Tech Deciphered

The reckoning is here. Once a safe harbor, Big Tech has finally also gone full out on layoffs. Is this a structural shift to employment in Tech? Will the subsequent talent spillover be great for start-ups and entrepreneurship? Will it positively affect other industries? In this episode of Tech Deciphered, we will answer these and other questions in a deep discussion on the Global Tech Labor reset. Navigation: Intro (01:34) Layoffs & Restructuring Shifts in Compensation & Perks Rise of Fractional, Freelance, and Solopreneur Work Talent Spillover to Other Sectors Geography & Culture Shifts Conclusion Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Nuno Goncalves Pedro Welcome to Episode 66 of Tech DECIPHERED. Today, we’ll talk about the global labour tech reset. Tech and big tech, which seemed immune to any lay-offs, seems now to be under fire. Massive lay-offs over the last 2.5 years, a lot of discussion around the importance of having a computer science, computer engineering background, and so what seemed to be a safe haven for any graduate is now under stress. Today, we will discuss the structural perspective on what’s happening in the market, if this is a long-term trend or not, what has led us to this, and what is next. We’ll talk about the rise of fractional freelance and solopreneur work, as well as talk about talent spillovers, and some of the usual geographical dynamics around the space. Bertrand, a huge shift in tech. Bertrand Schmitt Yes, definitely. It’s pretty big. I think it started probably around 2022, once we got some changing interest rates that have a pretty massive impact in stock prices for a lot of companies. At that time, a lot of companies decided, and usually under some pressure, that it was time to be more efficient, to generate more cash. Yes, you want to grow, but not grow at all cost. You have to go efficiently. That’s when we started to see some share price going down and step by step, quarter after quarter. Some change in attitude with a lot of big tech and that has created some impact in term of lay-off from different parts of the business, from the sales team to the DNA, to even engineering R&D. What is also been happening since 2022, 2023 is a change of focus. A lot of focus is being put in AI. A lot of investment in CapEx is going to AI. At some point, if you want to keep doing all this investing, investments, you might have to get some other part of the business in order to create additional savings to do all the spend you can in AI. There has been more recently a switch. It’s not about just efficiency to push all the… But generating the ability to invest in AI. Nuno Goncalves Pedro It’s part of a broader movement. Before we step back a little bit and go back in history, even recently, we’ve heard that there’s talks between Meta and a bunch of private equity firms like KKR, Brookfield, Apollo, and others, to actually help in financing data centers. Meta is a gigantic company, so one would assume they have cash to do all these things. Maybe they don’t. To your point, that level of efficiency that is now needed in the market where you need to throw actual money, CapEx, into the building of infrastructure, the building of the core underpins of what you’re doing is pretty vital. But let’s go back a little bit of a second, and we’ve talked about it maybe in our early episodes. Companies like Meta, Facebook back in the day, Google, Alphabet now, and others had a tendency, in particular in the Bay Area, to hoard engineers. They would over-hire. There was a lot of discussion that some of these players had as much as 20%-50% the engineering resources they needed, and part of that is that they didn’t want their competitors to have them, and so in some ways, we went from hoarding too much capacity to the days of COVID that in some ways illustrated that there were a lot of people that maybe were not working very hard also on the engineering side, not just on the sales, et cetera side. That right-sizing, I think, has been a long time coming. We discussed in a past episode that there was a little bit of an adaptation, or an adaptation, rather to the market by a lot of these public companies saying, “Now that I have a mandate where there’s lay-offs happening in other industries, I can do it myself.” But this time is different, and I think the message of probably today’s episode is going to be around that. This time is different. There are some fundamentals that have changed. Bertrand has already alluded to AI as one fundamental shift in terms of the efficiency of engineers, in particular more junior engineers. There is more behind this. There is the notion that you need less to deliver more. In tech, I would start with a platitude. I think if anything, everyone talks about AI and how AI is going to disrupt financial services, and it’s disrupting functions like marketing, and displacing people around, for example, customer service, and all of this. But a lot of people forget to talk about the most obvious industry that’s being disrupted by AI, and that industry is tech. Tech is disrupting itself with AI because you have all these tools available, you have all these platforms that you’re deploying, and they have value for your own purposes. They become the underpinning of a more efficient workforce, in particular if you’re a tech company. A lot of people don’t talk much about that, but I think a lot of what we will talk today around lay-offs and efficiencies and all of that actually do relate to the fundamental shifts we’re seeing where the emergence with a lot of these AI tools and platforms that we’re seeing, so tech is disrupting itself at the end of the day. Bertrand Schmitt I think AI has two effects. One is it’s so big, it’s so important, you cannot miss it as a business that you are going to reallocate resources. From your traditional product lines, your traditional development, expansion, creation of new features, and you will reallocate instead more money to AI. It can be one side, can be just CapEx, and the other side will be, of course, software that you want to develop connected to AI. I think that was the first effects that started early on. What it means is that many companies ultimately decide to fire people who are not so AI knowledgeable and instead hire people who have more expertise in AI. I think what you are talking is a second effect of AI. Now we start to reap the rewards of the investment in AI. What we are seeing as a result is that we can do more with less. Basically, if you’re a software company, or a tech company, you have a lot in software engineering. If you have a lot in software engineering, guess what? One of the best way to leverage AI is actually to use it to develop more efficiently, faster. The tools have gotten better and better, what we got 2 years ago was barely usable, 1 year ago start to be good. Now, I must say, it’s shockingly impressive what you get if you have tool like Visual Studio or if you use some other tools on the market that are even more focused on AI. It’s quite shocking the quality of the code auto completions that you can get. It’s quite shocking what you can get from other tools directly like ChatGPT. It’s definitely like having a buddy that can support you, check your code, provide you some IDS, run code, help you go faster through documentation, testing. You are going to save time. The first effect might be, you know what? We can do so much more with the same workforce. Maybe we can reduce slightly the workforce, and we’ll still do more thanks to AI. Of course, there might be a question of you might want to keep the same size of software engineering so that they deliver even way more than before and your pace of development is truly accelerating. Companies are facing multiple options here. It looks like many are choosing to be more efficient. Nuno Goncalves Pedro Yeah, there’s just… Let’s talk numbers, right? In terms of lay-offs, 2024 alone, it seems like the number was around 250K-260K, globally, people were laid off. Bertrand Schmitt In tech. Nuno Goncalves Pedro In tech, yeah. This is global tech lay-offs, right? In tech, 250K, 260K tech lay-offs in 2024. In the US, it varies. We have numbers that go from 95,000-150,000 tech jobs in the US alone that were laid off in 2024. We’ve had numbers that over a period of 2.5 years, 400,000 people in tech were laid off globally. These are massive numbers. This is an industry that by itself was already, in some ways, part of some efficiencies. It’s not the most inefficient industry in the world in some ways, so very significant numbers that we’re talking about. Bertrand Schmitt It’s not just lay-off, it’s also who you are not hiring anymore. I think we found an interesting stats and the quantity of entry-level tech jobs have dropped by 50% since 2019. Before the pandemic, new graduates made up 15%, of big tech hires. Today, it’s just 7%. We’re moving from 15% to 7%. It’s pretty shocking. Where is it coming from? We talk about general cost-cutting measures post-COVID, but for sure, there is a lot around AI and automation, and especially since that AI is replacing a lot of more entry-level jobs. It can be QA, it can be IT support, it can be some software development. It’s definitely a big change. One thing not to forget is that computer science used to be a much smaller field 10, 20, 30 years ago. It has expanded a lot. To be frank, I don’t think the quality of the graduates has stayed high. The more you expand the pool of people working in industries, the less you have the best of the best. As a result, you could argue there is a lot of people who are not either so good or so really interested in computer science, who still end up in computer science because that was the thing other people were doing. That was a safe way to get a job after your studies. But it was not because they are incredibly excited and knowledgeable about the space. It’s not because they are excellent developers. My guess is that when everything is great, everything is easy, that’s good. But when there is tension in term of hiring, then it’s going to be trouble for a lot of people who don’t have the interest, appetite, and quite frankly, sometimes the level of what it takes to be a software engineer, for instance, in that new age. If you are not an expert with AI tools, if you don’t know AI deeply, why would a company hire you? Nuno Goncalves Pedro I think there are three important things to highlight here. The first one, and we’ve talked about it before, is, and this might be surprising to some people who are not computer engineers or computer scientists in background that might be listening to us, but there used to be the mythical figure of the 10X developer. Being a full-time equivalent can do the job of 10 good engineers. Those developers do exist. Shockingly enough, they do exist. I’ve met a few in my career. I’ve been lucky to have a couple of them working with us at Chamaeleon. But amazing people that can do really the job of 10 people. I think what’s happening in the industry, to your point, Bertrand, is there’s a lot more variants in the quality. You have a lot of people that are not great. If you’re not a great developer, the problem is you’re actually probably having a negative impact in the projects that are involved in and slowing them down. I think the second factor, which is really important to highlight, is some of these roles, and not to basically downgrade what the roles are, they’re very important roles, but some of the roles around DevOps and dev tools, around QA become specialists roles, but they’re roles that are a little bit less engineering-heavy, and they actually match some of the junior developer roles, which are what I’d call breaking stone issues. You’re trying to do hardcore integrations, convert code, clean up code, et cetera. But at the end of the day, it’s not a fundamental engineering problem that you’re trying to solve for. AI, as we know, is extremely well-equipped to solve issues around that. It’s the issues that are very repeatable, that through testing can have relatively low impact in some ways at the end of the day in terms of the code base that you’re actually maintaining. Then the third piece, I think, is some people might say, Well, but then is computer science that and computer engineering is that? What matters? No, it’s not. Actually, there are roles in computer science and computer engineering that are becoming even more and more vital. People that have very strong architectural view of code base, of what they’re developing, people that have full on, full stack knowledge of the world, people that have very deep knowledge around legacy systems, for example, embedded system, coding, et cetera. All of those right now don’t seem to be as under threat as other types of roles. In some ways, we even have a more significant part of the haves and have nots, which you, Bertrand, very alluded to, which is people that have very deep domain knowledge around artificial intelligence. We’re now seeing an arms race for that talent, which the joke is going on that obviously Matt is trying to hire people and paying $100 million in our issues or whatever that is. I’m not sure how much of that is true. Bertrand Schmitt Just bonus. Nuno Goncalves Pedro Just bonus. I’m not sure how much of that is actually true or not and what the rules are for, but there’s this arms race for that talent. That talent is even more valuable because, again, back to the point, it’s probably seen as more scarce right now. It has a competency that, at least at the current time, AI cannot easily replace. Again, you have to put things, again, horses for courses. That’s why I mentioned these three little pieces of items, which is we have to serve, see it’s nuanced. This is not a one-size-fits-all lay-off, mass, you’re done, thing. It really depends on the role. It depends on the seniority of the person. Depends on the competency in the area that they’re involved in. Bertrand Schmitt In terms of AI, there are really two situations. Either your core knowledge and expertise lies in AI per se, you are a data scientist, an AI engineer. The other side is that you are really good at using AI to do your usual work. Suddenly, if you are a software developer and use all the latest AI tools, and as a result, you are 2X, 3X more efficient than before, that’s definitely a level of expertise that companies will also be interested in. I remember reading an interesting stat that people who best benefit from all the latest AI tools to do software development were actually the most expert developers who made the switch to using these tools some time ago. They were much better leveraging AI than younger developer, for instance, with little expertise. They will benefit from AI tools, but not as much as a pro developer. In a way, the gap is getting wider between entry-level people might have started to use AI and true experts who are also experts at using AI tool. It’s a gap that has been increasing. I wanted to share two stats I read from the latest COA 2-2025 deck. They shared during their conference. One, they were showing an interesting analysis about Microsoft employee count, where basically between in 2022-2023, the number of employees stabilized. At Microsoft, it went stable at around 230,000 people. Then we had a peak, a strange peak around July 2024 at around 240K, 250K employees. Since then, so basically since the past 12 months, the number of employees has constantly been going down. One of the questions would be, as Microsoft, which pick employee? Microsoft, by the way, show a stat that 30% of all their code now is generated by AI, 30%. That’s pretty impressive. Another company, a much smaller one, but quite successful one, AppLovin. Another interesting stat is that in the past 4 years, they have doubled their revenue per employee. Their revenue per employee started from 3.6 million per employee. It was not starting from a low base easy to increase. It was starting from an insane number, very high number. They managed to double that to 7.6 million revenue per employee. During that period, they actually decreased their number of employees. They went up to 1,000 people and went down as of today, to maybe 750 people. It’s very impressive to see even smaller companies, less than a thousand employee, has managed to increase so much their revenue per employee and took the decision to decrease actively their number of employees because they could have said, “You know what?” We need to invest in more stuff, and we need to do more stuff. Let’s be careful. Let’s keep increase employee size. But no, they decided that they can do more and keep increasing the business while decreasing employees. Even a world-leading revenue per employee. Nuno Goncalves Pedro It’s a two-tale side at play. One is that there’s a lot more code being actually generated by AI and tools. Garry Tan, the CEO of YC, has said that at least a quarter of their companies, more than 95% their code was generated by AI, which is silly. More than 94% of the code was generated by AI. Then the other side is then you have these rapid growth micro companies that have very few employees as startups and are scaling through the roof. We’ll come back to that a little bit later because that changes a lot of the dynamics around employment in engineering, R&D, development, et cetera. But we’re now seeing a lot of these companies that are growing super fast with very few employees. Maybe that’s an interesting segue. Then what happens to salaries? Our salary is going to go through the roof for everyone involved. Not really. As you said, actually, there’s a lot of functions where salary growth has actually flattened. In many cases, there’s now some salary decreases around certain areas. It’s again going to be a have and have nots. If you have a certain capacity and skill set, you probably can make more and more money as an individual. But actually, across the board, what used to be the core rules, the rules that carry the organization, for example, in terms of development, it might be that there is a salary flattening over time. Bertrand Schmitt There is that question in Silicon Valley right now about when will we see the first one employee unicorn? What’s your take on this one? When will we see that? Nuno Goncalves Pedro I think sometime soon. I’m looking forward to when we’ll see a zero employee unicorn. An agent will create some… Bertrand Schmitt Zero employee, technically. Nuno Goncalves Pedro A zero employee. I’m an agent. I created my own self and I created a company. I’m not sharing it with anyone, and I’m a billionaire, and I don’t need VC money. That’s going to be cool. I don’t know. I think we’re probably going to reach it at some point. There are some of these numbers, again, just to take this with a grain of salt, because a lot of these companies that seem to be growing at the speed of light, we’ve already talked about it in previous episodes, but a lot of these companies that are growing at the speed of light are getting subsidized to grow at the speed of light. They’re getting a lot of money, for example, to bolster their infrastructure. We already discussed it today. The fact that you might be very lean in terms of your employee count might still mean that you have a lot of costs that you’re incurring in terms of your cloud processing, compute, storage, et cetera. It’s not like you don’t need capital. You might need capital, actually, you might need a lot more capital, but basically just your team is much smaller. We have to look at some of these numbers with a grain of salt because there’s subsidization going into this. We’ve discussed it also in the past, there’s subsidization going into to go to market. There’s a lot of land grab playbooks out there where companies raise gigantic rounds. Then they might not have a ton of employees, but at a certain point in time, they are spending a ton of money to get to wherever they are in terms of, for example, annualized recurring revenue as a metric. Again, I would be a little bit paused on… It will happen, I’m sure, the one employee unicorn, or the one-person unicorn, founder unicorn, single founder, only person on the team unicorn. But we’ll need to look at it with a little bit of a fresh lens at that point in time. Bertrand Schmitt As you say, if you have big needs in term of CapEx, for instance, because you are building your own training clusters, for instance, for sure, you might spend a lot on that side. As a result, yes, you might have less employees, but does it still mean you are profitable? Maybe not. You are right that another part could be the go-to-market spend. It could be enormous, especially at times when everybody is going all in in the eye. How do you differentiate yourself? How do you make yourself visible in the middle of all this noise? It might be very hard. It might be very hard. What do you do? You go out and do some marketing spend to correct for this. It’s not because you have smaller teams that it means that you are profitable. But my bet would be that at least if you are more focused on the software side of things, not investing too much in infrastructure, you probably are in a better spot than before in term of capacity to be profitable. But at the same time, you are right in the middle or in the beginning of a big race, so not investing enough could be a dangerous game. Nuno Goncalves Pedro Everything changes. We started talking about salaries. It changes with equity grants, bonuses in general. We had the parentheses around some of these AI roles that seem to be super overpaid at this point in time. Like a superstar rock star signing, a little bit like a football player thing. But in general, there’s a little bit of a stepping back on bonuses, a stepping back on equity grants. The perks, there was a step back. I’m not sure that’s true anymore with the perks. There’s now a push to get people back into the office in many of the large companies. I think the concern there was a concern around culture, but also a concern around people hiding and not doing anything, of which we knew there were a mass amount of a significant percentage of people hiding and not doing much in terms of work, in particular around some of the engineering disciplines. I think this perk thing is probably a tale of two cities kind of thing. There’s a reduction in perks in many companies, but at the same time, there’s maybe a comeback of perks in other companies so that people do go to the office. But in general, perks, I don’t know. My perspective is that tech will still be ahead of the game in terms of perks it gives to his employees, in particular if we’re talking about Silicon Valley and some of the big tech companies in the US, Silicon Valley, Seattle, et cetera. But what’s your read, Bertrand? Bertrand Schmitt My guess is that I’m not sure perks have been going back in a big way in general on average. But what is true is that the past 2 years, there have been a lot of forcing back on place to come back to the office. In some ways, that has been used as a way to get rid of people who are not willing to relocate back closer to headquarters, not willing to go back working at the office. In a way, it was a soft lay-off. In many situations, there was also no compensation. Basically, if you are not coming back to the office, you are resigning. It’s not that you are getting fired. That was also a way to do it on the cheap, even from bigger companies. Personally, I understand that. It’s logical to say that if you’re not willing to come back, I mean, you are resigning, basically. But I would say my exception would be depending on what was the company policy, because if you got hired with a specific reason that, “Hey, you can work from remote, and you can work wherever you want.” I mean, it’s a change policy. If there is a policy change, I don’t know if it’s totally super fair to play that game in such a way. I think it really depends on a case-by-case basis. Nuno Goncalves Pedro We’ll see how that evolves if big tech will take away a lot of its perks, and they’ll go back to normal. If all of this is happening, what’s the positive end of the spectrum? Is there something emerging that is positive in terms of growth, in terms of different employment, and around big tech in general? We’ve already mentioned AI and some of the AI skills, people that have deep knowledge that have come, for example, from the research side, that have come from the applied maths side of the fence, which is pretty vital for AI at this point in time. But there are other pieces that are really rising, and there’s a rise of different roles and a different working. Many would call it the fractional roles, freelance roles, solopreneur work. There, we already started seeing it a long time ago. Startups in particular needed fractional talent. Very early on, for example, the classic one is the CFO, a fractional CFO. “I’m a startup. I don’t need a full-time CFO for a long, long time. But I do need someone to keep up my books and my accounting and for me to bounce ideas of and have all the accounts in order, everything like that.” Now we start seeing fractional CTOs and fractional Chief Marketing Officers and fractional chief revenue officers, et cetera, et cetera. All of this is emerging not only because of lay-offs, but because in particular, if you’re talking about a startup, the half life of some of these roles is pretty limited early on. You don’t need someone, first of all, to be full-time. Secondly, you need very specific things and very specific help. You could say, “Consulting could be an obvious thing for this.” But consulting is not cheap in general because there’s overhead and there’s a bunch of other things that are being loaded into it. It’s easier to have either a fractional firm that’s a little bit like a body shopping entity or individuals that do this with part of their time. In some ways, I think what’s cool right now with this emergence of significant lay-offs, which is obviously bad news, is a lot of this talent is in the market. They’re like, “You know what? I could actually make myself available to a variety of organisations at the same time instead of just working for one. Honestly, I could make more money working for five or six organisations.” I have a very good friend of mine, and he started doing consulting after his last startup. At a certain point in time, he had tons of people working for him, and he built a firm, and he’s been doing it for 5 years. It’s a deep functional expertise that he had and that he built in his firm. Then at the same time, there was a very deep segment and audience that he was catering to in companies. So that can actually work for significant amounts of time. I call that a little bit the podification of work. It might start with an individual doing this as a one-off. But over time, that individual starts building a team and starts building infrastructure and starts building around a couple of things. Again, similar to what we’ve seen, for example, with fractional CFOs, with outsourcing companies for IT and for development. We’re now seeing it across a variety of functions. I think that’s actually super exciting. Bertrand Schmitt Yeah, I think it’s a good thing. I think some individuals will find success in that. But given the increase in this function, of fractional CFO, CTO, CMO, I would say I’m mostly doubtful that it’s more than a temporary situation for a lot of people. I don’t see how the market can adjust to such an increase. I think the trend was up 70X on LinkedIn, so it doesn’t sound something that will still exist forever. I think some will definitely adjust. As you say, I also know some people, some fractional CMOs who have built their own team, it’s half a dozen people. I think it’s definitely a good trend and something that can be helpful for a lot of startups because when you have to start building a new team, a new marketing team, a new financial team, that can take quite a while to have the right people in the team. In the meantime, outsourcing to people who have real expertise that should also help you build the right team internally step by step. Personally, I think it’s a great idea as a startup to leverage some of these resources. Nuno Goncalves Pedro Yeah, maybe new companies will emerge out of this. The question is really, is this a temporary piece or not I’m a little bit more on the other side. That’s why I think there are elements in terms of the stack of functional knowledge that are not temporary. Will most of these people make it? Of course not. I mean, most of the people will fail miserably. Out of this, some companies will emerge, some new companies that will be better at catering to the beginning of the life cycle of a company, so the startup phase. Others will just stay as podification. My friend’s company is a good example of that. They just stayed within a certain size, and they did very well. I’m not sure his objective is to be the next mini Accenture for whatever space he’s in. I feel there’s a little bit of staying power and people want that, I think, freedom. They want freedom, they want autonomy, they want quality of work. They want to be able to select the projects and the teams that they want to work with and the ones that they don’t. I think one other effect is people like you and me. We have day jobs, we do stuff. I run a VC firm, you’re in a VC firm. But then we have side things that we do. It’s natural that people have side things. Obviously, our friend, Elon Musk, is probably the one that has more side things than everyone else. He has several companies as side things. But in general, it also means that people like you and I, when we have domain knowledge on the side that we can apply to other domains that are not necessarily the domain we’re spending our time in. For example, I don’t work extensively with corporations right now. I work with startups, and I have investors. I have limited partners that I need to cater to. But I have a bunch of knowledge around digital transformation, innovation, scale up of companies, et cetera, et cetera. How do I share that? Starting to have platforms in the market, for example, Intro is now making a bit of a splash in the market. Having some of these platforms in the market that allow you to actually be procured by other people that need your knowledge is very powerful. Some of these platforms have existed for a long time, the GLGs of the world and all of that. But I feel there’s a new momentum here emerging around deep expertise, subject matter expertise, knowledge, and how you scale that knowledge and how you put it into the market. This is still the pre-AI phase, because once AI can create replicas of us and avatars of us, that’s going to be cool, right? I mean, it’s like… Bertrand Schmitt I mean, that means we rent our AI by the hour. Nuno Goncalves Pedro Let’s get a Nuno avatar to do things, and I can just go and chill on the beach. Bertrand Schmitt We can do, yes, 200, 300 hours a week, thanks to our virtual AI. So, that would be the right way to do it. That would be interesting. I start to see this happening, actually. People building chatbots based on what they have written, based on what they have been talking on podcast, building a chatbot based on that and providing access to this chatbot for a fee. It’s actually a very interesting development. That’s also, for me, an interesting proof that it’s good that you put in writing or in audio what you are doing. Then you can build this type of AI tools. If you are just doing your job, but your sharing is not really public or in a form that is usable for a chatbot, you won’t be able to virtualise this knowledge. I think that’s for me an interesting development. You could argue writing a book is also something good from that perspective. Even if we know that writing a book is not in itself something that will bring you much money, indirectly, in addition to being a way to advertise yourself, it can be a way to start your virtual self from. Nuno Goncalves Pedro Maybe moving to other positive effects of this mass transition in terms of workforce that’s happening in technology, is how is this talent spilling over to other areas? I mean, is it that everyone’s getting laid off in tech, and they’re without a job, and they’re unemployed, or is it that they’re finding jobs elsewhere? Our perspective, at least from what it looks, is in the market, there are some interesting migrations happening. Some of them are the adjacencies. I mean, if you look at things like healthcare, biotech, you could say, “Well, that’s tech as well.” Well, probably most people would disagree. It’s a different tech at the very, very least. There’s obviously a lot of interesting things happening in the deep and frontier tech side of this fence, but that’s still tech at the end of the day. But a lot of the talent is really spilling over to other areas. They’re going now potentially into companies in finance, financial services. There’s been always this tension movement between FSI, financial service industry, and tech, where FSI typically paid well, at least in certain kinds of roles. That transition can happen during these times. Manufacturing, logistics, government, in some cases, we won’t go. I won’t open the Pandora’s box on that one. We’ll just stay at that level. But obviously, there’s a lot of talent that’s now migrating to industries, defence, for example, where it might have classically not gone to. There’s a lot of tech talent, for example, going into defence. They