SpaceX-Cursor Deal, SaaS Debt Bomb, New Apple CEO, SPLC Indictment, Colon Cancer Spike

David Sacks: One thing I just want to say is just what a pleasure he has to deal with. when I read in the media, they're always describing him in a certain way that, he's yelling at people or he's moody or something like that. And that's never, ever been my experience with him. He's always pleasant to be with. He's always genial. He asks questions. He's interested in the subject matter. It's just a completely different portrayal. I don't get where the media is coming from at all on this. He's charming AF. Let's just call it what it is. I mean, maybe if you double-crossed him, maybe, I don't know, but I've just never seen any evidence of how they describe him at all.

David Sacks: Cursor obviously is very strong in coding. That's what it brings to XAI. XAI brings compute and they bring a foundation model. And the problem that Cursor had is that even though coding is kind of like the white hot area of AI right now, when it got started, it was really competing against generalists in the form of OpenAI and Anthropic. But now those generalists have decided to vertically integrate in this area of coding, right? And so Cursor's now competing against Cloud Code and OpenAI's Codex. And so they were dependent on foundation model companies that were getting in the business of competing with them, which was just not a good place to be, right? So now they have this new alliance with a different foundation model company, which also brings the compute. It just makes a lot of sense.

David Sacks: The thing that people are waking up to in the last 120 days is just how much of the value of AI is being realized by writing software. And we've kind of got this wrapper term, we call it agents, but agents are fundamentally just quickly spun up applications. But for all of them, as we're realizing very quickly, you end up making too many agents, they end up being super inefficient, they need to be engineered, and you still need to have a strong software engineering capability and competency to fix all the agents, to build all the harnesses, to make everything work well together. And that's why having a strong developer environment, a strong IDE, actually solves that biggest problem. So eventually all the enterprises that are getting hot and heavy on agents are going to be like, whoa, wait a second, we've actually got to fix how this is all being done, as we saw this week in that story with Amazon where there's like a million agents being spun up inside and everything's wasting resources, redundant data creation, redundant data stores, redundant API calls, et cetera, tons of money being wasted. So you have to centralize still. You have to have good software engineering talent that's making good infrastructure and good use of these agents. And that ultimately will require an integration of the AI tooling with a standard software engineering front end, which is the IDE that Cursor has.

David Friedberg: The thing that people are waking up to in the last 120 days is just how much of the value of AI is being realized by writing software. And we've kind of got this wrapper term, we call it agents, but agents are fundamentally just quickly spun up applications. But for all of them, as we're realizing very quickly, you end up making too many agents, they end up being super inefficient, they need to be engineered, and you still need to have a strong software engineering capability and competency to fix all the agents, to build all the harnesses, to make everything work well together. And that's why having a strong developer environment, a strong IDE, actually solves that biggest problem. So eventually all the enterprises that are getting hot and heavy on agents are going to be like, whoa, wait a second, we've actually got to fix how this is all being done, as we saw this week in that story with Amazon, where there's like a million agents being spun up inside and everything's wasting resources, redundant data creation, redundant data stores, redundant API calls, et cetera, tons of money being wasted. So you have to centralize still. You have to have good software engineering talent that's making good infrastructure and good use of these agents. And that ultimately will require an integration of the AI tooling with a standard software engineering front end, which is the IDE that Cursor has.

David Friedberg: What has happened in the last year in particular is agents have become so good and so fast and so cheap that many enterprises can simply spin up an alternative to a vertical SaaS solution. And that is crushing the sales team ability to sell in. That is who you are competing against. Now, I want to make one point and just link this with something else that happened this week. And that is Kevin Warsh hearing for Fed Reserve Chair. Kevin Warsh went and talked a lot about the deflationary effect of AI. And I actually think we all talk about the SAS apocalypse as if it is this sort of isolated business phenomenon where these SAS companies are getting blown up. I think another lens to look at what is going on is the incredible deflation of how much it costs to successfully run a business and you do not have to pay a premium price for SaaS products anymore. Meaning that piece of the business can suddenly get much cheaper. That AI is delivering on its deflationary promise.

Chamath Palihapitiya: I want to make one point and just link this with something else that happened this week. And that's Kevin Warsh's hearing for Fed Reserve Chair. Kevin Warsh went and talked a lot about the deflationary effect of AI. And I actually think we all talk about the SaaS apocalypse as if it's this sort of like isolated business phenomenon where these SaaS companies are getting blown up. I think another lens to look at what's going on is the incredible deflation of how much it costs to successfully run a business and you don't have to pay a premium price for SaaS products anymore. Meaning that piece of the business can suddenly get much cheaper. That AI is delivering on its deflationary promise. [...] He said, the way that we've been measuring inflation is wrong. And that he doesn't agree with the way the Fed has been measuring inflation because you can do a survey of any household and they'll tell you, my God, everything's so expensive. So all of the indices and bullshit that are being used to calculate an inflation index is completely misrepresenting what the average American is actually feeling.

