like doing large checks very quickly and your LPs loving that. So why shift from that to this fund now? This is the first time you've had a fund. I mean, it's the first year old fund. I've added some small little things here and there, but I think that the landscapes changed. So, you know, when we were first putting really large SPVs together in 2012, it's different now. There's been that creation over the last, I don't know, a decade or so, where folks are largely calling themselves family offices and then we don't know what that means when they have, you know, 500 investors. Or where we could say like we are what we are, right? We're a group of, you know, a bunch of great investors, some are institutional, some are family, some are our friends and and we can be open Camono with the companies we invest in, but that's not the case for every other investor that they have. So ultimately, it becomes really hard for them, the great companies, Thunder, Sand, like, look, you know, I'm 10 times over subscribed. I can take $10 billion into my company. It may just be easier if I bring it in from the discretionary funds because we don't really know who these SPVs are. And now we're finding and I think we'll see more and more of it. I think it's a cause for concern, for sure, from a regulatory standpoint. It's some of these firms that are under a certain amount. Of course, I think if you manage over 150 million, there's numbers where you could be an exempt reporting advisor. And unfortunately, you know, those are people that, you know, if they deployed potentially, or said they did, or were raising money for a great company, Imagine Anthropic, Anthropic, we start calling a lot of people out in the last fundraiser. So, you know, what if it is that, you know, they didn't actually deploy the capital that they raised. And ultimately, that's a black eye on the company, even though the company had nothing to do with it. But there's a lot of gray area folks that have entered the market. And they've been called out, for sure, by, you know, companies that are very direct about it, you know, Android. And some others have been, you know, Databricks have been big proponents of people doing this. I should say, I've not, not being able to do it. For us, it makes a lot of sense now that you have that shift, that we'd be able to conform to what I think the companies need and want from a security standpoint. It's like, you know, here is, you know, committed capital. It's coming from this place. It's secure as to who your partners are on the capital side. And it's not a guessing game. And I think it'll work for for some and whatnot. But I think you'll be prohibited over the long run. If you're simply, you know, in the deployment of capital through SPVs, only and I would never want to create a situation where, you know, we just had adverse selection where the great companies won't take capital from SPVs and only from discretionary. And so ultimately, like we've gotten ahead of that now. Do you think a lot of people are going to be burned on SPVs, especially in the big names, like SpaceX, Anthropic, Databricks, etc. Even open AI? Do you think there's going to be a lot of pain there? I do. Yeah. Unfortunately, I do. I don't have any, like, greater example of it. I'm constantly looking for it because, you know, we've, you know, we as a shareholder, we show up on the registry of a lot of companies, cap tables. There's a lot of people that are reaching out to buy companies. We famously don't, I don't know, famously, but famously don't sell, you know, anything of ours to third parties. We're not using brokers, but I've heard many times, you know, that these brokerages or SPVs and whatnot, you know, are turning around and trying to sell us our own stock and, you know, where they get the idea, I don't know. My assumption is though people are making things up and by doing that, like, I definitely have a fear that, that there's, you know, a large amount of fraud. And the way that, you're the way I do think about it, you know, is that because there's so much time in between making an investment and then maybe a company stays private 10 years, that's a long time to, you know, to say I deployed the capo, but maybe not. To figure out what that result was, maybe there's no result in their safe, but if there's a good result, well, the other one, stock back to those investors or cash, and it takes a long time for us to see what the results are of those. And like, the SEC does a good job on, like, surprise, custody audits and things like this to make sure, you know, people actually buy what they're saying, but I think those that slip under it, I'm fearful of those people. And one has to think that if this, the private markets were more demystified and more transparent and accessible to the general public, maybe this grifting that we're talking about wouldn't be happening. There is this, you know, information asymmetry and access asymmetry that helps, you know, investors like yourself, certainly, but also leads to these negative outcomes that we're talking about. I'm wondering if there's anything, if you could wave a magic wand and change how the private markets work. Is there anything that you would do? The information is, I think, it's held very closely to those companies because they're not ready to report publicly. They're young companies. I think it's very much a function of that. There's not a lot of companies that we know that aren't public yet by choice or that they shouldn't otherwise end that they won't be in the next couple of years or so. And everybody, you know, it's, look, as investors, you know, with, I think we have 40 or 35 somewhat portfolio companies, you know, a concentrated portfolio. If you were to look at at those companies, they so seriously take the moment in which they're going to go public, try to time it perfectly and whatnot. And I think there's this really interesting thing that happens where by, you know, ultimately, because there's