might end up in defence tech themselves, but defence in and of itself, in terms of the tech talent that was there, was a different animal, so to speak, as an industry. Now we’re seeing a lot of these spillovers, a lot of these movements of talent, which, in my opinion, are actually very positive. Let’s bring in the love, let’s bring in the expertise of technology to other domains that might actually benefit tremendously from it. Bertrand Schmitt Yeah, I totally agree with you. In some ways, it’s funny because it’s reminding me what I saw 10 years ago in mobile, where a lot of people were early in mobile apps. At the beginning, early on in the 2010-2015, mobile apps were really mostly about gaming. But step by step, many people were not so keen to stay in the gaming industry. I saw many moving and switching to different industries who were very keen to have people knowledgeable in app business, app development. I remember seeing many people jumping to the financial industry, for instance, when banks were building their mobile apps and the like. It was for me very interesting to see that switch. These people were highly sought after by these industries because they were known to have dealt with stuff very early on that were not so easy and that were important and could apply to their own business. Nuno Goncalves Pedro I do predict there’s even a more interesting spillover effect that’s probably up and coming as well, which is even founders of startups and some of us investors that might say, “You know what? I just want to go and do something else in another industry.” We discussed it in the past, what areas are less impacted by AI. There’s many industries that need so much revamping that even the effects of AI will take years, even decades to be more heartfelt. The level of core innovation that needs to happen and the underpinning of that innovation, again, some of this talent, founders, investors, they’re more than capable to bring it to other industries. We’re not saying that we’re white knights that are going to save industries. That’s not the point. It’s like the technology toolkit, the understanding that tech skills very, very quickly or quicker than humans is something that’s valuable, we believe, for a lot of industries. Bertrand Schmitt One thing, though, to keep in mind because sometimes I see some companies with things they can do as well as Meta or Google or others in terms of developing their own tools or product based on AI. Sometimes I’m just shocked. I’m like, “Guys, come on, let’s be realistic 2 minutes. You don’t have the capacity to pay some of the top talents like Silicon Valley can pay.” I’m talking about cash, signing bonus, salaries, stock options that we increase in value. I would say I would just highlight that piece of the puzzle because I’ve seen again and again some industries that believe that, “Hey, I’ve hired a few guys relatively cheap from the tech industry, and now I don’t need to buy the products from the Google of the world. I can do it myself.” I mean, good luck with that. Good luck with that. You are not going to be able to compete. Find a way to use this talent in a way that is efficient and smart, but don’t think that give you the ability to compete with the big boys, because you won’t be able to compete. Nuno Goncalves Pedro The operating models, to your point, are fundamentally different. If you just hire a few people and say, “Well, now go and do it.” It’s like, well, you’re fitting into an organisation that has specific APIs in mind, a specific value system, how things are done, how the cycles are done, you need to cater not just to individuals, but really create organisations that really are able to scale technology and actually shift how the organisation would work. If you want a more tech-enabled organisation, you need to create an operating model that is tech-enabled, not just come here and fit in. It’s like you can’t make much work. In some ways, fully agreed, just hiring people won’t solve the problem. Making big bets into pools of talent, into new operating models, into new processes, even into new spin-out organisations is going to make a much bigger impact. Bertrand Schmitt Yes. Again, at some point, it’s the very best. We stay in tech where they can get pretty insane salary compensation that no normal company will be able to afford. You won’t be able to fight meta who wants to hire the top AI engineer or top AI scientist and spending dozens of millions on some of the top talents. I mean, there’s no way you can compete there. You have to be realistic about the level of talent you can bring and, of course, making your organisation compatible with this talent. If you don’t change your ways, there is not much anyone can do. But even if you change your way, even if you do a lot of things positively, if you are not able to compete on the comp side, you have to have reasonable expectations as well. Nuno Goncalves Pedro Let’s talk maybe about some of the cultural and geographical shifts that we see happening. We’ve talked about many of them because of COVID and during COVID and post-COVID, the logic and what was happening. A very obvious one is the remote versus return to work dynamic as two extremes: fully remote or full return to work. In some ways, big tech seems to be going back to the return to work, so the whole, you guys can be wherever you are, and you get paid. That has come crashing and burning, so to speak, very visibly and very publicly. A lot of the big tech companies saying, “You need to return to office, and you need to return to an office that you belong to. Otherwise, either we change your salary because you’re somewhere else. If you have an office for you to go into in the area that you’re in now, or you should leave.” In some ways, there’s a momentum back. I think at least I have been a proponent that the world, maybe with everything that happened with COVID, would go more towards a hybrid model where you have hubs, where people work from the office, again, a lot more, but they get to work a bit from home. In some cases, we’re seeing a really like, no, you return to the office, maybe you can work from a one day a week, and that’s it. There’s a little bit of a rebalancing, I think, of workforces. Obviously, smaller companies, startups still very much have very distributed teams, in some cases, almost fully liquid still and all remote. But if we’re talking about mid-size, high-growth companies, large big tech companies, it seems like we’re going full on back to the good old days. We’ll see how that pans out. Bertrand Schmitt Yeah, I will say on this topic, one thing I have seen and has not changed is that if you are some of the top talents around there on your topic, companies will let you do whatever you want. I know some people who are AI scientists, they are still working from home, and trust me, they are not going to get fired because the companies know that they have a good deal. The guy is there, and he can pick any job he wants if he’s out. I think it’s true of your average worker, but top talent can still impose their rules to most systems. Nuno Goncalves Pedro Let me just comment on that. I think it is true, but just for those listening, we’re talking about really top-tier talent. I was just privy to a transaction involving two parties, a larger party and a smaller startup, where the transaction didn’t go through because they were doing an acquisition of a company, the larger party, just for AI talent, and they recognised the smaller company had amazing AI talent, and still they were like, “No, you guys are going to have to come to these two hubs, and there’s no flexibility. We don’t give a shit.” Again, we’re talking about really high top-tier talent, rock star talent. We’re not talking about the best performers. We’re talking about the the the best performers is what I would say. Then you’re allowed to do whatever you want. Then you’re prima donna, that’s fine. Bertrand Schmitt Yes, and I’m sure different companies they have different approach, but some people I have in mind are working for companies that are very well known to not have remote work policies, but they still have for some people. The other piece of the puzzle that some things I’ve heard is some companies that are mandating a return to the office, but they don’t have enough seats. Nuno Goncalves Pedro Yes, I’ve heard that. Bertrand Schmitt For me, it’s just so unbelievable that you’re mandating employees to come back to the office, but you don’t have the number of seats. People basically don’t have a desk when they arrive, don’t have a parking spot, practically cannot work from the office. You have 20, 30, 40% not enough capacity in the office. For me, just this stuff blows my mind because I have no way. I simply cannot understand how an HR team, how some execs have no clue to such a level that they mandate one thing on one side, but on the other hand, they don’t have the capacity. They do both at the same time. We mandate, and then we don’t have the capacity. I’m not sure what to take about that. It really made so little sense to me that it’s shocking. I’m talking about really big companies that have the ability to have the visibility and to rent whatever needs to be rented. It’s shocking. For me, it’s interesting. You have what he said, what he talk about. When you see the practical reality, it’s quite shocking to see the, I would say quite frankly, incompetence of some in terms of how the organisers return to the office. Nuno Goncalves Pedro Definitely a lot of incompetence. Fundamental shift, maybe switching gears a little bit is, how is work being done? Obviously, we’ve talked a lot about demographics, and now Gen Zers are fundamentally different and looking for authenticity, mission-driven work, having side gigs. They have their work-life balance as a given, and all these elements that are being pushed onto. We’ve also discussed the social issues. Are they ready socially to manage and scale to be managers, et cetera. But I think there’s a more fundamental shift happening right now, in particular, if I look at tech, which is this notion of individual contributor versus manager. I think we went through a time where there was a lot of more and more management layers. There’s now this discussion where the structure should be flatter. There should be still managers because there needs to be orchestration, but the structures need to be flatter because there’s a lot of individual contributors at the table. Bertrand Schmitt It’s more efficient. Too many layers destroy your capacity. Nuno Goncalves Pedro It’s always been more in computer engineering. This notion of small teams, highly empowered, highly capable to deliver with a thin layer of management is always, I think, what people have talked about in computer engineering as the best case scenario. I feel in some ways we’re going back to that a little bit. We are going back to the age of individual contribution, and particularly with this AI augmentation, the ability for me to do stuff myself. I was talking to a founder the other day, and he’s an older founder, a little bit more experienced in the market. He was telling me, “I’m not sure I need a ton of junior developers. I can just go and look for stuff.” He’s the CTO, in this case, of the company. “There’s a lot of stuff I can do myself. I could just look for code, clean it up, debug it, compile it, run it. That’s fine. For basic stuff, I don’t need people.” In some ways, we’re like, this is the max manager, the CTO. In some cases, the CTO is saying, “I can be a contributor myself, and then I don’t need to be managing three or four people. I can do basic jobs myself.” I feel there’s a little bit of flattening of engineering orgs going on. It might at some point go back to a lot of management layers, but that it feels, at least to me right now, that’s where we are in terms of the cycle. Bertrand Schmitt Yes. An interesting thing is that it goes in parallel with that new trend of AI as a manager. Not only you might have less manager for efficiency’s sake, a lot of companies realise they cannot have too many layers of management without losing their capacity to do stuff quickly, to turn around quickly. But on top of it, there is that new trend of management through AI. A lot of people say AI might be able to replace middle management. It’s also an interesting development. It might not just be about AI on the front lines of replacing the most junior jobs. There is a lot of talks about AI replacing managers. Nuno Goncalves Pedro Do you want to close down? Bertrand Schmitt Yeah, sure. Some takeaways on the topic. Definitely, there is a big shift in tech in hiring. If you want to be focused as a founder, you want to, of course, be cost-effective in hiring top talent, you should probably think about leveraging more fractional roles, talents that are not easy to hire, you cannot afford to hire full-time. You want to stay in. AI keeps improving, if not by the day, by the week, so be careful. Stuff that you don’t believe could be done in 6 months might be doable with AI. If you are an operator, focus on a retention of your team, focus on best practices, remote, hybrid. I think that what some of the big companies are doing could be your benefit as a smaller company. Don’t think about applying the policies of the big guys because applying a different policies could be a way to get a specific advantage. If you’re investors, I think that you probably want to think carefully about how this company is using AI, how this company is optimising resources. Are they still living like we used to do years ago? Are they full on in that brave new world, and I think it’s important to push for that. Of course, some of this is painful when people are fired from their job, are laid off. But on the positive side, that’s usually a way to start again, to start new, to think about how you could do things differently, potentially start a new type of business as we discuss. I think everyone should think very carefully to upgrade their skills in order to better use AI, because that’s definitely the way things are going. Thank you, Nuno. Nuno Goncalves Pedro Thank you, Bertrand.

Robotics is a field that seemingly hasn’t really delivered on its promises. Sure, plenty of robot arms and other robotic solutions in logistics and industrial spaces, but what about the rest… including, Consumer?! Navigation: Intro (01:34) B2B Robotics Consumer Robotics Looking Ahead Conclusion Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Nuno Goncalves Pedro Welcome to Episode 64 of Tech DECIPHERED. Today, we will discuss robotics. Our new overlords are coming. Robotics is a field that seemingly hasn’t really delivered on its promise. Sure, plenty of robot arms and other robotic solutions are out there. But somehow it feels like we should be actually already controlled and dominated by our robotic overlords. Today, we will discuss B2B Robotics, their growth, adoption, industry use cases, the drivers of innovation in that space, players in that space, challenges. We will also talk about consumer robotics, talking about also robots that have gone mainstream, personal and social robots, emerging trends that are happening in the home, market dynamics. Then we’ll look ahead to the future of B2B, the future of consumer, and the societal and workforce impact, which obviously is going to be the last but not the least topic that we will address today. Let’s start with B2B. B2B Robotics. Bertrand Schmitt Yes, thank you, Nuno. It’s certainly a growing space. As you say, it might not feel like it, but at the end of the day, we already have quite a few millions robots in B2B. It’s estimated that the stock of your operational robots, industrial robots, is around 4.28 million units in 2023, which was a 10% increase year-on-year. If we look at China, and I think we talk about the fact that we are installing around 400,000 robots a year. China alone by itself has been installing 276,000 units in 2023. China is definitely a leader in that space and that might come as a surprise to some. That number, to put it into perspective, is five times higher than the second place, Japan. Nuno Goncalves Pedro I think China has recognized a long time ago that because of its population composition, that they’re going to have a lack of people to produce, to be in factories, et cetera, so they actually have been adopting robots now for many, many years. I think now, you were joking with me just before we recorded this, but now that we’re having trade tariffs and all that stuff, it might make sense to have a broad discussion around why robotics in an industrial environment are key. Bertrand Schmitt Definitely. I think that actually I was surprised to hear that, when we’re making this recording on April 15, I was surprised to hear in the Trump administration, quite a lot of very positive support regarding AI and robotics. It looks like part of the plan is already acknowledging this is not like the old-school jobs that we are going to bring back. It would be a different type of jobs. There will be way more robotics than before. Obviously, more robotics is possible thanks to the latest advanced in AI. There is some consensus that, yeah, it’s not just bring back the old jobs as they were, but it would be a new type of jobs. It would be a new type of industrial revolution and acknowledgment that robotics are here to make all of this not just more efficient, but even possible. Because it’s clear that if you take the US, for instance, there is actually not so much unemployment in the US. For an industrial revolution to happen, we need to bring our new friends, the robots. Nuno Goncalves Pedro If we go through the use cases where we see robots coming in, obviously manufacturing, automotive and electronics will probably come to people’s mind. A lot of robot arms are being used there. More than serve your classic solutions, et cetera. But it’s a lot of robot arms using on specific pieces on the line, a lot of pieces of robotics that we don’t recognize necessarily as robotics, but are actually roboticized systems used, in particular on automotive, again, in consumer electronics. Basically, it has to do with the fact that there’s a tremendous lack of… One, there’s going to be, at some point, the limitation on how fast you can produce, so that’s very obvious. Two, there’s actually even lack of people that can do some of these roles. Some of it is actually high precision work. In most of these environments, there are environments where humans need to coexist with the robots that are on the line, and that has led to the creation of this movement of cobots. Robots that are able to basically interact with the environment that they’re in, obviously be very careful around safety procedures that they don’t kill a human being that is around them. There’s been a lot of innovation around that using computer vision, using sensors, and using a variety of other elements around that. That cobot segment in particular is growing quite rapidly, estimated to be 14.7 billion market by 2031. But obviously, we all recognize manufacturing, there’s robots being used, so no shocks there. One of the largest markets by far. Bertrand Schmitt Definitely. Collaborative robots are a recent phenomenon made possible thanks to better activation of motors, electric motors possible thanks to new AI, vision AI. There is a lot of the latest technologies that makes this possible versus your big, bulky, robotic arms that used to be encaged. It’s not to kill anyone. Yeah, it’s a change from bigger to smaller. I mean, we can even say step by step, and we’ll talk more about it, but more humanlike in terms of how it looks. Here we have around 113,000 professional services’ robot for transportation and logistics sold in 2023 alone. That was a big increase of 35% year-on-year. I think we have all seen how Amazon is doing with some robots in their warehouse, logistics systems. What some might not have seen is as impressive in China. If you look at the efficiency of some of these warehouse in China, it can be very impressive. I don’t think they’re holding anything back actually in China. Nuno Goncalves Pedro Yeah, definitely not. There’s a lot of amazing things happening on the logistics side. Obviously, Amazon bought one of the early granddaddies, which was Kiva Systems, which was bought by Amazon, and now it’s Amazon Robotics. There’s a lot of stuff happening on the lines, autonomous mobile robots for the transport of materials, robot extruders, mobile picking robots, automated forklifts, and a bunch of other things. It’s also an environment where I know Amazon is obviously using a lot of co-robots, and there’s a lot of people around as well still. Very interesting environment. I’d say probably Amazon has been the company on the logistics side that innovated the most, the earliest, certainly in the US. I still remember the Ocado ads where they use robots. In the UK, there’s always been a lot of this debate whether that was actually very useful, very impactful in Ocado’s operations or not. Also, retailer there. But definitely, I think we would recognize probably Amazon has been one of the players that has innovated the most in this space for a couple of decades now. Bertrand Schmitt Yes, it’s definitely I mean, that has been key for them to grow, to expand their network. As you know, I mean, Amazon has a lot of people working in their warehouse, but they were still able to manage to grow so fast while not growing proportionally the number of people working there. It’s thanks to advance in robotics. Nuno Goncalves Pedro Indeed. One other area, obviously, of use has been in the healthcare and medical space, and particularly in high precision need environments. Surgical robots like Intuitive Surgical, their Da Vinci system, does provide the precision that you need for procedures that require minimally invasive play with high precision. Basically, things that you can’t really… The human hand actually might not be precise enough for it, even if you’re an amazing surgeon. Beyond that, medical robots have grown quite significantly. It’s grown to the thousands units, which might not seem a lot compared to the hundreds of thousands that Bertrand, you were just mentioning. But obviously this is a much more specialized space, less mainstream in some ways of robotics. A lot of these devices are incredibly expensive, and then we’ve seen a lot of innovation around that. There’s obviously the old-school players that are on the market, Johnson & Johnson’s of the world, Medtronic, that have also entered that arena, the surgical robot arena. Then there’s a bunch of other applications for robots that I would highlight. Hospitality or hospital delivery robots, so robots in hospitals that do deliveries. Rehabilitation exoskeletons, which is really, really cool. If you guys remember Aliens, the second exoskeleton that she has and stuff like that. Obviously this is for recovery for people that are rehabilitating. It supports them in their rehabilitation without having necessarily to have a human there all the time doing that. Then obviously diagnostic robots. A lot of players in this space, CMR surgical as well, Ethon, Exobionics, Cyberdine. There’s a bunch of things happening right now that are quite cool. Bertrand Schmitt Yeah. If you look at rehabilitation robots, the growth was pretty amazing at more than 128%. You can call it a surge. Some of these metrics are pretty amazing. As you said in rehabilitation, for sure, if you need a human by the side all the time, it will be way more expensive, and you might not have the staff to just do that. It seems like a very, very obvious option. Going back to medical robots used for surgery, for instance, as you say, I mean, robots can do stuff that humans cannot. You can have a very small robot moving your own body in some ways, coming from places that would be impossible to operate. It also could end up being more safe. Ultimately, you decrease the need for specialized surgeons. You might need less of them, or you might simply do more with less. Nuno Goncalves Pedro Correct. Next, we go to agriculture and farming, AgTech. Actually, the name probably comes from use of robots in agriculture and drones, et cetera. We have some big numbers, basically according to our research, 20,000 units in 2023 that were used. There’s high precision agriculture that, again, requires things that are very, very precise. There’s also the base equipment that are used by humans that are being repurposed to become equipments for agricultural activities. Autonomous tractors and sprayers would be a great example of that. Milking robots, the robots that do the milking of cows, et cetera, also makes a lot of sense. Again, replacing human in an activity that probably can be more easily replaced. Then you have, obviously, the drone space with a lot of things around field scouting, the surveillance, the pieces around how to create new ecosystems around the fields. Last but not the least, obviously, we have picking robots, the robots that pick up stuff. Those robots are particularly complex. Obviously, some fruits, some vegetables, et cetera, need to be picked in a way that is more complex because they require either cutting or something like that. Its identification is pretty critical because you don’t go through the whole process of actually growing the stuff and then have the robots destroy it. But yes, and there obviously there’s a lot of players, mostly the old guys, or the guys that have been around for a while, obviously DGI on the drone side, Yamaha, a motor, John Deere, then there’s a couple of startups as well. He’s emerging in this space, Farmwise and a few others that are doing a lot of activity. I’ve looked at this space quite a lot. Just as a disclaimer, I spent a significant amount of years in a VC fund as a venture partner that was really very focused on Deep Tech, Frontier Tech, in particular, robotics. It was actually in the name of the firm. As part of that, ended up interacting with a lot of the B2B applications of it. AgTech seems like an obvious use for it because there’s searches of people. It’s been a huge debate around immigration and illegal immigration in particular. The reality is agriculture has very, very thin margins in general. It’s maybe a broader point we can make at this point in the episode, but the problem with robotics is systematically, is this a big enough issue that you should solve it with a very complex solution. Because normally, robotics, even if it’s a verticalized solution, require complex elements, not just on the hardware side with sensors and a bunch of other things, but also on the software side. I think AgTech is one of those areas where there’s been a couple of companies, there’s been one or two interesting exits with Blue River going to John Deere, et cetera. But still feels like it’s an area that we haven’t figured it out yet. Either we fully roboticized a facility or do something else, but we haven’t really figured it out yet. My theory is it’s just the margins are just too thin, and it’s too complex. It’s also a space where the owners and the people that operate the fields are actually not necessarily people that have any technical knowledge of any kind. The solutions do need to be really, really simplified to that level. Bertrand Schmitt That’s a good point. I have also seen quite a lot of startups in that space. At Red River, we invested in a startup called Robovision in Belgium. Some of what they do is definitely to serve agriculture needs. It’s not easy, as you say. First, it’s not like the car market, for instance, where you make millions and millions of cars every year, where you have a clear market and buyers are ready to buy. In agriculture, there is tractors and stuff, but the competition is very different. The volumes are not the same, and there are always, as you say, questions about how do you deal with a space that is not actually so human-friendly. It’s not a road. It has not been designed for it. It’s a field. Two, the people around are not experts, are not technical, so the smallest issue can be a problem. It’s really a big question. At the same time, I must say I’m quite and optimistic that robotics have definitely the ability to transform agriculture. If you look back, the story of agriculture is just a question of improving the methods, the tools and you increase the yield. That’s how we managed to move from 95, 99% working in agriculture and the fields to 1% today. I’m still a believer. As you say, there is a big question around immigration, especially legal immigration in the US, probably quite a lot is happening to serve agriculture needs. Given that push, that might create some new incentives in order to stay competitive. Nuno Goncalves Pedro Yeah. I mentioned Blue River before, which was a company acquired by John Deere, apparently for $284 million or so. The company raised in total $30 million, so it feels actually like a decent exit. But it’s one of the very few plays in this space that has really gone to a fruitful exit. Also, important to magnify that a lot of the AgTech stuff for example, that’s been happening in vertical farming, for example, is around robotics. It’s around almost managing vertical farming a little bit like a manufacturing facility with its own complexities, but a bit like a manufacturing facility. There we really haven’t seen a runaway winner. I mean, plenty raise a ton of money. From my knowledge, they haven’t done necessarily great. I’m not sure how roboticized they were. There’s a bunch of other companies in the market that we know well, like 1.1, et cetera. There’s definitely a lot of plays going on that depend fully on robotics around the AgTech that we see today. Bertrand Schmitt Yes. You talk about a specific type of agriculture. I mean, the ones they try to do in some convert some old factory, for instance, do it even in the cities, urban farming. I think this stuff by definition, I’m not super optimistic that the yields can work. We’ll see, obviously, maybe if you control well water space, automation, but it looks like yields are definitely a big issue in this space. At some point, size and scale matter. Nuno Goncalves Pedro It becomes a unit economics issue at the end. I was very involved in one of the plays that I mentioned before, and it is clear to me that we will get there, but to your point, there is a need for scale that needs to happen. These guys need to get big contracts. They need to get really, really big contracts in terms of what they need to put in the market. It’s also very clear to me, it’s a very difficult market for you to do stuff that goes one hop from consumer. Let me do a vertical farm and sell to supermarkets, and they’ll get fresh, produced from me and whatever. It’s very tough. There’s a lot of intermediaries in the middle, distributors, et cetera. A value chain that is much more complex than we think it is. I think if you’re someone who’s not spent a lot of time around agriculture, you think, “Oh, there’s people in the fields that produce stuff. They sell it maybe to markets or someone in the middle, and that person in the middle somehow sells it to supermarkets and whatever and what we get.” No, there’s a lot more players in the middle that get involved for all of the stuff. There’s brokers and the wholesale players, and then there’s even in retail, there’s different types of players as well. It’s like, it’s my God. Bertrand Schmitt There’s a whole communities feature market. Nuno Goncalves Pedro Yes, it’s an ecosystem that’s extremely, extremely complex. Maybe moving to construction, I think it’s probably an industry that, as promised a lot, that we would have construction robots replacing people. It’s a particular hazardous role. In construction, there’s accidents, people get hurt, and they might even get killed. Obviously, it’s an area where it’s high risk, high rewards. Robots, you would assume, would be great for this. Honestly, I personally have seen some interesting innovation around 3D printing, which I would argue is it robots or not? Drones for surveying and for looking at buildings and a variety of other things. We’ve had this huge promise, I think, in construction of prefab, of the ability to do prefab buildings and prefab homes and all that stuff. There’s a lot of interesting players out there, so I’m not disrespecting them necessarily, but it hasn’t really scaled. Again, we haven’t seen a player that has really won that market. We saw a player that failed miserably, which was Katerra, which wanted to use stuff like that. I’m not sure they ever got to that level. Bertrand Schmitt Yeah, I was going to say it’s been a decade we talk about prefab and stuff, and for some reason it has not taken off at all. Nuno Goncalves Pedro It’s not. I’ve seen amazing things, in particular around single-family homes and things like that. ADUs, right? Bertrand Schmitt Yes. Nuno Goncalves Pedro In particular, California with a change in less installation, et cetera, and certain markets, in particular, like LA County being super aggressive on opening up the ADU market, et cetera. Nothing dramatic. In this space, we see autonomous construction machinery, which in some ways could be used for what we were just talking about, the prefab market, robotic bricklaying, 3D printing robots, site inspection drones. I think we are seeing more and more site inspection stuff. I think we are seeing more and more stuff around 3D printing. I don’t see this industry being disrupted