OpenAI CTO Departure, DOJ AI Compliance, M&A Trends, and more! | E2014

Jason and Alex kick off the show (0s)

• Two individuals are digging a tunnel towards diamonds, with one giving up just before reaching them, while the other continues persistently (0s)
• There is a belief that the business world is on the verge of a significant super cycle due to AI's capabilities (19s)
• Companies that are efficient and growing now could achieve earnings comparable to major tech companies like Google, Apple, or OnlyFans, with potential earnings per employee in the tens of millions of dollars (29s)
• The show is sponsored by Linear, Oracle Cloud Infrastructure (OCI), and Fundrise, each offering various services and discounts (55s)
• The hosts, Alex Wilhelm and Jason Kakanis, discuss startups, technology, media, and politics as they relate to these topics (1m48s)

Breaking news: OpenAI CTO departure and speculation (2m3s)

• OpenAI's Chief Technology Officer, Mira Murati, has announced her departure from the company. (2m13s)
• Murati joined OpenAI in 2018 and was a long-tenured employee, though not a co-founder. (6m37s)
• No specific reason for her departure was given, but Murati stated that she wants "to create the time and space to do her own exploration." (4m14s)

Linear - Streamline issues, projects, and product roadmaps in a tool your team will actually enjoy using. Get 25% off (8m17s)

• Linear is a software development platform designed to streamline issues, projects, and product roadmaps. (8m23s)
• Linear is used by tech companies of all sizes, including half of Y Combinator companies, Cash App, Scale AI, and Versel. (8m47s)
• For a limited time, you can try Linear for free and get a 25% discount off your first year. (9m4s)

DOJ AI compliance guidelines (9m11s)

• The Department of Justice (DOJ) has incorporated AI into its compliance best practices, recognizing the potential risks associated with AI technologies. (9m55s)
• The DOJ's guidance emphasizes risk management, urging companies to mitigate unintended consequences, ensure AI is used for its intended purposes, and establish accountability for AI use. (11m57s)
• While these initial guidelines are considered a starting point, more comprehensive regulations are expected as AI applications expand into sensitive areas like healthcare and finance. (17m44s)

Oracle - Try OCI and save up to 50% on your cloud bill (17m52s)

• Oracle Cloud Infrastructure (OCI) is a comprehensive cloud platform that offers infrastructure, database, app development, and AI capabilities. (18m6s)
• OCI is cost-effective, offering 50% savings on computing and 80% savings on networking compared to other cloud providers. (18m27s)
• New OCI customers in the US can potentially cut their current cloud computing bill in half by switching to OCI until September 30th, 2024. (18m47s)

Current state and trends in tech M&A (19m15s)

• There has been a significant number of tech M&A deals recently, including Salesforce acquiring Zoman for $450 million and spending $1.9 billion to buy Own. (19m44s)
• Vista Private Equity announced plans to buy Smartsheet, IBM is acquiring Kubacast, and Databricks bought Tabular. (20m5s)
• Many small deals are occurring because companies are running out of money, and their valuations have dropped significantly. (20m31s)
• Venture capitalists are reluctant to fund companies with lower valuations and complex deal structures, leading to "shotgun M&A" where companies are sold at much lower valuations. (20m40s)
• Companies with lower growth rates (e.g., 10% per year) are less attractive to venture capitalists, who prefer to invest in high-growth companies. (21m20s)
• Venture capitalists are focusing on investments that are growing faster and are more likely to provide a return on investment. (22m31s)
• The market has been distorted by recent economic events, leading to a challenging environment for tech M&A. (23m12s)
• Growth rates for public companies like Uber and Airbnb are considered high at 20-30%, while venture capitalists expect 50-200% growth for startups. (24m0s)
• Companies with slower growth rates are advised to aim for break-even, but this can lead to lower valuations and eventual sales at lower multiples of revenue. (25m7s)
• The trade-off between growth and profitability is evident, with companies being pushed to become profitable, which can slow down their growth rates. (26m10s)
• Despite the challenges, there is still hope and optimism in the tech industry, with successful examples like Uber and Airbnb demonstrating the potential for high returns. (28m1s)

Liquidity, market trust, and the move towards a cashless society (29m13s)

• The increasing prevalence of services like Uber and mobile payment systems like Apple Pay are making a cashless, and even credit card-less, society possible. (31m1s)
• This shift towards a cashless society is based on trust in these systems, allowing individuals to leave their homes without physical keys or cash. (32m4s)
• There is a noticeable increase in M&A activity in recent quarters, indicating a positive trend in the market. (33m2s)

Fundrise - Sign up today (36m5s)

