The Europeans, I mean, they have a really different mindset for all this stuff. When they talk about AI leadership, what they mean is that they're taking the lead in defining the regulations. You know, they get together in Brussels and figure out what all the rules should be. And that's what they call leadership.

It's almost like a game show or something. They do everything they can to strangle them in their crib and then if they make it through like a decade of abuse of small companies, then they're going to give them the money to grow.

Ronald Reagan had a line about this, which is if it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.

Yeah.

The Europeans are definitely at the subsidize it stage.

David, welcome to the a16z podcast. Thanks for joining.

Yeah, good to be here.

So, David, you're the AI and crypto czar. Why don't you first talk about why it makes sense to have those as a portfolio? What do they have to do with each other? And then I'll have you lay out what's the Trump plan on those two categories and how we're doing.

Well, there are two technologies that I guess are relatively new. And so there's a lot of fear of them and I think people don't actually know that much about them. They don't really know what to make of them. I think that from a policy standpoint and we can talk about the similarities and differences. The approaches are a little different.

I think with crypto, the main thing that's needed is regulatory certainty. You know, all the entrepreneurs I've talked to over the years, they all say the same thing, which is just tell us what the rules are. We're happy to comply, but Washington won't tell us what they are. And in fact, during the Biden years, you had an SEC chairman who took an approach, which I guess has been called regulation through enforcement, which basically means you just get prosecuted. They don't tell you what the rules are. You just basically get indicted and then everyone else is supposed to divine what the rules are as you get prosecuted and fined and imprisoned.

So, that was the approach for several years. And as a result of that, basically the whole crypto industry was in the process of moving offshore and America I think was being deprived of this industry of the future. And so President Trump during his campaign and last year he gave a now famous speech in Nashville in which he declared that he would make the United States the crypto capital of the planet and that he would fire Gensler. That was like the big applause line.

He's talked about how surprised he was at what a big ovation he got at that. So he said it again and the crowd erupted again but in any event he promised basically to provide this clarity so that the industry would understand what the rules are, be able to comply, in turn that should provide greater protection for consumers and businesses, everyone who's part of the ecosystem, and it makes America more competitive. So I think that's sort of the mandate on crypto is in a way it's pro-regulation. It's basically we want to put in place regulations.

In a way AI is kind of the opposite where I think the Biden administration was too heavy-handed. They were starting to really regulate this area without even understanding what it was. They had no one had really taken the time to understand how AI was even being used, what the real dangers were. There was this intense fear-mongering and as a result of that, the approach of the Biden administration was they were in the process of implementing very heavy-handed regulations on both the software and hardware side and we can drill into that.

I think that with the Trump administration, the approach has been that we want the United States to win the AI race. It's a global competition. Sometimes we mention the fact that China is probably our main competitor in this area. They're the only other country that has the technological capability, the talent, the knowhow, the expertise to beat us in this area. And we want to make sure the United States wins. And of course in the US it's not really the government that's responsible for innovation. It's the private sector. So that means that our companies have to win and if you're imposing all sorts of crazy, burdensome regulation on them then that's going to hurt not help.

So the president gave a I think very important AI policy speech a couple months ago on July 23rd where he declared in no uncertain terms that we had to win the AI race and he laid out several pillars on how we do that. It was pro-innovation, pro infrastructure, which also means pro energy and pro export. And we can drill into all those things if you want, but that was sort of the high line. And so I think that, again with AI, the idea is kind of like how do we unleash innovation? And I think with crypto, it's been more about how do we create regulatory certainty.

In terms of my role, like why am I doing both? I mean, I think the common denominator is just again, these are new technologies. They obviously come from the tech industry, which has a very different culture than Washington does. And I kind of see it as my role to help be a bridge between what's happening in Silicon Valley and what's happening in Washington and helping Washington understand not just the policy that's needed or the innovation that's happening but also kind of culturally, what makes the tech industry different and special and how that needs to be protected from government doing something excessively heavy-handed.

