hi Mark good to see you again

hello good morning how's everybody

we are really well thank you now Mark where are we going to make money going forward

well so in our business uh the theory is relatively straightforward uh which is uh we make money on technological disruption um and so we we make money when these new up start uh startups uh form and uh you know either either try to go take down a big incumbent or try to create some kind of New Market um and so that's what we do

um and so we we make money when these new up start uh startups uh form and uh you know either either try to go take down a big incumbent or try to create some kind of New Market um and so that's what we do

um I I think for the World At Large uh the you know the challenge is just that there's a fundamental uh uh Supply demand imbalance between the amount of capital um you know that's seeking productive uh economic investment opportunities um and then the the number of those opportunities and so I think there's a a very large macro problem uh on making money in the economy

um and and and and Tech and Venture Capital can only be a small part of that answer but but hopefully we will be a part of that answer

yeah well you see in the middle of Silicon Valley and you kind of invented the Internet so um kicking off the the AI question just how how will the AI raise pan out here

yeah so the the the theory and the Hope um certainly that we're betting that we're betting against and investing hard against um is that is that Ai and specifically these new breakthroughs around AI like like generative AI U represent a new platform

and in the in the tech industry that's a sort of very powerful concept uh because the idea of a new platform in the tech industry is sort of a new foundational technology um that you can then imagine Reinventing thousands and thousands of application categories on top of

and and the the tech industry historically um has been fueled by these platforms you know the original one was the Mainframe computer that then led to mini computers client server computers personal computers mobile uh mobile computers

um and every time there's a platform shift There's an opportunity to reinvent the industry and reinvent basically the entire ecosystem and and all the different ways that people use technology and and create an entirely new generation of companies

um and so we we certainly believe that AI is is is is a is a new platform shift we believe that AI is one of the really big platform shifts we we think this you know might the possibility exist that this is on par with the microprocessor

um and so you know we think there's an opportunity to take a very broad uh perspective here and invest in many different um both core Technologies and also use cases of of AI

where is the where is the kind of fight going on just now what uh is it about chips or money or people or electricity just what exactly is it

yeah so the the the most dramatic thing about this this sort of AI shift um is that it's it's it's what I call an 80-year overnight success

um and so the original paper on neural networks which are the foundational technology of AI was actually written in 1943

um and then you had over the course of the last 80 years you had entire generations of researchers who who basically try to make AI work and for the most part weren't weren't able to do it

um in fact when I when I was in school you know 35 years ago AI was a was a discredited field because there had been an AI boom in the 80s that that that didn't pan out

um and so it's an it's a it's a technology sector that's sort of been in search of of working products for a long time

um essentially what happened was the Breakthrough moment was in 2022 and it was the it was the chat GPT moment

um and so it was you know it's actually 7 79 years into the technology but it was a breakthrough moment and then it was a breakthrough moment of it went basically from not working to working incredibly well in one step

uh and you know the the technolog is not perfect yet there's still a lot of work to be done but it fundamentally you know these products are just incredible already in what they can do and and they're far better out of the gate than the than you know the microprocessor was or the internet was

um and so it's this kind of rare situation where you have this dramatic leap and functionality happening extremely quickly

um as a result of that basically every part of the tech ecosystem is trying to react and trying to figure out how to incorporate AI or trying to build on AI or trying to you know basically compensate you know figure out how to how to compensate for weaknesses in AI

um every single sector of the tech industry is reacting right now

um there is a you know massive chip you know shortage uh this the biggest Supply deance Supply demand imbalance and chips that we've ever seen as an industry

um and so there's a massive fight happening there there's a massive you know wave of data center Innovation development

there's actually power a lot of people are now trying to figure out how to power and cool these giant data centers there's actually a Resurgence of interest in nuclear power um around these data centers

um and then there's there are there are basically fights happening up and down the software stack

you know the the the fight that gets probably the most publicity at the moment is the fight between the software companies building the so-call foundation models

um and so and there there's sort of a big fight between a view of the world in which there will be a few big models that basically win everything and then an alternate view of the world in which this is more like the microprocessor and there will actually be you know many you know thousands of different models running on billions of devices

um you know of many different shapes sizes descriptions customized in various ways

um and and actually that that latter thesis is the thesis we're investing against very aggressively

now you said last year that we should just stuff AI into everything we do like weapons cars everything in order to beat the Chinese what do you could you tell us about it

yeah there's there's sort of two policy debates uh happening around AI um you know somewhat somewhat for sure in the EU but for sure in the US

um and and there's sort of one policy debate which is you know AI is sort of weird and scary and we should regulate it and we should kind of prevent it from happening in different ways

and you know the EU has put in place these kind of very onerous regulations the UK has followed and then there's a big fight happening in in in US politics around this

um and so this is sort of an inward-looking you know kind of domestic policy uh Viewpoint and people have all these all these fears around AI

um there's a completely different conversation which is the geopolitical conversation and that's the that's the conversation of basically you know geopolitical competition with China

