00:00I was taking a look, of course, at your post-perspective blog post, putting a value
00:04on SpaceX. You ended up with an enterprise value of about $1.2 trillion in equity value near $1.3
00:12trillion. And as I just read, SpaceX, of course, is trading roughly double that in terms of its
00:18market cap. But walk us through what led you to those figures. You know, what were the different
00:24inputs, rather, that led you there? I mean, let's start with, I think, the big story. This is
00:30about as close as you can get to the Avengers Stark Industries, a futuristic company that is in space.
00:36As you look and say, that's what the future is going to look like, a space launch company
00:40that offers internet through satellites and now is in the AI business. It's an engineering marvel as
00:47a company. But it's still a company that has only $20 billion in revenues, is losing money.
00:52So the value is going to come entirely from what you think about its future.
00:56And that's why when I value the company, I said, this is my story, my value, my decision. But if
01:02you have a different story and a different value and a different decision, I'm not going to contest
01:07you and say, you're wrong and I'm right, because how can I make that judgment? So it's a three
01:12business company loosely tied together by outer space. But ultimately, all three of the businesses
01:19it's in are the businesses of the future. And it's in a pretty good spot in each of the three
01:25businesses.
01:26I love that phrasing, three businesses loosely tied together by space. Let's talk about the AI piece
01:31a little bit more, because you kind of describe that as really the swing factor when it comes to
01:36your valuation. And it seems like the AI factor there continues to swing. You think about the news we
01:42got today, SpaceX announcing that it has finally formally agreed to take over Cursor, for example,
01:48when it comes to its AI business. There's a lot of speculation about whether it could merge with
01:54Tesla. And I wonder, you know, you think about how quickly the AI story is changing. How rapidly
02:02does that sort of impact the valuation when you think about that AI swing factor?
02:06And you're absolutely right. This is still a huge potential market where much is unknown. We don't
02:13know what successful businesses in the space will look like. In addition to what you mentioned,
02:19the fact last week that it clawed fable. And those of you who've been tracking the news know that the
02:24U.S. government has essentially suspended its use to non-Americans. So basically, there is that new
02:30story. The other big news story, less reported, is that open AI is cutting prices, which tells you that
02:36this is a business where competition is going to be upfront. And the costs of delivering products
02:42and services are still a big unknown. I mean, I read somewhere that an hour of clawed fable would
02:49cost you $6,000 as a company. You think that's good for Anthropic. They must be making a lot of
02:55money.
02:55Not necessarily. The cost of delivering AI products and services is also in turmoil. The power, the water,
03:01the other costs involved. So I think there's a lot in this business we don't know. And of the three
03:07businesses SpaceX is in, this is its shakiest business, but the one with the greatest potential.
03:12So you're right. It's a swing factor. People disagree on what SpaceX is worth. It's around AI that the
03:18disagreements are going to revolve. Well, draw that thread then from the SpaceX AI business,
03:22obviously its lowest margin business of the three major ones under that umbrella, to Anthropic and
03:27potentially open AI, which hopefully when they come to market, we'll get more clarity on what
03:31they have. Is the future of AI and more importantly of the AI business model, not necessarily just in
03:37selling the time and the tokens, is there sort of a bigger flywheel that maybe these companies
03:43might go after? Yeah, absolutely. They have to. But their market caps, if they don't go after the
03:48bigger flywheel, the value is not there. So the question is what that edge is. What's going to create
03:55the networking benefit in this business? It's going to cause somebody who picks Claude to stay
04:00with Claude or picks OpenAI to stay with OpenAI. That's why I said this is a business very much
04:05in transition right now where people are feeling their way, including the big players. It's not like
04:10OpenAI and Anthropic and XAI know what's coming. None of them do, which is one reason you see them
04:16trying things out, hoping that something sticks. Starting with this choice of subscription versus usage
04:22models. Anthropic has increasingly shifted away from subscription models to usage-based fees.
04:28Because it turns out that left in the hands of people, you can end up with incredibly large
04:33expenses from AI bots if you don't control them. So that's going to play out in the companies that
04:39adopt these AI bots or AI agents. But I think you're also going to see it play out in the
04:46companies
04:47offering these products and services. But you're right. Ultimately, this is a big market.
04:52And the company that essentially ends up controlling this market could be worth a lot more than
04:58$5 trillion. I mean, you put the number on it. It could be a huge number.
05:01Well, I am curious about it.
05:02At the moment, we don't know which one it is.
05:03I am curious, though, too. And obviously, I mean, you are basically the guy who teaches folks how to do
05:08traditional evaluations. And I am curious as to whether the way we think of traditional,
05:13I kind of put that in quotation marks, but you take whatever the standard is out there.
05:17Does that even apply to this sort of future, particularly given there are so many unknowns
05:23about how this technology is going to be applied?
05:25By traditional valuation, you mean looking at price earnings multiples or EV debit and saying,
05:30this looks expensive. You're absolutely right. Those metrics are almost useless here.
05:34But if you ask me, where does the value of a business come from? I don't care how futuristic
05:38you are if I'm investing in a business. Ultimately, I need that business to generate revenues.
05:43Those revenues to be profitable and have cash flows left over for me as an investor.
05:48So no matter how futuristic a company is, ultimately, it's got to show up in the brass
05:53stacks. The missing ingredient is your imagination because you can't just take past numbers and
05:58extrapolate them. You need to tell a story about the AI business. And that's why I said there's
06:03room for disagreement. If you think AI is going to replace every white collar worker, and there
06:09are some people who do, your potential market is much bigger, and you will value LLMs and AI
06:14companies a lot more than I do. I don't think that's likely to happen. I think you're going to
06:19see a healthy subset of white collar workers replaced. But I think those are the disagreements.
06:25There are disagreements about the big picture. What's AI going to do? What is it going to replace?
06:29Is it a tool or is it a people replacement? All those questions ultimately have to be answered
06:36for you to be able to value these companies. And right now, we're shooting in the dark. We don't
06:41have much information to base it on. But we can't use the excuse of it's too uncertain. I'm not going
06:45to make an estimate. You still have to make your best judgments, accepting you're going to be wrong
06:50100% of the time.
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