So David, you know, we're going to talk a lot about AI today, but just on crypto, I've had this interesting experience this year kind of after the election, people adjusted to the change of government. And I've had this discussion with a number of people who, let's say, in politics who were previously anti-crypto, who have been trying to figure out how to kind of get to a more sensible position. And then also actually people in the financial services industry who kind of followed it from a distance, and maybe participated in the various debunking things without really understanding what was happening. But the common denominator has been they're like "you know Mark I didn't really understand how bad it was. I basically thought you guys in tech were basically just whining a lot, and pleading as a special interest, and kind of doing the normal thing. And I figured the horror stories were kind of made up, of people getting prosecuted and entrepreneurs getting their houses raided by the FBI and, you know, like the whole panoply of things that happened and like I didn't really I now in retrospect now that I go back and look, I'm like, 'Oh my god, this was actually much worse than I thought.'" Do you have that experience? And as you're in there and kind of as you now have like a complete view of everything that happens, like do you think people understand actually how bad it was?

I mean, I think it's a great point. I mean, I didn't really know either. You kind of heard generally. I mean, we knew that there was debanking going on and by the way, it wasn't just crypto companies that were being debanked, but their founders were being debanked personally. So, if you were the founder of a crypto company, you couldn't open a bank account. I mean, that's a huge problem. It's like how do you transact? How do you make payments? How do you pay people? I mean it basically deprives you of a livelihood. It's a very extreme form of censorship. So that was definitely happening. And then of course you have all the prosecutions that the SEC was behind. So yeah, it was really bad.

I remember back in I think it was in March we had a crypto summit at the White House and one of the attendees said that "a year ago I would have thought it was more likely that I'd be in jail than that I'd be at the White House." And so it was a really big milestone for the industry. They had never ever received any kind of recognition like that. The idea that this was even a industry that you would do an event at the White House. I mean at a minimum I think crypto is seen as very déclassé. But in any event yeah no it's been a huge shift. I mean, we basically have stopped that. And it was very unfair because again, these founders wanted to comply with the rules, but they weren't told what they were. And that was all part of a deliberate strategy, I think, to drive crypto offshore.

Yeah. One of the things that is very different between crypto and AI that we've noticed is that on the crypto front, everybody just wanted rules, and the industry was relatively unified. Whereas in AI, we've seen very like interesting kind of calls coming from inside the house with certain companies really going for regulatory capture. You know, people who have early leads saying let's cut off all new companies from developing AI and so forth. What do you make of that and and where do you think that's going?

I think it's a very big problem. I actually recently criticized one of our AI model companies for engaging in regulatory capture strategy.

Yes.

Very fair criticism by the way.

It is very fair and actually, of course they denied it and then, should I tell the story? Rarely do you get vindicated on X so thoroughly and completely as I did on this because after this company, it was basically Anthropic, after they denied it. There was, what basically happened is that Jack Clark who's a co-founder and head of policy for Anthropic, gave a speech at a conference where he said that he compared fear of AI to a child seeing monsters in the dark or thinking there were monsters in the dark and but then you turn the lights on and the monsters are there. I thought that was such a ridiculous analogy. I mean it's basically puerile. I mean, it's so childish just to be almost self-indicting because you're basically admitting the fear is made up, not real.

In any event, so I said, "Well, this is like fear-mongering and part of their regulatory capture strategy." And of course, they denied it. But then a lawyer who was in the crowd at his speech said, "Well, yeah, but Jack's not telling you what he said during the Q&A, which he basically admitted that everything that Anthropic was doing with like things like SB53, which is supposedly just implementing transparency." He said, "No, that's all, he admitted that was just a stepping stone to their real goal, which was to get an approval, a system of pre-approvals in Washington before you can release new models." And he admitted as part of the Q&A that making people very afraid was part of their strategy. So again, just as much as a smoking gun as you could ever get in a spat on X.

But the reason why I think that that approach is so damaging is that the thing that's really made I think Silicon Valley special over the past several decades is permissionless innovation. Right? It's that two guys in a garage can just pursue their idea.

You know, maybe they raise some capital from angels or VC firms. Basically people who are willing to lose all of their money and these are people who, you know, are young founders. They could also be the future dropout in a dorm room and they're able just to pursue their idea. And the only reason that I think has happened in Silicon Valley whereas you look at in industries like pharma or healthcare or defense or banking or these highly regulated industries where you just don't see a lot of startups is because they're all heavily regulated which means you have to go to Washington to get permission to do things. And the thing I've seen in Washington is just that, you know, the approvals get set up for reasons, but those reasons very quickly stop mattering. And it just matters like how good your government affairs team is at navigating through the bureaucracy and figuring out how to get those approvals. And it's not something that your typical startup founders are going to be good at. It's something that big companies get good at because they've got the resources and that's exactly what regulatory capture means.