so much pressure in that, making the right decision on timing, that it's just ultimately going to take longer because you're constantly perfecting what the timing is. We get to see them do it a lot of times. We get to see companies go public often, whereas the companies themselves, they go public one time. We get to see it a lot of times. And that happens often. We get to see these companies turn, you know, a billion dollars for the first time ever. Well, we get to see it in all of our portfolio companies or we get to see them hit certain run rate hurdles and things like this. And so again, a lot of things, it's the first time the company gets to do something. We get to see a lot of times. And I think, you know, chance your question, like we get a really great view of how that company's maturing. They don't know how they're maturing sometimes. And sometimes they do. Because sometimes you have multiple yeah, multiple time founders. But but I think, you know, I think the private markets, it sits really well for us. The amount of available information, you know, in the public markets gives such a level playing field to everybody. Anybody with a Bloomberg terminal with privates, there's so much more that goes into it, including what you can do for them. That I wouldn't change it for anything. How do you identify a disruptive investment? I think I touched on it a minute ago. Which is we literally keep a list of, you know, I say 20 companies. Sometimes it's 15. And sometimes I own the list. And and so there's companies that come in and out of that list. And ultimately it's our job. You know, for doing a good job forecasting of what the future of investments look like of following those companies of and maybe they're too early or maybe they're just about to come through on a breakthrough. And we're not the guys that feel like we have FOMO because we missed around at a certain valuation. And we now can't invest in it at a later on. We're the opposite of that, right? The there are times where, you know, we become more convicted or we're writing bigger checks. The higher the value gets because it becomes it becomes more sensical to us. And we can underwrite a return or maybe there's more we can do to take them to market and be helpful to them. But that's exactly what we do. We're unfortunately not the people that get, you know, pitch decks and read through the pitch decks. We don't read through pitch decks. The times that we've done poorly in the past is when we've done that. And we've learned, you know, if you go and just take the data and see the times that we've actually gone and found a company that we wanted to know versus the times they've come and found us, well, we've done incredibly well when we got to find them. And when they come and find us, it's average selection. On that note, I mean, you've been kind of alluding to it the ways that you all can help that seem unique. What is the Alex Davis disruptive version of helping? Let's just say half the job is, you know, identifying, underwriting and figuring out the, you know, allocation of capital. The other half is, I just described to you a whole bunch of firsts for companies. You know, the first time they go international, the first time, you know, they step foot in a CEO's office to sell a product. And these could be big companies, like big companies on a valuation basis before they do that. But those folks that we're taking them to, we've done it so many times, where we're helping our portfolio companies. And I think everybody says their value add investors, like so one of the values clearly is you give people capital. Yeah. And they use that capital. That's obvious. I think if you were to talk to your investors, they would tell you there's unusual things that we would do for them, creating unfair advantages for them. Not on any, like, nefarious way, but in a way where they may not have the ability at a top down level to, you know, get to the most important person in an organization or in a country. And we make it our job to do that. In order to do that, though, you've got to really understand the company almost like you work there. And I think we have to be able to explain the story or the narrative around the company in a way that maybe we're even better storytellers than they are. Because a great company doesn't mean they're great storytellers, but we need to be able to help them. And so I think that's one of the, yeah, super power. It's certainly something that like if we can go simplify the narrative and I think it's one of the things that we've been able to do, you know, well, personally, that's something I feel comfortable sitting with a CEO of a, you know, 100-year-old company that may or may not understand all the nuances that occur in a given time, but be able to very simple, very, you know, matter of fact sort of simplify the thing that that company can do to help them without overselling it and open the door for one of our companies. We've done that for a lot of companies and we'll continue to do that for a lot of companies. And that means traveling all over the world and spending, you know, probably half my time in my entire life, you know, with these companies on the road with the C suite and, you know, trying to help them, you know, fit into market. And not to, not to check a box is I don't have to do it for LPs. We're doing it because we actually think that we could help the companies. If we don't think we could help them, for instance, like a, you know, take a very, you know, we've a really nice relationship with folks at Databricks. They are so well, you know, integrated into, you know, the ecosystem that they're in that, you know, it just becomes harder to help them because they've done so well. Yeah. And we find this at Sound Ventures where I work, too, is that the storytelling and the how you position yourself is so important, obviously. But sometimes it takes a friend who's just on the outside, but sees also what's happening around you