by construction in the next couple of years, by robots, rather, in the next couple of years. I think that will be very optimistic. Bertrand Schmitt Yes, it seems like it will take a while. Not saying it might not come, but it’s not as if we were at a tipping point at this stage. Going into retail, hospitality, we’ve seen a lot of robots that try to come to some sort of, I would say, awkward space, trying to welcome you SoftBank at some robots. Robots are acquired from a French company, actually, maybe at least a decade ago. It’s 54,000 units sold in 2023, so a pretty good increase, 30% plus. That also includes hotel delivery robots, restaurant food runners, concierge info robots. I think it’s a mix of everything, to be frank. Nuno Goncalves Pedro There’s a mix of things going on. Again, it’s a space that everyone’s like, “Obviously, this is going to be delivery robots and all sorts of things.” This is just going to scale very, very rapidly just if you think about the use cases. Inventory scanning, customer service, restaurant service robots, floor cleaning robots, delivery robots, all this stuff. It’s obvious. Again, we haven’t had amazing winners in this space. There’s a bunch of players, question mark on when we’re going to get them. I think some of the problematics of this, I think in closed environments, I’m very surprised that we haven’t figured out closed environments. Why are robots not able to do inventory scanning at scale? Why are robots not able to deliver food to me in a restaurant? That part seems like a problem that’s eminently solvable because floor plan is more controlled. I know there’s people, so that’s the cobot dimension to it. In some ways, the more the food delivery things, which seem to have taken off in some places, actually. Seemed like a more complex issue, but somehow I guess there’s more activity in that space. We’ll see. Bertrand Schmitt If you remember for hotels, you had these delivery robots bringing your food potentially and not much happened to be frank. I remember seeing some startups trying to do robots for universities, colleges, and the same thing. I don’t think much happened. I think in many situation, it’s an awkward space because you’re like, “Okay, so I’m delivering because people don’t want to just go downstairs and buy at the counter or just buy an automated machine that is just delivering food.” We know the machine to get your bottle of drinks, your snacks, it’s pretty straightforward. The robots providing not the last mile, but the last few feet. It’s a tough value proposition and it has so many constraints. For robots in restaurant… There is one chain that you probably know where I go once in a while, where you have these delivery robots directly to your table. It’s Haidilao. Nuno Goncalves Pedro Of course. Bertrand Schmitt I’m always impressed that the only restaurants in the US where I go, where we get served by a robot is actually a Chinese chain. Nuno Goncalves Pedro Yes, the hot pot guys. Bertrand Schmitt It’s a hot pot guy. They have pretty good food, actually. I’m always shocked because it’s really working. You see the robots coming up, not hurting anyone, finding their way around. You have kids in this restaurant. It’s a very kid-friendly place. You can see it’s not a replacement for human. It’s really making humans more efficient and for sure decreasing the risk of breaking something, having a plate falling off, that stuff. I think it’s a very smart use. I’m surprised why not more restaurants do that, but I think there might be a cultural issue, especially in Europe and in the US. Nuno Goncalves Pedro I think there might be. In Asia, it’s probably where we’re seeing a lot of these advancements coming in. We’ll talk about some of the geopolitics around this in a bit. Moving maybe within still B2B robotics to what are the key innovations and technology movements we’re seeing. One very obvious one, which is the one is artificial intelligence and the use of machine learning, deep learning methodologies, computer vision, and a variety of other things to optimise lines, to optimise how things are done, but also to optimise in-process things and what’s happening. That is very, very obvious. There’s a lot of things happening around that space. Robots are not very useful if they don’t have some brain, if they are not doing something that is defined within the realm of some degree of operational intelligence, as I would call it. AI is critical to that. That I think is the thing we’re all afraid of. It’s when robots are actually using proper AI then they’ll come to kill us. Sorry. Bertrand Schmitt Maybe we’ll talk later about the key players, but obviously NVIDIA has been pushing very hard in the robotic space and sees that as one of their big future markets. Nuno Goncalves Pedro Maybe moving along to something we already talked about, so co-bots, mobile and collaborative robotics in general. We’ve already talked about it. It uses a lot of the AI pieces that we were talking about, but it’s this notion that we will need to have things in this world that interact with us. There’s some cool things happening. Tesla with Optimus and Agility Robotics doing bipedal robots. We did have a bunch of… Boston Scientific was the dog ones, early on. We’re having all of these things that are on the one hand, basically interacting with humans and on the other hand, looking more like animals and humans. Becoming a little bit more anthropomorphic on the human side as well. Interesting things that are happening in that space. As we discussed, those markets are real, they’re growing fast. Certainly in the manufacturing space, we know that’s the case. I think there will be a lot of crossover technology transfer to other use cases in the more consumer-related domain where there are people and little kids running around doing stupid things, et cetera. Bertrand Schmitt Maybe to keep going on the technology, another way to make robots happen at scale is all the work done in term of digital twins and simulation. When you can build virtual replicas of your factory for testing, for optimizing, that will help you decrease downtime, that will help you be more efficient with your deployment. That has been a key part of the game in order to bring robots to the factory. Nuno Goncalves Pedro Indeed. Last but not the least, the things that we would like to highlight, more business models that are changing robotics. A robot can be a very expensive, cost for a firm, for a company, and for a startup. There’s a lot of things happening around robotics as a service where companies can lease robots on subscription rather than just purchasing them. I’d say that’s more of a financing play, to say the very least, but there’s deeper things going on in the space with really solutions that are optimised towards outcomes-driven revenue sharing. People could say, “It’s just a business model innovation.” But there’s a lot of cool things happening around that. I think we might have some of the big manufacturing companies of the future, et cetera, merging because of these business models with a fuller stack where I have my own robots and that’s what I’m bringing to table. Making them available to you. Startups like Formic that have been quite heavily discussed about, and they are trying to really go on a usage-based fee play. It’s solely based on usage. The jury is still out if this is going to really scale, if it’s going to be at the level of mass market. But certainly, if we’re thinking about small-scale manufacturing, et cetera, I would say it’s a great business model and we’ll create a lot of innovation around it. Bertrand Schmitt I think business model innovation is quite critical. We have seen how software as a service, SaaS, has been able to transform the software industry and create basically a new dramatic wave of growth. For robotics as a service, could unleash a similar efficient model that will help scale to the next level robots, so it will be interesting to follow. Nuno Goncalves Pedro If we talk now maybe about leading companies and startups in the B2B robotics space and starting in industrial automation, industrial automation has the big boys, so ABB, FANUC, KUKA, Ishikawa, Kawasaki, Mitsubishi, Universal Robots, Teradyne. These guys are all super well-known. If we think about some of the big guys, they grew up with a lot of the solutions that we were talking about earlier, robot arms, but really expensive robot arms. That market is still dominated by these players, and they command significant premiums on their valuations, et cetera. Bertrand Schmitt Let’s not forget that KUKA was a German company that got acquired by a Chinese company some years ago in 2016. I think that was crazy because it was one of the Chrome J-well of the German manufacturing industry. To let it be acquired like this was probably a strategic mistake. Germany decided to make some change in how they are going to let M&A happen, depending on the country of origin of the acquirer. The acquirer was a media group, Chinese appliance manufacturer. I think that’s really a fair question because when you know that the acquisition of Chinese companies is not something so easy for Western companies, I’m not sure why we should let it work in the other way. Nuno Goncalves Pedro Very good. Logistics and warehouses. We’ve talked already about some of these examples, Amazon Robotics with the acquisition of Kiva Systems. That’s how itself got pulled in. 6 River Systems, which I believe was acquired by Ocado to make their deployments due. Locust Robotics, Grey Orange, Geek+, Boston Dynamics. A bunch of players that have been done. What’s for me interesting, it’s an area that has had a lot of acquisitions by the retailers themselves, which is not obvious. Bertrand Schmitt But not huge acquisitions usually as a result. Nuno Goncalves Pedro It’s not huge acquisitions, small acquisitions. Even Kiva, I remember was not a very big acquisition by Amazon. It was relatively important for them to go into that space. Anyway, I wrongfully, by the way, mentioned Scientific Boston Dynamics. Two different companies just to be clear. Boston Dynamics is the one with the anthropomorphic robots and also the dog-like robots. Boston Scientific, a total company altogether, but it is what it is. It’s a life science company. Bertrand Schmitt There are other types of AI startups, collaborative robots, universal robots, Techman, Doosan. I think for me also, the big guy we should talk about it’s really NVIDIA. NVIDIA is making the brains of many of these robots. I have a lot of platforms to develop robots. It’s just open source, a new model. Recently, it’s called Project GROOT. GROOT, G-R-O-O-T, the foundation model for humanoid robots. We will talk more about that later on, but NVIDIA is definitely pushing very, very hard in the robotic space. They want to be the brain of all the robots in your factory, in your field, the medical space. Nuno Goncalves Pedro NVIDIA platforms everywhere. Obviously, we don’t have… There’s dominating legacy operating systems for a robotics operation, but most of them are owned by the firms themselves, the ABBs of the world, et cetera. We haven’t seen a prevalent robotics operating system that would work across domains that has killed dramatically. There’s a lot of interesting things, and it wouldn’t be in the realm of impossibility for NVIDIA to go up stack, do more software platform ownership, and even into who knows operating systems. We’ll see what happens. Not out of the realm of possibility. Talking a little bit about challenges, just to put a bit of a bookend on the current conversation on B2B. We’ve talked quite a bit about geopolitics of it, et cetera. One of the issues clearly around robots are people. You can frame it as the integration of people and the integration of their skills with the use of robots. It’s complex because you have to reskill staff, not only to maintain robots, et cetera, but to work alongside robots. In some ways, we people are unpredictable. We do stupid things at times, we try to optimise because we know the shift is almost coming to an end, whatever. I don’t know. In some ways, that piece of just integrating people with robots, integrating their skills with the skills of robots, et cetera, is something that we know for a fact has been quite complex and have led to a lot of safety issues and a lot of concerns around the use of robots, even in the B2B environment. Bertrand Schmitt At the same time, it’s always easy not to say, “Okay, the robot is a danger.” Okay, sure, but we forget that many times robots are replacing work that is dangerous for human in the first place. Let’s be also careful about making sure we see the benefit of not having humans doing dangerous tasks or less dangerous tasks. A good example, actually, we don’t talk in that category, but if you think about robots for taking care of potential bombs, for instance. Now you send your guided robot to try to basically make the bomb implode. No humans, neither. I can tell you that before that, it’s not a fun job for a real human. We know that there are robots as well for nuclear facilities, for instance, that can be used. I think that, yes, we have to be careful with human safety and at the same time, let’s not forget that a lot of these robots are decreasing risks for humans, ultimately. Nuno Goncalves Pedro Second big challenge is obvious. The high cost, the narrow eye. There’s a lot of things going on with robotics as a service, but the robotics as a service, someone’s paying for the robots. There’s still high costs in the space and there’s still a little bit of an argument on how do you think through return investment. It has to be a very top-down decision architecturally on what robots you go with versus not. You can’t have a ton of trial and error in this space. I think that’s part of the issue. It’s not just that you have high cost and ROI, it’s just you can’t have a huge amount of trial and error. You have to get architectures right over time. If you made a significant mistake on your architecture, you’re going to pay for it, and it’s going to be very, very, very expensive. Next, technical limitations. Very significant challenge. Robots can’t do everything under the sun. We know that. They have limitations in how they do things, the precision they have, what are they handling. There’s a lot of complexities around this. These machines. There’s a lot of complexity around it. There’s maintenance that needs to be done, make sure that it operates with the precision that people expect from it and all of that. That’s the third area of challenge in this space. Bertrand Schmitt What’s interesting is that some of these technical holders have been solved by some of the industries. If you take EVs, for instance, we have seen the rise of the electric motor and more and more high-performance electric motors. Some of this is going back to the robotic space. You could argue that a lot of the current stage innovation in robots is half. Yes, better AI, better vision, specifically, better understanding of the environment, but I believe it’s also around motors. Motors are becoming much better at doing the job. If you want to have a smaller robot, if you want to have a human-size robot, if you want to have hands that can do something, then yes, electric motors, actuators have changed what’s possible. Nuno Goncalves Pedro That’s a little bit of the key issues that are more on the core technical business model side. Then, if we move to other areas, the robotic space we’ve already mentioned has a huge issue around interoperability and standards, with ROS, Robot Operating System being one of the most common used protocols/robot operating system thing. But honestly, the reality is there’s very little integration between systems. There’s a lot of pervasive systems out there that are dominated by the suppliers themselves and the owners of the hardware. There hasn’t been a huge focus on creating a platform that truly works across the world and across different domains as I mentioned before. Interoperability and standards are still very much an issue. Bertrand Schmitt We just need robots that talk and listen and LLMs in the middle and problem solved. Nuno Goncalves Pedro We just need robots that do everything, yes and then it doesn’t matter. Bertrand Schmitt I think we are going there. The reality is that the more you can naturally command a robot and ask it to do a task and have it indeed do this task without too much detail or at least the similar level of details to a human trained at a specific level, I think the more things will change versus having a team of programmers to program the robots and any time the stuff change on the other side, you have to reprogram the robot. That was a big part of the cost of running a robot in a factory. Nuno Goncalves Pedro Two last but not the least topics. Maybe we’ll bundle them a little bit together. The regulatory and safety, regulations that occur from market to market and how this is done, the regulatory framework by which safety is managed, and public acceptance in general, and supply chain dependence. It’s very clear that you need advanced components from all over the world. Going through a world right now where there’s all this geopolitical instability, and there’s tariffs, and there’s all this stuff, how does that work? That is a bit of a creating also encumbrance on development of B2B robotics. Bertrand Schmitt As we said, China has seen a rapid adoption of robotics and that might surprise some because thinking about China, low-cost countries and stuff. But as you said, the reality is that China is a decreasing population, especially a population that can work, makes sense to automate. They also wanted to go more high-tech type of production. China is definitely big versus Japan, Europe, and US, where definitely there have been traditional struggles of automation. But as we just said, China is probably leading at this stage. Nuno Goncalves Pedro Just to be clear, the US is a big robotics market. If you’re listening to us, the US has to catch up. Maybe there’s potential to be growing, but the US from what we know, had 37,587 industrial robots installed in 2023. It’s a significant market, in particular around professional service robots. Some of the leading companies in the world. It remains hopefully a player in that space. If some of the big brands we mentioned are not here, they’re in Asia, some of them are more in Europe, and now they’re owned by Chinese, as you were mentioning, Bertrandt. There’s still some stuff happening in Europe that’s significant, but I would say Asia has taken the lead in some ways across the board. China catching up now and going to the next level. Japan was one of the big, big first players a lot because of demographic pressure. South Korea has caught up as well. There’s a lot of interesting things happening in Asia in particular. Bertrand Schmitt I still remember years ago, there was really a question that your… Cheap people working in factories was a better deal in many, many situations than having robots. I remember stories about highly automated South Korean companies having trouble to compete versus actually cheap labour from China, but I think all of this has changed. Nuno Goncalves Pedro Indeed. Shall we move to consumer robotics, which is probably what a lot of people, “When will we have this robot serving me at home?” It’s like, “Well, probably not anytime soon.” There’s good news and bad news, but probably not anytime soon. It’s growing fast. To be very honest, a lot of the home robots that we’ve had, one’s I think have been misclassified, which is the whole use of things in the kitchen, et cetera. Those things are not robots, just let’s be clear. Those things are very basic mechanical elements compared to what a robot needs to do. In the household, the big dominant player that came into the market was Rumba. They reached a ridiculous amount of smart vacuum shipments as they say in the low tens of millions around 20 million units and all that stuff and then nothing. I don’t know if there’s anything public or not, so I’m not even sure if I’m talking out of place, but I heard that they’re not so much in great shape. Bertrand Schmitt There’s how many rumours in the market that they are doing very bad? Nuno Goncalves Pedro I used it at the beginning and I really disliked it. It’s just like the experience wasn’t great. I think it’s a great experience if it’s a very contained environment, but if it’s, for example, if you have pets, it’s a mess. I just gave up on it. I tried twice and I just gave up. With the iRobot, just to be clear, a lot of people know the Rumba, but iRobot is the name of the company. Bertrand Schmitt Same for me. I tried it very early on, maybe the first-gen. It didn’t work that much, to be frank. I think that’s what has been the issue. It’s very sad because it was definitely… I think the best-selling robot in the world by unit’s shipment of any robot. I don’t think there was any robot, autonomous, shipping at similar volume than iRobot. I can say that personally, not inside the house, but outside. I just bought two robots from Navimo to do my lawn, front yard, backyard. It has been working quite well, actually. I must say I’ve been pretty happy with that because instead of having a gardener coming every two weeks to do the job, you have the garden clean every two days or every day, if you want. That has been a quite interesting solution, but obviously, you always have the question, how much is a robot? How much are you paying your gardener? How long is it taking? How long will the robot keep working? You have location issues. Usually, that’s the biggest issue with robots. You need to know where they are to know how to keep doing their job. It’s not totally problem solved, but it’s getting better. Nuno Goncalves Pedro It is getting better, but we just wish we had a vacuum cleaner for our house and a lawn mower for them whatever and it’s still not there. It’s like, surely these are the easier use cases. Then we move to the other use case, which we all want, the personal assistant, social robots, like the toy that plays with me, that interacts me, embodies Moxie. We had this… Was it Jibo? Jibo, the social robot thingy, whatever. Obviously, aibo, Sony’s aibo robotic dog, which we’ve seen a couple of iterations on. We all want that stuff. Bertrand Schmitt I bought the first one 25 years ago now. Nuno Goncalves Pedro I want that stuff. Some of us grew up watching Battlestar Galactica, the previous one, not the dark one that came after, but the original one. We all wanted those little dogs, the little dogs that were in Battlestar Galactica. I wanted the dog since I was little. I wanted that dog. I wanted the dog that does stuff for me that I don’t need to train. Bertrand Schmitt I can just tell you that my aibo was for a very long time my worst spend in tech gadgets I have ever had for at least a decade or two. I don’t know. Nuno Goncalves Pedro How much did it cost, do you remember? Bertrand Schmitt It was very expensive. It was very expensive for the time. A few thousand euros, which 25 years ago was a pretty insane amount. For something that was, ultimately at the time, truly useless. I remember playing a few weeks with it. I think that’s a big issue. How do you make it useful while keeping cost reasonable? How do you make it so that it’s not just a fad where everyone got excited because that’s a gift for Christmas everyone gets to have, but next year no one cares? Nuno Goncalves Pedro I think there are two key issues around personal assistance and social robots. I’ve seen some really beautiful solutions. Things that look like it’s a toy. You know it’s a toy, but they’re really engaging with you. The ones that look the best and are the best are obviously, as I mentioned before, in the case of B2B robotics, over-engineered. They have a bunch of sensors, there are a bunch of things going on, and that makes them expensive. It means their bill of materials, what makes up for the cost of the hardware, is actually very expensive. Therefore, you can’t sell it at a very low cost. I haven’t seen anyone at scale try to play around with robotics as a service for a consumer, where you have something, and you’re renting it out thing. That might be a play around that, but it feels to me that there has to be something around that. Because I’ve seen some solutions that are really endearing. You want to interact with a robot, et cetera. That’s problem number one. Problem number two is to your point, I think maybe, Bertrand, I’m putting words in your mouth, is the level of engagement you get from it. It’s a novelty, you interact a little bit, and then what else does this thing do for me? If it doesn’t do anything else for me, then I’m like, okay, cool. I move on. There’s no interest. It has to have one, ability to be updated, to go to the next level, to become a better solution, and two, to actually do something with me that is of tremendous value to me systematically. If not, then why would I do it? Why would I buy and consume something that’s likely to be relatively expensive for me to have in the home? Bertrand Schmitt There is always the question, you are fighting against all the stuff you can buy. You are fighting against buying a computer, buying a tablet, buying a phone, a TV. In some ways, you have the question, if the hardware side of the robot is actually not working that well, what are you left with? You are left with an Alexa where you can talk to that has some eyes. What will it do based on its eye? What action will it take that benefit from being equipped with two cameras, for instance? It can navigate your home, but what will it do by navigating your home? Next question, can it hold something? If it’s small, it won’t be able. It will have to be bigger. It will have to be heavier and balanced. Then it’s a whole different ball game. Then we go back to cost. We will talk maybe more about it. But if you look at Tesla and the robots they are working on for consumers, we are talking about the price of a car. They are talking about 20 to 30K. That might be the price so that you have a robot that indeed, practically can do things in your home. As what it takes to open something, close something, go up the stairs, go down the stairs, move some books, move some food, take a kid. It’s not an easy one. What do you do with a small size robot, like the size of a stuffy so that it’s cheap, but ultimately it’s useful? It’s not clear. Nuno Goncalves Pedro Innovation will come, I believe, but it’s not clear. I’m not sure we’re going to have Jeeves anytime soon as an anthropomorphic robot. Bertrand Schmitt Of course. I’m not saying it won’t come. I was mostly in a mindset of the next 5 years. Nuno Goncalves Pedro It’s a little bit of a segue. We’ve been talking about personal assistance and social robots, entertainment and educational robots are in the same logic, SoftBank’s NAO robot. Things that have been used for education. We had Sphero. Everyone probably remembers Sphero. Unfortunately, the toy space needs to be even cheaper. If it’s a social thing to be doing stuff with your children, then that’s one thing. If it’s something that’s been there just as a toy or as an entertainment to play, it needs to be even cheaper. I don’t know. It’s a space, again, I think the comments you just made, Bertrand, I’d make them my own. Very, very difficult to justify the cost unless there’s a clear beachhead in terms of the actions that the robot can do for the child or for the person that it’s interacting with. Bertrand Schmitt I think what we see in the meantime, if you take Sphero, for instance, many of them are moving to the education market. Luckily, there is a big push for STEM in schools. As a result, my impression is that they realize that, hey, most parents have no clue. It’s not as if they are going to teach robotics to their kids. If we want to do stuff that is relatively cheap while interesting, let’s make them educational. Let’s have schools buy them. Let’s have labs with our robots. My impression is that a lot of what could have been from a robot actually end up being education for a STEM education type of robot that basically belongs to the classroom or the lab. Nuno Goncalves Pedro It feels to me, it’s a little bit like, let’s move business model. Let’s not sell to consumers because they’re price sensitive, and let’s sell to educational entities, academic entities, et cetera, who are not price sensitive. I’m like, you’re moving from price sensitive to price sensitive. You’re just saying, well, but the other guys have more money because they’re an institution. I’m like, yes, they do. But you have to share these across different people, et cetera. Different wear and tear as well. Bertrand Schmitt But that’s the thing. You can share one robot for 30 kids versus 2. Nuno Goncalves Pedro I understand, but still, it is a very, very, very price-sensitive market as well. It’s very difficult to break into. If you look at the US, for example, unless you’re going to higher education, it’s going to be very difficult to crack into a lot of these schools. Very difficult. Even if you’re going to private schools, super price sensitive. I don’t know. I feel it’s an interesting pivot on business model that I have a lot of doubts will scale. Maybe last but not the least, another demographic that obviously matters tremendously is the senior demographic, elder care, and assistive robots. When we know so many people don’t have someone that can take care of them and look over them. Even in assisted living, there’s lack and shortage of employees. Even if you are living in a home or assisted living facility, having these kinds of robots is particularly critical. I know for a fact that the Japanese have tried a lot of things out there. I’m not sure if anything has scaled that we could talk about, but definitely for obvious reasons, again, around demographics, they’ve had to do it. The world is moving this way. We’re having more and more ageing population at scale. So having some elder care or assistance robots seems like a must. Again, if you have vertical solutions, in particular around assisted living, homes, et cetera. Now, one would say if you have personal assistance, personal social assistance, et cetera, that work across the board, that should take care of everyone. But as we’ve seen vertical solutions are the ones that emerge first. That’s probably where we are in the market at this stage. Bertrand Schmitt Yes. I think that’s the right way to go. First you start with very specialized robots in terms of hardware and software. That’s your only option because the cost of everything, from the chips to the mechanics, is just very expensive. You have to pick something that you can solve where people find an ROI. But I think step by step, there will be a convergence somewhere to more standard models. That’s why some are very bullish on humanoid robots, because the idea with a humanoid robot is that it can work anywhere a human can. It can do any task, at least physically, as that a human can, because it will have the same size, it will have similar hands, it has a similar balancing and walking mechanism. If a human can do some tasks there, physically, a humanoid robot can. I think there is some very strong logic. Obviously, the negative is that it’s big, it’s heavy, so it will get expensive. But at the same time, if you move from, I can do just one task for cheap, or I can do 100 tasks way more expensive, maybe that would be the right combo. Nuno Goncalves Pedro Exactly. Really finding that sweet spot then leads to great unit economics and scalability. Talking, maybe moving a little bit into the key trends that we’ve seen in the consumer robots or robotic space. Really, the advancements are trying to make these more capable, affordable, user-friendly, as we discussed. First one, again, very obvious AI and the integration within put and output mechanisms like voice and others. Bertrand Schmitt And cameras, and vision. Nuno Goncalves Pedro Cameras, vision, and all these things. These elements are particularly critical to what we’re seeing. Obviously, ability to recognize owners versus strangers, ability to generate speech back to people, to interact. I think the big part of engagement in all of that is also related to that. No surprises there. Obviously, one of the key trends that we’re seeing is all of the advancements that we’re seeing in AI and input and output. Bertrand Schmitt Yeah, 100%. I’m a big fan of the input/output problem. That’s the problem we need to solve. If we cannot communicate easily with a robot, forget it. Forget it at home. Maybe we have seen in industries, factories, it’s okay, you might pay developers. But even then, I think the big scale will come when all of this become easier to communicate with and robots able to act on this. Nuno Goncalves Pedro Indeed. The second area is obviously around sensors and mobility, which enables a lot of these things. The ability for some of these robots to move around and the ability for them to have sensors that detect the environment around them and to have actuators to actually interact with that environment. It could be something that leads to a hand moving, to something moving, to something touching someone. Good luck on that. Obviously, there are a lot of things happening in that space that are quite interesting and have led to tremendous innovations that are still being implemented in the market. In my perspective, it’s an