So the whole basis of Silicon Valley success, the reason why it's really the crown jewel of the American economy and the envy of the rest of the world. We see all these attempts by all these other countries to create their own Silicon Valley. The reason that's the case is because of permissionless innovation. And what is being contemplated and discussed and implemented with respect to AI is an approval system for both software and hardware. This is not theoretical. This has already been happening on the hardware side. One of the last things that the Biden administration did the last week the Biden administration was impose the so-called Biden diffusion rule which requires that every sale of a GPU on Earth be licensed by the government which is to say preapproved unless it fits into some category of exception but basically the overall idea is that compute is now going to be a licensed and and pre-approved category. We rescinded that.

And then on the software side like I said I mean the goal very clearly is to start with these reporting requirements to the government to the states and then where that ramps up to is you have to go to Washington to get permission before you release a new model and you know it's this would drastically slow down innovation and make America less competitive. I mean, you know, these approvals can take months, they can take years. When a new chip is released every year and we have licenses that have been sitting in the hopper for 2 years, I mean, the requests are obsolete by the time they finally get approved. And that would be even more true with models where, you know, the cycle time is like three or four months for a new model. I mean, you know, and what exactly is a bureaucracy in Washington going to know about this technology that they're that they're going to be in a good position to approve it. Any event, but this is what is being contemplated right now and I think it would be a disaster for Silicon Valley, but also and for innovation, but therefore for American competitiveness and I think we will lose the AI race to countries like China if this is the set of rules that we have.

Yeah. One of the really diabolical things about their argument is if they really believed there was a monster then why are they buying GPUs like at a rate faster than anybody? And then the other thing that we know from being in the industry is their reputation is the literally the worst security practices in the entire industry with respect to their own code. So if you were building this monster, the last thing you'd want to do is like leave a bunch of holes around for people to hack it. So they don't believe anything they're saying. It's like completely made up to try and maintain their lead by the same psychotic.

I think there is, I think it's a heady drug to basically say that we're creating this new super intelligence that is going to could destroy humanity but we're the only ones who are virtuous enough to ensure that this is done correctly, right? And I think that you know...

It's a good recruiting tool. Yeah, join the virtuous team.

Yes, I think that's right.

But yeah, but I think that is definitely... So I think of all the companies that particular one has been the most aggressive in terms of the regulatory capture and pushing these for these regulations. And just, I mean let's just bring it up a level, just doesn't have to be about them. There's now something like 1,200 bills going through state legislators right now to regulate AI. 25% of them are in the top four blue states which are California, New York, Colorado, and Illinois. Over a hundred measures have already passed. I think three of them just got signed in the last month in California alone.

I'll tell you what Colorado is actually... Colorado, Illinois, and California have all done some version of a thing called algorithmic discrimination, which I think is really troubling where it's headed. What this concept means is that if the model produces an output that has a disparate impact on a protected group then that is algorithmic discrimination and the list of protected groups is very long. It's more than just the usual ones. So, for example, in Colorado, they've defined people who may not have English language proficiency as a protected group. So, I guess if the model says something bad about, you know, illegal aliens and that would be, you know, that would basically violate the law.

I don't know exactly how model companies are even supposed to comply with this rule. I mean, presumably, discrimination is already illegal. So if you're a business and you violate the civil rights laws and you engage in discrimination, you're already liable for that. You know, if you happen to make that mistake and you use any kind of tool in the process of doing it, we don't really need to go after the tool developer because we can already go after the business that's made that decision. But the whole purpose of these laws is to get at the tool. They're making not just the business that is using AI liable, they're making the tool developer liable.

And I don't even know how the tool developer is supposed to anticipate this because how do you know all the ways that your tool is going to be used? How do you know that this output, you know, especially if the output is 100% true and accurate and the model is doing its job? Um you know then how are you supposed to know that that output was used as part of a decision that had a disparate impact? Nevertheless, you're liable.