more. Because when you're running a company, I mean, it's your, your blender's on your building. It's really hard to see the, the force or the trees. And, and being a hopeful person who's around the table, but is not inside every day can really help with kind of that clarity of how do you position yourself that you're talking about? Yeah, like to, to what you said, I mean, if you say something nice about me, it's a lot better than me saying something nice about myself, right, which is kind of like to the point of what you're saying. But if I could point it out a little bit more carefully in a way that like, look, when we spend time with non-investors or maybe investors that are looking for plugins in their country, well, it's like, I know just the company for that. And, and then, and then we can help sort of, you know, usher it, and then again, when we're advocating for it with, you know, a friend of, you know, 20 years or so. thing, it's very different than if they had gone through a local hire in that country, junior, and try to go top down or bottoms. Most of the companies at the level were dealing what they need to go top down, and so you got to help them get there. If you could do that, you're saving them probably years on a contract or on a deal. It depends on the kind of company, whether it's consumer or we talk about like sovereignty, eye and things like this. How can you be helpful? Well, repetition makes you really helpful to these guys. Framer is the AI website builder that powers the sources podcast website at podcast.sources.news. Framer brings AI agents into the same canvas where your website is designed, managed, and published, so you can move faster without giving up your taste or control. I use Framer to make the sources podcast website be the destination for everywhere you can find the show, plus you can also see recent issues of my newsletter. Start building with agents for free today at framer.com/sources for 30% off a framer pro annual plan. Framer.com/sources rules and restrictions may apply. I spend a lot of time context switching between meetings, often with no time to process one before the next starts. Thankfully, Grinola runs in the background the whole time. It's an easy to use AI notepad for meetings that works everywhere, even on phone calls. I use Grinola to recall it was set in meetings and create helpful summaries. I use it every day to stay on top of what I need to get done with my team. It connects to my email and suggests follow-ups for me to quickly review and send saving me valuable time. Grinola isn't just a core part of my workflow, it's basically my second brain. Try Grinola at Grinola.ai/sources and use the promo code sources for three months off. Mercury is a modern take on banking built for startups like mine. When I decided to start my media business, Mercury was by far the most straightforward, full-featured banking solution for me to set up quickly. The interface is intuitive and simple, saving me valuable time every day. 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As you move faster and bring in more AI agents, keeping tabs on what's actually happening gets harder. Who's working on that? What did that agent just change? Are we still on track for our goals? That's why teams rely on Jira for visibility across their work, whether it's done by people or agents. Jira is powered by Atlassian's teamwork graph, which connects work across Jira, your most used tools and apps, and your agents. That means your agents share the same context your team has, like the goal behind the work, the decision made yesterday, and the project plan. So they work faster and more accurately. You get oversight, track agent progress right alongside human work, spot blockers sooner, and connect your work to goals. You don't have to choose between shipping fast and staying in control. Let's talk about two deals, in particular, you've done that I think Exilempify, how you work, and the first is Palantir. So this was one of your earlier successful investments. I'd heard that around the time of the IPO, you owned roughly 20% of it, and the way you accumulated that position, and then the moment that you doubled down right before it went public, I'm really curious about. Can you walk through how you built that position? Obviously for the sake of their privacy and not overselling me, I had really great conviction in that team over everything, and they were out competing everybody in 2010, 11, 12, and then obviously just kept going for the best engineering talent. It really didn't matter what they did, but there weren't really budgets for the things that they were doing. They were really creating budgets for the first time. That's a good sign, creating budgets. Although very hard for them when folks don't have a budget until there's an emergency, and then I remember even for them, a lot of the strife was actually like trying to compete internally with organizations, not externally, but why do we need this? Why do we need this? Yeah, and so it was actually fun to travel over the world with those guys and be helpful to them. They're incredible operators, always incredible to work with, but basically to the question to the point of what happens is there is a point in these companies where they break through where they're trying to get and they're trying to become, maybe it's growing, gross margins, and really proving that they have a sustainable, growth-y business that could be largely profitable. It's just maybe people didn't see it at a certain point in time. They were one of these groups that weren't largely backed by Sandhill Road, and so it was clearly a fun business to be involved with because they had that chip on their shoulders. Look, at the time at which it was COVID, right around COVID, that they were, while everyone else was sheltering in place. They were thinking of going public, which was a total, which was a very palantir thing to do and way to think, and so look, it made a lot of sense