This transcript is generated with the help of AI and is lightly edited for clarity.
ARIA:
Reid, so excited to be chatting today. There is so much happening in the world of AI acquisitions, aqui-hires, billion dollar sums. So in the last two, three weeks, we saw OpenAI agree to buy Windsurf, formerly Codeium, for about 3 billion. OpenAI also announced the acquisition of Apple designer Jony Ive’s startup for 6 billion dollars. And then, we got the biggest acquisition or acqui-hire yet when Meta acquired 49% stake in Scale AI for almost 15 billion dollars. And then as of this recording, we just heard that eye-popping sums are going to Nat Friedman and Daniel Gross to join the Meta team. That is not finalized yet. So we don’t have final word on what is happening. But it seems like a lot of these AI companies are making moves, whether it’s acquisitions or acquihires. And also there’s, there’s large sums of money they’re going around. Meta is building their executive team on the AI front. So I’d love your reaction to a related statement. Just tell me if you agree or disagree and why in the age of AI, company building acquihires are generally more of a strategic advantage than acquisitions.
REID:
Well, it doesn’t surprise you that my answer is gonna be nuanced and not gonna accept either the agree or disagree format. They’re both critical tools, and they both need to be used effectively. And I think what’s really interesting about the last couple weeks of news is that, basically everybody that is strategic and is smart is doubling down. And not just resting on laurels in the OpenAI case, but is betting hard on AI and what AI is gonna mean in the next two to five years. And so in the Meta case, you’ve got Zuckerberg who has, you know, always been one of the most Meta strategic, you know, CEOs. You’ve got the Instagram purchase when Instagram was tiny. You’ve got WhatsApp, you’ve got Oculus. Similarly, you know, doing this massive deal with Scale [AI], hiring Alexandr [Wang], doing the reported deal with Nat [Friedman] and Daniel [Gross]. And the report is the hiring them as well, basically trying to get really in the game because heretofore, the principle success point for Meta has been we’re releasing open source Llamas. And the last Llama was having a lot of real problems. And so, given that there should be a natural, structural, right, for Meta to be much better on AI. You know, I think that’s a good, bold move. I think the first thing will be to get into the GPT-4 kind of class, models and to be in the mix, because you need to, to make that kind of stuff work. And obviously, Alexandr had a lot of views about what, you know, Gemini was doing and others were doing, relative to their formally using Scale AI as a training labeling data source.
ARIA:
But do you think, fundamentally, is there a shift in the age of AI, like you mentioned Instagram and WhatsApp, those were clearly acquisitions, of course, for the talent, but they really also wanted the product. They kept Instagram standalone. They also wanted the network, they wanted the user base. Whereas these sort of acquisitions or acqui-hires aren’t really about a user base. They’re not really about the technology, they’re about the people themselves. Is that a fundamental shift or are these just a few one-offs that are happening?
REID:
Well actually it’s a fundamental addition versus a shift. The addition is the fact that in order to be training these very large models, you need scale compute and scale data. And so, for example, Scale AI’s data is not its own, it’s bought by other people. So you can’t buy it for the data. Meta already has a whole bunch of data. Meta has a scale compute, you know, Scale [AI] does not. And so there’s relatively little in the product that you’re looking to actually in fact acquire. Because by the way, it’s Scale [AI] compute, Scale [AI] data and Scale [AI] teams. The scale effort to build these cognitive capabilities is absolutely the right thing to be doing. Everyone should be betting on them. The question is what you should be betting coming out of them. And part of that bet is a strategic set of probabilities of, well, there’s one probability that it’s just a human worker replacement on a lot of things. There’s another probability in which things–there’s another probability in that it’s a massive, human amplifier. That one we already see in which ways. There’s another probability in which it’s capable of doing things that really fundamentally matter, that are beyond what we can do now, and which are those? And that’s what we need to kind of sort through our strategies.
ARIA:
So that’s sort of talking about the technical and super intelligent side. And if we stay on the business side, if you’re looking at this from the outside, you’re thinking, these are some huge acquisitions. But I’m also seeing these companies trimming headcount. Google recently declared a new round of voluntary buyouts across major divisions, search, ads, commerce, central engineering, marketing research, comms for US-based employees. I mean, that’s many, many, many departments, of course outside of artificial intelligence. And these initiatives arrive ahead of potentially antitrust ruling that may force structural changes specifically at Google if they’re gonna split off Chrome or ask them to split off their ad tech business. And so it seems again, from the outside, that other companies are doing the same acquisitions, voluntary buyouts, you know, getting ahead of antitrust rulings. So I’ll ask you again for an agree, disagree, they all are happening anyway, but proactively or reactively, these companies are taking any opportunity to become leaner, especially as they integrate AI into their business.