And the only way that I can see for model developers to even attempt to comply with this is to build a DEI layer into their models that tries to anticipate could this answer have a disparate impact? And if it does, we either can't give you the answer. We have to sanitize or distort the answer. And you know, you just take this to its logical conclusion and we're back to, you know, woke AI, which by the way was a major objective of the Biden administration. That Biden executive order on AI that we rescinded as part of the Trump administration had something like 20 pages of DEI language in it. They were very much trying to promote DEI values, they called it, in models.

And we saw what the result of that was. You know, it was, you know, we saw the whole black George Washington thing where history was being rewritten in real time because somebody built, you know, a DEI layer into the model. And I almost feel like the term woke AI is insufficient to explain what's going on because it somehow trivializes it. I mean, what we're really talking about is Orwellian AI. You know, we're talking about AI that lies to you, that distorts an answer that rewrites history in real time to serve a current political agenda of the people who are in power. I mean, it's very Orwellian and we were definitely on that path before President Trump's election. It was part of the Biden EO. We saw it happen, you know, in the release of that first Gemini model. That was not an accident that those distorted outputs came from somewhere.

So it was, you know, to me this is the biggest risk of AI actually is it's not it was not described by James Cameron it was described by George Orwell. You know it's in my view it's not the Terminator it's 1984 that as AI eats the internet and becomes the main way that we interact and get our information online that it'll be used by the people in power to control the information we receive. That it'll contain an ideological bias that essentially it'll censor us. All that trust and safety apparatus that was created for social media will be ported over to this new world of AI. Mark, I know that you've spoken about this quite a bit. I think you're absolutely right about that.

And then on top of that, you've got the surveillance issues where, you know, AI is going to know everything about you. It's going to be your kind of personal assistant. And so it's kind of the perfect tool for the government to monitor and control you. And to me that is by far the biggest risk of AI. And that's the thing we should be working towards preventing. And the problem is a lot of these regulations that are being whipped up by these fear-mongering techniques, they're actually empowering the government to engage in this type of control that I think we should all be very afraid of. Actually,

Sam Altman earlier this week said that in 2028 or by 2028, he expects to have automated researchers. I'm curious just for your sort of state of of AI sort of model development or or just progress in general and what do you think are the implications? Some people have been sort of, you know, saying that, you know, AGI is two years away, sort of the AI 2027 papers, the old Ashenbrenner's situational awareness papers. I'm curious kind of what's your reading of the of the state of play in terms of AI development and what are the implications from that?

So, my sense is that people are in Silicon Valley are kind of pulling back from the let's call it imminent AGI narrative. I saw Andrej Karpathy gave an interview where all of a sudden he's rewritten this and he says AGI is at least a decade away. He's basically saying that reinforcement learning has its limits. I mean it's very useful. It's the main paradigm right now that they're making a lot of progress with. But he says that actually the way that humans learn is not really through reinforcement. We do something a little different which I think is a good thing because it means that human and AI will be synergistic, right? The AI's understanding if it's based on RL will be a little different than the way that we intuit it and reason. But in any event, I sense more of a pullback from this imminent AGI narrative.

The idea that AGI is two years away. Of course, it's kind of unclear what people mean by AGI, but it's kind of, you know, it was used in this like scary way that it's kind of the super intelligence that would grow beyond our control. I feel like people are pulling back from that and understanding that yes we're still making a lot of progress and the progress is amazing but at the same time you know what we mean by intelligence is multifaceted and it's not like there's progress being made along some dimensions but it's not along every dimension.

Therefore I think again I would just I mean I've described actually the situation we're in right now as a little bit of a Goldilocks scenario where the extremes would be you know you kind of have the scary Terminator situation imminent super intelligence that'll grow beyond our control on the other the other narrative you hear in the press a lot is that we're in a big bubble. So in other words the whole thing is fake and the media is basically pushing both narratives at the same time.

Yeah. But any event, I think that the truth is is more in the middle. It's kind of a Goldilocks scenario where we're seeing a lot of innovation. I think the progress is impressive. I think we're going to see big productivity gains in the economy from this. But I like the observations that Balaji made recently where he said there's a couple of things that really struck me. One was AI is polytheistic, not monotheistic. Meaning what we're seeing is many instead of just one all-knowing all powerful god. What we're seeing is a bunch of smaller deities, more specialized models. It's not that sort of we're not on that kind of recursive self-improvement track just yet but you know we're seeing many different kinds of models make progress in different areas.