to me. We had been in the company, I think, for 10 years at that point or so, and we had an opportunity that brought a couple large investors and included a big insurance company. We absolutely doubled down, but it was because, like, you spend so much time getting to know a company, and our goal and our history has not been to be invested for 10 years in companies. Typically, you would think they're further along, in their case, it just so happened to be that, at that moment in time, it made all the sense in the world to, if I could write a check to anything, and this is, you know, palantir is, I don't know, and it'd be wrong, but it is a sub, maybe $10, $15 billion dollar company, which we know, it's like half trillion dollar company now. Obviously, looking back seemed like a really great bet, but it was all, it was understanding what had gotten them to that point, what got them comfortable, to then go over the hump to do the, you know, let's go public, let's not just go public, let's go public in a direct listing. Of course, we didn't know that we made an investment, but also I should say this. I don't think there was a month or two or three where we weren't investing in the company. Like, we stayed with them for a long period of time and-- And you doubled down right before they went out, which, like, I assume your basis on that was really great. You've been doing it for a long time. Why double down right before they go out? I mean, you've got that incredible history of building up the position. Yeah, I think some of these companies and I think for, I think, Palantir is one of these things that, you know, they were very closed off to the outside world. And in my view, it's really two things. One is, like, the world yet hadn't spent much time with Alex Carp. The way that he created his aura inside of Palantir was the most unique thing I've seen, you know, still probably ever. And his ability to instill confidence in that team was, you know, sensational. And in the community of folks that he was creating budgets for in government, if the outside world, meaning they go public and whatnot, they got a view of it. Well, then maybe they would see the same Alex Carp that I got to see. And there's so many other people that are incredibly special, Sean, and the list goes on of, like, the most impressive people that Palantir is and was. In fact, like, you know, the fear is, would there be a drop off of, of these really great people? If they went public, I was a fear. And they held on to that. And they've, you know, been an incredibly successful public company. But I think that was sort of the biggest thing is like, you know, can you, you know, can you double down before, you know, saying these guys are now going to show themselves to the rest of the world. Alex is actually going to be on these quarterly calls. And people are going to have to get used to somebody that's very straightforward, very honest and very blunt and unique. And I think it'll be a breath of fresh air. And, and that was just a bet on a person, I think. And that, and that team, largely in thinking it's probably undervalued in the private's versus where it will be when it's public. And that was, I think that was probably a fairly, you know, easy bet to make. And the fact that like, he would just win the public over. And he has, I think he's become, you know, one of the more iconic CEOs and, you know, and he deserves it. Let's talk about another quintessential investment. I think you've made GROC. So you were involved early in GROC, you know, the inference chip company that was really prescient, I think, in setting up its own compute. And then did this very interesting deal within video, this $20 billion. or licensing deal where Jonathan and a lot of the core team went to NVIDIA, but the assets remained and you're now running those. So you now have this inference forward cloud. Talk to me about how you got involved in GROC in the early days, why and how that deal happened. - Yeah, like most things, I'm not that early in anything. You know, maybe a palanter is an outlier just 'cause the amount of time. The openness when I was willing to invest in the company. You know, and the team is great, but that team was willing to like shift their narrative, you know, where they'd actually be more of like an accelerator. And so it wasn't hard to then get behind that. And obviously like, look, Jonathan's incredibly brilliant. There's other people on that team, like Sonny and Gavin, who, you know, are easy people to get behind, you know, and a lot of them sort of filled each other's weaknesses. And then it wasn't long before, you know, when we made an investment that, you know, NVIDIA was interested in doing an on-exclusive licensing agreement, which ultimately happened in a really short period at the end of the year last year. Like I think what most investors do at that point is try to figure out, you know, like Christmas present or something like this, I get to distribute a bunch of capital to LPs and whatnot. I think what happened was quite different there. Certainly an unusual deal where, you know, you had a bunch of folks end up going to NVIDIA to help with the chip making effort. Obviously like, you know, you mentioned like investing in inference, obviously I think inferences is going to be, you know, as, or more important, really, than anything as it relates to, you know, running these models and like reinforcement learning and all this stuff. But equally important is, like, could you, could you look at the existing assets? Like, what do they actually own? And, and could you do something with them? We could be really helpful in terms of, you know, understanding whether distributions to shareholders were done in the right way. I think that's important. You know, obviously a deal done very quickly at the end of the years, typically not that tax-efficient. And so, you know, how could you be helpful and just oversee some of the things there? But ultimately I had the