REID:
So one of the things I think is an interesting point that everyone gets bemused by and drives private equity people nutty, is, companies actually in fact expand to the number of employees that they can manage to experiment with getting new strategic opportunities. You know, the private equity view of these things is you should run with as absolutely few employees as possible because you should be throwing off those profits, getting high PE measure and increasing my stock value, is the kind of PE value. But on the other hand, the PE people don’t understand. And this is one of the things that venture capitalists understand and startup founders do–and scale up founders do and large company executives–is what really matters is your ability to build new strategic franchises. And then there’s a risk discount where the PE people think, “I don’t think you can do that.” And the management thinks, “I think I can.” But part of the whole thing is, for the management is to say, well, you know, do I have enough buy-in that I’m allowed to do that is kind of the dynamic that plays out. So what that means in the world of employment is the natural role for all companies that are doing well is the management is giving permission, and sometimes encouragement, to go extending their franchise. So like for example, the comment has been made about Google for a long time that, you know, they have at least two-thirds more employees than they need to be running this super lucrative ad business with the other kinds of things. And they’re like, if you just trimmed down to this massively lucrative ad business, put in Chrome, some other things, and YouTube, you’d have this huge value. On the other hand, you then wouldn’t get Waymo. You then wouldn’t get all of these other things where it’s strategically investing in. And, and actually in fact, I’m more often at least conceptually on the side of the managers than I am [on] the side of the private equity people. Because actually in fact, what builds future value is these future franchises. That is actually in fact what you’re trying to do. It’s one of the reasons why I love doing startup investing and scale-ups and everything else, ’cause it’s like it’s building that future franchise that creates the value. Not just for society, not just for the markets, not just for the industries, but also even private equity. But, you know, you have to be, taking those shots on goal. And by the way, if you’re taking shots on goal, just like any kind of football, soccer, kind of thing, you miss sometimes, but you have to take structured shots on goal. So now what this gets to is the question of leaner and this kind of rumor going around that because of AI, they’re becoming leaner. And I think that rumor is broadly incorrect, except for the following nuance, which is, what all of the companies recognize is they desperately need to be playing in the AI future. So they need to be refactoring for that. And refactoring that is somewhat with talent for AI, but also we need to be affording prodigious amounts of compute and kind of training runs in order to make that happen. And we have to do that within a kind of a P and L envelope that’s acceptable to the market. And so if you say, well, if trimming these people, voluntary buyouts, et cetera, et cetera, is the right way that we recapture some of our P and L to be spending on compute and AI talent, then that’s absolutely what we should be doing. And that’s a smart thing to be doing. It’s not necessarily, our goal is to be leaner. Our goal is to be AI. People will be spending more money on compute because they’ll be amplifying what the employees are doing. And that means that there’s a trade off that is opposed to saying, you know, I have a fixed compute budget per employee. It’s like, I have a laptop, I have some server time, I, there’s a lot more compute that’s gonna be deployed per employee in order to make them much more effective. And that’s compatible with the super agency thesis. And it may mean that when you have a fixed-size budget, there’s a moderately less sized percentage of budget that’s going to employees, because of the increased compute. But it doesn’t mean, it’s not the, the simple, you know, kind of like terminator of jobs replacement theory is not actually what we’re seeing at all.
ARIA:
Well, Reid, I wanna push back on you a little on that because I don’t think people care whether it’s because Terminator AI is taking their jobs or because a company has less money for employee salaries because they have to spend more money on compute. Do you think that’s a meaningful distinction for the average employee who maybe doesn’t get hired? Because the company’s using compute?