And then the other one was just his observation that AI was middle to middle whereas humans are end to end and therefore the relationship is is pretty synergistic and I think that's right. I mean I think all those observations are like resonate with me in terms of where we're at right now.

I think it's so important that this technology remain decentralized because the kind of the Orwellian concern is kind of the ultimate centralization. And fortunately so far what we're seeing in the market is that it's hyper competitive. There's five major model companies all making huge investments. And the model performance, the evaluations are relatively clustered and there's a lot of leapfrogging going on. So, you know, Grok releases new model, it leapfrogs ChatGPT and but then ChatGPT releases something new, they leap frog. So they're all like very competitive and close to each other. And I think that's a good thing.

And it's the opposite of what was predicted, you know, through this like imminent AGI story where the storytelling there was that one model would get a lead and then it would direct its own intelligence to making itself better and then so therefore its lead would get bigger and bigger and you kind of get this recursive self-improvement and pretty soon you're off to the singularity. And we haven't really seen that, you know, we haven't seen one model completely pull away in terms of capabilities. And I think that's a good thing.

And so Eric to your point about this narrative about the virtual AI researcher that that was one variant of this sort of imminent AGI narrative is that the steps would be models get smarter then models create virtual AI researcher and then you get a million virtual AI researchers and then you know it's singularity and I think just the slight of hand in that is what is a virtual AI researcher right it's like a very easy thing to say, but like what does that really mean? And you know, Toby's point about AI is still middle to middle. It doesn't it's not end to end. So if an AI researcher is end-to-end, there's like things that has to you things the person has to figure out. They've got to set their own objective. They've got to be able to pivot in ways that AI can't.

You know, like is it really is that really feasible to create a virtual AI researcher? I think there's like parts of the job that you know AI could get really good at or even better than humans, but probably that tool has to be used by a human AI researcher. So I guess the argument I suspect could be sort of teleological in the sense that you might need AGI to create a virtual AI researcher as opposed to the other way around. And if that's the case, you don't just, you know, you're not going to get like singularity. So, I'm a little bit skeptical of that claim. We'll see. What Sam say he could do it in 2028. I mean, I guess we'll see.

I think all those claims tend to be like recruiting ideas as opposed to actual predictions.

He's not the first to mention that idea. Other model companies have been promoting it, but yeah, Leopold mentioned that too. We'll see. But I suspect that that's what's wrong with that argument is that virtual AI researcher requires AGI and so the idea that you're going to get AGI through a virtual AI researcher is backwards but we'll see.

David, you've also you and the administration I think have also been very supportive of open source AI which I think also dovetails into this in terms of like the market being very competitive.

Yes.

Do you want to spend a moment on what you guys have been able to do on that and how you think about it?

Yeah, I mean so just to the... open source is very important because I just think it's synonymous with freedom, I mean software freedom. You basically could run your own models on your own hardware and retain control over your own information.

And by the way this is what enterprises typically do all the time is you know about half the global data center market is on prem meaning enterprises and governments create their own data centers. They don't go to the big clouds and by the way I've got nothing against the hyperscalers but just you know people like to run their own data centers and maintain control over their own data and that kind of thing and I think that will be true for consumers to some degree as well.

So I do think it's an important area that we should want to encourage and promote. The irony right now in the market is that the best open source models are Chinese. And it's sort of a quirk, right? It's the opposite of what you'd expect. You'd expect like the American system would promote open and somehow the Chinese system would promote closed. That has kind of ended up being a little backwards.

I think there's like good reasons for it. It could just be it could just be kind of a historical accident. The fact that the Deep Seek founder was like very committed to open source and kind of just kind of that like got things started that way or it could be part of a deliberate strategy. If you're China and you're trying to catch up, open source is a really good way to do that because you get all the non-aligned developers to want to help your project which they can't do if you know with a closed project. So it's a great strategy for catching up. And then also if you think that your business model you know as a company or as a country is let's say scale manufacturing of hardware then you'd want the the software part to be free or cheap because it's your compliment right so you try to commoditize your compliment and I don't know whether it's by accident or part of design that that seems to be what the Chinese strategy has been.