trust of people like Jonathan and others that, you know, I could take responsibility of that, of that board, make sure distributions were done properly, but at the same time, you know, instead of, you know, effectively, you know, finding an end or negotiating with, you know, data center releases to end them, which is a dream to those, you know, those that own the data center would be actually like repurpose it, you know, reinvest in it. Well, we have the capital to reinvest in these companies. And ultimately, you know, upgrade all of the existing, they have about 53 existing megawatts and work with your friends at NVIDIA and be a partner of theirs by, you know, whether you have to retrofit some of those existing sites because the, you know, cooling efforts change. So maybe you have to look at cool some of the sites. And then also with the iterations that they were making on the underlying technology, the LPU technology, John then created is that they would sort of advance into, you know, three versions later the LPX, could we be a customer of LPX and bear a rubin and wouldn't it be great if we could go in a mass, a greater amount of sites to put those chips and sell those chips as offtake to, you know, others in our ecosystem, we have this great, you know, ecosystem of companies that we've backed at all are compute constrained. And could we be a partner to those companies in it at the same time? This is also a resource to your other companies. A huge resource to the other companies, certainly. But then also like as a NeoCloud, 'cause ultimately that's what it becomes. It becomes sort of like an inference in NeoCloud. Can you do that in a way where you're not just servicing, you know, venture-backed companies, but the hyperscalers, the anthropics, which are kind of in the middle who soon to be public and whatnot and could you become important enough that those folks would think of you when thinking about inference, when thinking about LPX next year when it delivers or very rubin or things like this. And so to me, it seemed like a very obvious thing that it's something I should personally spend time on. So I not just took the board, but took, you know, exact chair of the company and like you said, I've been running the company. I don't know if that's the long-term plan to run that company. There'll be, you know, great, you know, leadership that steps in and helps to formalize with the future of Grock looks like, but certainly like it has its place in the world. And we're really excited about Grock, but it's definitely something that is not usual, you know, of running in and stepping in, you know. And I've had, like we've had lots of help, we have lots of great people around the table. And, you know, it's been an interesting ride for the last, you know, six, eight months or so to be part of it, but I've seen it grow a lot. - Do you think the Neo Clouds consolidate that there's too many right now? - I think the way to look at it is, like there's very little competition on off-take, right? So it's really a matter of like who can stand, compute up, who can be an honest, an honest player? And look, like the, the average question that comes up is, you know, from a venture back company, even another Neo Cloud or a model builder is, can you get me compute in three months, six months? You've seen it with Elon and what he's able to do because he stood up the chips, and he's got great working clusters. - And reflection on one of your companies has a deal with him. - And yes, exactly. And so, you know, and those are shorter term deals where, you know, they need the compute, they need it now. And there's a premium for that. The problem I think ends up being that you might depend on one of these Neo Clouds that they'll stand something up for you in six months, which is almost impossible. And so, in order to do that, you'll pay a big, you know, upfront deposit, and you'll find that, you know, they didn't do the diligence at, you know, whatever powered land they were doing it out, or they committed to doing something modular, which it might not be ready or large enough. This isn't about competition. There's more than enough demand for compute that if you have it, you'll find off-takers for it. How you price it really is dependent on like, there is a market for it, you know, there's certainly a market that's got wider margins if it's ready. And so, there's things to think about there, but in terms of like how much competition there is, I don't think there's too many Neo Clouds. I think there's not enough good Neo Clouds. - Is this what you were talking about when you recently wrote, we prefer backing owner users not speculative landlords. This will not end well, correct. So, what does not end well mean? - Let's just say that you're not well funded. Let's just say that you take, you know, five years to build something and not two years. Or, you know, you don't necessarily even know how to go about off-takers or rappers or financing and whatnot, and you have a piece of land in Texas as a big family or something. That's basically who I'm saying it's not gonna end well for. We've seen the prices of memory in two years, like 5X and double in the last year. And like that wouldn't even come into the equation where then thinking about, well, now we've got to spend, you know, ex billion dollars on chips that are now increasing, you know, 15% of pop. But now there's new chips. And so, do we put GBs or do we wait for Vera Rubens? Like, if you're not, if you aren't fully adept and don't understand everything that's going on in that universe, which is highly dependent on a lot of different things changing, literally daily. Yeah, I think if you're a visitor to the space, I think that, you know, I could see a lot of people getting hurt putting a lot of debt on these projects and finding out that, you know, forget about off-takers, they'd never end up with chips. - I wanna talk a little bit about your personal story and how it impacts you and how