David Friedberg: I want to make one point and just link this with something else that happened this week. And that's Kevin Warsh's hearing for Fed Reserve Chair. Kevin Warsh went and talked a lot about the deflationary effect of AI. And I actually think we all talk about the SAS apocalypse as if it's this sort of like isolated business phenomenon where these SAS companies are getting blown up. I think another lens to look at what's going on is the incredible deflation of how much it costs to successfully run a business and you don't have to pay a premium price for SaaS products anymore. Meaning that piece of the business can suddenly get much cheaper. That AI is delivering on its deflationary promise. ... what he's saying is that the deflationary forces ultimately lead to economic expansion because other parts of the economy will now grow. So if I can suddenly cut, you know, call it 50% of my SAS budget, and I can reinvest that capital in other ways of growing my business instead of managing my expenses, all of a sudden, my enterprise will grow and the economy will grow.

Jason: Kevin Warsh went and talked a lot about the deflationary effect of AI. And I actually think we all talk about the SaaS apocalypse as if it's this sort of like isolated business phenomenon where these SaaS companies are getting blown up. I think another lens to look at what's going on is the incredible deflation of how much it costs to successfully run a business and you don't have to pay a premium price for SaaS products anymore. Meaning that piece of the business can suddenly get much cheaper. That AI is delivering on its deflationary promise. [...] Warz spoke a lot about the deflationary evolution promised by AI and that he expects that it will drive productivity growth like we've never seen before. But he said, I don't know what that's going to do to the job market, that there may be a dislocation between that productivity growth being realized and how the labor markets are going to be able to respond to those things. But fundamentally, he's saying that we're going to see economic deflation. [...] He also said, just as an aside, and I want to make sure I cover this so that we're really clear, he said, the way that we've been measuring inflation is wrong. And that he doesn't agree with the way the Fed has been measuring inflation because you can do a survey of any household and they'll tell you, my God, everything's so expensive. So all of the indices and bullshit that are being used to calculate an inflation index is completely misrepresenting what the average American is actually feeling.

Chamath Palihapitiya: Kevin Warsh went and talked a lot about the deflationary effect of AI. And I actually think we all talk about the SAS apocalypse as if it's this sort of like isolated business phenomenon where these SAS companies are getting blown up. I think another lens to look at what's going on is the incredible deflation of how much it costs to successfully run a business and you don't have to pay a premium price for SaaS products anymore. ... what he's pointing out is that as a result of deflation, because it's not coming from some cost cutting or economic contraction, what he's saying is that the deflationary forces ultimately lead to economic expansion because other parts of the economy will now grow. So if I can suddenly cut, you know, call it 50% of my SAS budget, and I can reinvest that capital in other ways of growing my business instead of managing my expenses, all of a sudden, my enterprise will grow and the economy will grow.

David Sacks: I would be bullish for private equity just based on pricing, but the bearish part is that in order for their business model to work, you have to have predictable cash flows. You cannot have a SaaS company go from 120% net dollar retention one quarter to 80% net dollar retention six months or a year later because a big part of their customer base is attrited to using tokens, or to basically creating some bespoke software.

Chamath Palihapitiya: I think what happens is when you're a startup, you typically have to figure out how to disruptively price to enter the market. So you're like, okay, if I deliver $10 of value, I'm going to charge a dollar. And that's the normal playbook, like a 10% ratio, right, of price to value. The problem is when you start to stack venture capital into it, and then you stack growth equity into it, what you're effectively creating in the preference stack of your company is that you are creating a higher return hurdle, right? You got to clear 300 million, 500 million, a billion of pref, and then you have to return 15 or 20% on top of that. So what do people do as they raise more money? They increase price. But the problem is at some point when you increase price, you engender a ton of competition and you put a huge target on your back. Private equity is the last stop. Because when they come in and they layer in billions and billions of dollars of not just equity, but also debt, and that has to then be completely predictable and paid back, their only lever is to raise price. They can never cut price to take share. They can't underwrite that to pay back their debt holders. And so Sachs, part of the big problem here and why nobody wants to touch these companies is that they are overpriced. Yes, they're making a billion dollars of ARR, but the unit cost has gotten out of control. It used to be 10% of value, it's probably now 30% of value. And everybody's looking at their contracts thinking, well, when it comes time to a renewal, I'm going to just cut this in half, or I'm going to cut this by two thirds, or I'm going to cut this by 75%, because the value isn't there anymore.

Chamath Palihapitiya: The problem is when you start to stack venture capital into it, and then you stack growth equity into it, what you're effectively creating in the preference stack of your company is that you are creating a higher return hurdle... So what do people do as they raise more money? They increase price. But the problem is at some point when you increase price, you engender a ton of competition and you put a huge target on your back. Private equity is the last stop because when they come in and they layer in billions and billions of dollars of not just equity, but also debt, and that has to then be completely predictable and paid back, their only lever is to raise price. They can never cut price to take share. ... the unit cost has gotten out of control. It used to be 10% of value, it's probably now 30% of value. And everybody's looking at their contracts thinking, well, when it comes time to a renewal, I'm going to just cut this in half.