REID:
Ultimately they don’t care if a company moves from, call it a thousand employees to 900. And then they’re one of the hundred and I would think that’s the heuristic maximum order of magnitude in any time soon in these things. But it may even be more likely 950. But, I don’t think they’ll care about that. I think they’ll go, well, I’m one of those, it doesn’t matter. Now I do think that’s part of the job transition that’s an issue. Now the question is, what usually people think about is they think that there’s a zero-sum amount of work in the world. And so they don’t think that other firms will be created and that, you know, that other people will be able to be hired to do other things in other firms. And so they just go, oh, that goes to the unemployment line. And actually, given the productivity I think we’re getting with AI, I don’t think that’s likely to happen. I think the fact that AI can teach, find, help people find new work, learn new work, learn how to use AI, be productive, is actually one of the things that we need to be encouraging as much as possible. Because the transition actually is gonna be really difficult. And that transition is if you’re one of those 50 or a hundred that is, you know, no longer part of company A’s future, that transition’s difficult. And by the way, it’s hard. But by the way, that’s part of what productivity and progress means. That’s part of what happens when everyone goes, okay, now this industry is much more productive and automated and competitive on a global basis.
ARIA:
Yep. I mean, I think I do wanna go back, not to just, you know, dump on PE people all the time. They’re, they’re a great punching bag, but I think Google is a great example there. When you think of, you think of Gmail, you think of Google Docs, like, to your point, they could have cut those long ago and it would’ve been a blip in their bottom line. And yet for the last 20 years, they’ve delivered enormous social good, you know, people using free Gmail accounts. And we don’t know, but you could imagine that Gmail and Google Docs are actually ripe for the AI age. And that’s a place where Google can innovate on that. We don’t know, but at least it’s a consumer interaction that now they have a toll hold to. And actually, I wanna note for anyone who’s particularly interested in this discussion on AI and jobs, we actually have the tech economist, David Autor on the pod next week talking about how AI will influence jobs, the world of work, what it’ll do to wages, the middle class. So, stay tuned for that. So Reid, I wanna switch gears a little bit from software to hardware. In Q1 2025, we saw 2.26 billion in global robotics funding. 70% of that was directed at specialized robotics in places like logistics, healthcare, inspections. And when we had Demis Hassabis on the pod, he talked about breakthroughs like deepminds, Gemini robotics and Gemini Robotics ER, and those are enabling robots that interpret language and adapt in unstructured environments. And they also have cardinal robotics. It sells cleaning robots that are two to four feet tall. They have raised $800 million in capital to pay robot manufacturers upfront, allowing them to lease the robots to businesses in exchange for a monthly fee that’s more manageable for many business owners. So it’s clear we might be in the first inning, that sort of this age of robotics is coming. Tesla claims they’re gonna make huge advances in robotics this year, too. So I would love to hear your agree or disagree. These parallel breakthroughs and LLMs that can power robotics and in hardware manufacturing are unlocking access for businesses of all sizes to deploy versatile AI driven machines in everyday operations.
REID:
So people would normally expect my answer to be I just a straightforward 1000% agree on this. And by the way, obviously, this is certainly what’s gonna be happening. And the only real question is timeframe. So I think the short answer to this is in a medium timeframe at least, the answer is absolutely yes. Agree. But the nuances are, that I actually think the world of physics, the world of atoms is much harder than the world of bits. It doesn’t mean it’s impossible. I mean, for example, what we are accomplishing with AI in terms of visual image recognition is extremely important. And that visual image recognition, unlocks everything from Aurora’s self-driving trucks to radiology, in cancer [diagnoses]. So, you know, and all of these things actually in fact really do play over in certain ways into the world of atoms. But the usual generalization is, and now it’ll be the whole world of atoms. For example, we’re gonna create a simulation of the entire world and then we’re gonna figure out fusion within the simulation of the entire world. And you’re like, that’s great, science fiction might be true someday not true soon. What I think will almost certainly happen since this is the Reid Riffs where we’re dunking on private equity people, is that all of the private equity people think it’s happening really, really soon. Or betting really hard. And, you know, there’s a reason why I started Manas with Sidd [Mukherjee] and not robotics companies, [be]cause biology is actually intermediate between bits and atoms. It’s much more like digital atoms. It’s much more like code. It’s much more complex in our environment, it’s much more amenable to that sort of thing. And so that’s part of the reason why I think the robotic stuff is gonna come, it’s gonna come in waves, what the first wave is, and you know, people tend to be predicting this is just like robots everywhere. That one is probably the one that I am most skeptical of not being the first wave.
ARIA:
And because there are these things that could be massively beneficial to humanity, surgical, self-driving cars being so much more safe, people not having to go into mines. You know, better for your health. Do you think there should be government investment or some other kind of investment there so that we can bring those on more quickly? Or no, [the] status quo is where we should be.
