Latent Space: The AI Engineer Podcast
01:03:29 · Jamin Ball, Shawn Wang
[01:03:29] S0: Mhmm. [01:03:30] S1: Takeaway that I want people to know. One of the things I wanted to... I was diving towards... I I didn't I didn't quite start it yet, I'll start it now, which is typically when you have an s one, you have a clear sense of the business. Let's call it market segments, product segments Mhmm. The org chart, the whatever. Mhmm. And we got Claude Code. Yeah. Claude Cowork. Yeah. Miscellaneous. Yeah. Or platform. Whatever. Yeah. Yeah. Yeah. And I'm like, okay. What about legal? What about design? Like, all this stuff that you've... Claude dot ai, the consumer business. Yeah. Yeah. For a while, that was a thing. Mhmm. Mhmm. Do we care? Do we... Is this all like one revenue bucket? You know? [01:04:07] S0: I I think we do care. [01:04:09] S1: Like, the products. Right? Like, this Claude Yeah. Code, and what else? [01:04:14] S0: I I... And this is where I do think and there was there was a section of the s one where they broke out some of these vertical applications they wanna go after. I mean, it it... It's kinda funny you bring this up. Like, I had a hypothesis, you know, years ago that, like, hey. Maybe the labs will stop releasing models, And instead, they'll just build applications and products powered by their models. [01:04:36] S1: Yes. [01:04:36] S0: And if they're powered by the best models that are never released publicly, hey, maybe they have the right to build all the best applications. [01:04:42] S1: That you kill Harvey by only using Claude Fable six legal.
01:04:42 · Shawn Wang, Jamin Ball
[01:04:42] S1: That you kill Harvey by only using Claude Fable six legal. [01:04:46] S0: Right. Or it's, hey, you know what, cursor? Guess what? We have... Well, you know, years ago, we got the best model and we're not releasing it. So guess what? We're gonna have the best coding agent because our model that's the most powerful isn't released publicly. And I do think it's why some of the leading application companies today are moving towards in housing their models. They want to control their own destiny. You need to. I think it's gonna be really hard as an application company over the long haul to survive without a research team internally. It's one of the investment thesis that I have that if we're investing in applications, I wanna believe there's two things, really strong product org, but also a really strong research org. And I also want to believe that they're aligned. And as the research gets better, the product gets better, which sounds counterintuitive, but there are a lot of research orgs that are just doing research for the sake of research versus closing the loop and actually having a positive cycle of of product improvements with research improvements. [01:05:43] S1: I'm I'm not, you know, I'm not in Anthropic, but I have the benefit of being friends with fair... A fair amount of people at Anthropic. And I would say research is king at Anthropic. [01:05:51] S0: Yeah. Totally. Totally. By far.
01:05:51 · Jamin Ball, Shawn Wang
[01:05:51] S0: Yeah. Totally. Totally. By far. [01:05:53] S1: Totally. And so part of my whole thesis around model labs versus agent labs is model labs will, you know, respect the model and a g... And try to build AGI, and products will be a final last mile Yeah. Sort of delivery mechanism. Whereas the agent labs will will respect the customer the most and build whatever they need, and then... And they'll they'll backwards integrate to models as and when, but they'll never be... Probably never be at the frontier for for those things. Yeah. And both can coexist. Yeah. Totally. Both have a market. [01:06:19] S0: Totally. Maybe to your question, I do expect to see a much bigger push by both labs, Anthropic and OpenAI, into vertical applications and kinda like diversifying out of just delivering models. I I think [01:06:31] S1: I I think the the actions of Anthropic show... So far have shown no serious intents at it. Yeah. Because cloud design is just a tab inside of That's right. A quad. That's right. Like a whole Adobe, you know, replacement. [01:06:44] S0: Mhmm. [01:06:44] S1: Claude legal is a markdown file, you know, markdown repos. Mhmm. Which like that is the AGI pillar. If if if research is king and like, you know, one model does everything, that is what you do. [01:06:53] S0: Yeah. So there's classic enterprise and org management. Yeah. You have a cash king product. [01:06:58] S1: Yeah. [01:06:58] S0: Yeah. Think your sales reps, what do they wanna sell? The thing they know how to sell that they've been selling, that is crushing it. What's harder to sell?