you think about running the company. I mean, your grandfather, Marvin Davis, he was a very, in a larger than life figure, was successful in a lot of different domains. And I'm curious about what growing up in that kind of environment taught you as it relates to building for yourself and, you know, moving from Los Angeles out here to Dallas. Can you impact that a little bit? - Yeah, I mean, I grew up around one of the truly great, you know, entrepreneurs, you know, risk takers, wall caters. I had a front-run review and some things that most people will, most people will never see. you know, obviously great to grow up around a lot of stuff, but to grow up around, you know, somebody is open and larger than life is that it's invaluable. And it's the kind of things that like, you know, I've two little girls and, you know, I, you know, I want them to see what I do. I want them to be opinionated in what I do. In fact, I share every deal I do with them. Before I do it, I want their blessing. I need to be able to explain it to them. My grandfather and I had that kind of relationship where, you know, he cared a lot that I understood things. And I did. So I got this great, like first class lesson in things that most, you know, 10, 12-year-olds, you know, would, would never have come close to, you know, even experiencing let alone understanding. And I think of that age, like you don't even know, you know, half the stuff you're breathing in or the, you know, language of business. But I think I picked it up like at some point when I was, you know, certainly when I was a teenager and, and it, and it gave me the kind of drive where like by the time I was in college, I didn't want to be in college, I want to start a company. I didn't want to ride the co-tails of family. I want to build my own business. And my biggest fear was, you know, not about being rejected on a sports team or something. My biggest fear is like failure. And you know, what happens if, you know, I'm not like him, you know, or what if I'm not successful at all. And so, yeah, you have all these things that, you know, run through you when you, when you grow up that way. I think, you know, I, I was fortunate that, you know, I went away for school. I, for, for, so I went to Northwestern and, and, and I had an opportunity to like really learn about the markets. And I worked at the Chicago Mercantile Exchange. And I got to do some things that were really interesting and learning about Game Theory and learned a bunch about auctions. And it later helped me, you know, in, in, like, my first endeavor, but I, but I'm college dropout. And, and, and a lot of that is, you know, I did drop out of college after he passed. I didn't, you know, I was in college, really, because, you know, that was one of the things he wanted me to do. And, but I couldn't stand being in college. And, and, and I am an advocate, you know, for, for, you know, even people here are disruptive. When I feel like they're ready, something intern class, like, you know, I've used on, on the fact that, you know, I think they could skip school, or at least parts of it, like, when they're really, really ready. And like, this is a moment in time. And I see the moment in time for us that, that they should be part of it. And maybe I'll fill a kinship towards somebody here. And I see it as that, like, mentorment to your relationship is the same kind of thing for me, you know, growing up. But it certainly repelled me to, like, want to be different, keep my head down. And I never got involved in all the Hollywood stuff. And, I don't live in Hollywood. You know, we, we moved during COVID to, to Texas. But a lot of that is, you know, again, little girls and, and a, and a young family. But I felt like I could do what I'm doing for many where in the world. I'd be curious to hear you make a prediction about how you see the macro picture of this environment playing out over the next couple of years. I mean, you're, you've raised 10 billion. So, um, you have the luxury of that capital. But do you see anything on the horizon that gives you cause for concern? I think the biggest concern, and I make a, you know, hopefully a positive prediction. But I mean, biggest concern is, you know, is, is trying to follow some of these trends where, where are, you know, there's so many different things developing around AI in general is that you don't look at anything else. And for us, where there's been great opportunity, I mean, John Strowley's talk about it, but it's, you know, like defense tech in general, has this massive opportunity. And, you know, just as we were walking in Harris, uh, Androel signed a massive contract with the Navy. And like, these are things that, you know, 15, 20 years ago, like we didn't see this stuff. You didn't see like private companies signing these, uh, massive contracts of record with the US government or foreign governments and whatnot. I think that will continue to be the case. Um, um, um, and, and in fact, greater where I think, like, you know, this current administration and I think others, um, will allow for the greatest innovators, you know, who don't necessarily go and work at government, they'll have an opportunity to continue to build these very large and meaningful businesses that aren't, that aren't sitting inside of the hundred year old primes. And so I think we'll have, um, you know, with one of these, there's several of these copies. I think we'll have, you know, new primes for the first time in a hundred years. And, and I think, uh, so that whole defense tech ecosystem changes and then because of it, what we're seeing with the LLMs, it's all becoming very political, right? Everybody's very scared for safety and things like this. They are becoming defense companies, uh, all of them. Um, and they're all doing work with the Pentagon. And they're all talking about regulation and and self-regulation and things like this. And so, um, yeah, I think my, my prediction is, you know, one, there's going