I think that the right answer for the US in this is to encourage our own open source. I mean, we I think it'd be a great thing if we saw more open source initiatives get going. I guess there's one promising one called Reflection, which was founded by former engineers from Google Deep Mind. So I hope we see more open source innovation in the west. But look, I think it's very important. It's critical and like I said I in my view it's synonymous with freedom and it's definitely not something we want to suppress.

The Peter Thiel quipped, you know, many years ago that he thought, you know, crypto would be libertarian or decentralizing and that AI would be communist or or centralizing. And I think one thing we've perhaps we've learned that technology isn't deterministic and that there are a set of choices that determine whether these technologies are decentralizing or or centralizing. And maybe we could use that as a segue to go deeper into the state of the race with China. Maybe David you could lay out the sort of the what's most important to to get right. You've already indicated you know open source is one example. You know you alluded earlier to sort of our strategy as relates to chips. You know some people say that yes it's it's a good idea to do what we're doing because it'll you know limit domestic semiconductor production. Other people say, "Oh, well, you know, some of these companies say chips are their biggest, you know, limiting factors and so are we enabling them in some way." Why don't you talk about the sort of state of play and then our strategy?

Yeah. So, you know, when we talk about winning the AI race, um, sometimes we say we're in a race against China, sometimes we just leave it a little bit more vague because I don't think we should become overly obsessed with our competitors or adversaries. I think whether we win or not will mostly have to do with the decisions we make about our own technology ecosystem, not about, you know, what we do visa v them.

And so the president in his July 23rd speech on AI policy, I think mentioned a few of the key pillars of how we win this AI race. And by the way, I'm not saying it ever ends. This it might be an infinite game, but we want to be in the lead at least. And I do think that there could be a period of time where like you know take the internet where I mean the internet's still going on. It's happened but we understand that kind of who the winners are is kind of baked now. So there could be a period of time in which it's kind of baked who the winners in AI are.

But in any event, in terms of how we win this race, I mentioned a few of the key pillars. Number one is innovation. You know it's very important to support the private sector because they're the ones who do the innovation. We're not going to regulate our way to beating our adversary. We just have to out innovate them. I mentioned I think right now the biggest obstacle is the frenzy of overregulation happening at the states. I desperately think we need a federal a single federal standard. A patchwork of 50 different regulatory regimes is going to be incredibly burdensome to comply with. I think even the people who support a lot of this regulation are now acknowledging that we're going to need a federal standard. The problem is that when they talk about it, what they really want is to federalize the most onerous version of all the state laws and that can't be allowed either.

So, you know, there's going to be a battle to come. I think as the states become more and more unwieldy, you know, as it becomes more of a trap for startups that they now have to report into 50 different states at 50 different times to 50 different agencies about 50 different things, people are going to realize this is crazy and they're going to try to federalize it. And then the question, I think, is whether we get preemption heavy or preemption light. I think everyone's gonna ultimately be in favor of a single federal standard. Because I think one of America's greatest advantages is that we have a large national market, right? Not 50 separate state markets.

The second big area is infrastructure, you know, and energy. You know, we want to help this amazing infrastructure boom that's happening. And the biggest, I think, limiting factor there is just going to be around energy. I think President Trump's been incredibly far-sighted in this. I mean, he was talking about drill baby drill many years ago. He understood that energy is the basis for everything. It's definitely the basis for this AI boom. And we want to basically get all of these unnecessary regulations, the permitting restrictions, a lot of the nimbyism out of the way so that AI companies can build data centers and get power for them.

And then the third area is around exports. And maybe this has been the most controversial one. And it really speaks to the cultural divide between Silicon Valley and Washington. So, I think all of us in Silicon Valley understand that the way that you win a technology race is by building the biggest ecosystem, right? You get the most developers building on your platform, you get the most apps in your app store, everyone just uses you. I mean, you know, those are the companies that typically win are the ones that get all the users, all the developers, and so on. And so we in Silicon Valley have a partnership mentality. You know, we want to just publish the APIs and get everyone using them. Washington has a different mentality, right? It's much more of a command and control. We want you to get approved. We kind of want to hoard this technology. Only America should have it. And this was really fundamental, I think, to the Biden diffusion rule where the point of that rule is to stop diffusion, right? Diffusion is a bad word. But in Silicon Valley we understand that diffusion is how you win.

I know I mean I don't think we ever called it diffusion before. That was a new word for me. We just called it usage.

