Do Kwon Guilty, Powell Pivot & OpenAI’s $12B Run Rate | E2168

Key Concepts

• Fed Rate Cut: Potential decrease in the Federal Reserve's interest rates.
• Basis Points (BPS): A unit of measure used in finance, equal to 0.01% (one hundredth of one percent).
• Algorithmic Stablecoins: Stablecoins that maintain their peg to a fiat currency through algorithms and incentives rather than being backed by reserves.
• TerraUSD (UST): An algorithmic stablecoin that was pegged to the US dollar and part of the Terra blockchain ecosystem.
• Luna: The cryptocurrency token associated with the Terra blockchain, used in the algorithmic mechanism to maintain UST's peg.
• Ankor Protocol: A protocol that offered a high yield (20%) on UST deposits, contributing to its initial popularity.
• Death Spiral: A rapid and catastrophic decline in the value of a cryptocurrency or asset, often triggered by a loss of confidence and cascading sell-offs.
• Genius Act: Stablecoin focused legislation that passed recently.
• Endogenously Collateralized Payment Stablecoins: A stable coin that relies solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.
• Run Rate: A method of projecting financial performance based on current data.
• Tender Offer: An offer to purchase some or all of shareholders' shares in a corporation.
• Robo-taxis: Self-driving taxis.
• IP Assignment: A legal agreement that transfers ownership of intellectual property rights from one party to another.
• Super Voting Shares: Shares that carry more voting power than regular shares, often held by company founders or insiders.

Fed Rate Cut and Market Impact

• Jerome Powell's Speech: During a speech at Jackson Hole, Jerome Powell indicated that the Fed might consider a rate cut due to risks to inflation and employment.
• Market Reaction: The market interpreted Powell's comments as a signal of a potential rate cut in September, leading to a rise in stock prices.
• Poly Market: Poly Market data showed a spike in the probability of a 25 basis point rate cut in September following Powell's speech.
• Impact on Startups: Lower interest rates make it easier to borrow money, encouraging investment and risk-taking.
• Jason Calacanis' Investments: Calacanis announced two recent investments: $200,000 in a late-stage growth venture fund and $200,000 in a crypto fund.
• Reasoning: Calacanis cited increased confidence in the US economy, clearer crypto regulations, and a desire to learn more about the crypto space as reasons for his investments.
• Den Miller's Strategy: Calacanis referenced Den Miller's strategy of making small bets to gain knowledge and understanding of a particular market or technology.

The Do Kwon/TerraUSD (UST) Debacle

• Algorithmic Stablecoin: UST was an algorithmic stablecoin that aimed to maintain its peg to the US dollar through a system of incentives involving the Luna token.
• How it Worked: Users could burn Luna to mint UST and vice versa, creating arbitrage opportunities to keep UST's price stable.
• Ankor Protocol's Role: The Ankor protocol offered a 20% yield on UST deposits, attracting a large amount of capital.
• The Collapse: A large withdrawal from Ankor triggered a sell-off of UST, leading to a decline in its value and a massive printing of Luna, devaluing the Luna token and causing a "death spiral."
• Jason Calacanis' Skepticism: Calacanis expressed skepticism about UST's complexity and lack of regulation during an interview with Do Kwon.
• Do Kwon's Arrest and Guilty Plea: Do Kwon was arrested in Europe and extradited to the United States, where he pleaded guilty to fraud charges related to the collapse of UST.
• False Claims: Kwon was found to have made false claims about partnerships and the independence of the Luna Foundation Guard.
• Genius Act and Algorithmic Stablecoins: The Genius Act calls for a study on non-payment stablecoins, including "endogenously collateralized payment stablecoins," which rely on the value of another digital asset from the same originator.
• Key Term: "Endogenously" refers to something that originates from within a system, not influenced by external forces.