um and of course you know the minute you get into that conversation it becomes very clear that we need to win

um and and specifically the reason we need to win is we need to win we need to win the AI race with China you know sort of a very analogous way that we won the you know the sort of Technology race with the Soviet Union um you know in in the previous Century

which is you know we have two basically two basically dominant you know mindsets regimes of you know Western democracy and and and and Chinese communism um you know that both have aspirations to to to transform the world

um you know both of those are are supported by Major you know major nation states uh both of those are supported by Major militaries both of those are supported by Major economies and both of those are supported by Major Tech Industries

um and if you look at the pre precedent of the cold war with the Soviet Union the reason the West won was because of sort of a triangle of technological superiority economic superiority and then and then and then National Security Military Intelligence superiority

um but you know we we decided we wanted to win and and and and we won right and by the way our Victory ended up actually being great for the the people of Russia right it was actually really great for the Soviet Union to fall and and you know people people in Russia are much better off today

um and so you know I think this is very straightforward like we we need to win we need to win by being better technologically better economically and better militarily

AI has been identified as the core technology uh for the future of the nation state by both US military planners by the Pentagon um as well as by uh you know the the the Chinese planners

and so it will be one of the main areas uh in which these you know these kind of two the two hemispheres compete and and and I think it's important that we win

where do you think the West is now relative to China

so the West has I would say all of the advantages and disadvantages of a decentralized system uh and a market economy and a and a sort of a system in which governments don't control everything

um and you know the huge advantage of that is innovation and Entrepreneurship the disadvantage of that is you know a very it's very difficult for our systems to plan

you know there you know there is no top- down American Technology strategy there is no top down European technology strategy those concepts are kind of you know antithetical to our systems

U and so we're very robust and dynamic in general um but you know we're very messy

um the Chinese have both the advantages and the disadvantages of a centralized system much like the Soviet Union did

um you know they have a command and control system where the Communist party you know owns and controls everything and they can direct their private companies to do whatever they want which they're doing right now you know with sort of increasing Force

um and then they have all the disadvantages of of a centralized system which is you know they have they have a command system

um you know they're actually in the process of trying Crush their entrepreneurial system right now they're you know they're trying to basically Drive their entrepreneurs you know out of out of you know in many cases out of business in many cases out of the country

um and so it's it's just like like the cold war with the Soviet Union it's it's an asymmetric situation each side brings strengths and weaknesses

and then I would say you know each side is tempted to embrace the model of the other side to try to get the advantages

so the Chinese have kind of this fake entrepreneurial system uh you know that they kind kind of try to Foster

and then we have this sort of you know you know sort of U not very effective you know Central planning function uh you know in in in DC and in Brussels you know that doesn't work very well

and and at least I would argue we should lean into the strengths of our system um and you know and and try to benefit from the fact that we should have a much more Dynamic economy we should have much more entrepreneurship um and and hopefully that thatss what we'll do

to talking of um dynamism you when we met you also talked about the importance of investing in American dynamism and I guess that also goes for European dynamism what what do you mean by that

yeah so you know look the the this is sort of part of you know this is part of the challenge for the the geopolitical conflict as well as our our domestic issues

and so you know look both both the US and EU I mean we're we're we're we're you know we are the result of the Industrial Revolution right we're a result of the first Industrial Revolution with things like steam power we're the result of the Second Industrial Revolution you know with things like electricity we're the result of the of the computer age

you know the the the West represented by the US and Europe is where you know most of these Technologies over the last you know 300 years were developed

um and historically our society's benefited enormously by this you know we we have the highest standards of living you know are you know children over time have you know have done the best and and and generally it's been a very you know synergistic positive uh process

um you know in the last 50 years I think both American society and EU Society has sort of lost faith in the idea of technological progress um and lost faith frankly in the idea of economic progress

and you know decided to become let say I don't know much more you know cautious much more risk averse um much more you know sort of unwilling to to think of change as a as a positive and exciting thing

um and and you know you actually see that I would say in in in in America right now you know the relationship between industry and the government is is at a 50-year low it's it's you know the actually quite quite a large amount of hostility between government and Industry

and the same is certainly true in in in in Europe

um and and so again you know our view is like look we you know we need technology we we need technology we need Innovation we need markets uh we need these things to function why because we need growth

um you know we we we want our societies to be growth societies we want people to think that there's opportunity we want people to be able to think in positive um uh some terms

you know we we don't want people to think in terms of like for me to get something I have to take it away from somebody else we want to you know think about our society as as societies that can grow and flourish where our children will do better than we do

um and so American dynamism is sort of a very direct investment program that we have um you know focused on injecting a lot more technological energy into a lot of the sectors of the economy that the government's very involved in

um and certainly defense and intelligence are a big part of that but also energy and and and law and education and Healthcare are also big parts

and in all these sectors you know frankly they they they just they I think they're really suffering from a lack of technological change and Innovation and and they could really use it

what would be the key to get Europe to become more Dynamic I mean not that we are not dynamic in Europe but uh compared to Silicon Valley we seem to be lagging a bit behind here

