"The Cognitive Revolution"
00:40:19 · Prakash Narayanan, Mike San Miguel, Nathan Labenz
[00:40:19] S1: Do do do they do this... A lot of Chinese entities will go through a Cayman Islands or a BVI or whatever. But do they do they trace back through that? [00:40:28] S2: Yeah. Yeah. They do. I mean, at least it's something we do. Every company is a little bit different, but we we do international orders. Right? We're not just, geo bound in North America. So, for us, you know, we're we're gonna trace back not just to the hardware purchaser is, but also if they have an off take. They're signing, an agreement with a neo cloud. You cannot legally sell this equipment with a off taker being a Chinese entity, for instance. [00:41:03] S0: Mike signed off there. Prakash and I kept talking. [00:41:09] S1: We talked to people like Samuel Hammond and others on the DC facing national security decision makers. But then you go down to the deployment guys, and these guys are running around, they're getting permissions, and every six months they're expecting an Nvidia checkup, and they're chasing on KYC, and they even know they're going to the owners, and they're going to the users, and maybe they don't know the user of the user. They're saying, Okay, maybe that is unclear. So I I I I wonder to what extent the policy discussions at the top end are divorced from really how in-depth the execution is at this point. Yeah.
00:41:59 · Nathan Labenz, Prakash Narayanan
[00:41:59] S0: I bet everything everywhere all at once is probably true here because a lot of what he described did sound to me kind of like the fracking boom in the sense that there's just, like, a lot of... I mean, it's capitalism at work. Right? I mean, if there's a lot of things coming together all at the same time, there's a ton of moving pieces in everything from the sites and the approvals and the local politics and the grid and, you know, and, of course, the chips. And you you gotta reinforce the concrete and, you know, not every site is ready to take on the the latest super heavy racks. I mean, just so many little details, so many people coming in together to do their part to create something that at the end of the day, at the consumer level is just like, you know, gives you some appreciation for why Claude occasionally has some downtime. Like, in general, you know, it's pretty amazing how smooth it all is. So I could see both, you know, the enforcement could, in many cases, be pretty legit, especially [00:43:09] S1: among,
00:43:09 · Prakash Narayanan, Nathan Labenz
[00:43:09] S1: among, [00:43:09] S0: you know, people who care about it or, you know, who are, just conservative enough that they wanna make sure they're absolutely on the right side of the law. And at the same time, that sounded chaotic enough that, if you told me that, like, I don't know, you know, 20% of the GPUs, like, somehow don't get their regular NVIDIA six month check-in, and of those, you know, some percentage found their way to wherever, that wouldn't shock me at all, you know, based on on what he said. It sounds like there's, you know, eighty twenty is obviously a simplistic way to describe it, but it sounds like there's a lot of sincere effort going in and then also just enough noise and and chaos that probably... The the opportunity for things to slip through is also pretty substantial, I would bet. Then Prakash turned to China and the pressure on American companies over their Chinese customers.
00:44:10 · Prakash Narayanan
[00:44:10] S1: Like, for example, Oracle selling capacity to Tencent, $7,000,000,000 of capacity, that was canceled. Right? So the national security infrastructure is pressuring these companies to cancel that. It's an American company doing business, it's outside China, and not sending chips into China. And at the same time, there is no pushback on the political infrastructure that is allowing this. Why don't you just make laws? Why pressure the companies? I just don't like it. If you wanna make laws, just make laws. But if you don't have the political willpower to make those laws, and you try to slide this under the gate, like why? You have a mandate now, right? You have a mandate in Congress, like do something, right? We say compute is the new oil, right? And so there is also this impact on compute. Let's say you decide not to sell compute to China, like zero, zero Chinese content, right? Do you also mean that YouTube cannot show AI generated video to Chinese participants, to Chinese viewers, to Chinese customers? Because that is an AI product. And Google needs to generate that AI product. Google has to use compute. And that compute is gonna be used on behalf of a Chinese customer. You can restrict it at the data center level. You can restrict it at the raw compute level. You can restrict it at the product of compute level. But at some level, you're going to end up selling to the Chinese because they are global consumers. Right?
00:45:48 · Nathan Labenz
[00:45:48] S0: I had said we get carried away with these restrictions. Here's why. I really do think we're gonna need cooperation with the Chinese. You know? That... That's... In terms of why all this matters to me, it's one, because, you know, I just generally don't wanna see tensions ratcheted up between The US and China in general. But specifically on AI, I really think we are going to need cooperation between The US and China on AI governance. I I really don't see how, I'd be extremely pleasantly surprised if we can get through all of this without the two countries coming together in some meaningful way. When you have, as we recently talked about, a super senior person at a frontier company telling me at the curve that there's a level of intelligence we probably just shouldn't go beyond, if that's the view that has now taken hold at the top levels of frontier model companies in The US, the only way to achieve that is gonna be through some sort of agreement. And we're really not putting ourselves in a great position to make that agreement. So a lot of this stuff seems ultimately quite self defeating, and it makes me sad. Part five, what investors are superhuman at. Back to Friday and Bryan Bischof of Theory Ventures, an early stage venture firm. First, the compute. I asked how much slack there really is in the market when we keep hearing both that you can't get GPUs and that you can get them on demand if you'll pay a multiple.
00:47:27 · Bryan Bischof
[00:47:27] S4: Totally. I think there's a couple things at work here. One, if you go to a Neo Cloud and you say you got compute, they're like, nope. It's all locked up. It's all contracted out for the next two years. And they're not lying. Like, they're not telling you an untruth, But there's also been quite a lot of discussion and even, you know, Satya talked about how there's a lot of compute that is locked up as you hear. This is essentially underutilized compute due to either, like, the geolocation of it or the available, like, energy. And so these are both true at the same time, where there is locked up compute that actually isn't super useful. There's also the reality of sort of utilization, utilization of GPU. Yesterday, I was chatting with some folks working at the infrastructure level around, like, GPU utilization, and one of the big problems is you actually can't run at maximum capacity all the time because it's unsafe from a scheduling perspective. You actually wanna build in Slop. And so there... There's actually so many more dimensions than simply do you have contracts on the available compute? And this is why you see many different routes to big success and, like, embarrassingly large numbers of ARR in the compute market. This isn't just because of FOMO. This is because there's actually so many profiles that you need to kind of, like, maximize the value of whatever compute is available to you. And so we run, you know, thousands of jobs here at Theory Ventures that are powered by AI agents. If you ask me, what's the distribution of immediacy for those jobs? Well, I'll tell you. Okay. Maybe five to 10% is right now. And maybe 40 to 60% is I'd like to see it before my next meeting. And the rest is, I don't know, maybe, like, this week would be neat. Like, you know, and that even just in, like, this one sort of niche of the kind of work that we're doing, we already have quite a broad variance of inference needs, and that's true of, I would say, almost every AI application layer company that I've ever spoken to since 2023. And so from that alone, you can see that if someone tells you there's simply no GPUs to be had, well, that's not really, like, accurate, but also they're speaking from a particular, like, bias. And the bias they're speaking from is probably for the workloads that is under demand right now for me.