area where we’ll need to deliver, deliver, deliver, deliver until we can have solutions to your point that are at scale, much cheaper, and then can be propelled into consumer robotics. It’s one of those things. It will ripple down the value chain to finally get to consumer robotics. Bertrand Schmitt I agree with you. The same way that not everyone could get a car at first started with trains, actually, and then we went smaller and smaller. Definitely, I think some of this. Not just that, let’s not forget a lot of the robots we see today in demonstration of how agile they are and what they can do, actually are remotely operated. People have to know that in many cases, this stuff is not real in the sense of a robot being somewhat autonomous. It’s just remotely operated. I was quite shocked how many companies, Boston Dynamics, for instance, are real pro of remote operating their robot and making you believe that… They won’t lie. They would just imply that this stuff is autonomous. No, it’s not in many situations, so nothing. We are not getting there because if you don’t have the hardware that is agile and has a power to do what it’s supposed to do, of course, you are dead in the water. But I think we’re not yet fully there in the autonomy of this robot, but it’s coming. Nuno Goncalves Pedro Maybe to highlight three more trends that we see in the space. Obviously, there’s the notion of emotional AI and AI interacting with people, reading their emotions, reading their things. It’s another field of AI that we’ve already mentioned. The aesthetics and form factors of robots are essential. In some ways, if you look more anthropomorphic, or if you look more like either pets or humans, et cetera, it’s easier to interact with them. Software designing versus more hardcore designing, friendlier design. It’s probably one of the key things that will lead to that attachment. Last but not the least, obviously, the realm of connectivity and integration with smart home facilities. Maybe as a proxy to avoid precisely the problem we were just talking about, because some of these sensors are very expensive to have in the robot itself, but could the robot use other stuff that’s already in the house? Do you have cameras in the house? Do you have a TV in the house? Do you have whatever? I can interact with that. Again, on that stuff, the more multimodal stuff beyond just connectivity, beyond me just connecting to Wi-Fi, the multi-modal stuff, I think, is probably the one that I’m the most sceptical about. If we think it’s going to take decades for us to have some of the stuff in our home working at scale, the multimodality of it is going to be even more difficult because it assumes interoperability, it assumes that the systems talk to each other, which we know doesn’t happen today. They don’t talk to each other. They’re all specific to the manufacturers, to the owners, in many cases of the hardware, as we mentioned before. Bertrand Schmitt I’m somewhat hopeful for the integration because even today, we can see you have apps to integrate, and you build up step by step, pieces by pieces, your smart home. There are standards, so there are ways. It may take time. Of course, there’s no real unifying effort. That’s true that the humanoid size robot at home is not there in 5 years, probably not 10. But at the same time, I can see that it’s coming. Maybe it’s 15 or 20 years that it’s really practical. But the tech is slowly… I would say slowly, but now it’s getting there faster, is my personal perspective. Yes, it will take time to really do useful stuff, to be cheaper so that people can afford. But at the same time, I think it’s important to share my belief that it’s getting there. Yes, we are complaining because it’s not yet there, but it’s moving in that direction. Nuno Goncalves Pedro Maybe switching for a rapid fire on preferences and cultural factors that we see around the world. Obviously, the US, not very shockingly, has a strong preference for utility-based robots, so things that do stuff for me, like vacuum lawn mowers. Obviously, the US, we also have more space, so we have homes and fields. It’s very different than living, for example, in Tokyo. Bertrand Schmitt Less focused on emotional AI, maybe. Nuno Goncalves Pedro I think we should have more emotional AI in the US. Maybe the vacuum cleaner can also talk to me. Bertrand Schmitt Maybe I can pet the vacuum cleaner. Nuno Goncalves Pedro The vacuum cleaner, yeah, come here. United States is, as you would imagine, probably one of the most utilitarian in that sense. We want robots to do stuff for us so that we can then just chill by the TV and ask the robot to pick us a beer and do stuff for us. That’s probably the best way to look at it. The opposite is a little bit, I think, Japan. Japan is more, in some ways, even embracing robots, maybe too much. We know that some funky dynamics in Japan where some robots are treated like pets and characters and whatever. By the way, if any of our AI overlords are listening to me, I love robots. I love robots, please don’t kill me. But obviously, there are a lot of things happening in Japan that have to do with ageing society, a society where human connectivity has had some challenges because of demographics, because of how cities have been built, because of cultural aspects of Japanese. In those environments, robots are really more tailored towards personal societal links, pets, characters, all that stuff. That’s maybe the most extreme opposite. Then coming a little bit to the middle, we have South Korea, which is both a mix of utility, and we also have some social interaction. Bertrand Schmitt Yes. Of course, Europe will focus on data privacy and safety and will regulate its way out of robots. Nuno Goncalves Pedro No robots for us. Bertrand Schmitt No robots for Europeans. As we discussed, I think China is definitely very technologically optimist, both on the industrial side and the personal side. I remember there was in China at some point, I forgot the brand, a brand of robots for kids, educational, that was doing very, very, very well. I was very surprised, and that was years ago. Nuno Goncalves Pedro Yeah. Maybe moving to forward-looking and what’s happening in the market. A mix of what’s happening in the market that is structural and what’s happening in the market as we look forward. We’ve already looked at a lot of these partnerships, already mentioned them, not just acquisitions, but also what happened with Amazon and iRobot. The deal got scrapped in the end. As we know now, iRobot, who are the makers of Roomba, may actually falter now. We’ll see, but Amazon was very active early on, in particular in the B2B space. A couple of things also on the consumer side. We’ve seen other things happening a lot in the B2B space in terms of acquisitions. We’ve already mentioned several of these examples. Alphabet has come back into the market to do things around particularly the operating system, the stack. Obviously, they acquired a bunch of things like Open Robotics, which maintained ROS, the robot operating system, and Vicarious. They’ve done a lot of movements that are a little bit more connected to the software platform side with operating systems. NVIDIA has done a bunch of things that we’ve talked about. I know you are a big believer that NVIDIA will become one of our overlords. Bertrand, do you want to talk through some of those? Bertrand Schmitt Yeah, I don’t know if I would put it this way, but of course, I welcome our new overlord if he listens to us in the future. But look, I think NVIDIA is realistic that they need to keep looking for new paths for growth, and the robotics is a perfect match for what they do. You have vision issues, you have audio issues, you have communication issues, you have mobility issues. It’s a perfect match for the NVIDIA stack. I think for them to propose solution on hardware, on software, on chips makes a lot of sense because it’s going to be a big market. Maybe we don’t talk much about that, but it’s clear if you are thinking 10, 20, 30 years from now, it’s one of these big markets that’s going to change the world. Nuno Goncalves Pedro Don’t let the fact that we didn’t start at that point… That robotics is going to be huge. Robotics is a next era of AI in some ways. I don’t think we’re there yet. I don’t think we’re at the level of rapid disruption that we faced in AI more on the software layer. But robotics, we will get there. There’s no doubt we will get there. It will be, again, a major seismic shift. It’s going to be one of the next big industrial revolutions or technology revolutions, if we want to call it as such. To maybe go actually as a segue into that, obviously, we could talk about partnerships, we could talk about all the money from government that’s going into a lot of these activities. But maybe looking a little bit ahead in the next 5 years, maybe even beyond that, what do we see as happening? The first piece that everyone’s particularly excited about is this convergence of AI software, so to speak, in robotics. It’s when AI comes into robots that can do things with that, that they can do manipulation of pieces, interaction with people, interaction with other objects, et cetera, in a very meaningful way. There the world just takes over. In particular in a world where the robots can then do things that they haven’t trained for, that they haven’t done any piece of supervised learning or unsupervised learning, that they can go to the next level in really framing how they interact with their environments and with the world. That’s a big deal. Once we start having that conversion, it’s accelerated. It’s also the part that concerns us. Just to be clear, this is the part that if we get to a convergence of AI and robotics super quickly, we should become a little bit more concerned about what they do because then they have physicality. They do have sort of a brain. At that point in time, we should worry a little bit more than we do today. Bertrand Schmitt Definitely. That’s why AI progress has been fast in the pure software side now. AI hardware, robots basically, are downstream of this trend. As you say, that’s true, that it’s a different story when suddenly you have a body, you are more or less independent because I guess that most robots would be designed to be really some edge computing. I would be surprised if robots are designed in a different way. Not saying they won’t be upgradable through the internet, not saying they won’t be able to look up for something on the internet for some reason, either looking for information or looking to increase capacity on the spot. But I would be shocked if anything is not designed to be fully working locally. You need to work around a network disruption, you need to work around internet disruption. I think that’s a good example. Nuno Goncalves Pedro That’s a very good point. I mean, if we’re looking at humanoid and general purpose robots, they definitely need to have most of their sensorial, their senses’ interaction with the world—be it the sensors or the actuators—controlled by the edge. I don’t see at scale how they can just be communicating and all of a sudden there’s no network. What happens, right? What state do they go to? Bertrand Schmitt It’s like smart cars. If you remember in the past, there was the idea that self-driving cars would be remote controlled. I mean, no way. It has to be fully automated. Maybe it has to go back to the human owner in some ways for some needs, but ultimately there is a need for real local autonomy. Nuno Goncalves Pedro I think it’s funny that you mentioned that because we didn’t talk about self-driving cars. But for me, self-driving cars are a robot. I mean, they fall under the definition of a robot. Machine capable of carrying out a complex series of actions automatically, especially one programmable by a computer. They’re our transporters in some ways. I do think that’s going to be one of the big ones that will be available to us maybe within a decade. Bertrand Schmitt I didn’t talk about self-driving cars as robots because they have another name, cars. But you’re right, they are 100% robots. Again as we said, you could argue actually they are at the forefront of everything. They have been at the forefront of electric motors that we need for any other type of robot. They are at the forefront of AI. The self-driving part has been the forefront of AI for 10 years, easily, way before LLM. Of course, people are willing to spend 30, 40, 50, 60K to buy their car, you have financing mechanism available for that. The whole economy is designed to help you buy and finance a car in the first place. It’s definitely the reference. It’s good we end on this in some ways, because it’s a critical piece of the puzzle. You can argue that not all, but many robots are downstream actually of the car innovation. Nuno Goncalves Pedro I feel that might become actually the first real full-on consumer robot that consumers buy and use. Bertrand Schmitt It has a specific use case. It’s not trying to do groceries or take care of the kids, or this, or this, or that. No, it’s driving people. It might be driving stuff as well, but it’s driving on the road, going from point A to point B. So it helps. Nuno Goncalves Pedro If I was an automotive OEM, original equipment manufacturer, I would be thinking through the car and how the car becomes actually the next centre of innovation because the car itself becomes its own spot. If I have that amount of intelligence so to speak, AI so to speak, linked to the car moving around, which is the most complex activity, think about all the stuff I could do inside the car. Honestly, the rocket science part is the part of the car actually moving around and doing all its things. I don’t know. I feel sometimes I have conversations with some automotive executives and people that are consultants to automotive executives, et cetera. I feel the industry is still very limited in how it thinks about self-driving cars and how that changes the world, et cetera. It really becomes key element of mobility interactions. If you don’t need to drive it, there’s a lot more space to do a bunch of other things, really. Bertrand Schmitt I think that’s the reason why Tesla has been moving so fast, so hard on Optimus, their humanoid robot. A lot of things are very similar. Yes, the use case are less clear. It’s definitely not… We already have a robot, it’s a better robot, like cars. Where it’s a car. We have better car. The use case is less obvious for humanoid robots, but at the same time it’s clear that there will be a huge innovation from the car manufacturing, the self-driving cars at least, that are going to provide downstream innovation to especially humanoid robots, but not just. You can imagine other type of robots. Xiaomi, who recently launched cars, is also into robotics. So I would expect to see more and more of this actually going forward. Nuno Goncalves Pedro Maybe, obviously, just to name a couple of things that we do know will happen over the next few years. Obviously, B2B robotics will have a lot more applications across sectors, will go into the small and medium business arena. It goes without saying as well that we believe that the scaling in economics of robotics is going to be critical, that unit economics can only work at scale once you have materials sensors, actuators, et cetera, that are much, much, much cheaper coming into the market. The effect of robots in society and in public discourse, technology, philosophy, are looking very deeply into it. How do we interact with robots? How do they interact with society? What’s their role? What rights do they have, et cetera. Regulation and standards, evolution, so all of that. Overall, I feel there’s a lot of topics that we didn’t go in detail on, but that you guys can probably get a little bit of a feel on where we stand on them just because of the description we had earlier. Last but not the least, obviously we always talk about robots as something that is separate from us, but there’s a piece of robotics that is very focused on us and them which is obviously human augmentation. There’s obviously the discussions we already had around co-bots, collaborative robots, exoskeletons, and all is related to that. Which I think it does lead us to a brand-new world when we have the ability to complement ourselves with elements that are extraordinary to us, but then make us much more either productive or have skills that we wouldn’t otherwise have, et cetera. A lot of cool things, I think, will happen around augmentation. I think that’s more science fiction, to be very honest. The reason why I think that’s more science fiction is because these elements need to interact with us. The moment you start interacting with humans, with the humans themselves, there’s a level of complexity that you need to deal with. Not just in terms of technology, but also in terms of regulation, standards, et cetera. Bertrand Schmitt I don’t know if exoskeletons are a real robot in themselves, but at the same time I can see how it can become a huge, as we say, co-bot complement to a human. Either because you need a rehabilitation or because your work or your labour is very hard, or because simply you are too old, and that’s a big change. With an exoskeleton, suddenly you’re able to walk. Or normally, you don’t need a stick, you don’t need something else. That might help in many ways. Nuno Goncalves Pedro Let’s talk about societal impact. I mean, we’ll adapt unless the robots start killing us. I think that’s societal impact. That’s my sentence. It would be great. We will all be great unless they start killing us, then we won. Bertrand Schmitt You have seen too much of Westworld or Terminator, I guess. Nuno Goncalves Pedro Yes. Bertrand Schmitt Or the movie iRobot, actually. Nuno Goncalves Pedro On a serious note, I think there’s a lot of complex implications of it because as robots became more and more humanoid, they become more and more… Look like us. For example, material innovation will lead us to have robots that might actually look just like us, not anytime soon, but in decades. What happens? What’s our interaction with these beings, these elements, et cetera? I do think that produces a very interesting dynamic societly. We’re already starting seeing things like that. If you want to see at complexities of society, look at Japan to see what’s happening already. But can you get married to an avatar? Can you get married to a robot? How does that work? Do they have rights? Do robots have rights? What are the rights of robots? Will we have a constitution for robots? At some point we say, actually, the robot can become citizens. How do they become citizens? All of that stuff is like a minefield. I don’t know. I feel we still have much to go, and it will really depend on the implementations that we have of robots that scale. In all honesty, in particular on the consumer side, once we have robotics on the consumer side that scale and start becoming more and more anthropomorphic. More and more like us, we will have to deal with, based on those use cases, what are the regulations we need to think about? What are the issues we’re having now with these machines as they are scaling in the market. That’s my two sense on that. Bertrand Schmitt I was wondering, we cannot do an episode on robotics without talking about the three laws of robotics from Isaac Asimov. Nuno Goncalves Pedro Yes, we have to talk about Isaac Asimov. Bertrand Schmitt Isaac Asimov, a famous science fiction writer, has written extensively about robots. I actually think he’s the inventor of the term robotics more than now, 80 years ago. He built some laws for robots, that robots are supposed to follow. First law is a robot must not harm a human or allow a human to be harmed through inaction. Second law, a robot must obey human orders unless his orders conflict with the first law. Third law, a robot must protect its own existence unless that protection conflicts with the first or second law. From these three laws, Asimov managed to write a lot of sci-fi explaining ultimately what it means in real-world application to follow these laws. Nuno Goncalves Pedro I think we sometimes forget that. We always say, “The science and technology of people are changing the world.” I mean, in some ways that’s true. In other ways, actually, there’s other things. It’s like writers change the world, people that do movies change the world. A lot of the things we’re seeing implemented today in our tech realm in the future, both in terms of AI and in terms of robotics, for example, just to quote two very big visible spaces, we are imagined by people decades ago. 80 years ago, 70 years ago, 60 years ago. So the imagination was already there. And in some ways, we’re now implementing them, which is interesting. Bertrand Schmitt I feel sad for some people like Isaac Asimov who didn’t live long enough to see the conclusion and the execution on some of his dreams. To conclude, B2B Robotics is scaling rapidly, fuelled by labour needs, AI breakthrough, cost declines, but also geopolitics. Consumer robotics is more fragmented, but has had a breakout success in cleaning robots, with social robots on some cusp of border acceptance. I think we should keep an open mind on how robot can transform the workplace and the everyday life. It’s an exciting moment. Robots are shifting from the realm of sci-fi to practical reality, and we reshape industries and how we live. Thank you, Nuno. Nuno Goncalves Pedro Thank you, Bertrand.

Our analysis of the Space & Aeronautics, Defense and Homeland Security industries from key trends to investment landscape… to perhaps, more importantly, evil vs no evil? Where are we now? Navigation: Intro (01:34) Why now? Geopolitics Aerospace and Aeronautics Defense and Homeland Security Conclusion Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Nuno G. Pedro Welcome to Tech DECIPHERED. In today’s episode, Episode 62, we’re going to discuss space and aeronautics, defense and online security. We are going to talk about key trends, why now is such a wonderful time to be looking at this space not only from a startup perspective but also from an investment landscape perspective. We’ll also go into the whole evil versus no evil topic. Specifically, we will discuss why now, and the geopolitics of the industries, aerospace and aeronautics, defense and homeland security, and then we will conclude. Bertrand, why now? Bertrand Schmitt Why now? I think this industry, this sector, space, defense, homeland security has seen not just a lot of growth and quite a few very successful companies coming out, but it’s an interesting complete turnaround, if you look at that from an entrepreneur or from a VC investor perspective. Why now? I think there has been, I would say, historically, there was a lot of scepticism, a lot of concerns by entrepreneurs, investors alike, centred around the military industrial complex. Bertrand Schmitt We probably all remember the famous Eisenhower’s farewell address where he was sharing his distrust of that military industrial complex. And venture capital shunned these sectors also due to long sales cycle, in some cases only one client, the Department of defense for many startups, as well as ethical debates. Bertrand Schmitt At the same time, it’s an evolving landscape. Startup came with disrupting legacy models. It’s not just a cost-plus approach. It’s a product approach. It’s agile. It’s innovation. The debate around, is it evil to is it something we must do in order to address global threats, basically coming to the forefront for investors and entrepreneurs alike. Nuno G. Pedro It’s a supply and demand issue. It’s not just that startups are not necessarily interested in it because it always creates this issue around, is it evil? Is it good? Are we doing something good or not? I think there’s a lot of that. There’s a lot of supply issue because of that angle. But it’s also a demand issue. Contracts historically with military take a long time to be hashed out. They depend on doing trials and proofs of concept. Nuno G. Pedro I think on the other hand, it’s an industry that historically was very resilient and dominated by services. Particularly the US military want to own everything, and so, therefore, there was this notion that whoever was the provider provided it to provide it as a service for them. There are services that still need to be done today, but the industry has been largely productized, and there are a lot of products. I buy planes, I buy weaponry, I buy a bunch of different software systems that will allow me to operate, but they’re productized. I think that’s one of the big shifts that we’ve seen and why now is a good time to look at it. Nuno G. Pedro If I’m a startup, I don’t need to go through 3, 4, 5-year cycles until I sell anything of scale. Then on the plus side, once I sell, it is at scale. There’s a lot of money in the military. We’ll talk a lot about the numbers later on, but there’s definitely a lot of money in the military complex that warrants the focus of startups. Nuno G. Pedro The other part is venture capital firms. Venture capital firms, historically, maybe because of the whole evil versus no evil and perceived ethical issues have stayed away from it. But we have more and more active large firms in the space from Founders Fund, Andreessen Horowitz. We ourselves have invested in companies that are around both the Homeland Security and the military complex space. So as a venture capital investor, because then the cycles to sales are better, because then startups scale faster, the economic piece of it has been solved. Nuno G. Pedro Then, on the other side, the whole ethical issue has been really put into perspective. There’s clearly a lot of geopolitical tension right now. Defense as an industry. It’s an industry that needs to scale properly where there are geopolitical interests at scale, but you need to put money where your mouth is. Bertrand Schmitt We will talk more about it, but I believe also we had one big example of an extremely successful company that really broke the dam in how you see these investments from an entrepreneur or investor perspective and how you can really win against these traditional companies, very entrenched companies. This is SpaceX. SpaceX really shown to everyone that, yes, you can build actually rockets. You can build better rockets. You can build cheaper rockets than everybody’s. Bertrand Schmitt That was the poster child of, yes, there is a brand-new market opportunity that until now we thought was impossible to crack for young, talented tech entrepreneurs. Suddenly, everyone could see in some ways that the emperor was naked and that these big defense contractors were actually extremely weak. Bertrand Schmitt From my perspective, they became weak. It was a two-way street. Also, the government makes them weak. You have only one supplier. You have only one buyer. At some point, it’s about wining and dining clients. It’s not about solving problem. At some point, it’s garnering political support, not delivering great products. Bertrand Schmitt I think there has been a slow path to extreme mediocrity, and mediocrity might be generous term, actually. I think there is, as a reaction to that, again, SpaceX example, shows that you cannot just make things 10% better, but you might make 10x or 100x cheaper and change the whole industry. Nuno G. Pedro I do think the example you put forward is a great example on aeronautics and aerospace. On military and online security, Palantir was at that first breakthrough. You could argue it’s still a relatively services-heavy company rather than a product, but it is a startup, it IPO-ed, etc. It’s obviously a company that has done really, really well in the industry. We now have obviously the example of Anduril in the drone space and how that’s scaling. Nuno G. Pedro I think we have now a bunch of good examples to your point, Bertrand, as there has been an unbundling of pieces that were typically government-owned or only government pushed like NASA. With aerospace, you have this opportunity like SpaceX that just dramatically changes how things are done, where it eliminates all these inconsistencies and these inefficiencies. I think that’s been true also of the defense and military complex side and how that has scaled. Nuno G. Pedro Maybe moving to geopolitics, it’s very clear that the US is the big player, spending a significant amount of its yearly budget on military by any admissions. Probably around 900 billion a year spent on defense in the US, which is incredible. The US GDP is 27.7 trillion as of 2023. This is a significant part of it, so obviously, the budget’s much lower. The use of military in the US and defense is a huge percentage of its not only GDP, but also its yearly budget. US is clearly leading the way, obviously. We’ll discuss other countries and where they’re at. Nuno G. Pedro Europe doesn’t seem to have gotten the memo. I think the recent discussions happening around Ukraine and what’s happening there show a little bit that not only it’s lost the plot, but it’s lost the power as well because it lost the plot. Bertrand Schmitt I’m French. You’re Portuguese from origin. For me, it’s totally shocking why is Europe… It’s been 35 years since the fall of the Berlin Wall, and it feels like the Europeans rushed to stop investing in their defense. There are some metrics in terms of German investments in defense spending, for instance, where we move from huge quantity of tanks to barely any tanks as Germany can bring into any battle. This is one example of how it moved from being a military superpower, same for France or the UK, to basically the shadows of their former self. It’s quite unbelievable. Bertrand Schmitt For me, what’s unbelievable is that even after 3 years of Ukraine war, some Eastern European countries have changed their defense spending. But the Western European countries have not changed much their spending. All these promises about increasing military productions, being able to provide military supplies to Ukraine. Bertrand Schmitt Yes, we sold them or gave them “some weapons”, some typically older weapons, but at the end of the day, we are not even able to provide enough artillery shells, which is the bread and butter right now on the battlefield. Same with drones. Most of the parts are coming from China, on both sides of the conflict, by the way. It’s a very, very scary situation. Bertrand Schmitt I guess we are recording that one week after JD Vance spending some time in Europe and talking at a Munich conference about European security. It’s very clear that the US is fed up from this perspective. As a result, I would expect actually a change in spending and priorities by Europeans. I guess they will buy some weapons from Europe, but also from the US. There have been some European initiatives like the JEDI initiative to stimulate faster tech adoptions. There are some efforts to change also the way stuff is procured, stuff is manufactured, and we will see what are going to buy going forward. Nuno G. Pedro If you look at the US and you think through the numbers, 27.7 trillion GDP, we’re talking over 3% is the expenditure yearly of the GDP. If you then talk about budgets, the budget for the US is around 6 trillion. It could be high or below 6 trillion, at least the numbers I have for 2022 and 2023. That’s like 14%. Nine hundred billion is 14% of 6 point something trillion depending on how you count it. Nuno G. Pedro It’s incredible, and that’s before you start talking about the other guys in the rest of the world like Russia and China. China is close to 300 billion in an expenditure from what we know. I’m not sure if those numbers are correct or not. It’s one of those only probably the Chinese know kind of numbers. Bertrand Schmitt Only a very well-placed Chinese would know. Nuno G. Pedro Only a very well-placed Chinese person would know or Chinese official. It’s second only to the US, China. They’ve been going through 29 years of consecutive growth in spending. They’re very clearly trying to catch up. Then Europe stands in the middle. Again, we have to talk about Russia where we still, again, who the hell knows their numbers? But it’s significant. Europe is between a rock and a hard place. It’s like everyone’s spending except Europe. If we looked at it as a conjoint, as a unified superpower, it’s the only superpower that really is not doing much. Bertrand Schmitt Actually, I had similar metrics for Russia where 16% of its government spending in 2023 went to the military. Similar to the US, 16%, maybe slightly higher. But yes, the big problem is countries in Europe like Germany where we are talking about 1% of GDP. So it’s a real problem. For me, what’s really shocking is the disconnect between the talk and what they actually do. Bertrand Schmitt When you see the Germans, or French, the UK talking strongly, condemning, attacking Russia, willing to do this and that, but then they don’t invest. They don’t follow the words with dollars on the battleground, with spending, with new lines of productions. It’s totally crazy. I don’t know in which parallel world they live. It’s very shocking, this level of disconnect between talk and reality. I don’t know how to explain at this stage, honestly. Yes, I stopped trying. Nuno G. Pedro It’s definitely the king has gone naked. I was just watching a movie. I think it’s called Rumours. I didn’t particularly like it. I think it’s barely funny. It’s supposed to be very funny. But