OpenAI's Growth and the AI Landscape

• Revenue Growth: OpenAI reached a $1 billion month, putting them on a $12 billion annual run rate, a 20% growth in less than a quarter.
• Compute Constraints: OpenAI's CFO, Sarah Frier, stated that the company's growth is limited by compute capacity (GPU availability).
• User Base: OpenAI has 700 million weekly active users.
• Monetization: OpenAI generates revenue through API access, consumer subscriptions (ChatGPT Plus), and enterprise solutions.
• Advertising Potential: Calacanis suggested that OpenAI could generate significant revenue by introducing advertising to its free users.
• Anthropic's Funding and Performance: Anthropic is raising $10 billion at a $170 billion valuation and has seen its revenue scale to a $5 billion run rate.
• Model Performance: Anthropic's Claude Opus 4.1 is currently ranked as the top-performing model on LM Marina.
• Market Size: Calacanis estimates the AI market to be a $10 trillion prize, with the potential for a trillion dollars in revenue.
• MIT Report on Enterprise AI: An MIT report found that 95% of enterprise AI pilots are not generating significant value.
• Verticalized AI: The discussion highlighted the success of verticalized AI applications, such as coding co-pilots, tax co-pilots, and sales tools.
• Examples: TaxGPT, Gorilla Voice, and Granola were mentioned as examples of successful verticalized AI applications.

Canva's Valuation and the Design Tool Market

• Valuation Increase: Canva's valuation has increased from $32 billion to $42 billion, surpassing its previous high from 2021.
• Revenue and User Base: Canva has over $3 billion in revenue and a quarter billion monthly active users.
• Figma's Influence: Figma's successful IPO has contributed to Canva's valuation increase.
• Figma's Market Cap and Revenue: Figma's market cap is $38 billion, and it is projected to reach $1.1 billion in revenue in 2025.
• Canva vs. Figma: Canva has three times as much revenue as Figma.
• Market Focus: Canva targets consumers and "prosumers," while Figma focuses on professional designers.

Nuro, Self-Driving Technology, and the Future of Transportation

• Nuro's Funding: Nuro raised an additional $100 million, bringing its Series E to $200 million, with investment from Uber.
• Partnerships: Nuro is partnering with Uber and Lucid to develop self-driving taxis.
• Deployment Plans: The companies plan to deploy 20,000 self-driving cars by 2026.
• Nvidia's Role: Nvidia provides hardware and software platforms for self-driving technology.
• Consumer Preference vs. Mandate: The discussion explored whether self-driving features will become standard through consumer preference or government mandates.
• Automatic Braking: Automatic braking systems will be required in all new cars and light trucks sold by September 2029.
• Whimo's Partnership with Toyota: Whimo is partnering with Toyota to integrate its self-driving technology into Toyota vehicles.
• Job Displacement Concerns: Protests against self-driving cars are emerging due to concerns about job displacement.
• App Drivers Union: The App Drivers Union is protesting against the introduction of self-driving cars in Boston.
• Robo-taxi Depots: The infrastructure required to maintain and operate fleets of self-driving cars, including charging stations and maintenance facilities, will be a significant factor.
• Market Expansion: The adoption of self-driving technology is expected to expand the overall transportation market, with ride-sharing accounting for a larger percentage of rides.
• Relocation of Human Drivers: Human drivers are expected to relocate to suburban and rural areas to provide transportation services in areas not yet served by robo-taxis.

Equity Splits Among Co-Founders

• Founder Question: A founder on Reddit asked for advice on how to handle equity splits with a technical co-founder.
• Negotiation: Calacanis emphasized the importance of open and honest negotiation about equity splits.
• Contribution: The equity split should reflect each founder's contribution to the company.
• Alternative Offers: If the founders cannot agree on an equity split, the business-oriented founder should seek other opportunities.
• Salary Considerations: Salary levels can be adjusted to compensate for differences in equity ownership.
• Future Equity: Founders should also consider future equity grants and compensation adjustments.
• Importance of Early Discussion: It is crucial to discuss equity splits early in the company's formation to avoid conflicts and legal issues.
• IP Assignment: Ensure that all founders sign an IP assignment agreement to protect the company's intellectual property.
• Third-Party Mediation: An angel investor, board member, or advisor can help mediate equity split discussions.
• Snapchat Example: The Snapchat lawsuit involving a third co-founder who was unfairly excluded from the company's profits highlights the importance of addressing equity issues early on.

Conclusion

The episode covered a wide range of topics, from the potential for a Fed rate cut and its impact on startups to the collapse of TerraUSD and the future of self-driving technology. Key takeaways include the importance of understanding complex financial systems, the potential of AI to transform various industries, and the need for careful consideration of equity splits among co-founders. The discussion also highlighted the challenges and opportunities associated with emerging technologies and the importance of adapting to a rapidly changing landscape.