Chamath Palihapitiya: Private equity is the last stop. Because when they come in and they layer in billions and billions of dollars of not just equity, but also debt, and that has to then be completely predictable and paid back, their only lever is to raise price. They can never cut price to take share. They cannot underwrite that to pay back their debt holders. And so Sachs, part of the big problem here and why nobody wants to touch these companies is that they are overpriced. Yes, they are making a billion dollars of ARR, but the unit cost has gotten out of control. It used to be 10% of value, it is probably now 30% of value. And everybody is looking at their contracts thinking, when it comes time to a renewal, I am going to just cut this in half, or I am going to cut this by two thirds, or I am going to cut this by 75%, because the value is not there anymore.

Chamath Palihapitiya: Private equity is the last stop because when they come in and they layer in billions and billions of dollars of not just equity, but also debt, and that has to then be completely predictable and paid back, their only lever is to raise price. They can never cut price to take share. They can't underwrite that to pay back their debt holders. And so Sachs, part of the big problem here and why nobody wants to touch these companies is that they are overpriced. Yes, they're making a billion dollars of ARR, but the unit cost has gotten out of control. It used to be 10% of value, it's probably now 30% of value. And everybody's looking at their contracts thinking, well, when it comes time to a renewal, I'm going to just cut this in half, or I'm going to cut this by two thirds, or I'm going to cut this by 75%, because the value isn't there anymore.

Jason Calacanis: Look at Benioff. He's the founder of the company. He's run this thing since its founding decades ago. He is willing to bet it all. He's willing to make the change. And it may be that the index you buy in this era of AI transformation is the index of founders, that the founders who are still running their businesses are going to be the ones who are most likely to see the future. They can burn the boats. They'll burn the boats. They'll maneuver the boats. All of the guys who have hired managers to run the business are going to do the things that Shamaf's talking about, which is try and charge fees and try and maintain the old way of doing things as opposed to reinvent for the new future.

Jason Calacanis: Look at Benioff. He's the founder of the company. He's run this thing since its founding decades ago. He is willing to bet it all. He's willing to make the change. And it may be that the index you buy in this era of AI transformation is the index of founders, that the founders who are still running their businesses are going to be the ones who are most likely to see the future. They can burn the boats. They'll burn the boats. They'll maneuver the boats. All of the guys who have hired managers to run the business are going to do the things that Shamaf's talking about, which is try and charge fees and try and maintain the old way of doing things as opposed to reinvent for the new future.

David Sacks: I have always hated when founders take on venture debt. Part of it is that founders forget that they have to pay it back. They treat it like venture capital and they forget about that. And then they get surprised. But the other thing I have never liked about it is it makes you more fragile. It basically subjects you to a bunch of business covenants and it makes it harder for you to do an abrupt shift in your business because now you have got a bank looking over your shoulder and they want to make sure they get paid and they have to review your financials and all the rest of it. And to your point, J. Cal, the companies that have free cashflow right now are the ones that have the most maneuverability. I hate taking away maneuverability from founders, and that is what debt does because it subjects you to a fixed schedule of payments. And so this is always a thing to remember, whether you are a business or you are an individual, when you put on that debt, it makes you more vulnerable to big disruptions in the market.

David Sacks: I want to say just a quick thing about venture debt, which is, look, I think it's fine when private equity guys use it because they know what they're doing, but I've always hated when founders take on venture debt. I know, Jake, how you agree with me. Part of it is that founders forget that they have to pay it back. They treat it like venture capital and they forget about that. And then they get surprised. But the other thing I've never liked about it is it makes you more fragile. It basically subjects you to a bunch of business covenants and it makes it harder for you to do an abrupt shift in your business because now you've got a bank looking over your shoulder and they want to make sure they get paid and they have to review your financials and all the rest of it. [...] I've never seen venture debt work well to improve the quality of a business. Never, it doesn't work. I've only ever seen venture debt that damage companies.

David Sacks: I want to say just a quick thing about venture debt, which is, look, I think it's fine when private equity guys use it because they know what they're doing, but I've always hated when founders take on venture debt. I know, Jake, how you agree with me. Part of it is that founders forget that they have to pay it back. They treat it like venture capital and they forget about that. And then they get surprised. But the other thing I've never liked about it is it makes you more fragile. It basically subjects you to a bunch of business covenants and it makes it harder for you to do an abrupt shift in your business because now you've got a bank looking over your shoulder and they want to make sure they get paid and they have to review your financials and all the rest of it. [...] the companies that have free cashflow right now are the ones that have the most maneuverability. I hate taking away maneuverability from founders, and that is what debt does because it subjects you to a fixed schedule of payments.