the way they did it, it’s not a punchline. But it’s really a G7 meeting gone wrong with the leaders of several countries and the only thing they’re focused on is writing that perfect announcement at the end. That’s the whole thing that matters during the movie. It’s like end of the world kind of movie but the only thing that matters to them is writing that thing. Nuno G. Pedro It feels like that’s what Europe is about. It’s all about posturing. It’s about politics and politicking. It’s like, “Well, you guys…” Again, you and I are European. No power. It’s like you’re talking about stuff. You have no power. It’s like you can’t do much in the Ukraine, and then when push comes to shove, you come and say, “Well, we’re not going to do anything.” Really? It’s next to you guys. It’s a European country. Bertrand Schmitt What’s even more shocking to me is that 35 years ago, it was clearly different. There were strong militaries on the continent beyond the US army, but not any more. Basically, all that money, they decided instead of keep investing, protecting peace, basically, said that, “You know what? Let’s stop spending there. Let’s spend this somewhere else.” You can guess, if it’s somewhere else, it was probably into retirement, into healthcare, into all of this “softer” spending. But the reality is that you cannot do that if you live on the European continent. You have to be prepared to defend your country. Bertrand Schmitt Now all these politicians decided, “Let’s take that money. Let’s take it away, and let’s invest it into our favourite programs that are going to help us get elected.” I guess that’s really what it is all about. Politicians are staying in power and promising free lunch to their constituents in order to get elected. Nuno G. Pedro For those right now listening who’s like, “Oh, are you guys defending war and military and whatever?” No, we’re not. We’re not defending that there should be war in the world. I’m Catholic. In my mind, the world should be at peace. The sad thing is we are human beings and therefore people will go into wars, and we have several ongoing right now. If you are a superpower, let’s say European Union, whatever you want to frame it as, if you are a country within that complex, you have to defend yourselves. It’s at your borders. Nuno G. Pedro We are in a geopolitical state right now where, for example, with President Trump in power, it’s not clear the US will come over and do anything, all the recent comments on the war in Ukraine and Russia. So you have to control your own destiny. The point we’re making today is you have to control your own destiny. If Europe cannot control its own destiny—we’ve discussed in a previous episode, defense is one of the biggest Achilles heels of Europe—what happens next? Bertrand Schmitt I couldn’t agree more with you. We are absolutely not for war, but we definitely believe that if you don’t want war, you need to be prepared for it. You need to show that you are strong enough to fight off a war. You don’t want to show that through weakness, you are an easy target. Because if you become an easy target, the odds of war increase dramatically. That’s probably the big point we are talking about. You can call it peace through strength potentially. Bertrand Schmitt In a way, I think JD Vance, Trump, in some ways, doing Europe a favour by being extremely clear-cut about what they expect from the allies. First, in terms of values, and two, in terms of spending because that’s what you want. You want clarity. You want some equal partnership. Because to be frank, is it fair that the American taxpayer is paying more in order to protect Europe? Because he’s paying more, he’s spending more, he’s getting less free healthcare, less free retirement so that Europeans spend less and can afford more on the other side. Bertrand Schmitt People always talk about this topic, “Oh, we have this great stuff in Europe, free healthcare, great retirement, all of these. Americans are crap.” Yeah, but sorry, guys, we’re paying for your security instead. For me, as an American taxpayer, I’m especially angry about this situation, to be frank. Nuno G. Pedro I agree with everything you said. Let’s see if he does go after the military defense complex because we haven’t seen any signals that he is going after it. He is saying this and everything he’s saying is fair. Why are we paying for wars elsewhere? We’re not the policemen of the world as Americans. But at the same time, it is the biggest bucket of cuts that he can go into, and I’m not sure we’ve seen anything from him yet. Nuno G. Pedro I think until then, I reserve that this is not just a comment on whatever. His recent comments on Ukraine and the war, etc. to be honest are not cool. We’re questioning that the Ukraine started the war and not Russia. Is that what happened? Bertrand Schmitt I think at this stage, you have to separate a battle from war. Does a war start with the first bullet, or does a war start when you start to topple a government? Nuno G. Pedro Man, I feel on that one, I don’t think we’re going to agree, because I feel there’s a lot of posturing right now from Elon and from President Trump, and I’m like, “Guys, let’s not try and reinvent history now and try to…” Anyway. But again, if he goes after the military complex, I agree. If he goes after the military complex and if there are significant cuts made there… Because that’s the big chunk that you need to go after. It’s that and healthcare. Otherwise, for me, it’s just posturing. Bertrand Schmitt But to be clear, I’m not sure he wants to decrease significantly the budget. There has been a new directive a few days ago to reduce the budget of the Department of defense, 8% a year for the next 5 years, but it was not clear to me if it was to make space for new initiatives instead. I’m not 100% clear on that. I think their point was more, “We have a fixed budget. We have to project more power in the Pacific, in Asia. Europeans need to take your part of the budget because we cannot do both at the same time properly.” To your point, I don’t know if it’s more about Americans spending less versus Europeans spending more in order to bear more of the load in Europe. Nuno G. Pedro I think there’s, definitely. I’d be shocked if there are no opportunities for improvements in defense spending by the US. I’m not defending that it needs to go to zero, or it needs to go to 1% of GDP, but it definitely, really, really very inefficient as well. Again, we hope with this innovation, and we hope with these startups supplying products, and we hope with these companies scaling supplying products that those efficiencies are captured. But my belief is there are a lot of inefficiencies still there, huge amounts, more than any other industry probably in the US. Bertrand Schmitt I think no one questions that. That’s why, again, they launched this order to decrease the budget by 8% for the current budget going forward in order to squeeze efficiency. We are talking about 35% over 5 years, to be clear. It’s not small. The question is more, do you save in order to just cut the fat? Or do you save in order to cut the fat so that you can invest more at ease of budget in order to have more power, more military power? That’s the question. Bertrand Schmitt I think no one question at this stage the fact that you should squeeze more of the existing military. But the question is, is it in order to absolutely reduce the budget, or is it in order to give space so that we invest in new stuff, more valuable stuff than today? Nuno G. Pedro I think it should be both. That’s my view. It should be both. There should be a reduction in budget, and there should be a renewed focus in terms of activities and projects. That’s my view. Bertrand Schmitt Yeah, that’s the question. I don’t have an opinion on this. But I agree with you. We should spend less for sure on some existing initiatives. I’m sure, like everyone in government, there is plenty of fat. Nuno G. Pedro Now that we’ve sold off geopolitics, so Europe has to catch up. US, China leading the way. Russia is still doing their thing. We’ll see. Bertrand Schmitt I’m hearing US has a lot of F-35 to sell, by the way. Nuno G. Pedro Yes. Our GDP also depends on that. Maybe let’s move to something a little bit less arguable, less of a topic where I think we’re going to have major disagreements, which is aerospace and aeronautics. We’ll come back to defense and online security specifically later. Nuno G. Pedro On aerospace and aeronautics, obviously, we’ve already talked about SpaceX, a company that really has effectively disrupted how certainly space exploration and space access has been done. We already mentioned it in previous episodes. The company is doing really well. Do you want to talk a little bit about the last fundraising exercise that they did? Bertrand Schmitt Yeah. Maybe to talk about SpaceX, let’s remember people what SpaceX is doing now. SpaceX has been building rockets, especially the latest, Falcon 9. Then, SpaceX is building an even bigger rocket with a space vehicle called Starship. In terms of products, they have launched some very innovative products like Starlink, which gives you Internet access anywhere on the globe, on the sea, but also in the air, in space. Bertrand Schmitt This is an amazing revolution. If you have tried Starlink, it’s just plenty amazing. Their latest innovation, actually, there was an ad for it during the Super Bowl a few days ago that was announced in partnership with T-Mobile. It’s a new direct to sell initiatives. You don’t even need a Starlink dish in order to receive Starlink. Bertrand Schmitt You can use your regular cell phone, and that’s plenty amazing. It’s starting with text, but, of course, it’s going to evolve with full data access, high speed data. It’s going to bring video, and it will work with some of the latest generation of fonts. Not every font, but most of the most recent modern fonts. The big change, it means that suddenly everywhere on earth, you are going to be able to get signal. No more dead zone. No more you’re in the middle of the ocean, too bad. Bertrand Schmitt It’s really game changer. If you talk to people who work on cruise ships, for instance, their life was miserable. There was no Internet access when you’re at sea. You pray for Wi-Fi at the port. It’s a big game changer for a lot of people. I don’t think we fully realise the impact. Some of those stuff, for instance, if you think about where you can live now, there are so many new places that open up. Between solar energy plus Starlink, suddenly you have really new opportunities. Personally, I think they have developed an absolutely amazing product there. Bertrand Schmitt SpaceX, in terms of fundraising, I think the last fundraise was discussed around 300 billion plus in terms of private valuation. For me, SpaceX is clearly the next trillion-dollar company. There is no question about it. Nuno G. Pedro They’ve revolutionised SpaceX and exploration. They have all these other products here on Earth with Starlink one being one of the key ones. Obviously, they are exploring many other opportunities and projects, and we will discuss some of the opportunities I think are about to arise like Moon and Mars exploration, space stations. It’s funny as we mentioned in a previous episode that they had to bail out the Boeing vehicle, and they had to go there, or they’re about to go there. They haven’t gone yet, but they are going to have to bail out to get the astronauts back on earth. Nuno G. Pedro In effect, a company that’s doing great. There’s obviously other companies, Blue Origin, with Jeff Bezos going after their own opportunities and really scaling. What’s been going on? Bertrand Schmitt They just did a launch with New Glenn, the first successful launch with New Glenn just a few days ago. It’s moving in the right direction. But let’s not forget, they totally destroyed Boeing space program. As you said, the astronauts from the Boeing program were stranded, but that program is destroyed. I think, from what I’ve heard, Boeing is seriously considering cutting everything. Bertrand Schmitt To be clear, overall, Boeing is in a fight for its survival just on the regular plane manufacturing. They completely messed up. It makes sense for them to consider abandoning this program, given how much harder it is for them in the space program. It’s quite an amazing reversal of fortune in 15 years to see Boeing from the big guy to basically disappearing. Nuno G. Pedro Indeed. This is SpaceX that you’re saying has destroyed Boeing, et cetera. Right? Bertrand Schmitt Yes. SpaceX. Sorry. Nuno G. Pedro Not Blue Origin, yeah. Bertrand Schmitt To be frank, it’s good to see a competitor, but so far, they’re so far away from SpaceX that we should talk about them as a competitor, but they are very, very far behind. What saves them is obviously the Jeff Bezos company. There’s some backing from Amazon. Amazon is actually investing and buying some capacity from Blue Origin. The European Union is also interested to buy some capacity from Blue Origin. Bertrand Schmitt Basically, everyone who doesn’t like too much Elon Musk is trying to buy from Blue Origin, but that’s a bit sad if that’s the only saving grace. I’m not sure it would be enough. Nuno G. Pedro On a couple of other space topics, the private space station movement, ISS, the International Space Station, is about to retire in 2030. There is obviously a lot of movement in creating a private space station. There is work being done. I think Axiom has a NASA contract to work on it. Nuno G. Pedro They say they are going to be free flying orbital platform as early as 2028. We’ll see. Fingers crossed. There are startups going after mini stations like Vast Space. There’s a lot of work being done on that. That’s one area that is definitely exciting. Bertrand Schmitt At the same time, I guess you missed the latest twist from Elon Musk, but he just said yesterday that he was going to push the president to retire the Space Station much sooner than expected, so in the next 2 years. Nuno G. Pedro He’s going to build one. Bertrand Schmitt No, he’s just saying it’s a complete waste of time. It’s useless. He’s saying, “Why are we wasting time there and money? Let’s just go to Mars.” Nuno G. Pedro It sounds like a philosophical disagreement, basically. He doesn’t think we should have space stations at all. Bertrand Schmitt Around Earth, I think he’s raising a lot of questions. A waste of time, energy. I think that’s a fair question. I can see personally value to learn how to live in space, to learn how to build a base on the Moon before going first to Mars. But I guess he’s thinking otherwise. Bertrand Schmitt That’s one to keep in mind. The other piece is that Axiom, considered one of the biggest project for a private space station, is not doing great financially, apparently. It’s not clear where it’s really going, to be frank. If you have Elon Musk positioning so clear about what should be next, maybe it will remove a lot of investing capacity into private space stations. Nuno G. Pedro Moving to Moon and Mars because that’s the segue. There is the Artemis program from NASA to go back to the Moon, and this is obviously done with private consortiums. The first one, the uncrewed test flight around the Moon was done in 2022. The next one is set for 2026. The SpaceX Starship has been selected as the lunar lander for Artemis 3, which is planned for 2027. Obviously, we definitely want to go back to the Moon. Obviously, our friend Elon wants to go to Mars as well. We’ll see. Bertrand Schmitt Not as well. He doesn’t want to go to the Moon. He doesn’t care about the Moon. Nuno G. Pedro He doesn’t care about the Moon, just Starship will be used potentially for the Moon as the lunar lander. Yes. Bertrand Schmitt Exactly. He’s happy to sell service to whoever wants to buy service, but for his direction as a business, as a person, he doesn’t care. Nuno G. Pedro He doesn’t care. Wonderful. Bertrand Schmitt Maybe another piece on the Artemis mission. Obviously, they use some very old, very bad rocket technology to launch their space vehicles. The big question is, we just stop doing this stupid decision and instead replace that with SpaceX rocket. That’s a big question. That’s not clear right now what will happen. But I will bet that they are going to buy from SpaceX instead, their following rockets. Nuno G. Pedro Maybe moving to the closer to us kind of space, the on Earth kind of thing. Talk a little bit about drones and uncrewed aircraft. Obviously, a lot of movements around it, only commercial, but also around military, around homeland security, around a variety of other areas. Obviously, historically, there’s been the use of large drones, the Predators and Reapers by the US military for decades, but now there’s a lot of smaller things. Nuno G. Pedro The Ukraine war in some ways has been a lot played around commercial drones being repurposed for military purposes. There’s obviously a lot of activity around it. We have an investment in a company that has been trying to work around that space, not for effectively attack purposes, but really for reconnaissance purposes. China is also trying to capitalise on this, so there’s a lot of movement on that. What’s your take on this? Bertrand, it feels that this is going to be the golden age of drones for good and bad. Bertrand Schmitt I would say first, I’m very, very angry at the Western regulators like the FAA in the US. I don’t think in Europe they have been so much better because thanks to the unnecessary and overly complex and overly restrictive regulations, they have basically impacted the market very negatively big time. By impacting this market, basically, they have destroyed the ability of local manufacturers to be really successful. Bertrand Schmitt As a result, they have opened the gates for Chinese make drones like DJI to become super successful because they were not blocked in their home market by all these regulations. They were able to build a stronger base of revenues at home. Bertrand Schmitt I’m looking forward for big change, and I’m expecting that very quickly, to be frank, that the FAA is going to dramatically change the rule around that. I see a lot of opportunities. I hope it doesn’t just all go to Chinese companies, obviously, in the US. I hope that will also stimulate a renaissance of manufacturing and drone manufacturers space in the US or Europe. Because I don’t think there is any of them of notice, except in the military, as you said, with the Predator, Reaper, and all those military drones. But on the civilian market, it has been catastrophic for Western manufacturers. Nuno G. Pedro The other movement we’re seeing is, as we mentioned, around more commercial things. One thing is obviously flying taxis. We still don’t have self-driving cars yet, but we’re going to have flying taxis. The technology, one of the key technologies around vertical takeoff and landing, electric vertical takeoff and landing being one of the core technologies that might make sense to deliver it on. There’s been a lot of attempts at it. Lilium in Germany was one of the players around it. I think that they have ran out of cash and went insolvent late last year. Cool. Bertrand Schmitt Unfortunately, yeah. Nuno G. Pedro There’s Joby, which has received a lot of money. Archer Aviation and a bunch of other companies around the world. China again could have an edge because of battery production we’ll see, but there’s a lot of movements, and we all want really flying taxis and then flying cars. We don’t want cars anymore. At least for me now a guy who loves the sound of an engine, driving an electric car, I might as well get an electric plane. Bertrand Schmitt I feel horrible because this is another example of Western regulations that have made it near impossible to develop efficiently, quickly and cheaply an eVTOL. The Chinese, actually, aviation authority was the first to certify an eVTOL. It’s so ridiculous, the situation we’re in. We have regulators who are destroying our industries. That has been happening with eVTOL as well, not just withdrawn. Bertrand Schmitt At the same time, to be frank, I’m not so sure about the eVTOL market. We will see. I’m not so sure that electric is the best approach for aviation. It has a lot of constraint in terms of weight. For instance, you cannot go away with a lot of weight when you are flying. Bertrand Schmitt If you take eVTOL, it’s not as efficient as a plane. You don’t have wings. It’s not an easy formula. I don’t think people should expect this stuff to take away passenger planes, for instance. But it’s really a much shorter distance type of vehicle that could be interesting, ultimately, if we manage to make the economics work and if we don’t have regulators, I’m assuming these innovators. Nuno G. Pedro The other topic is supersonic planes because obviously we all miss the Concorde. Boom supersonic was one of the big attempts at it. It’s not looking great. I think we now have to go back and figure out, how do we get faster transfers with flights here on Earth? Not sure, but definitely the solutions we’ve had thus far are not great. Nuno G. Pedro Again, it might be an issue of regulation because of the whole sonic booming thing and how that affects communities, et cetera. But at the end of the day, it feels like it’s an area that has quite a bit of investment that really seems to have not dramatically scaled. We all want to go faster from one continent to the other. It is something that I do feel would have huge implications for consumers and for people, if we dramatically changed how fast we can go from one place to another globally. Bertrand Schmitt Let’s not forget that the “issue” on some issues made by supersonic planes. A lot of this was put in place by the US in order to destroy the commercial capability of the Concorde. Basically, they tried to, sadly so, destroy the Concorde program. For some reason, didn’t want that to compete against US alternative. Bertrand Schmitt I mean, there was no US alternative up to recently. My point is that some of these regulations were artificially manufactured. If we go forward, one of the big points of the Boom supersonic plane is that actually it generates less noise. They’re actually pushing hard to change regulations that were totally unreasonable. Again, from the FAA and others, it looks like they have the support from Elon Musk because that was a few days ago. Promising to look into some of these FAA regulations, unnecessary ones. Bertrand Schmitt I start to be a bit hopeful there that there is indeed an opportunity to build a supersonic passenger plane. It’s also much cheaper to run the boom plane versus the Concorde. They made quite a few significant changes. The cost per passenger is much, much cheaper. Lower noise in supersonic. When you go supersonic, much cheaper. We might have an economic equation that start to make sense if regulators don’t add artificial barriers. Nuno G. Pedro Much for that. We’ll see what happens going forward. But we’re still looking for that dramatic innovation that really gets us from point A to point B around the globe faster than the current planes that we have. Bertrand Schmitt That’s super exciting. Dividing by two the time it takes to fly somewhere else, it’s amazing. Nuno G. Pedro It would be super exciting. It would be ridiculous. A killer of a flight, like 17 hours to Singapore, gets manageable. It’s like 8 hours or 9 hours. A flight from here to Europe in 10 hours, I live on the West Coast and so do you. Bertrand gets 5 hours, which is like, that’s an easy flight. It changes stuff dramatically. It changes everything dramatically. That’s a big deal. Bertrand Schmitt You know what will be the next steps? The next step would be to use Starship for airborne transportation. Here, we are talking about 30, 45 minutes. Basically, it’s as fast as an intercontinental ballistic missile, so it will get much faster. Nuno G. Pedro We just want to be “Beam me up, Scotty.” That’s what we want to say. We want to go from point A to point A immediately. Bertrand Schmitt Yes. That’s the next level. Nuno G. Pedro Moving to defense and homeland security. Obviously, there’s a stronger and stronger crossover between homeland security and defense. I’m not sure it’s totally warranted. I’m not sure, again, that our police forces should have tanks and stuff like that. I don’t think so. But there’s definitely a lot of technology that’s cross fitting and cross-cutting across both worlds for all intents and purposes. Some of it, I think, is warranted. Some of the drone usage, I think, makes sense. Some of the elements around software. Bertrand Schmitt Cybersecurity. Nuno G. Pedro Exactly. Cybersecurity and other elements. We haven’t talked about software much. We’ve been talking about physical things for a bit. But obviously, on the software side, there’s obviously a lot of crossovers that should be manifested. We have an investment in the homeland security space, but it’s really more around police forces and the use of their body cams, in particular for the purpose of training. Nuno G. Pedro We feel there’s huge amounts of things that still need to be done around that. There’s a lot of things that you wouldn’t think about that need to be done. For police forces to be better, they need to be able to use what they already have. They have body cams. Why can’t they use it for that? Nuno G. Pedro Definitely a lot of interesting things happening, but there’s a huge crossover between international defense and homeland security, so to speak, at this stage. Bertrand Schmitt I think there are a lot of opportunities to serve both markets with similar technologies. I think a lot of startups are focused on that. What’s also interesting is some of the big name investors who are investing in that space. In-Q-Tel (IQT) has been one of the most active investors in defense and national security startups. That’s the name that we always see, backed by the US intelligence community. But there is a lot of more traditional VCs like founder funds that are investing in the space. Nuno G. Pedro Andreessen Horowitz, we mentioned already Founders Fund, obviously Marc, Peter. We invest a little bit as well. We have some ground rules around what do we consider to be evil, no evil and create some borderlines around our investment thesis. We do have a sort of evil versus no evil piece of analysis when we’re looking at an investment. Nuno G. Pedro The investments that I mentioned in this episode before went through very complex analysis internally for us to really be sure that we felt that we were not breaking that rule that we have as a partnership. But obviously a lot more activity in the space in terms of investment framed as we discussed earlier by players like Anduril, like Palantir, like SpaceX. Nuno G. Pedro I mean, SpaceX more on the aeronautics and aerospace space. But obviously, this unbundling of what government controls and dominates and does, going into a direction where the private sector can take some of those responsibilities and really innovate much faster than government and these complexes would by themselves. I think that’s the piece of the puzzle that we’ve seen. Nuno G. Pedro We also have had some movements with the NATO Innovation Fund. We’ll see what happens with the NATO Innovation Fund. A lot of activity around it, in particular in Europe, and really deploying capital at scale into other funds, into startups, and actually even working on the accelerator side with establishing DIANA, the defense Innovation Accelerator, to connect startups with defense problems. To create this venture building, venture studio element and this open innovation construct with defense departments, et cetera, we’ll see if it bears any fruits. Nuno G. Pedro That’s super, super exciting. Even if we don’t have huge massive shifts, but if we create this environment where startups really can engage with the defense ecosystem much more easily. Bertrand Schmitt I mean, there has been also this partnership between SpaceX, Anduril, Palantir. Partnerships/alliance in order to better provide a new edge solution to defense and overall homeland security market. I think there is a lot of initiatives, new player working better together, as well as new funds in Europe and US. We cannot talk about defense or homeland security. We start talking about AI. Bertrand Schmitt It’s quite clear that AI can bring a lot on the table. It might be about automated image analysis. It might help you pilot automatically your drone. It might help you automatically acquire targets. It might help you go through a lot of quantity of data all at once. I think AI can also, not just can, but is playing and should be playing an even bigger role in the US and European military and defense industry. Nuno G. Pedro It’s definitely shifting everything. For good and bad. With AI, we will need to figure out what will happen out of it. It’s not just the physical space, the autonomous vehicle piece, the drones that self-manage. There’s a lot of stuff happening also in the sea, so underwater as well. Nuno G. Pedro Not just the physical stuff, but also the software stuff. The software stuff is dramatic. Like planning tools, thinking through intelligence analysis, imaging, and really identifying things much faster. I think that’s a game changer. I’m still to see whether all of it will be positive or not, but it’s definitely a game changer. Nuno G. Pedro I think it links well to this notion and this trend that we see in defense and military where a lot of the things that are now addressing military and defense needs and even homeland security to a certain extent are coming from companies that are really deploying them with dual use. Dual use strategies. These are companies that have, so to speak, a commercial side of their business and then a military side of their business. All the companies we invested in have dual use. Nuno G. Pedro They have a commercial side where they have commercial uses for the technologies they’re developing, the things that they’re doing, et cetera, but then there are also a use for it that defense could use in effect. Really interesting how we’ve gone from companies that, again, this was a taboo area to companies now that do both commercial and defense alongside. I think that’s going to be a huge driver of tremendous innovation for overall the industry. Bertrand Schmitt To be clear, I’m certainly not advocating some of these technologies for civilian use. Some of them are incredibly scary when you think about what could be done once you automate more, once you put more AI into it. I will say for some of this technology, I’m certainly a believer in the defense space. When you think about autonomous target acquisition, for instance, this is such a game changer. Because if you can recognise by imagery alone, video alone, a target and go there all by yourself, this is changing so much how war has been working for the past 70 years. Bertrand Schmitt You can see something from far away, decide it’s a fair target and automatically go there with risk of detection being decreased, but also risk of manipulation. Your GPS positioning could be jammed, but if you still see your target, you still go there. Compared to laser that was usually combined with human beings in the loop, it’s also game changer. There is no human beings in the loop. You can totally imagine a swarm of military weapons that are just going in one direction and picking target after target without any human in the loop. Bertrand Schmitt I can imagine how war is going to change at scale. That’s, to your point, around defense spending and other stuff, is certainly raising a lot of questions. Do some of the existing programs still make sense in a new type of war? Nuno G. Pedro Just to be clear, there’s things that should absolutely not be used in commercial. One example I was thinking about is if you’re developing, for example, a highly-advanced AI methodology that deals really well with edge case scenarios, for example, loss of connectivity or dramatic weather conditions, et cetera. They have great commercial applications for sure. For self-driving cars, for many other things that are being done in the commercial world. But guess what? They also have great applications for, for example, dealing with drones in war environments. Nuno G. Pedro I think it’s more around that logic that I’m talking about that the dual use obviously should be used thoughtfully, but in many cases, it makes a lot of sense. That you are developing very advanced technologies that should be used across both worlds. Bertrand Schmitt It helps reduce the cost, the spend, leverage R&D. It makes a lot of sense as long as we’re careful about what we are doing at home and still protect freedom and personal privacy. Bertrand Schmitt As you have seen, there has been a lot of change in the past 15 years in aerospace, defense, and homeland security industry. There is a convergence in technology, commercial viability, and national security. There are opportunities in dual use tech, in AI, in deep tech manufacturings, and I think startups are already at a tipping point where they start to reshape how national security is achieved, making this, I believe, in a pivotal time for investor. Bertrand Schmitt At the end of the day, it’s not all about SaaS anymore. It’s also about what can be done through hardware and software in support of new space programs and defense programs. Thank you, Nuno. Nuno G. Pedro Thank you, Bertrand.