Yeah. But we understand that like getting the most users is how you win. So there's like a fundamental culture clash going on right now. And the way I kind of parse it is that what we decide to sell to China is always going to be complicated because you know they're our competitor and our adversary and there's the whole potential dual use and so the question of what you sell to China is is nuanced. But what we sell to the rest of the world that should be an easy question which is we should want to do business with the rest of the world. We should want to have the largest ecosystem possible. And every country we exclude from our technology alliance we're basically driving into the arms of China and it makes their ecosystem bigger and what we saw under the Biden years is that they were constantly pushing other countries into the arms of China starting with the Gulf states in October of 2023.

Basically the Gulf States and I'm talking about countries like Saudi Arabia, UAE, long-standing US allies, they weren't allowed to buy chips from the US. In other words, they weren't allowed to set up data centers and participate in in AI. And you know, here we are telling all these countries that, you know, AI is fundamental to the future. It's going to be the basis of the economy, and yet we're excluding you from participating in the American tech stack. Well, you know, it's obvious what they're going to do. You know, the only play we're giving them is to go to China. And so, you know, all of these rules basically just create pent-up demand for for Chinese chips and models. And it creates a Huawei belt and road. And we are hearing that that Huawei is starting to proliferate or diffuse in the Middle East and in Southeast Asia. And I just think it's a really counterproductive strategy. We're completely shooting ourselves in the foot.

And like the the greatest irony is that the people who've been pushing this strategy of driving all these countries into China's arms have called themselves China hawks. You know, as if what they're doing is hurting China. No, it's like it's helping China. I mean, it's basically just handing them markets. And our products are better. But if you don't give these countries a choice to buy the American tech stack, obviously they're going to go with the Chinese tech stack. And you know, China's out there promoting Deepseek models and Huawei chips and they're not like ringing their hands about you know whether exporting chips for a data center in UAE is going to like create the Terminator and you know all these like ridiculous narratives that we've invented to you know reasons we've invented not to sell American technology to our friends. So, that has ended up being, I think, surprisingly maybe the most controversial part of what we've advocated for. But there you have it.

Right. So David just to come back real quick while we still have you on on crypto. So the administration and I think the country had a significant victory earlier this year with the president signing the stablecoin bill into law which was the Genius act. And I'll just tell you what we see is like the positive consequences of that law have been even bigger than we thought. And I would say that's both for the stable coin industry and you now see actually a lot of a lot of financial institutions of all kinds embracing stable coins in a way that that they weren't before.

And you know sort of the phenomenon spreading in America you know by the way doing you know being being in the lead and doing very well there. But just also more broadly just as a signal to the crypto industry that like this really is a new day. And there really there really are going to be regulatory frameworks that that make these things possible and and you know that that are responsible but also make this industry really possible to flourish in the US. As you know there's a second piece of legislation being constructed right now which is the market structure bill called the Clarity act which is sort of the phase two of the legislative agenda and I wondered maybe if you could just tell us a little bit about your view of of the importance of that of that bill and and then you know kind of how do you think that process is going

I think it's extremely important. So as you mentioned we we passed the Genius Act few months ago but that was just for stable coins. Stable coins are about 6% of the total market cap in terms of tokens. So 94% are all the other types of tokens and the Clarity Act would apply to all of that and provide the regulatory framework for all those other crypto projects and companies.

You know, if we could be sure that, you know, currently we have a great SEC chairman, Paul Atkins, and if we could be sure that Paul Atkins and a person like Paul Atkins was always at the SEC forever, then we wouldn't necessarily need legislation because they're already in the process of implementing like much better rules and providing regulatory clarity. But the truth is that we don't know for sure. And if you're a founder who's trying to make a decision now about where you're going to build your company, you want to have certainty for 10 years out, 20 years out. We want to encourage long-term projects and so again I think it's very important to canonize the rules that that's first to provide the clarity and then to make sure there's enough stability around them and sort of canonize those rules in legislation. That's the only way that you provide that long-term stability.