01:06:58 · Jamin Ball, Shawn Wang
[01:06:58] S0: Yeah. Think your sales reps, what do they wanna sell? The thing they know how to sell that they've been selling, that is crushing it. What's harder to sell? [01:07:05] S1: Like New things. [01:07:06] S0: New things, new SKUs, and so it's inertia, it's momentum. And this is just classic like big company boring stuff. [01:07:12] S1: But it's just like, you know, I I think for someone... Like, I've been through maybe fifteen years of IPOs. Mhmm. And for an IPO stage company, much less a $2,000,000,000,000 company Yeah. You've never seen, like, well, we have three SKUs. [01:07:27] S0: Yeah. Yeah. Exactly. Exactly. But but I think to Anthropic's credit, they've been really good at focus. And like they haven't been, you know, enamored with the next thing or [01:07:36] S1: No robots. Yeah. No images. [01:07:39] S0: You know, it's and again, you look at open eye, it's tough. Like, who are they competing with? They're competing with NVIDIA. They're competing with Google. They're competing with Meta. They're competing with Anthropic. You know, like, they're... They have different lines of business that are all competing with giants, like the biggest tech company in the world. And it's like, it's it's a tall task to take on one at a time, let alone all of them at a time. But, hey, that's that's the game you take on if... You know, when you're a trillion dollar company. You know, the state... The stakes are just higher.
01:07:39 · Jamin Ball, Shawn Wang
[01:07:39] S0: You know, it's and again, you look at open eye, it's tough. Like, who are they competing with? They're competing with NVIDIA. They're competing with Google. They're competing with Meta. They're competing with Anthropic. You know, like, they're... They have different lines of business that are all competing with giants, like the biggest tech company in the world. And it's like, it's it's a tall task to take on one at a time, let alone all of them at a time. But, hey, that's that's the game you take on if... You know, when you're a trillion dollar company. You know, the state... The stakes are just higher. [01:08:05] S1: Yeah. Okay. I wanna round out the Anthropic discussion, and then we can go to general commentary on other stuff. We... We've cheated a bit with Elorean and and TypeSafe. But have we covered the main debates that you've you've been engaged in? There's [01:08:22] S0: there's two others. So this is gonna be very, like, financially in the weeds. There... [01:08:29] S1: If you look at You can talk about convertibles. Yes. Exactly.
01:08:29 · Shawn Wang, Jamin Ball
[01:08:29] S1: If you look at You can talk about convertibles. Yes. Exactly. [01:08:31] S0: Yes. Okay. So on the balance sheet, you know, earlier in the episode, we talked about, hey. A 140,000,000 of cash raised... Capital raised, 134,000,000,000 of cash. That's what the the balance sheet shows you. What the balance sheet also shows is a... I might mess up the exact numbers because I don't have them in front of me, but I think about 108,000,000,000 of convertible notes payable as a liability. And so the question is, was that debt? Did they raise debt? And what you also see is a huge portion below the operating income line of other income and expenses that makes it look like they have a huge net loss. They're both related. And let me explain. So any company and any startup founder listening to this would understand and appreciate this. There's different ways to raise capital. You can raise preferred equity. You can raise converts. You can raise safes. There's a whole different host of options to raise money. Anthropic, just like every other startup, did everything. They raised some preferred equity. They raised some converts. They raised some safes. And along the way, there's different reasons that certain investors of the company might prefer one or the other. When it comes to strategic investors, there's even more reasons why they might prefer one or the other. And I think it's it's very well known that some of the strategic investors, Amazon and Google in particular, were very large investors and very big owners of Anthropic early on. And...