to be a huge, huge business. I don't know what it is. So I'm not, uh, necessarily advocating for a company, but I think there will be a huge opportunity and safety. And in, you know, protecting, um, you know, our big corporations, um, our data and whatnot, um, you know, from the growth of AI and the populism of AI, um, I think that's a huge space. But I think you like to take our eye off the ball and defense technology right now or the fact that there won't be more companies that come up that do really special things that would otherwise be people, you know, that would just say, like, not interesting for me to go work at Lockheed. I don't want to do that. But also, like, too big of a mountain to climb to create my own Lockheed. Like, I think that's now becoming possible. And I think you're going to see it. And like, look, we, we're seeing the first, really the first two with, you know, Andrew, and Shield. I think becoming, you know, what, what are starting to look like primes. Um, but I think we'll see more of those companies. And then I think we'll see like a tale of some of these, um, you know, I really think the open models have an opportunity to become the next big defense companies and how they all work together. We'll see. But I think that opportunity is absolutely massive. And that would be my, I guess, my, my prediction. Any advice you would give founders on fundraising right now, given all the market dynamics we've been talking about? Yeah, I'd be very specific and, uh, and I think this idea of being specific with the ask and, and again, using words like compute efficiency are things that are like music to our ears that you're not just raising ungodly amounts of money with, you know, being told, this is how you're supposed to spend it. Knowing that they're being good fiduciaries and that they'll spend it well, I think that that's, you know, really helpful. And a lot of that is in the storytelling. Like, do they do a good job of portraying portraying, they're going to be good fiduciaries to us. Um, for the most part, we see it. Sometimes we don't see it. I'm also curious to know, uh, what you think of the state of venture in, in private, uh, investing, the things you see that you go, uh, this is not right or the incentives are misaligned and how you've approached incentives at disruptive, which I think is, is fairly unusual for a funder's size. I just think venture is really hard. Yeah. Right. I like without venture, we wouldn't exist. Like, we just wouldn't, right, we come in and sort of back the truck up, um, when venture's been right, um, but ventures really hard because there's this, and it has to be that spray and pray mentality. And then, you know, the two or three and a hundred that I think statistically, you know, return up portfolio, uh, an early stage portfolio, it's, you know, making sure those work, those are the ones I'm usually, you know, dealing with, which is why I say like without those, we wouldn't have much of a, a business or certainly not one where you could do risk it. I think it said dibs can be misaligned because they can really be about how much capital can I raise, um, you know, and there's no knock on anyone firm. It's just the overall, um, sort of idea of like growing AUM and that's across all managers and whatnot. As your business, IRRs of management fees. We make our money truly off of carry. Like, it's, it's very, like you said, it's different, um, where, you know, I think I've said to you, like, I don't think anybody should get rich on management fees. And people do where the outlier should exist is on great performance and, uh, and on returns. So return a bunch of capital, you know, celebrated is great. Um, you know, the celebration of AUM, you know, you ask me, like, my AUM today, I don't know what it is. Like, it's not important because I'm not earning management fees on the AUM. And I'm not trying to keep whether raised 10 or five or seven billion dollars or didn't raise anything at all. It wouldn't make a difference. What does make a difference is, you know, that we have these great, um, you know, you know, iconic exits, um, you know, and they're not throwing in there with a bag of a bunch of, of poor results. Um, you know, and I think the way that we've built it to a little bit different than others is, you know, everybody is looking at, including, yeah, that's it. the way that we point our investors in this direction is you know each of our companies really matters right there's not there's there's no such thing as like writing a company off and when when company might not be performing like the others I think they the overall industry is such that like we should probably spend less time on that company I think in our case it's like you know we should be harder and more focused on that company and and figure like some of the best things that we can do are save results you know save an investment they could have otherwise been bad you know if you can do that like the good ones like things that outperform and are these you know multiple axes you know they might have been that way anyway you know but could you be really helpful you know to helping land the plane somewhere and I think the venture community for the most part will abandon those companies that are outperforming I think that's just sort of understood I'm not saying anything that's new yeah disruptive has what 30 employees yeah very very so how do you think about the edge that you guys have relative to what AI can do and how like what is the part of your process that you know AI is never going to be able to touch this and then how are you using AI because at the scale you're operating at that 30 employees is it's a pretty impressive feat so how are you thinking about using AI and your day-to-day and then there's talk in the valley of you know people setting up AI hedge funds and having AI trade the markets and be humans and are you thinking about that as a release to what you do no no no but by the way like we're