In a few decades, will Europe be good for anything beyond food and tourist experiences? With Europe lagging on innovation, productivity and with extremely costly decisions on the Energy side, and needing to defend itself, what is next? Navigation: Intro (01:34) New report out from Mario Draghi Profound mistakes in Energy initiatives increasing costs and competitiveness Dalio and Lee Kuan Yew comments Lack of growth in Europe, lack of creation of new European champions Too much protection for employees? Too Complex regulations around companies and innovation initiatives are too bureaucratic Conclusion Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Nuno Goncalves Pedro Welcome to Episode 60 of Tech DECIPHERED. Today, we will discuss European competitiveness. The competitiveness of all of Europe, not just the European Union, but the whole of Europe. It’s been in the news recently. There’s been a new report out from Mario Draghi a couple of months ago that really mentions what is happening in Europe, what are the things that need to be done for Europe to increase its competitiveness going forward. Nuno Goncalves Pedro There have been a lot of discussions around the world on Asia, in particular, and American dominance of the world economy. Europe is lagging behind. What do we make out of all of this? Maybe let’s start with the report out from Mario Draghi and the conclusions of that report. Bertrand Schmitt Yes, I think it was for once, a pretty interesting and pretty lucid report from a commission by the European Commission and written by Mario Draghi with a lot of support from many CEOs and also entrepreneurs to provide feedback to try to explain what’s happening, what’s going on. I would agree with everything in terms of analysis or conclusion, but I must say it’s a good read. Bertrand Schmitt Maybe a few points that he’s making is first acknowledging that there is an issue in European competitiveness and growth since the past 20, 25 years. This lack of competitiveness and growth has increased with a great financial crisis from 2008-2012. In 2012, there was a crisis around the euro. I think it is indeed time to try to look back at what happened and try to get some sense about what could be done differently going forward. Nuno Goncalves Pedro A couple of really astute observations. Obviously, the GDP growth of Europe has lag behind that of the US and China. The period of time from 2002-2023, the US has grown 2% and both on constant prices and constant PPP prices. China, 8.3% and the EU, 27 at 1.4%. Obviously this report is on the EU. Clearly lagging, and the lag is significant. Nuno Goncalves Pedro If we look at GDP at constant prices, there was a 17% delta in 2002 between US and Europe, and now there’s a 30% delta between US and Europe. It’s lagging you further behind. Even more seriously, China has outpaced it on constant prices. If we look at constant PPP prices, the EU was actually 4% above the US back in 2002, and it is now below 12% of the US. Nuno Goncalves Pedro China has outpaced both of them at constant PPP prices. This is worrisome. I think Mario Draghi makes, or the report makes a bunch of very significant and strong statements, which basically are saying, “We cannot, as the European Union, continue like this and have the social welfare that we put in place in all these countries.” something’s got to give. Nuno Goncalves Pedro He goes on to make a couple of proposals and what he thinks needs to be done in Europe. But very significantly, what he’s saying is this is a crisis. We need to address it. This is not just a nice report, please read it. It’s like we cannot afford the lifestyle that we’re having. Nuno Goncalves Pedro If Europe or European Union was a household, it would be going bankrupt, I think is what he’s saying. We can’t keep doing what we’re doing. Something’s got to break at some point. Either the social welfare construct that we have will not work any more, or we, as Europe, will need to really reassess how we behave, et cetera. Very interesting report. A lot of fear at the beginning of the report immediately. Then three areas that he recommends action on for Europe in order to reignite growth. Bertrand Schmitt Yes. First, I would like to say that, yes, some are doing analysis based on PPP, but there is a risk when you do that. Because PPP is cute when you try to estimate cost of food, if you go locally your food, for instance, or pay locally your services. But for anything you buy from outside your region, PPP doesn’t work as well. That’s a big issue for Europe, given that it’s manufacturing less and less of what it’s bringing. PPP can be providing some comfort in terms of things are bad, but maybe not as bad. I would be careful in terms of analysis where they push PPP so much. Nuno Goncalves Pedro But it’s on both, Bertrand. They are showing it at constant prices. Bertrand Schmitt It’s on both. It is just that the impact is way bigger when you did not choose PPP. Nuno Goncalves Pedro Just to tell those that don’t know what PPP is, is power purchasing parity. It’s something to your point that aligns the power purchasing parity across different markets. It’s an adjustment made to the numbers, basically. Bertrand Schmitt Yes, because what we see, for instance, is on a per capita basis, real disposable income has grown twice as much in the US since 2000. It’s an absolutely huge difference. Nuno Goncalves Pedro I always switch it, so I apologize. It’s purchasing power parity. Purchasing power parity. Bertrand Schmitt Yes. Nuno Goncalves Pedro Apologies again. Bertrand Schmitt I think one point that I believe is really important is the lack of innovation in Europe. That is, of course, very scary. They made a good point, it’s the lack of tech companies in Europe. One number shared in the report, only four of the world’s top 50 tech companies are European. Only four. How can you be one of the top three regions in the world and the future is not well represented in Europe? Bertrand Schmitt For sure, it’s a big issue. It has big issue in terms of R&D. The three biggest spenders of R&D in Europe are actually automotive companies. Guess what? None of them is Tesla. I’m not sure where is this R&D going, but I will guess it didn’t go in the right direction on top of it. But it’s not just a question of how much you spend, but how well you use it. That part is something to be fixed. Bertrand Schmitt Another data point maybe around tech companies, but there is no EU company with a market cap over 100 billion that has been set up from scratch in the past 50 years. While all six US companies with a valuation above one trillion have been created in the past 50 years. That for me is just incredible because it’s proof of a total lack of dynamism that is step by step self-fulfilling. I’m not saying individuals in Europe lack dynamism. I guess it’s not the overall European system that is creating so much ball and chains behind your back. You cannot run. At best, you walk. At worst, you crawl. If you have your operations in Europe. That’s really probably the main issue. Bertrand Schmitt One could argue, has it been designed or proposed this way to help the incumbent? I don’t know. But for sure, the result is that all of these regulations, all of this lack of competitiveness, or all of these constraints and cost are creating issues. The end result, whatever you agree or not, the end result is that you don’t create with such a system highly successful companies. That’s it. They were created a number of years ago. Nuno Goncalves Pedro It’s even more significant than that. Obviously, if you look at startups, more recent startups, 2008-2021, close to 30% of the unicorns that were founded in Europe, so startups that went on to be valued over a billion dollars, relocated abroad, mostly to the US. It’s even worse. When there is innovation in Europe, these guys want to raise money from the US They want to raise money from US venture capital. They want to expand into the US markets in many cases. Nuno Goncalves Pedro In a significant amount, we just saw 30% of unicorns, from 2008-2021, relocated their headquarters to the US, or most of them to the US It’s incredible. It’s like even the innovation doesn’t stay in Europe. It’s not just that the industrial complex is totally stale. To your point earlier, in the last 50 years, it’s more than that. The new companies that are emerging are also not staying in Europe, or at least a significant part of them are not. Bertrand Schmitt Yes, that’s a very good point. That one is really scary because even if you say, “Oh, you know what? We have some good programs to help create startups.” At some point, the rational ones might discover that actually they better leave Europe because it would be more efficient for them to gain scale from the US. They will probably realize that most of their markets in the US in the first place, they will see that most of the exit opportunities, be it in terms of M&A or in terms of IPO, will probably be in the US if they are highly successful. Bertrand Schmitt There has not been a lot of successful acquisition of big tech companies in Europe or IPO of tech companies in Europe. There has been a few, of course, but certainly not to the level we’ve seen in the US. The US is still seen as the best path for exit for a lot of startups, especially the ones that have global appeal in terms of products and customer base and shareholder interest. Nuno Goncalves Pedro This is the first big thing, the first big area of change that the report proposes is innovation. We need to fundamentally shift innovation, R&D, the creation of European winners that stay in Europe. Then there’s a lot of conversation around articulation of policies, capital, diffusion, all of that thing. Nuno Goncalves Pedro The second piece is around energy. I think it mentioned it specifically as decarbonization and competitiveness. But it’s really the fact that the energy prices in the US are much, much lower than in Europe. Just to be clear, EU companies have electricity prices that are 2–3 times those in the US Natural gas prices are 4–5 times higher than those in the US. The price cap is because Europe doesn’t have many natural resources when it comes to energy. Nuno Goncalves Pedro I think the thesis here is, since we don’t have those natural resources, we can’t just pump oil, gas, whatever. We need to go somewhere else. Where we need to go is decarbonization and really shift power generation towards secure, low cost, clean energy sources. We need to figure out as well what we do with fossil fuels. Anyway, really complex issue for Europe because the price of energy is so uncompetitive. Nuno Goncalves Pedro Because of lack of resources, how do you sort it out? I know this is a pet peeve that you have. You’ve mentioned that in many episodes, the whole decision-making around energy in Europe and how it was flawed and messed up. Bertrand Schmitt To this point, to share some metrics, if we look at the average electricity price for industrial users in dollar per megawatt in 2023, the worst four countries for energy price are European companies. The worst is the UK at 400 bucks. The second is Germany at 270, maybe. Third is Italy, 250. Then France at 235, and then we have Japan. Everyone knows that Japan is not in a great place to get access to cheap energy. It’s a small island, it’s far, there is not a lot of oil and gas around. That one does make some sense. Bertrand Schmitt But I’m sorry, it doesn’t make sense in Europe. We say we don’t have source of energy. Of course, we have. It’s just that we banned them. We banned fracking in Europe. Why is US so cheap on oil and gas energy? Because of fracking. I don’t know if it is a US. invention, but definitely it has been used with huge success in the US It has created that high volume, low cost energy source that Europe has banned. Bertrand Schmitt No, we could use fracking and get a lot of cheap gas and oil in Europe. We just decided not to do it. Let’s not forget, and it’s the same with coal. We have coal in Europe. We just are not competitive bringing coal. It’s not as if I’m pushing big on coal, for instance, but oil and gas we need that. This is very efficient source of energy. The last piece for me, which is crazy, is, of course, nuclear. Bertrand Schmitt Germany used to have nuclear reactors. They closed all of them. The UK still have a few and was in the process of closing some. France, which has been the world leader for nuclear energy, has started closing some reactors. Countries are coming back on some of these mistakes and reinvesting. But the crazy part is that the price of energy in France, which is very high, close to Germany, makes absolutely no sense. Bertrand Schmitt What’s happening is that there is a crazy European scheme around electricity price that has been set up to serve German interest and has basically tried to make uncompetitive prices of energy based on nuclear. We have a situation where Germany depends on French nuclear energy. They don’t have enough energy, but they manage to make the French pay as much for electricity as the Germans for some reason, while, of course, French generation of electricity is much, much lower cost. Bertrand Schmitt But for some reason, the French government agreed to this scheme. That makes no sense. Some European countries actually left this scheme, like Spain, and decreased their energy cost as a result. We are in a very, very weird situation. Obviously, we can’t talk about energy prices in Europe; we are still talking about Russian gas. Again, thanks to Germany, Europe has become very dependent on cheap Russian gas imports. This is another piece of the puzzle. Bertrand Schmitt Europe wants to buy less gas, less oil from Russia. It is still buying some directly. But through all the sanctions and all the programs that have been put in place against Russia, in some situations we end up buying Russian gas through other countries because we do not want to buy directly any more. Bertrand Schmitt Some of it is from Russia, so we are buying, from India, for instance, Russian oil from India at crazy expensive price instead of buying directly from Russia. On the cover of not funding Russian war against Ukraine, we end up spending way more cost for energy price when actually we are still buying from Russia, not as directly. Some people feel better about that, I guess. But particularly, it makes no business sense, whatsoever. Nuno Goncalves Pedro Energy is number two, so innovation number one. Energy number two. Number three, not shockingly, security. The huge dependency on NATO, on the US, and the fact that there are only 10 countries in the EU that spend over 2% of their GDP on defence-related issues is of much concern. Here, I feel very vindicated. I was actually 18. It was 18 years ago, so it was before 2000. Nuno Goncalves Pedro I remember I was asking a former Prime Minister of Portugal, who later become a President, a question at an event. One of the questions I asked him is, is there a future for Europe that is not a federal Europe, in particular if we think about security and dependency on US and NATO and whatever? Nuno Goncalves Pedro I won’t tell you what the response was from the person, but I will tell you that it was obvious to me, 18-year-old, many moons ago, that this old dream of a unified Europe would depend also on unification of defence. Now Europe is not lagging behind. It’s like hugely behind. It’s not that Europe doesn’t spend money on defence. It does spend, if you put it all together, quite a lot. It just has very inarticulate policies among state members, duplicative expenditure, and no uniform optimization of what needs to be done and how. Nuno Goncalves Pedro A little bit the comment on the report is, before we even think about execution, we need to unify planning. There’s no unified planning in defence in Europe that I know of. There’s been some interesting efforts, but there isn’t really. Bertrand Schmitt Yeah, defence is also one of my pet peeves in Europe, but it’s so crazy when you look at it with a cold eye that for me, it’s unbelievable. You say they are spending quite well. Actually, I’m not sure there is a single European country that is spending 2% of their GDP, their NATO agreement on defence. First it’s below what it should be spending and below what the US is spending as a percentage of GDP. Bertrand Schmitt But at the same time, European GDP keeps growing slower than everybody else, slower than the Americans, slower than Russia, I guess, actually, for sure, way slower than China. These numbers are bad in terms of absolute number, percentage number. But if we go further, a lot of decisions are wrong. Bertrand Schmitt First, let’s remember, nuclear dissuasion in Europe, it’s coming mostly from the US. UK has some nuclear dissuasion, but they cannot press the button without American agreement. When we talk about nuclear weapon in the UK, it’s, yeah, sure, it’s in British soil, but it’s actually technically controlled by the US. Bertrand Schmitt Only France has a source of nuclear weapon that is truly basically there to support Europe if this was needed. Of course, France doesn’t have the level, the quantity of nuclear weapons that its enemies have, if you take Russia or China. That is the first thing that you could argue that, all the European nuclear defences today are assumed by France if the US is not supportive of their use. That’s one piece. Bertrand Schmitt But then everything else goes in a similar way. France has only one nuclear aircraft carrier. The British might have one as well. This is to compare to at least 10 in the US. This is a pretty poor position from that perspective. Let’s just take some metrics, for instance, to see how much of a joke have become the defence in Europe. Germany used to have 7,000 tanks to defend itself during the Cold War. Then it went to 3,000. Do you want to know how many they have to defend their territory? Nuno Goncalves Pedro I don’t know. Maybe 500? Bertrand Schmitt Three hundred. Nuno Goncalves Pedro Close, but no cigar. Wow. Shocking. One-tenth of what was already pretty poor; 3,000. Bertrand Schmitt One hundred twenty. This is bad. We have to be realistic that this is very bad. I remember a report just at the start of the Ukraine war in France. Suddenly people realized that it was a pretty high-intensity war, what was happening in Ukraine. A lot of munitions were used, and that is why there is actually a lack of munitions to fight properly, especially artillery shells, but mostly of everything; ballistic missiles and bombs. Bertrand Schmitt In France, they were on a report. They said, “You know what? We never predicted there would be such a hot war possible that we would be spending ammunition; we could be spending munitions so quickly.” basically, the analysis was if France was to fight on its own a similar high-intensity war, they will have one week of ammunition. One week. It reminds me the masks with COVID. We have a few days of masks. Nuno Goncalves Pedro We’re not prepared. We’re not prepared. We’re prepared for a week of war. Bertrand Schmitt All the masks in storage were actually not usable any more. They were gone or they cancel buying new ones. There was a scandal at the time. Here, you see the same. We have planes, we have stuff, but yeah, by the way, we have what it takes to fight modern war for one week. Nuno Goncalves Pedro It’s mind-boggling. It doesn’t make any sense, really. Lagging behind, huge dependence on the US. Bertrand Schmitt For me, it’s very surprising because you just pick step by step. You look at the metrics, you look at the numbers, and it’s public information. The picture you make out of this is truly scary, to be frank. Imagine that, for instance, if you look at what’s happening in Ukraine, at some point, I remember reading that the US was asking South Korea to transfer some of their ammunition to Ukraine because Europe was not producing fast enough, US was not producing fast enough. Actually, only South Korea was producing fast enough ammunition. Nuno Goncalves Pedro I’m pretty sure China is as well, but you’re not going to ask China. Bertrand Schmitt Yes. Fair point. On the contrary, if you look at how Russia adapted to the war, they moved after 6, 5 months to a more war economy in the way, and they started prioritizing manufacturing ammunitions, weapons, and particularly they are taking this strategy, while in Europe it’s like, “What? Increasing productions of ammunitions when we need them? Why? Should we plan for what’s next? Why?” I don’t know. I read stuff about like it would take years to increase manufacturing production. This is a joke. There is no word for it. It’s a lot, and that is my worry, reading this report. Bertrand Schmitt There is some analysis, there might be some conclusion that doesn’t make sense, but my expectation looking at the past 20 years of European restriction is that it will probably do nothing. Or maybe it will generate some additional spend, but will it be wisely spent? That I’m not sure. Nuno Goncalves Pedro Again, read the Mario Draghi report. There are a couple of different reports out there with different levels of details, the executive summary, backups on all of these things, and his actual speech to the European Commission. Very, very interesting. Nuno Goncalves Pedro I will mention something. I think I’ve mentioned this in the past in one of the prior episodes. Recently, I watched Ray Dalio at a conference in Singapore, and he was avoiding the whole topic around talking about Europe. He was talking about US, Southeast Asia, Middle East, US. But he didn’t really talk about Europe. The person who was leading the fireside chat with him did end up asking him that question. “What about Europe?” He gave an answer that was, shockingly enough, very similar to an answer that Lee Kuan Yew, who was the Prime Minister of Singapore and has now passed away, gave at a conference many years ago that I was in as well, of senior leaders. Very similar answer. Nuno Goncalves Pedro His point is saying, “I love Europe, history, all these amazing places, tourism, food, incredible,” whatever. “But there has to be something dramatic happening in Europe or Europe is lost. It’s really not going to be the engine of economy that it needs to be for even itself.” The point, again, Lee Kuan Yew went a little bit further back in the day where you said, “I love Europe for tourism and food, but that’s about it. I don’t see it becoming a global power to the length of what we’re seeing with China developing and with the US developing, etc.” Nuno Goncalves Pedro Not great from two people that one can have some respect for because they do have a macro geopolitical view of the world at very different moments in time. Bertrand Schmitt Yes, to this point, we are both Europeans, born and raised in Europe, so we say that from a position of love for Europe. We love Europe, we like Europe, we have roots in Europe. At the same time, when we probably left is that we spent time in China. We are now both living on the US West Coast, and it seems that Europe is stuck in its models that are not really working. We are glad when some try to do analysis, make some proposition. Bertrand Schmitt At the same time, it’s not the first time we hear about analysis. EU looking into it. It’s not the EU, it’s France, it’s Germany, it’s the UK. At the end of the day, it is not words but facts that matter on the ground. It is metrics that you see coming out of it, and it is not there. It’s not there. Bertrand Schmitt I think that, when I was reading this report, they are trying to do the quadrature of the circle. It is like they tried to make that circle square. You cannot have everything. You cannot have on one side, you want a protective system; on one side, you want to manage retirement in a specific way; on one side, you want independence from the US for your defence, but you do not want to do the work. You want to do stuff to get elected, and to do that, you support the green movement demands that are destroying energy manufacturing. Bertrand Schmitt You have to make a choice at some point. If you don’t make these hard, tough choices, you can talk as much as you want. You are not going to deliver the goods. Nuno Goncalves Pedro If you don’t make those hard choices, someone else would make it for you. In this case, the US will make it for you, China will make it for you, et cetera. They’ll become more competitive, and they’ll become more aggressive, and they’ll build the next wave of amazing companies, and they’ll have the more liquid labour markets. Maybe a great segue to start with another pet peeve that we have; labour laws in Europe. Nuno Goncalves Pedro The protection for employees in Europe is silly. It’s incredibly difficult to fire people after they’ve gone through their initial contracts with you. There’s all these real rules around it. People try to fudge it and go around it, but it’s silly stuff. There are countries where you can take literally up to two years of sick leave, like the Netherlands or Switzerland. If you go and Google it and look for it, it will show, “Oh, it is maybe up to 70% of salary.” There are some extenuating circumstances by which you could actually get 2 years of fully paid sick leave, 100% of your salary. Nuno Goncalves Pedro It’s like, “Are you kidding? How does that work?” You have difficulties firing, the regulatory environments of most countries. It’s difficult to fire in Germany. It’s extremely difficult to fire in France, extremely difficult to fire in Portugal, Spain. You would have to do lay-offs, which is the removal of the position that the person was hired for, for you to let the person go. Then you can’t rehire for that position for a significant amount of time. Nuno Goncalves Pedro It’s incredible. People in the US listening to US right now is like, “What are you talking about? Two-week notice, you go, right? What 2 weeks notice, right?” Bertrand Schmitt We did not even go to the 35-hour work week in France, so it feels like that is such a visible measure that… It became an insult anywhere else in the world about, “What? Are you working 35 hours a week, like the French?” I feel so sad when I saw this measure being put in place in the late ’90s, early 2000s, people’s mindsets changing in real-time in front of me. Bertrand Schmitt Then it was not about doing your work, doing stuff. It was how to organize your three-day weekend. That was it. People lost interest in doing their job, doing their work, and productivity went to a cliff. It has been very, very surprising. Of course, there are also additional rules. If you are above 55, and suddenly, you are very difficult to fire, or you will cost way more to fire. Bertrand Schmitt There are other things. Employees might think, “Oh, I’m not so well paid. This is my gross salary, and this is my net salary.” They think, “Oh, it’s very little.” But what people don’t see in Europe is that there is an insane cost on top of their gross salary that the company has to pay. Actually, the company is typically spending way more, way more than people see in their bank account. I’m not even talking about taxation on top of it. Bertrand Schmitt But to give you an example, in France, for a take-home after-tax of €75,000, and €75,000 in France is already a pretty big salary, to be clear, companies have to spend €175,000 to enable the employee to get that amount of money back home, €75,000. That gap is pretty insane. Bertrand Schmitt I know, when you do financial modelling from the US, you do this quickly. It’s not a big multiple to have the total cost a company has to pay for an employee. Then they look at Europe, and they look at France, and they’re like, “What the hell? I thought it was cheap.” No, it’s not so cheap. Yes, when you include everything, it’s not so cheap any more. Nuno Goncalves Pedro Just to be clear, just to reflect on your numbers, Bertrand, you were talking about someone taking net home, €75,000, the gross salary for that person would be €120,000, and the cost to the employer is €173,000 at the top. There’s a €53,000 cost to the employer on top of the gross salary just to be able to cover that. It’s €53,000 on top of the €120,000 gross for you to take home €75,000. That’s ridiculous. It’s just silly. Nuno Goncalves Pedro It’s not just taxes. It’s not the net after taxes. It’s not the 120K gross to the 75K net. There’s the cost to the employer, which are 52K on top or 53K or something, it’s ridiculous. On top of all of that, social securities and all this stuff, it’s incredible. It’s totally mind-boggling. It doesn’t work. It can’t work like this. Bertrand Schmitt Yes, it doesn’t work. That’s one of the big problem. It is a very bad spot because employees are not happy getting paid loans, and at the same time, they do not understand what is really going on and how much is being spent by the company on top of it. The company is not happy because it believes it pays employees too much. Employees believe they are paid too little because they do not see the whole cost, or they do not care about the whole cost. I don’t know. But that’s an impossible situation to be. Bertrand Schmitt Of course, there is such a big gap because all of these nice government programs around universal health care, pensions, and other services have to be paid for from somewhere. That’s what’s happening is that this stuff is paid from your salary. Nuno Goncalves Pedro Social welfare costs money. Bertrand Schmitt Yes, unemployment insurance. All of these nice programs that you feel are so important have a totally insane cost. Guess what? From my perspective, a lot of this is actually abused. The system is being abused. But when you build in place such a system, you generate incentives for bad actors, people who are going to try to abuse the system. Nuno Goncalves Pedro There’s a side effect of this, which is in some ways why the far right is taking such ridiculous positions in elections, where they’re number one in Austria, they’re third in Portugal, and whatever, coming out of nowhere in many cases, for example, in Portugal, because people are significantly unhappy, and they’re like, “There’s all these abuses. There’s all this immigration. We’re covering this immigration with costs, et cetera.” Nuno Goncalves Pedro We know actually immigration is net positive in many of these markets. But there is this impression, this impression that is created in citizens that, “Oh, my God, we are becoming insolvent because we are taking care of all these people that are coming in.” “No, no, no, guys, it is not because of that. You are becoming insolvent by yourselves.” Because there is no increase in productivity that is dramatic at the level of what the US has seen over the last two decades because effectively, these markets are becoming uncompetitive. Nuno Goncalves Pedro What we are seeing is all of this taxation, to your point, the abuses where there are people who are staying at home and not working. In many cases, the people that are staying at home are not the immigrants. They’re the locals. They’re the citizens. They’re the people like, “You know what? I’m not going to work. I’ll get paid minimum wage, or I’ll get paid some unemployment fee, or I’ll pay minimum guaranteed payment, or whatever it is that exists in my country, and I don’t need to do it.” Yeah, guess what? That doesn’t work. We can’t cover the citizens of those countries and the immigrants can’t cover for everyone else. Bertrand Schmitt I’m not sure about what you say. I would actually disagree. There are a lot of metrics analysis now that shows that if immigration is coming from Europe, then yes, it might be a net positive. Even then, you have to really look at from a long period until retirement. But it’s actually not true from countries outside Europe. If you exclude the US and maybe a bit of East Asia, all the rest from Africa and the Middle East is actually a net negative for the few countries in Europe that have shared the matrix. I think it’s more of a legend that immigrants are a net positive financially because it looks like it’s not if you exclude the ones from the Western world. Nuno Goncalves Pedro That would be because of welfare in general, just taking over the system? Because in the US, it is true. That is net positive, the immigration in US. Bertrand Schmitt I don’t know. Again, I think you might want in the US to split between countries of origin, which are bringing positive net result to the country or not. It’s a mix of they are not earning enough and early retirement and a lot of welfare. But the numbers, just to be clear, are very bad. If you exclude the Western world countries, the numbers are extremely bad. It’s very clear net negative. But unfortunately, there are too many, too few resources and analysis because most countries try to hide this fact. It is more convenient for them to just provide some high-level metrics that, “Hey, immigrants are net positive.” Nuno Goncalves Pedro Then the whole social welfare thing in Europe is, I do not know how they solve it without solving that, just having to eliminate it massively. Bertrand Schmitt It’s pretty clear. Nuno Goncalves Pedro Shall we move to regulations? We love regulations. US invent, China manufactures, Europe regulates. Bertrand Schmitt I’m very sad to see that, to hear that, but at this stage, it’s probably true in some ways. When you see how proud are some European regulators to invent out of nowhere some new regulations on AI, or it’s a digital market act, or it’s GDPR regulations. This stuff, just to be clear, I’ve done nothing of what they claimed they would have shift. Does it have improved a bit of privacy and stuff? Yeah, maybe, but so what? However, they have certainly improved the situation of the incumbent, typically the US incumbent, by the way. Bertrand Schmitt Instead of creating competitions, instead of creating more levelling competitive ground, instead of improving opportunities for European companies, it’s pretty clear it has done anything but that. It has probably also make it worse for European consumers because all these regulations have a cost. The cost is borne by European consumers. You can’t use the data, you can’t share the data. Guess what? Then it’s one less source of revenues, one less source way you can optimize advertising, for instance. Guess what? Bertrand Schmitt As a result, companies will have to increase costs, and that’s what they are doing. They are increasing cost, stopping some operations in Europe, not selling some products in Europe, not bothering. Bertrand Schmitt Take AI, for instance. The latest is that the most advanced models from Meta are not available in Europe now. You cannot use them in Europe. Good luck with that. A trade-free product is not available. Apple is not launching Apple Intelligence in Europe for now. This is crazy. This makes absolutely no sense. Guess what? No one is copying US. There’s no equivalent in the US. Bertrand Schmitt Actually, you could argue in the US with the