yeah so look if you you know if you did a rank order of the the top 50 technology companies 30 years ago a large percentage of them were European I think it was about 40%

um if you did a rank order today I think it's one out of 50

um and so you know Europe Europe has really falling off

and and I guess the the way I would describe it is it it seems at least from the outside it seems to be almost entirely Choice

uh which is it seems like it's been a choice to sort of prioritize regulation and risk aversion and the precautionary principle over U you know over Innovation

you know the most acute version of that obviously is the energy sector um you know with the sort of sort of voluntary standown of energy development which you know I think has has led to you know real geopolitical stresses with respect to Russia

um and so you know I I I look I think I think it's been a choice I think that I think the the political leadership class in in in in um in in Europe has decided that they they want this the the voters so far have supported them in wanting it

um you know it has it has consequences I think the consequences are becoming clearer

I think you know fundamentally it's a choice at a societal level and you know the the voters will either step up or they won't and the leaders will either step up or they won't

but but but I think the the results of the current approach are in and I I don't I don't think they're they're very good

any reflection any Reflections on your responsibility as a venture capitalist or Venture Capital investor at a time where technology is becoming so integrated into the race between the superpower

you know um ellon musk with with Starling suddenly being key in Ukraine uh and so on what do you how do you think about it

yeah so I would describe it as we're 100% on the side of the United States um and we're 100% on the side of the West

um and so we we never as a firm for example had an investment program in China we never you know we always view that there would be difficulties from that which you know for a long time you know looked like a mistake but I think is now you know increasingly clear

so so we're 100% on the side of the US and the West

um as a firm we don't have our own foreign policy we have basically the foreign policy of the US state department

um and so we're you know we're sort of in complete lock step with our uh with our government you know we all of our programs that involve anything involving National Security will will will be based you know on on on the US government's view of of friends and allies

you know I would say this you know this was a controversial position basically up until Russia's invasion of Ukraine

um and so up until Russia's invasion of Ukraine basically there was a prevailing ethos and Silicon Valley that National Security is somehow bad or undesirable or the tech company should not want to you know be involved in it

and there was this famous incident where go gole had this program with the US Department of Defense that their you know their employees basically rioted on campus and forced them to cancel

um at the same time that Google actually had you know an AI lab in Beijing that by definition is you know anything in in in in China sort of connected to their Security State

um and so you know there was a fair amount of I would think internal dissension division in in Silicon Valley in terms of what the right role is you know between the valley and the US government

um basically what what we've observed is the the minute Russia invaded Ukraine it was you know was obviously a catastrophe for Ukraine and a terrible thing and I wish it hadn't happened but it it caused sort of an instant sort of re um I don't know like a depolarization of this issue uh certainly in the in the US and in the valley

where all of a sudden people who historically had been very averse to Tech involvement in defense all of a sudden became very in favor of it

um and you know the most Vivid example there was this company andril that was a very politically controversial company you know our our new defense contractor uh you know building all these automated defense systems

um it was a very controversial company in the valley basically right up to the day Russia invaded Ukraine and ever since everybody loves it

um you know which the founder of that company points out you know there's some you know some some some irony to that because the company's doing the same things

um uh but I you know I think the Russian invasion of Ukraine really highlighted for a lot of people including a lot of people on the political left in the US that actually National Security really matters and there are actually bad people in the world and there are you know going to be invasions and there going to be bad things that happen

and the Western democracies need to be able to respond and need to be able to be state of the art being able to cope with these situations

and then of course the you know the attack at Israel you know is a is a sort of a second again a another terrible thing but a second kind of uh factor that has caused people to say okay we we need to make sure that Western democracies are actually armed up

yeah yeah Mark finishing off on a completely different tag here uh in one minute how can we become better investors because that's the theme of the conference

yeah so I think the question always I I think the question for sort of large institutional investing the question is you know deployment of large amounts of capital

there just are not that many places in the world to get growth

um and so you know the fundamental challenge every large scale investor I talk to deals with is you know most of the capital that they invest uh you know just kind of by definition can't go into high growth sectors um just because there aren't that many high growth sectors they're actually you know quite quite hard to find

um and so there are basically a small number of places in the world that have growth there are a small number of people who are starting the kinds of companies and trying to build the kinds of industries that are going to be able to to deliver growth

um and so you know hope you know generally speaking you know Western investors are quite supportive of this and so you know venture capital is quite well funded

but um you know I think focusing in on the specifically the places and the people who are going to be able to generate growth

and then quite frankly the other thing is um you know it's very helpful when these investors also weigh in more broadly than just with money uh and also weigh in with their influence and you know with their with their level of authority and their level of of you know persuasive capability and so forth in their societies

uh you know the growth is something that we should be aspiring for and that is is actually good not just from an investment standpoint but from a societal standpoint

fantastic well uh big thanks for sharing your thoughts with us and uh you know all the best of Lu going going forward

great thank you very much it's great to be with you guys

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