I think that we will get the Clarity Act done. Like you mentioned it passed the House with about 300 votes of about 78 Democrats. So it was substantially bipartisan. I think it will ultimately... we're it's now going through the Senate. I think it will ultimately get done. We're negotiating with a dozen or so Democrats. We have to get to 60 votes. So that's the hard part is under the filibuster. We got to get to 60. So but we're negotiating with about a dozen Democrats. And I do think that we will ultimately get to that number. We by the way we ended up having 68 votes in the Senate for genius including 18 Democrats. So, I do think that even if we just get, you know, two-thirds of the number of Democrats that we got for Genius, then, you know, we'll be fine on clarity.

But I, you know, it this will provide the regulatory framework again for all the other tokens besides stable coins. And I think it's just a critical piece of legislation. And yeah, this would ultimately I think kind of complete the crypto agenda where we've kind of you know moving from Biden's war on crypto to Trump's crypto capital of the planet. And then you know I think the industry will have the stability it needs and can just focus on innovating and

On Genius Act, President Trump really made that bill possible. I mean, first of all, it was his election that completely shifted the conversation on crypto. We would still be, you know, if a different result had been reached, we would have again like figure out at the SEC. The founders would still be getting prosecuted. We wouldn't know what the rules are. Elizabeth Warren would be calling the shots.

So, President Trump's election made everything possible. And it's his commitment to the industry and he and his commitment to keeping his promises during the election that's made all of this possible. But also I mean he got directly involved in making sure the Genius Act passed. It was the legislation was declared dead many times. I saw it with my own eyes that you know he was able to persuade Rick Scott and votes and twist arms, cajole and charm and he ultimately got it done and I think that clarity will be a similar result. People are always prematurely declaring these things to be dead or whatever. There are a lot of twists and turns in the legislative process. It's definitely true that you don't want to see the sausage getting made, but anyway, I think we're on a good track right now.

Lastly, we were just talking about New York. Recently in an episode all in in San Francisco, you endorsed bringing the National Guard. You know, Benioff had his comments. He sort of, you know, went back and forth with those comments. I'm curious if speaking of teaching moments, I'm curious if you see San Francisco as savable in some sense and and what what needs to be true to to get there if so.

Well, Daniel Lurie is the best mayor we've had in decades. So, I think he's doing a very good job within the constraints that San Francisco presents. The mayor job, unfortunately, we have a weak mayor in San Francisco. I don't mean him, I just mean like the way it's all set up. The board of supervisors has a ton of power and over time they've been able to kind of transfer power from the mayor to themselves. And then of course you got all these leftwing judges.

I mean, it's just amazing to me that there's a case right now, this is a case that galvanized me several years ago, the case of Troy Mallister who was a repeat offender who killed two people on New Year's Eve. I think it was like 2020. And he was arrested four times, you know, in the year before that. He ended up killing these two people and he had a very very long criminal history. He had committed armed robbery before, stolen many cars. And he should have been in jail. He should not have been released. But he was basically released thanks to the zero bail policies of Chesa Boudin, who was then the district attorney who we got recalled. There was a huge outcry. I mean, even in San Francisco for there to be a recall of a politician, I mean, you got to be like seriously leftwing to alienate San Francisco and Chesa Boudin managed to be so far out there that he alienated even San Francisco.

And yet, I don't know why Troy Mallister isn't sentenced already and in jail for 20 years plus, but his case is still pending through the courts, never ending. And there's a leftwing judge who's considering just giving him diversion. Basically means you just get released maybe with an ankle bracelet or something. That's insane.

So, I mean, that's what we're dealing with in San Francisco. I mean, like crazy leftwing judges who want to release all the criminals. And so I just wonder like is Daniel up against too many constraints and therefore I know he doesn't want the president to send in the National Guard, but maybe ultimately it would be helpful. But in any event, I think the president has has agreed to kind of hold off on that out of you, you know, Daniel had a good conversation with the president and asked him to hold back and the president agreed and is giving him time to implement his solutions. And look, if if Daniel and his team can keep making progress and fix the problems without the National Guard having to come in, then so much the better. We'll just see if and and I know he wants to and like I said, he's the best mayor we've had in decades. It's just a question of whether he'll be too constrained by the other powers that be in the city.

David, thank you so much for coming on the podcast.

Yeah.

Fantastic. Thank you, David.

Yeah. And thank you for the work. It's we as much as anybody appreciate the work that you've done to fix the things in the past and and put us on a great road to the future. Yep.

Well, thanks and I appreciate what you guys have done as well. So, thank you for for your support, everything you're doing. So,