new Trump presidency with others from Vivek to Elon Musk, I would expect a big decrease in regulations. Actually, during the first Trump presidency, that was one of the first time there was a significant decrease in regulation in the US, that would make the US even more competitive than it is today versus Europe because there would be an active mindset to reduce unnecessary and costly regulations. People will say, “Oh, yeah, but it’s good to have regulations and stuff. Yeah, sure, a bit.” But the problem is that we have way too many, way too much. Nuno Goncalves Pedro Way too early. Way too early. That is what I think we are the most to share. Bertrand Schmitt On top of it, way too early. It has a direct cost. People don’t want to think about it. They just see the first-order effect. But the indirect cost is you destroy competition, you destroy your own economy, you limit your own economic competitiveness. At the end of the day, you don’t grow as fast. A big reason, from my perspective, why the European economy is growing so slowly is regulations. Regulations are the ball and chains you are dragging constantly, trying to run a sprint, a marathon, when others, the Chinese, the Americans, don’t have that. They can run. They are free to run. They are free to move fast, while in Europe, you are not free to do any of this. Bertrand Schmitt That has a real cost. I think that at some point, Europe will have to realize that. I don’t know when it will happen. To be frank, I guess we thought a much bigger crisis. It will not be taken seriously. We will see a new report in 20 years from now analysing why we do not grow as much. Nuno Goncalves Pedro In 20 years from now, this is insolvent. I don’t see how if we believe the report we discussed earlier from Draghi, et cetera, countries will be insolvent and things will not be working. This is like a situation. If this again was a household or let’s say a company, maybe the analogy is easier. This is like the most hardcore of turnarounds, maybe even almost, “Let’s go into chapter 11 to protect ourselves from creditors and try and see if we can turn around this thing.”, this mess. I still see all this demagogy at the European Commission level, local countries doing whatever they’re doing and fighting their own in-house fights because they need to politically. I don’t know how you solve this. Nuno Goncalves Pedro Let me ask this in a more aggressive way. Do you see something that would look more like, again, this federal Europe that it seems that the report is alluding to because it had more unified planning of defence, more unified policies for innovation, more unified views on energy, and our energy gets deployed and all that stuff? More federal Europe, do you see it happening over the next 5 to 10 years? Bertrand Schmitt I think it has raised a question. A lot of people are saying, usually, the conclusion of this report is, “Let’s do more Europe. It didn’t work, but let’s do more.” It feels a bit like communism. “It didn’t work, but let’s do more communism. Maybe it will work better.” Bertrand Schmitt I’m actually worried. I used to be pro-EU, pro-Euro 20 years ago, looked like a nice common dream. At the time, we also had the UK in the EU. Now the UK left. I think the UK was actually a good source of energy for Europe and liberalism and capitalism. We don’t have that any more in EU. We are just happily all together, European continental countries. I’m actually worried. I will actually ask a question given you could argue everything got worse with the increased power of the EU with the start of the Euro. Bertrand Schmitt I might have to think that we might actually be better off without the Euro. The Euro has brought a very, very big lack of competitiveness for Southern European countries, from Spain to Greece and even France. I’m not sure Euro has been a good thing. It has helped German exports, but for other countries, I am not sure it has been so good. Bertrand Schmitt In terms of EU, I think it should go back to something way smaller where, yes, there are some practical benefits to unify some stuff, bring some ease of movement, but at the same time, I think it went way too far at this stage. I don’t think more is the answer. I don’t know your take on this. Nuno Goncalves Pedro I am at the opposite end. I believe Europe was always half-baked. It was half-pregnant, or “Let’s do the Euro thing, but let’s not unify on decision-making Brussels, and let’s not think through how you unify tax regimes, and let’s not think through how we unify defence and all that stuff.” I think this only works if Europe fully unifies. I don’t see countries like Portugal or Spain, whatever doing better because there’s no Euro or because now we have our own currency again back, and we can do stuff with it. I don’t see it getting better. Nuno Goncalves Pedro I feel either we embrace a fully European project, et cetera, or we just say, “Look, Europe has failed miserably. Let’s forget about it. Let’s go back to our own countries and figure out what’s our competitive advantages.” For a country like Portugal, to be very honest with you, tourism, nomad living, digital people, we have the great advantage of sun and weather, I don’t know, I do not see how Portugal is going to thrive dramatically by going away from all these things. Nuno Goncalves Pedro My view is the opposite of yours. I feel we just went half-baked into this. We never really evolved into a system that we believe that we could have representatives at European level that took care of US. I believe the solution for Europe, if it wants to be competitive, is to be fully federalized. To my point that I was asking before, I don’t see it happening politically in any chance in hell in the next 5 to 10 years for sure. If we’re serious about a competitive Europe, that’s what would need to be done. Bertrand Schmitt Yeah. My worry at this stage is that so many things done by Europe have been wrong, that I don’t see how More Europe will bring it right. I can see the point around More Europe. I’m just extremely worried it will just get worse. Bertrand Schmitt Maybe one ray of sunshine. Company structure. There is a new initiative called EU Inc trying to push for a pan-European tech company-type of structure to simplify how you build companies, to simplify stock options programs, to improve them. You have to take that with the mind that actually in Europe, it’s complete madness. From one country to the other. the regulations are very different, and I’m talking more about company type of regulations, of company structure. Bertrand Schmitt For instance, in some markets, you cannot have individual shareholders without them putting tens of thousands of euros. It’s not easy to sell or change your ownership. It can take months, years, There are absolutely horrible stock options program in most European countries. France is just getting better. UK was not too bad. Germany, Austria were totally horrible. It’s complete madness, and all of them are worse than in the US. Bertrand Schmitt Guess what? When you are in competition for global talent, global talent is going to want to be compensated the best possible way, and that include in high-tech, high-growth companies, stock options. So if you’re stock option program is not competitive, then they are going to customers who are more competitive like in the US. The difference are huge. Bertrand Schmitt I think Europe is coming from a position of inherent weakness, because small countries, language barrier. It’s not easy. In a way, they should be working overdrive to be better than the competition. Not just to match it, to be better because you have to face that competition and you have inherent issues. You cannot soar. We are not all going to speak German or French in Europe anytime soon. Bertrand Schmitt For me, it’s always very surprising to see that because, to be frank, these are problems that have been discovered by multiple reports and committees the past 5, 10, 20 years, 30 years. Why has it not been solved by today? I don’t know. But it’s good to see that there is a push, and maybe next year, this is something that the new EU Inc might come to fruition. Nuno Goncalves Pedro Just to be clear, part of the issue with stock options in Europe, and actually treating of shares like investors having an investment in a company, is there’s this tendency of the tax authorities to tax, and so tax authorities are going to tax you even on unrealized gains. They’re going to tax you on your options, and options haven’t been even exercised yet. That’s the problem with options. Now it is being treated… It’s this trigger-happy… Which, by the way, Vice President Harris was trying to come to through the program that, obviously, President Biden had for the election back in time, which was then semi-thrown away. Nuno Goncalves Pedro But this whole notion of you can’t tax stuff preemptively because this has huge impact on ecosystems. Otherwise, I can’t take stock options in the company. I can’t take shares that I have not exercised yet, and you are going to be taxing me on them? How does that work? I don’t have the money to give you for the taxation because I need to sell the shares to give you the tax money. I haven’t done it. It’s not liquid. Bertrand Schmitt It makes no sense. When you know the level of risk of startups, of being in a startup, of startup not making it, you are actually making people poor, potentially by pushing for this. People who took a risk. And guess what? The next time, they won’t take a risk. Nuno Goncalves Pedro They won’t take a risk, yeah. Bertrand Schmitt They will go join that bigger, slower, corporate giant and won’t try to change the world. Nuno Goncalves Pedro Or they’ll move to the US and do the company in the US. Bertrand Schmitt Yes. Nuno Goncalves Pedro Which is what many Europeans do. Yes. Bertrand Schmitt Yes, that’s totally true. The UK, I mean, a European country, certainly not part of EU anymore. They added some pretty bad… I don’t know if they added new laws or if they started to implement them more recently, but anti-free speech laws under their latest new Prime Minister, a Labour Prime Minister. It’s very sad to see that some people complaining on X or some other social media platform can face a risk of jail, a real jail time, over some comments that might be inappropriate. But some of them, when you look at it, look more like clueless or maybe inappropriate, but not like hate crimes. Bertrand Schmitt But that’s the thing with regulations. It’s pretty easy to transform what they started with, probably starting with a good intent. Then they are manipulated and used, and surprise, surprise, what was considered a hate crime 5 years ago is the lower standard or whatever. It is becoming very, very shocking, actually. Bertrand Schmitt They managed to add a huge new taxes. Basically, in the UK, if you are qualified as a non-dom, non-domiciated, you could pay very, very little taxes. It has brought a lot of millionaires, billionaires to the UK, because if their earnings were coming from outside the UK, it would not be taxed or taxed very little. So it created a safe haven for wealthy people, which, of course, these wealthy people are going to start more businesses in the UK, to move headquarters to the UK. They will spend their money in the UK. There was a lot of inherent benefit, and that was a rational trade-off. Come here, we don’t tax you too much, and as a result, you will spend your money, you will create jobs here. That’s what happened. Bertrand Schmitt The problem is that the new labour government, and it started changing with the previous government, decided to go all in to remove this. It will be impacting UK, non-dom regime in the UK in the coming few years. I’m starting hearing about some people considering leaving. Nuno Goncalves Pedro It’s the end of the UK then if that happens, of expat UK filled with foreigners, etc, in high-paying positions. At some point in time, I don’t know. But it certainly will have a huge impact on the very wealthy bracket. The non-dom thing is always having a huge impact on the totally wealthy bracket, where the famous, even famous, Brits would go around the world and for a year, they’d be doing something somewhere else, somewhere in the world, so they could move income into the country and all that stuff or money into the country. It is a big deal. It’s something that’s very deeply entrenched in how not only foreigners, but also Brits see their relationship with the country in terms of, again, the very wealthy bracket. Bertrand Schmitt Yeah. You know, this rule was like 100 years old now. It’s not like something new that wasn’t experimented with for a few years. No, it was very deeply entrenched into how the UK was working, how the UK was seen, and how the UK was seen as a destination, so it will have an impact. It’s clear. I think that, of course, this lack of growth, this lack of success for different European countries, many are going to take that direction, especially the leftist government, socialist government, labour government. They will think that their way is to try to take their way out of their problem. But history has proven it never works. You don’t take your way out of trouble. You enable entrepreneurs, you unleash capitalist spirit. That’s the way China moved itself out of poverty. That’s the way US has been forever. At least from my opinion, that’s really the right way to solve the problem. Bertrand Schmitt The other piece of the puzzle is to reduce regulation, reduce that state full of bureaucrats. I mean, if you take France, 57% of GDP is spent by the state, 57% of GDP. Basically, you have a minority of private business that are generating the wealth for everybody else. Because the government is not a wealth creation machine, just to be clear. Can spend GDP, but this is not GDP that compounds. This is GDP that is just spent, not invested. So yeah, it’s a scary place on my tech unless they really change all the way to less spend, more cuts in the bureaucrats-run system, decreasing regulations. It’s not going to work. It will be actually a doom loop. You tax more people, the best minds are leaving, the more wealthy are leaving, and it is not going to help your country. Nuno Goncalves Pedro What percentage of the US, the contribution to the GDP is done by private sector? What percentage? Bertrand Schmitt Private sector is much higher. Yes, it’s much higher than 50%. Nuno Goncalves Pedro Eighty-eight percent. Bertrand Schmitt Yes. Nuno Goncalves Pedro Eighty-eight. Bertrand Schmitt To be clear, it got worse under Biden government or the Obama government. It’s pretty recent. It used to be not that bad. Nuno Goncalves Pedro Eighty-eight percent private sector. Eighty-eight percent private sector contribution in the US. It’s incredible. Bertrand Schmitt It’s tough to comprehend. No other country in the world actually is like this, I forgot to say, except that France. Sorry, maybe North Korea is different. Nuno Goncalves Pedro That’s a great comparison. Bertrand Schmitt You might have North Korea number one, maybe 95%, 99%, and then you have France. That’s pretty nuts. For sure, in term of OCD countries, it’s the worst. Nuno Goncalves Pedro Well, a couple of rays of sunshine. At least there is a good report from Mario Draghi, which, by the way, Ray Dalio mentioned as well at that event that I saw him in a few months ago. At least we know what the problems are, so hopefully we can start working on them. A lot of work to do. A lot of work to do in Europe, and a lot of work to do in figuring out if this is going to be a more unified Europe or a less and less unified Europe. A lot of work, Bertrand. Bertrand Schmitt Yes, Europeans are great at writing reports. I hope it move from writing reports to really generating action and generating the right action. I think the Europe is still biased in its understanding in the sense that it’s still making some assumptions about the right model. It’s full of if Europe wants to support the Green Initiative, if Europe wants to keep its protection system, this and this and that, which at some point I take offence. I think, no, you guys have to change this as well. Bertrand Schmitt But overall, there are a lot of good points, a lot of good analysis, some good ideas. Hopefully, some of this gets implemented. I am not personally super optimistic, having seen previous reports, commissions, and similar efforts in Europe or in France. But I really hope this time the crisis is too big. The lack of competitiveness is so big. It might become a time for action. Bertrand Schmitt Anecdotally, in France, there is a lot of factories and industries that are announcing some closures, maybe tire manufacturers like Michelin. In Germany, Volkswagen is going to close its first factory ever on German soil. I think anecdotally, I’m pretty worried we are going to see more and more something pretty bad happening to at least European more heavy industries where energy cost and cost of labour are starting to be such a weight that it’s totally uncompetitive. Bertrand Schmitt Interestingly, many of these businesses are actually moving factories to the US. Regulation, cheaper prices of energy, make it more attractive as an alternative. So hopeful, praying for the best, but at the same time, fasten your seatbelt. Nuno Goncalves Pedro Thank you, Bertrand.

Another election year and it’s already a dramatic one. Biden vs Trump turned into Harris vs Trump. An attempt on Trump’s life. What’s next? This episode will focus on the implication of the elections for Tech and its ecosystem in the US and globally. Navigation: Intro (01:34) Harris vs. Trump Silicon Valley / Tech business at large views Implications for Rest of the World Our take Conclusion Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Nuno Goncalves Pedro Welcome to Episode 58 of Tech DECIPHERED. Today, we will discuss the US election and what it means for tech. How will the upcoming US election affect tech and the entire ecosystem in the US and globally? To be clear, and just to put a disclaimer, this episode will not focus on policies by the candidates that do not relate to what we perceive to be implications to tech. For example, we will not be discussing topics like pro-choice versus pro-life, and other things that are obviously very central to the decisions that many of you will make in how you will vote for the next presidential elections in the US. Nuno Goncalves Pedro At the same time, we will also share with you what we know to the best of our knowledge. Obviously, policies change with time, and proposed policies definitely change a lot with time, as you know, with politicians. There might be things that we will share with you today that might be different when you listen to our episode. We are not responsible for that. People and candidates change their minds all the time, even after they’ve been elected. That’s not our fault. Just with those disclaimers, that’s what we’re going to share today. Nuno Goncalves Pedro The third and final disclaimer, obviously, there will be tonality on how we discuss and evaluate some of the policies, and if they’re good or bad or whatever. But from this, you cannot also take a conclusion on, “Oh, I should vote for Trump,” or, “I should vote for Harris,” because no, this is just a view around tech and tech ecosystem. We will share how we perceive the policies and the proposed policies, and that’s literally it. We’re not giving you advice on who to vote for. Bertrand Schmitt First, this is a recording made August 28. We’ll try to be as precise and as relevant as of this date. This is before the first debate between Donald Trump and Kamala Harris. As a reminder, a French politician once said that promises by candidates only engage those who listen to them. With that as a reminder, let’s start the topic. Maybe first, we can talk about the official platform. As of today, there is an official platform if we go to the page of the candidate, Donald J. Trump, there is a 20-point page, and there is a more detailed PDF as well on the Trump Republican platform. Some of our points will try to leverage what is on this official platform page, and we will also, of course, try to leverage what was done when Donald Trump was president, because sometimes actions speak louder than words. We also pick what we have heard from the candidates on the trail, if it diverts or if it adds to that platform. Bertrand Schmitt On the other side, VP Harris’ platform is not there. As of August 28, there is no official platform on her website, which, to be frank, it’s scary because if you cannot hold a candidate to their promise after they are elected, that’s a tough place to be. Obviously, she’s part of the Biden-Harris administration, so we will leverage for discussion what was done by her administration, what was also planned by her administration, and we will highlight whatever has been shared by her, since she’s running as a candidate. Nuno Goncalves Pedro Well, okay. That’s a great start. But based on speeches—obviously, Vice President Harris is in office right now, so she’s been part of a platform—based on what analysts’ say, we’ve looked at a bunch of comparisons across the board for where they stand on a variety of issues. Maybe we start with economic policy overall, and talk a little bit about how we see the Biden-Harris administration, and obviously what things have happened around there. We will later discuss other topics like taxes, labour, perspectives, for example, on gig working, immigration, antitrust, and a variety of other topics. The economic policy overall piece that we will share at the beginning is very high-level, as you will see, then we will go in details into a couple of other areas. Maybe starting on that, Bertrand. Bertrand Schmitt Actually, we have two, and when I say candidates, of course, we should think about the ticket, per se. If we take on Trump’s side, what’s interesting with both Trump and JD Vance is that they have both extensive experience in the private sector. Trump, obviously, as a businessman, who built a business empire. JD Vance, as an ex-VC, venture capitalist. Both have been in the trench of what it means to run a business, to be on the board of businesses, to be on the private side of things. Bertrand Schmitt On the other end, we have a stark contrast, because both Harris and Walz have actually never been on the private side of things. Harris has been on the legal side as a prosecutor, as attorney general. We have Walz, who had a long experience in the military, followed by running for different position at state level before becoming governor. Nuno Goncalves Pedro I would say one parenthesis on JD Vance. He was in venture capital for a short period of time, three years and a half or four years, which is not very long, for venture capital funds are normally 10 years, et cetera. But he does obviously have private sector business experience before that as well. He did write the book, and the book was made into a movie. There’s definitely a lot of private sector stuff in there. Bertrand Schmitt That’s true. Actually, I forgot to say that JD Vance also has a military experience. Nuno Goncalves Pedro Yeah, he was also in the military. Bertrand Schmitt The economic policy, if we look at what has happened under the Biden-Harris administration, I mean, obviously it has been hugely inflationary. The numbers have been terrible. I mean, if you have a basket of stuff to buy at the groceries, you have seen big price increase. Go to McDonald’s or any other restaurant, you will have seen a huge difference in the past four years. Whatever the Inflation Reduction Act was supposed to do, I guess it did the opposite of the name of the act. It was a more inflationary act instead of a reduction one. Bertrand Schmitt The latest has been Kamala Harris has shared, or some of her spokesperson have shared that she wants to put in place some level of price controls, which is pretty scary, to be frank. In some ways, it’s typical to first create inflation, and then to claim it’s the fault of the capitalists. If prices are increasing, therefore we need to put in place price controls. I think the last time that there were some level of price controls in the US was a long time ago, in the ’70s. It was not a good outcome, just to be very clear. It has rarely, if ever, be a good outcome if you go to price controls. Nuno Goncalves Pedro Yeah, I mean, price controls, I don’t think would be a great idea anywhere in the world. On economic policy, I would bring another element to the table, which is maybe stepping one step above. As you guys probably know, both Bertrand and myself are not American originally. I have since become an American citizen, so this will actually be the first presidential elections that I will have the pleasure and honor of voting in. Nuno Goncalves Pedro Bertrand is not an American citizen, but he does live in the US and has lived in the US for a very long time. Coming from different countries, Bertrand’s from France, I come from Portugal, with national health systems. We both lived in China, which is a bit funky in terms of health system. Again, different education systems, et cetera. I’d say the only point I would make is, at least from my perspective, coming out of Europe and having lived in Asia, there’s very little structural support on things that I do think are critical. For me, the three things that are critical, I always mentioned these three things, are health, education, justice. The health, education, justice system in the US is, let’s just say, very private sector-owned. It’s very private sector-led, and it’s uncommon for that in many countries in the world. Nuno Goncalves Pedro It has its pluses and minuses. But if I were to look at the minuses, the fact is, if I’m an American citizen, the level of protection I have in terms of, for example, having a health scare or whatever is not really comparable to, for example, I’m a Portuguese citizen, I live in Portugal. I do think there are a lot of factors that are put into economic policy to make some of these elements work in the economy, which, to be honest, the Democrats have had probably a better track record than the Republicans have had. Nuno Goncalves Pedro The whole notion of you take care of yourself, and if you have health issues, take care of yourself, and if you have diabetes, you take care of yourself, is very much a Republican speech motto thing. On the Democrats side, there’s more of this level of protection for at least certain elements. Now, we can have, as Bertrand was saying, also an argument that there’s been too much spend. The government is overspending dramatically. We have money that we don’t have the right to spend. We’re borrowing. Nuno Goncalves Pedro What happens at some point? Does the country default? What happens? There has to be somehow more of a moderate view on what is important and what is essential to citizens or not in the country. I do agree with the point that you were making that there has been extreme spend in US under this administration, too much spend under this administration. But at the same time, there are things that need to be taken care of in the US by the states, by the government, and particularly by the federal government in this case, because we’re discussing a federal election, that honestly do require spend. Sometimes I think the Republican piece of discussion is a little bit like, “Oh, no, we’re a capitalist country. Everyone takes care of themselves.” That’s not how a country should work. Why do we pay taxes? I think there should be something a little bit more in the middle. Bertrand Schmitt My take at this stage is that a lot of people talk about where is the money coming from, do we increase taxes? There is very little discussion on how well the money is spent, when at the end of the day, that’s all that matters. How well is it spent? My worry, and we’ll talk a bit on more specific points, but there are very clear specific points on, for instance, high-speed broadband or electrification of the US, where billions have been invested by this administration, Biden-Harris administration, and there is absolutely nothing to show for. Bertrand Schmitt That’s for me what’s totally scary, because when stuff is clearly identified, four years after, you see zero in terms of returns after spending billions. That, for me, is for sure the scary part, and a big question. I think there is some level of, from my perspective, a clear dysfunction overall, not just this administration, by the way, but there is, overall, a clear dysfunction. I think there should be way more discussion about how well is the money spent, and how well invested it is. I think, unfortunately, it’s not discussed. It’s more how much money do we tax, where should it go, and not, has it been well spent? My personal worry is that the majority of the money is actually not well spent. Nuno Goncalves Pedro I think that’s a good segue to the tax discussion. Let’s start exactly with the point you’re making, which is, I think of the countries that I’ve lived in, probably this is the country where I’ve seen the most delta between taxation and what’s deployed into stuff that you can actually see as impact. There’s a lot of leakage in deployment. Just to be clear, I lived in China, for example, like you did. There are other types of leakage in China, but the leakage here on tax credits, I mean, I live in California, you used to live here, Bertrand. It is absolutely incomprehensible where some of the taxes are going, because infrastructure needs a tonne of maintenance. Everything that gets done takes a tonne of time to be done. It’s super costly. Nuno Goncalves Pedro I mean, there’s all these incredible cases of the million dollar… Was it the million-dollar toilet in San Francisco or something? The way it gets deployed or something, it’s mind-boggling, and it is significant. I know people that left this country because of that, that left this country because they’re like, “I’m paying taxes. I don’t mind going somewhere else and pay even more taxes, but I know it’s being deployed. I know I have a national health service that takes care of me and takes care of other people. That mostly works. I know there’s education, guaranteed K-12, which is pretty decent. The variability is not huge across the board. I know where my taxes are going.” I think the accountability of taxation than in deployment is something that’s very interesting and very important to me. This country is definitely messing it up. Bertrand Schmitt It’s very surprising. I cannot say I’m a big fan of the French’s quasi-socialist economy, for instance. But if you pay more taxes in France, I personally feel you also get way more in return. You have functioning roads, you have high-speed rails, you have a great aerospace industry. Look at if you compare Airbus to Boeing, obviously, SpaceX is in the US. Yeah, that’s really a big question. Especially, I would say that one thing that personally surprised me was Kamala Harris’ support for the equality of outcome, not equality of chance, but equality of outcome. Because if you start with that mindset, and that started with a presidential election in 2020, that’s pretty scary. Because if that’s your mindset, if you want an equality of outcome, you are going to tax even more. Obviously, I don’t believe equality of outcome will work. That’s a scary part. Bertrand Schmitt If we go more precisely, it seemed to have been endorsed by Kamala Harris, it’s the last Biden-Harris administration proposal to increase corporate tax, to increase income tax. The worst of the worst is to dare to do a tax on unrealised capital gain. That one is like, from my perspective, I mean, batshit crazy. I will not use any other word. Bertrand Schmitt I’m coming from France, where we used to have a wealth tax, which had so many negative effects. The first negative effect was a tax that costs more to the state than it gained. Because people left France because of this tax. Wealthy people left France, and ultimately, France got less tax as a result of imposing a wealth tax. This is not only very bad in principle, but realistically it never works, but it certainly serves to damage the country. For me, that’s the most scary proposal of all. This is, as of today, seem to be endorsed. Nuno Goncalves Pedro This is to the best of our knowledge, right? I wouldn’t be shocked if she steps back a bit on that, but we will see, particularly in realised capital gains. A lot of people is like, “How does that work?” I have this stuff in stock—like Elon Musk has all this stock—and it’s worth something. Probably he’s getting loans from banks to do things, et cetera. Correct, he is. But think about, for example, the startup world, the world that we occupy for the most because we’re in venture capital. If I’m a founder of a company, I start the company, and sometimes I get paid literally zero when I start a company. At some point, I might get a meagre salary, and then that salary gets a little bit better and better, but it’s never a great salary. My compensation is I started the company, therefore, I have a big portion of the company in equity. Nuno Goncalves Pedro As I go through time, that portion of the company decreases because I’m raising money from third parties, and therefore, I have less and less ownership of that company. But let’s say I have, I don’t know, 20% of the company at a certain point in time. The company, as it goes through rounds of financing, is valued at different amounts. There are two types of valuation. There’s the valuation that’s done by investors that come in to get preferred chairs, and there’s the so-called 409A valuation, which is a valuation that’s applied because you have to give options to employees and other things to stimulate and give them as benefits. Nuno Goncalves Pedro If that valuation at some point, the valuation is always going higher. If the valuation at some point is higher, you’re being taxed on that increase in valuation on equity that you have done nothing with. You have equity in the company, but you have not done anything with that equity. That destroys that market. What’s my incentive? I’m a founder, and I’m getting taxed on stuff with cash I don’t have, because I haven’t sold the equity. In some case, I’m going to keep that equity for the next seven, eight, nine, 10 years. That part is what Bertrand is saying is idiotic. I think a similar thing is being done in the UK right now, which is creating a huge amount of noise and complaints and whatever. I looked at something recently, because people are, “Why does this matter?” Well, it matters for a variety of reasons. It matters because it has huge implications on the ecosystem and startup VC. I mean, it’s huge. I mean, Silicon Valley, this would be huge in Silicon Valley. Nuno Goncalves Pedro It has huge implications because the US has a tonne of millionaires. To this day, I just saw a chart from, I think, 2023. It’s net positive, the US. There’s more millionaires