REID:
Well, there are forms of what I think government investment can really be, and there’s ways of doing smart government investment. But in this way, again, I’m kind of nuanced and I’m neither left nor right on this. So, you know, right tends to be the only kind of government investment you should do is tax breaks and left should be is you should spin up New Deal programs for the government investment. And there’s places where the left is more right, for example, in funding of basic science and all the things, [are] right now under a massive assault and, you know, future generations are gonna pay the price and medical deaths and other kinds of things for this. And there’s places where the right is correct on this, which is allowing free enterprise, and getting companies and people doing this sort of thing, is in fact extremely important now. But there’s also other tool sets that governments generally haven’t experimented [with] as much because it’s one of the places where if you kind of took your thinking business hat on and said, okay, look, it’s generally true that governments are not, VCs can’t pick winners, shouldn’t be trying to, you know, pick this stuff themselves. Well that means they shouldn’t be involved, is the classic right wing answer. And actually, in fact, if what you did is you said, “Hey, we’re interested in venture capital that’s investing in things that we’ll be creating, for example, US jobs, well, here is a format by which we identify venture capitalists who are not government employees, who have private market equity insurance, that equity incentives that are validated by people who invest in VCs, a lot, foundations, universities, et cetera. And we will put in matching funds to them with a huge benefit to the fund and the LPs if they can demonstrate they’re creating businesses that create us jobs.” Right? And we’re not looking to make money off this in the public. What we’re doing is we’re using the fact that we have liquidity and capital to incentivize the market’s creation of these jobs. So I tend to think that there are ways that governments can invest in this. You have to be clever about it in engaging the networks of venture capital mindset. And how do you get like a network of entrepreneurs? And by the way, one of the things that drives most lefties nuts, is you have to enable people to get very wealthy doing this because that’s part of the incentive mechanism that then creates the value for future generations as society. And, you know, we’ve run the experiment where we’re absent that incentive mechanism and it never works. I mean, so the, “it’ll work this time.” It’s like, well, okay, read history, go through multiple societies trying this. And make an argument why this time is different. And then I will take your anti-capitalist position more seriously. But until you’ve done that, you’re really not credible. You’re just a sloganeer. Adam Smith gets overly praised and overly criticized, and part of it is that he didn’t just write the Wealth of Nations, he also wrote the Theory of Moral Sentiments. And that part of what I think people have to take seriously about, part of the functioning of capital doesn’t mean that it doesn’t have issues and challenges. And it’s such an efficient, good mechanism. It can create so much impetus in a direction you go, whoa, whoa, that’s making environmental changes, we need to rebalance the incentive some. But it was also a question of, capitalism is, how are we of service to each other? How is it that I create products and services for you? And that that is a great transformation of human nature for, how do we operate? And of course, you know, in current political times, part of what Adam Smith and others, but Adam Smith was one of the original gangsters in this, was a genius about how do we make human existence win-win. How do we make geopolitical treaties win-win? And how do we make that, how do we organize that? I’ll close by going to one of my favorite books, which is Nonzero by Robert Wright, because the building of systems that prefer non-zero sum kind of outcomes and preference[s] is part of the progress we make in society. And I think the people who do that are part of the good people, and the people who destroy it are part of the bad people.
ARIA:
I mean, I couldn’t agree more. I was saying this to someone the other day, the idea that I could create a product that someone would pay money for. Oh my God, they liked my product so much, they were willing to part with their hard earned dollars. Or I was such a good consultant that they were willing to spend tens of thousand dollars on my insights. That feels incredible to be able to, to your point, do that service for someone and for them to be excited about parting with their dollars because they’re getting something more. So Reid, anytime we can dunk on the left and the right and private equity, it feels good. So, thank you for joining us today.
REID:
And we will continue to do that. Always fun.
REID:
Possible is produced by Wonder Media Network. It’s hosted by Aria Finger and me, Reid Hoffman. Our showrunner is Shaun Young. Possible is produced by Katie Sanders, Edie Allard, Thanasi Dilos, Sara Schleede, Vanessa Handy, Alyia Yates, Paloma Moreno Jimenez, and Melia Agudelo. Jenny Kaplan is our executive producer and editor.
ARIA:
Special thanks to Surya Yalamanchili, Saida Sapieva, Ian Alas, Greg Beato, Parth Patil, and Ben Relles.