very like relationship-based business you know there's a touch and a feel for the companies and for our people and I care a lot about our culture I don't want an AI culture certainly like our people are using you know gen AI to help them you know do things better but we've not decreased and we won't decrease the amount of people that we have we have a really good core group of people we don't have a giant team like we could have you know many more people and maybe we'd have a few more people but but yeah folks that are really dedicated to this business unusual to other businesses and I know people say that but ours is like a family and it in no one's getting displaced by you know by by by an agent or something like this that said you know it's definitely something that's paramount like they absolutely have to you use whatever tools they've got to to be able to you know perform better and and to multiply the effects of what they do but I think when it comes down to like you know it sounds like when we talk about the dollars maybe there's an extra zero on our stuff but that doesn't that doesn't mean yet to have an extra zero of people right we're just writing a bigger check right so it doesn't necessarily mean that you need you know 10 times as many people to deploy 10 times as many dollars maybe that's a bad fact pattern and so there's a lot of ownership here and a lot of discipline around the things that we want to do and ultimately like we report to our investors how do you wrestle through thinking through an exponential as you're looking at investment I find personally is a newer investor a very new that that's one of the hardest things that people wrestle with is the valuation now versus what it can be seeing the bigger pictures saying like the real ceiling and most people can never see the real ceiling but do you ever find yourself at night like when you're weighing a checker about try going like I just I just don't know like if it's like do you wrestle with that idea of the exponential mattress that's something you've been able to just know okay I think the only thing I ever wrestle with is like regulatory you know those are the things that you know should I have not done this because there was a regulatory issue besides that no and I I published it at a recently and and talking about value investing and so it's dead yeah and yes and okay so like maybe those taken out of context a little bit but but but by suffice it to say that you know we don't know where valuations going to end up with the majority of companies that we're looking at we don't know what the ceiling is to your point and so for the greatest companies in the world they just take a thropic two years ago you know if we were modeling the company at 30 billion dollars and saying well look it's it's a 2x you know because they're gonna do this that and the other thing but no one would have predicted the fact that they could potentially get to a hundred billion dollar AR and that and that they could do that in like two years to have thought you could go and buy a company like that at a discount or if that was your nature that was the you know the idea of my node is like let me go get that at a 6% discount and thropic is good if I can get it at a 6% discount or I'm not doing it like that was the value investing mentality of like I'll buy a good company at a great price and my argument is like buy a great company period and like you know not to say that prices one of these things that you shouldn't pay attention to right of course but the great outcomes are gonna be great outcomes and it's not gonna be because you paid a 5% discount or a 15% premium right like those aren't gonna be if you go look back at my track record in history you know it's not rounding the edges or like sharpening our pencils around what we paid that made for a great outcome the great outcomes were exponential outcomes can end it here you've been very successful but I'm curious if there's anything you could look back on the last you know 15 years of disruptive and say man if I would have known what I know now things would be very different what would that be yeah I don't I don't know that I have any regrets in what we did but certainly 15 years later I know the answers to a lot of things and I don't think that we've been in a time like the one that we're in like right this second where we're so much in the middle of the universe where like of course I would have said we should have doubled down on the closed models that we should have supported them for more computing things like this and there's all sorts of things like this we could say the same thing with defense but overall I think we've done a really good job I'm happy with you know my team I think you ultimately our investors are really happy with what we've done like I get to go home and sleep well you know I'm excited about the fact that we have you know the next couple years to you know figure out you know what's next and you know what's the next decade gonna look like and and I think it's like look we have the most fun job in the world that doesn't feel like we go to work like we put in a lot of hours but it's a lot of fun because we get to deal with the most interesting companies in the world the greatest founders and I don't know another job in the world that they actually pay you to do this here here Alex Davis thank you yeah granola is the best AI notepad I've tried it works everywhere on a video or phone call in person or an Apple watch try it now granola dot AI slash sources and use the promo code sources at checkout for three months off banking should feel like modern software get everything you need in one place visit mercury dot com to learn more and apply online in minutes mercury's a fintech not a bank check the show notes for details gira by ad lasian gives teams the context visibility and control to build with clarity and ship with confidence try it free at gira dot com that's j-i-r-a dot com [BLANK_AUDIO]