• The S&P 500 comprises major tech companies that were funded by Venture Capital firms, generating substantial profits. (36m7s)
• Access to these Venture Capital firms was primarily limited to institutional investors, excluding individual investors from pre-IPO growth opportunities. (36m25s)
• The Fundrise Innovation fund, exceeding $125 million, offers individual investors access to promising pre-IPO tech companies. (36m53s)

Startup funding, valuations, and disciplined fundraising (37m21s)

• Some startups are raising funds at more reasonable valuations compared to the inflated valuations of 2021. (37m34s)
• Investors are becoming more disciplined in their investments, considering potential market exits and avoiding overpaying for companies. (44m14s)
• While high valuations might seem appealing, it's crucial for startups to prioritize sustainable growth and reasonable valuations to attract investors and ensure long-term success. (47m14s)

Instacart's valuation journey and venture capital challenges (50m9s)

• Instacart's valuation in the public market is 10 billion dollars, a significant decrease from its 40 billion dollar valuation in the private market. (50m22s)
• The value of a company is determined by its growth, earnings, and whether it is losing money or breaking even. (51m19s)
• Some venture capitalists are leaving the industry due to the challenges of the current cycle, potentially missing out on future opportunities. (51m54s)

Optimism for the AI-driven business super cycle (53m25s)

• There is a belief that the business world is on the verge of the greatest super cycle in history due to the capabilities of AI. (53m27s)
• AI-driven companies are becoming increasingly efficient, potentially leading to significantly higher earnings per employee, comparable to major companies like Google, Apple, and OnlyFans. (53m33s)
• Revenue per employee for companies like Apple and Facebook is already very high, and with potential reductions in workforce and growth, these numbers could increase further. (54m15s)
• The age of efficiency could lead to unprecedented earnings growth for these companies. (54m55s)
• Individuals with significant investments in the stock market could benefit greatly from this business super cycle. (55m7s)
• However, there is concern for people who do not have wealth or whose jobs may be affected by increased efficiency due to AI. (55m25s)

The future of labor: Skilled trades vs. knowledge workers (55m36s)

• There is a shortage of people working in the skilled trades, with 70% of skilled trades workers concerned about the lack of workers. (1h0m38s)
• The number of new apprentices in fiscal year 2021 was over 241,000, a 22% increase compared to the average of the previous 10 years. (1h1m1s)
• College enrollment peaked in 2010 at 18.1 million students and has trended downwards since then, although there has been a slight increase in enrollment from 2023 to 2024. (1h1m27s)

Trends in apprenticeships, college enrollment, and geographic arbitrage (1h2m3s)

• The fastest-growing jobs in the US are wind turbine service technicians and solar photovoltaic installers. (1h7m36s)
• Many of the fastest-growing jobs require a degree or certification, but not always a four-year degree. (1h7m55s)
• As a society, we could benefit from tying reasonable qualifications at the education level to jobs, considering two-year degrees as a viable option instead of always requiring a four-year degree. (1h8m1s)

Startup opportunities in vocational training and alternative education models (1h8m24s)

• There is a startup opportunity for creating online or in-person courses that teach skills like becoming a handyman or carpenter. (1h8m30s)
• There is a discrepancy between the cost of a college degree and the earning potential it provides, suggesting a need for alternative education models. (1h9m27s)
• There are opportunities for startups to create faster and more efficient education models, such as apprenticeships or shorter programs, that align with the needs of the job market. (1h10m19s)

Google's career certificates initiative (1h11m9s)

• Google has partnered with Coursera to offer career certificates in fields such as cybersecurity, data analytics, and UX design. (1h11m48s)
• These certificates are designed to address the skills gap in high-demand fields and offer a path to high-paying jobs. (1h11m53s)
• Google's initiative presents an opportunity to create a similar platform that trains and connects individuals with customers in skilled trades like carpentry and home repair. (1h13m33s)

Job expectations and the reality for young professionals (1h14m16s)

• Young professionals should not expect to get jobs at large, well-known companies like Google, Goldman Sachs, IBM, and Microsoft. (1h14m17s)
• These companies are hiring a decreasing number of highly elite performers. (1h14m27s)
• Individuals who are not yet extremely high performers will need to be in an office environment to be mentored, while extremely high performers can work remotely or in a hybrid model. (1h15m17s)

Tenet Media controversy (1h15m42s)

• Several podcasters were allegedly offered $100,000 per episode to license their podcasts to a media company called Tenet Media. (1h16m19s)
• The podcasters in question promote pro-Russian and anti-Ukraine viewpoints and allegedly received funding from Russian sources through Tenet Media. (1h17m45s)
• Conservative media outlets tend to have more access to funding from private benefactors compared to liberal media, which relies more on advertising revenue. (1h21m3s)