coming to the US than leaving the US. Last year, according to that chart I saw, the US was second in the world, only beaten by the UAE. I think UAE had a net positive of 7,000 millionaires. US had a net positive of 4,000 millionaires. For example, China’s last. China’s net negative, the most net negative. It’s in the top 10 of net negative. Portugal is in the top nine of net positive. It’s in ninth place. Of the top 10 of net positive, it’s in ninth place. What do you think would happen as well to millionaires? Because a lot of these people have participation equities in companies, the thing, whatever, your tax on unrealised gains. Nuno Goncalves Pedro I think that would be a massive destruction of value, and it would have a huge impact in tech ecosystem for sure. Extremely negative. I don’t know how we would go around that. How would we figure this out? I’m sure there are lawyers already thinking through that, but how would you work around these kinds of things? Going forward, it’ll have implications on VC funds, and how we hold the stock at because we would have to pay taxes ourselves, but we haven’t exited the company. We have the equity in our books, but we can’t do anything with that equity, either. We only do when there’s an exit, but then we have to pay taxes on it? This is dramatic. This is absolutely dramatic, and it’s absolutely idiotic in my perspective. Bertrand Schmitt Of course. The other piece, as you said, one of the biggest issue in private equity in venture capital as an entrepreneur is that the stock is not liquid. If you have to pay taxes, you cannot sell your stock because there is still not yet a market for it. Because by definition, it’s a private stock. It’s absolutely huge trouble. Are you forced to borrow to pay your taxes because you cannot sell your stock? Is everyone selling their stock at the same time every year to pay taxes? It’s destroying the valuation. It’s very shocking for me that there is even a discussion about this. Bertrand Schmitt As you say, for sure, there would be fewer millionaires or billionaires coming to the US. I mean, they will not come any more. I’m sure they were bringing not only cash, but their smartness and knowledge to the US. That would be a big issue. I certainly hope there will be a dramatic change ASAP on Kamala Harris on this part of our platform. But right now, that’s there, and that’s a big issue for anyone involved in entrepreneurship, from any side of the puzzle. Bertrand Schmitt On the other end, we have Trump proposing personal tax cuts at federal level. There were also some deductions that were set to automatically expire that would be probably extended. That actually is on Trump platform. These tax cuts would not be extended under Kamala Harris’ administration. I was surprised to hear that experts estimated this to be a 20% tailwind for the market, this personal tax cut. This simple one, once it’s expired, would have a very dramatic, immediate impact on the market. Trump is also planning to cut even more corporate taxes. I think the agenda could not be more stark in terms of their opposition on taxes. Nuno Goncalves Pedro It’s opposite in many ways, yes. It’s historically been one of the big things between Republicans and Democrats ever, always. Bertrand Schmitt True. Nuno Goncalves Pedro But in this case, to your point, it’s even starker, right? Bertrand Schmitt I would say, one piece I have not heard any candidate talking about that for me has some importance is the IRS Section 174 part of the code that has started to impact small businesses since 2023, if I’m not mistaken. This one is creating huge trouble for entrepreneurs because they have to, instead of deducting, amortise research R&D expenditures. That has a huge impact for a lot of business that are not yet profitable from a cash perspective, but are considered profitable from a tax perspective, and therefore end up having to pay taxes when they are not generating cash. Bertrand Schmitt I know a lot of businesses have been very significantly impacted. That’s also causing a lot of issues in terms of competitivity of smaller tech businesses in the US versus basically anywhere else in the world. I certainly hope candidates are going to work on it and change that. But so far, I’m not sure I’ve heard anything about it. Nuno Goncalves Pedro Maybe moving to labour, and that includes gig working. Vice President Harris does seem to be, obviously, more on the side that gig workers need to be treated more and more as actual workers. Bertrand Schmitt Employees. Nuno Goncalves Pedro As employees, effectively, with broader protections, and around what worker classification means, and how all of this works. Obviously, as always, the Democratic Party is much more on the side of unions, in principle. This has significant implications. I mean, both of us are VCs, just to be very clear. Hopefully, we don’t have too many biases, but I’m certainly investing in companies that have a significant part of their deployment is based on the fact that they can do 1099s, people that are seen as contractors, and sometimes they can do W-2s. Nuno Goncalves Pedro In this case, this company does both. The company has just got into someone’s pressuring them, in San Francisco County, whatever. It’s all sorts of things going on around this gig economy piece. Now, are there elements of the gig economy that need to be a little bit more thought-through? Yes. I do believe a lot of the elements of gig economy that need to be more thought-through should be thought-through for any person that is a citizen. In some ways, we’re trying to go after the gig piece because employers are easier to go after. Going after a corporation is probably easier to go after. Nuno Goncalves Pedro Obviously, former President Trump had adopted rules that made it easier for businesses to classify workers as independent contractors. He’s not a big fan of unions, as you can imagine. Bertrand Schmitt Actually, on this point, Trump was for the first time, there was a very visible union, Teamster Union, speaking at the Republican National Convention. Nuno Goncalves Pedro Interesting. Bertrand Schmitt I would say, for a Republican candidate, Trump is probably the most friendly to union workers of any Republican candidate ever. I think there is actually quite a significant change that is not widely acknowledged that union workers in industries, not in government—in government, I’m pretty sure they favour Kamala Harris—but in industries, I think there has been a very significant change where union workers are actually more massively voting for Trump than Kamala Harris, and there is more and more official support. Nuno Goncalves Pedro Are you saying overall, they would vote more for Trump than for Kamala more than before the delta would have increased towards Republicans? Bertrand Schmitt I think union representing industries—not government—employees are probably going to vote way more for Trump than Kamala Harris. Nuno Goncalves Pedro Okay, I’m not sure. It’s interesting to see where we end up once election day comes. But I do feel that part of this is, again, historical. The US historically has had very low unemployment based on a lot of sub-employments or under employment. People that have three, four jobs at the same time, they’re getting shifts here, shifts there. They’re not really employees of any company. They don’t get benefits through anyone. Nuno Goncalves Pedro I understand that, obviously, the Democratic Party and NDPRs believe that the situation should change, and that people should have employment and should have a protective net in terms of how that employment is done. Obviously, on the broader side, things have always been a little bit more around. Nuno Goncalves Pedro It’s the country. It’s a capitalistic system. This is how the country has had such low unemployment. This is how the country has had such low unemployment rates. Unemployment is part of the equation. If we had all these things in place, employers can’t employ people, and therefore, unemployment has to go up. It’s a fundamental religious fight almost on this. There’s a very different view on what’s at stake here. Nuno Goncalves Pedro I think in Europe, if we look at Europe, the right side and the right-wing parties versus the left-wing parties, certainly in the middle are the Social Democrats and the Socialists. They’re okay-ish in the middle. They do believe in protections for employees and all that stuff, et cetera. Nuno Goncalves Pedro The battle is quite a little bit in the middle. Here, we have a little bit more of an extreme battle. I think it does come from the notion that the US is in a very different place in terms of worker compensation, how people are treated as contractors, what rights are they entitled to, et cetera. There is a philosophical issue here. Bertrand Schmitt Totally. To be clear, I think flexibility in the US is flexibility of work is a feature, not a bug of the system. Ultimately, my guess is that the Biden-Harris administration or Kamala Harris-Walz and possible future administration wants more to follow the European path. Coming from Europe, I’m certainly not excited by this direction, because I personally think some of these choices and decision have a real cost to the economy. Bertrand Schmitt If you look at how Europe has grown, actually experienced lack, of course, compared to the US for the past 10 to 20 years. It’s very stark. It’s absolutely very stark. You can see that the efficiency in Europe has gone lower and lower. Productivity of workers has gone lower and lower. I would be really scared, personally, to go in the direction because I think it has been tried, and it has been shown it’s not working. You can say that, “Yeah, it’s harder here in the US.” Sure, but at least there is more wealth to go around. But at some point, it will come to each personal opinion. Nuno Goncalves Pedro It’s sad that we can’t get to a more moderate view, I think, would be my comment. It’s actually around most of the points we’re going to discuss today. Because honestly, I do think workers should have more protections in many cases. But at the same time, I agree with you, Bertrand, there are situations in Europe, in many countries in Europe, where you can’t fire people. You just can’t. Bertrand Schmitt Yeah. I can tell you very clearly from an entrepreneurial perspective, as a result of that, a lot of companies are making the decision not to grow as fast because they cannot take the risk to try to go too fast, and if stuff don’t work, you have to scale down, but then scaling down costs you so much money. You cannot afford it any more. You actually go bankrupt scaling down the business, where in the US, you can scale down the business in a matter of two weeks, save the business and turn it around, and basically manage the up and downs results of the global economy, which you cannot control on your own business and readjust. Bertrand Schmitt I have seen again and again that, at least in Europe for the growth economy, it’s simply not working. You cannot grow as fast in Europe because of these regulations than in the US. Another side effect is that it’s very slow to hire people because everyone has to wait for two, three months to give their resignation, leave the business. When you hire people, it takes a lot of time to hire people. This is again connected to the protection afforded, and you cannot fire too fast. But as a result, even if you wanted to hire, and you would take the disproportionate higher risk to hire fast, like in the US, you cannot because people cannot join you so fast. You will be limited practically on how fast you grow. Bertrand Schmitt Ultimately, if you have a business A in the US, and B in Europe, that is targeting the same market, has the same access to capital and stuff, you might deliver a much better result in the US simply because of the environment. I’m not even talking about also places like China, where you could also grow very fast. It’s a very tough place to be. At some point, you have to think about being globally competitive, and I think that that would be a mistake not to think about it. Nuno Goncalves Pedro Correct. I mean, it’s anecdotal. I do ask some gig workers, obviously Uber drivers, Lyft drivers, people that do any type of Taskrabbit, whatever. The feedback I systematically get is if the trade-off is there are fewer jobs available or whatever, honestly, I’m fine. Now, is there minimum benefits and minimum things that you need to put in place for these workers, even though they are independent contractors? Absolutely. You should. But I don’t think it’s going to be, honestly… Between you and me, Bertrand, I don’t think it’s going to be government regulation that’s going to make that much better or not. It’s going to be just natural competition if there are players in the market. Bertrand Schmitt I see so much flexibility in gig working, if we go on this specific topic. I mean, you have the ability to work whenever you want. If you’re an Uber driver, you can buy your own car. Not so long ago, you wanted to drive a taxi, you had to pay a medallion. You had to spend enormous amount of money. You have to get a loan, to be a shark loan, typically. You will be forced first to work for a taxi companies that will pay you very little. Basically, I don’t think all of this protection and so much were so great if you are really on the worker side. Bertrand Schmitt I think now, everyone has an opportunity to start quickly. It’s not a few taxi company bosses who are going to basically take advantage of you. I think the current system with Uber or Lyft is much more competitive, and give an opportunity to anyone. Personally, I’m very much in favour of this system. One thing I want to say, I think the overall functioning of the system in the US is not very efficient because a lot of it is dependent on the company paying for health insurance for different things. Bertrand Schmitt Instead, where I come from, Europe and other places, you have a system that is much more independent of the companies. If you’re a freelancer, and you want to work on your own, it’s very easy to get access to all the protection you want. You just pay a bit more on top of it, and you will get access to any protection. It’s very different. It has to go from the company that hires a worker. Bertrand Schmitt This is actually a weird distortion of the market coming from World War II, when employers were mandated in the US to not increase salaries to limit inflation. As a result, employers came up with some ideas to compete against each other by providing stuff on the side, from health insurance to other things. This is a very weird distortion of the market that happened, guess what, again, by government intervention. Where now, we have this system in the US where many things depend on the employer, making things more difficult in some ways for independent contractors. Nuno Goncalves Pedro A lot of the discussions we have today, it’s a country that has, at moments, at some point, historically, a very top-down industrial policy thinking, but then very large time periods of a couple of decades of bottom-up thinking. Because of the system in the US, with states, federal government, cities, counties, all of that. There’s all these flaws in it. It’s a very bottom-up thought. It has unintended effects that nobody ever thought about. People obviously take advantage of it, because the things are there to be taken advantage of. In some ways, I think part of how the country has evolved over time. Bertrand Schmitt On this point, it’s something we have not talked before, but the incredible complexity of the tax system in the US, for instance, is insane compared to most other countries. We are talking about a complexity of the system that is 2 or 3x more than most other countries, just to be clear. Most Americans don’t realise how complex is a system versus other countries. Nuno Goncalves Pedro Moving to immigration. Here, maybe we should focus around immigration that has an impact in tech. We’re talking about more specialised immigration. Bertrand Schmitt Yes. Nuno Goncalves Pedro I’ll throw the first stone. I mean, Trump was not cool when he was in power. Now he’s showing more openness around the H-1B visas, which are the specialised visas that are capped, for those who don’t know, which has been a huge engine of growth in Silicon Valley. There were some stats posted, I think it was probably around 2014, ’15, that for each H-1B person, there were 10 jobs created. I mean, that’s silly. Nuno Goncalves Pedro I think the cap back then was 60,000 H-1Bs. It’s silly. He wasn’t very kind, and he was tough on all immigration. In that sense, everything was slowed down. Green cards were slowed down, specialised visas were slowed down. Obviously, green cards are very important as well for specialised workers, because people want to be permanent residents. Nuno Goncalves Pedro Citizenships, I’m not sure if they were slowed down or not when Trump was in power, but I’d be shocked if they weren’t. He wasn’t very friendly to us here in Silicon Valley for sure, and had obviously a huge impact in that sense. Now, he’s speaking to a different tune, with JD Vance as the VP. Maybe they’re speaking to a different tune, but I’m not sure he has an amazing track record to show for on that side of the fence. Bertrand Schmitt That’s clear that it was not good in terms of legal immigration. It was also very strong in terms of illegal immigration, but this one has less direct impact on tech. It’s very sad for me that usually, those two go together. Either you’re open for legal immigration, and you’re also open for illegal immigration, or you are close to illegal immigration, and you are close for legal immigration. Bertrand Schmitt It’s very frustrating the two, illegal and illegal immigration, have to be linked somewhat by candidates. It’s either everything is open or everything is closed. I think it’s a dumb burst of [inaudible 00:32:53]. I’m personally quite happy to see and hear that Trump seemed to have a change of mind in terms of illegal immigration. He was extremely clear in an interview on the All-In podcast that he was open to legal H-1B immigration. I think it was before he picked JD Vance as his VP, so I’m definitely hopeful. Nuno Goncalves Pedro They need to believe him, but yes. Bertrand Schmitt Yes, of course. Nuno Goncalves Pedro We need the politicians, both sides. This is not a slap on Trump. I mean, to be honest, we need to then believe them. Everything we’re discussing today is we have to believe that they’re saying what they’re going to do, as I at the beginning of the episode. Bertrand Schmitt I would say, so far, my impression is that he tried to do what he said he would do in his first administration. I have some hope that if he claims to have a change in mind on this specific topic, it’s real. I think there must be some admission that if you want some support in Silicon Valley, you have to be more flexible on this. I think he’s trying to get that support, and he has more people around him coming from Silicon Valley. It might have helped change his mind, not just political calculations. Nuno Goncalves Pedro Yeah, this is definitely a big deal that matters. I’d say, probably, Vice President Harris would be a clearer view on this, as in what it affects tech, which is legal immigration, specialised workers, et cetera. Probably, she would have a stronger stance. We’re not going to discuss safety and security at the border, illegal immigration, and all that stuff, because as we talked about before, it doesn’t have a direct impact in technology for sure. Nuno Goncalves Pedro Shall we move to antitrust? Maybe just to frame my antitrust, this is obviously the ability for companies to be split because they’re too big, and they have monopolistic control of a specific market. But it also affects, for example, approvals on mergers and acquisitions. It has huge impact in tech in that sense as well. The ability for big tech companies to buy small companies, or other big companies, or do big acquisitions, and all of that. Nuno Goncalves Pedro I think on this, it’s pretty clear that with former President Trump being elected, it would be easier to get a more lenient antitrust rulings on a lot of things, and a lot more M&A would be approved. I had a conversation with a founder that I will not name, and he was telling me… Back then, President Biden was still a candidate, and he said, “I will vote for Biden, I won’t vote for Trump. But honestly, if Trump is elected, it will be much better for my company because I’m in the eye line of a top tech company to be acquired. The probability that it will get approved under President Biden is very low, and the probability it will get approved under President Trump, and that DOJ and stuff, it’s probably very high.” He’s like, “I’m going to vote for one, but I hope the other one win.” I was like, “That’s tough.” Bertrand Schmitt It has been a virtual ban on big tech acquisitions. If you are an entrepreneur or a VC in tech, that’s practically the end of the world. Because it’s either IPO, in a minority of case, or selling the business typically to someone with a lot of money if you want a big exit, so it will be to big tech companies. If suddenly, big tech companies cannot make acquisition, you cannot exit companies. If you cannot exit companies, you cannot provide a return, nobody can get rich, and nobody can reinvest. It’s a total nightmare right now. Again, as you said, it’s managed by the FTC, the DOJ. If we take the FTC, the chair, Lina Khan, named by President Biden, this administration has been totally following this policy. Interestingly enough, JD Vance was one of the rare Republican to support her. This is adding a level of intrigue to what will happen in a Trump-JD Vance administration. Bertrand Schmitt My guess is that JD Vance will fall in line with Trump policy, but we will have to see. We could also imagine that a more favourable acquisition policy could be connected, as it come out to other behaviour expected from big tech companies. I’m not sure it will be a free pass, but I would expect definitely a much easier situation and better outcome for entrepreneurs and VCs if the policies were changed. Nuno Goncalves Pedro Here, just to be thoughtful around the discussion, antitrust is obviously related a lot to the regulatory environment and regulation as we discussed in the past. It’s pretty structural part of regulatory environment. It’s who is controlling a specific market or who are the players that are controlling a specific market. Just to be a little bit more nuanced on the point, regulation is needed and things need to be regulated. There are things that are absolutely unacceptable. But I think what we’ve seen in this country in terms of antitrust policy is aggressive antitrust policy tends to not do much on actual regulatory constraints to the big guys. What it ends up actually doing is creating regulatory capture, which we’ve talked to in a previous episode. It creates the ability for the guys who are dominating a specific space to win in that space. It’s almost like a barrier than to entry. You’re like, “How does that work?” Nuno Goncalves Pedro If Google or Facebook cannot buy a smaller company, they cannot. It’s fine. They’ll live on. They won’t die. The small company might die as well. That space might implode in of itself. There are a lot of implications here that are pretty systemic in thinking through the system in a more complex way. These are very complex systems that are interrelated. Nuno Goncalves Pedro Startups with bigger tech companies, with investors, both private equity, venture capital, hedge funds, the public equity markets, all these things are related to each other. There are very systemic ripple effects once, for example, stuff like this is happening where antitrust is being more aggressively applied to the market. Again, I don’t want to be a sceptic, but I think in this country, you’ve seen it. If antitrust is very aggressively applied, the big guys win and there’s more regulatory capture in those industries. That’s it. Bertrand Schmitt I think that you’re totally right. That’s my big worry, when they care to wake up in terms of looking at what’s happening in an industry, usually it’s too late. It’s like you attack Google on a monopoly on search in 2024. Nuno Goncalves Pedro Well done. Bertrand Schmitt Well done. Just 15 years after the fact, maybe, and I’m generous. It’s like what’s going on? It’s like 15 years too late. Is it even relevant as of today? There is, of course, the question of what will you do about it? Do you want to split the company? How are you going to split the company? Even if you split it, is it better or worse? If we look at in the past when there has been the split of some monopolies, if you take some or all, or even the predecessor to AT&T and most telecom companies in the US, the resulting split entities became bigger than the original parent company in terms of revenues, in terms of market cap, and their founders and owners became actually wealthier. It’s not clear that competition was so much improved. It’s definitely raising question about what is ultimate outcome, but what is clear in our industry, keeping as it is today, we’ll start to have a very significant impact. Bertrand Schmitt Because if you don’t get exits, if you don’t get cashback from the investment, you cannot reinvest it in new investment. You cannot take risk, thinking that there could not be an outcome in terms of selling the business. 90% of the outcome is selling the business versus IPO. And by the way, IPO have been more rare, because it’s too taxing to go public. It’s too risky and not enough of rewards because of the regulatory environment of the past 15 years. What do you do? Do you stop the whole innovation pipeline that has been the core of the success of the US this past 30, 40 years? When you think about it, this is actually very dramatic. I think we have not seen a dramatic impact yet, because this is quite recent, what happened. But if we got one more administration playing this game, I’m actually extremely worried about where the tech economy is going. As you say, the big ones, the Apple and Google of the world, they would be good. But the rest of the ecosystem changing them? Good luck. Nuno Goncalves Pedro I think that’s the key issue that we have, and that has happened when antitrust has been very forcibly enforced. Moving to privacy and the digital divide, I don’t know if there’s a very strong view on what happens on that, but you want to share the SpaceX story? Bertrand Schmitt I think here, especially on the digital divide, there was a special program from the Biden-Harris administration to provide high-speed broadband to rural areas. I think there is real value to provide last-minute connectivity, high-speed to places that cannot get it easily. However, what’s very scary is actually this program has disqualified SpaceX to provide a high-speed broadband access and be part of that program. Nuno Goncalves Pedro This was the Internet for All, the 65 billion thing? Bertrand Schmitt It was a very big program spend, that’s for sure. And to be clear, this program has delivered, I believe, near zero in terms of connectivity after three years plus in activity. We talk about government waste. I mean, that’s one of the best example you can get in terms of government waste. But to think that not only such a total waste, but it actively excluded the best place private companies to deliver on this program is really insane. On top of it, when you think about it, it’s a program that was not needed because actually, private forces were at work to solve this problem, and the way to solve it was not to lay down miles and miles of fibre to nowhere, but to use space as a communication backbone if you want to go into more rural or areas with more limited access. Because fibre is workable in dense urban areas, but it’s not workable in extremely rural areas. You had to add another approach. Bertrand Schmitt For me, what’s interesting is that private market forces through SpaceX, I mean, saw that and saw that opportunity and worked on it. Instead of saying, “You know what? We are going to use the best provider for this, if we want to add an additional layer of subsidies.” No, they didn’t use the best provider, and as a result, they have nothing to show for, except paying some companies to lay fibre to nowhere. It’s very shocking because when you have a microscope to go into some programs, you see how bad it can be. Nuno Goncalves Pedro Yeah, I think on the digital divide, obviously, President Trump, when he was in power, did a few things, but not significant. I think he was trying to definitely reduce the regulatory oversight capabilities of the FCC. He didn’t invest much, from what I know. The only number I know for sure is 86 million to expand rural broadband through the Department of Agriculture. To your point, I think he was like, “Let’s let the market figure it out and just go after each other and get it.” I have to confess that the telecom market in US baffles me. That I pay the bill that I do, living so close to San Francisco, is mind-boggling to me. It has to do exactly with the fact of what you were saying. There’s no incentive to competition, and effectively, there are de facto oligopolies in certain areas, suburban and rural areas in particular. There’s de facto oligopolies. Maybe there’s a little bit of fight in urban areas, certainly on fixed internet access. But then I can only get high speed from Comcast Xfinity where I live. I can’t get it from anyone else. I could try DSL, some variant of DSL from AT&T. Nuno Goncalves Pedro I could try SpaceX as well as a back play, but it’s still not ideal. I love to have options, but I don’t have amazing options. I’m not part of the digital divide issue. We can afford internet and pay for it, and it is what it is. It’s just too pricey, it’s stupid, and it’s not competitive. We’re not here complaining. It is a first-world problem in that sense, but the market is messed up. It’s messed up. It’s too expensive in general, et cetera. Bertrand Schmitt I think you’re right. Coming from Asia or Europe, when you see the prices for fixed internet broadband or for mobile wireless, the prices in the US are insane. I’m not even going to compare it to India prices, where it’s probably the lowest. Nuno Goncalves Pedro Telecom is a classic example of a regulatory capture. You were mentioning they split into all of this, and then it all came together, and it’s bigger. It’s like the Terminator, right? Bertrand Schmitt Yeah, that’s an interesting comparison. Nuno Goncalves Pedro Just quickly on data privacy, just a couple of notes. Vice President Harris has supported the President’s call to action to pass federal data privacy laws, and it was linked to an executive order on artificial intelligence that their administration also put forward. We’ll talk about AI later on. On privacy, former President Trump repealed, when he was in power in 2017, an FCC rule that instilled online privacy protections for consumers from Internet service providers. That said, his administration was working on a consumer protection privacy policy in 2018 that never came to fruition. I think on privacy, it’s very unclear if any of the candidates has very aggressive thinking. Obviously, a lot more needs to be done around data privacy, but we don’t probably believe that there is a huge difference between the candidates. Maybe vice president Harris will be more protective and former President Trump will be less, but it doesn’t seem to be a huge area of a fight in terms of policy between both candidates. Bertrand Schmitt Yeah. To be clear, I’m absolutely not a fan of what happened in Europe with GDPR. As expected, it went way too far, and it benefited the bigger guys, the Apple of the world, the Meta of the world. I mean, it helped them to reinforce their market position compared to the smaller guys who had fewer data and therefore could not leverage as much in order to deliver advertising. They couldn’t even work together to try to compete against the bigger guys. The end result is a total opposite of what was claimed by Europe at the time. It didn’t create more competition. It didn’t push back the bigger guys. It actually helped entrench the bigger guys who, as usual, could afford thousands of lawyers on the payroll and could go around whatever regulation is put in place and could leverage the fact that there are bigger guys in the space. They have, by definition, more data to play with. They have access. Personally, I’m not a big fan. I don’t think it has helped. I don’t think it has helped in many ways. I know Europeans are more sensitive to that, especially the Germans, for some obvious reasons in their past. Bertrand Schmitt But I don’t think it’s a good reason to not be realistic about the true impact of such regulation. For me, I’m glad that both Biden-Harris administration, and Trump, potential Trump administration, will not try to go the European way. Nuno Goncalves Pedro California has done some stuff, we’ll see, but it’s a place where we shouldn’t do dramatic things. GDPR is one step too far, very, very clearly. Free speech. I know this is a pet one for you, so I’ll let you go first. Bertrand Schmitt No, I think we already did actually an episode on news. Which episode was it? And the lack of truth in our news. Was it episode 54? I forgot. Nuno Goncalves Pedro It was 54. Can you handle the truth? The future of news. 54. Yeah. Bertrand Schmitt Yes. You can go back to our episode if you want more perspective on what we think about truth and free speech. Yeah, personally, I feel very strongly about free speech. I think what’s key is to be able to seek the truth, to discover the truth. For that, you need free speech, free experimentation. For me, it’s very critical. Obviously, the Republicans have been way more pro-free speech. If we take a big backer, and we’ll talk later more about the backers of each side, but Elon Musk has been now officially on the Trump side, he is one of the biggest person to push for free speech, and as a result, was a target for the Biden-Harris administration of a lot of lawfare. For me, it’s very sad to see that the Biden-Harris hasn’t signed. Harris-Walz ticket are definitely way more on the censorship side, and we have seen how much the White House have pushed for control, censorship from most major news networks, social network platforms. I think quite recently, Walz have been a very public in his support of a limiting free speech. I think it was before he was a VP candidate, but that was a very scary speech he did on this topic. Nuno Goncalves Pedro Actually, I think the case has been heard by the Supreme Court, and I think they ruled in their favour, around the fact that the federal government had actively participated in influencing social media platforms in how they showed certain content above others or certain content wasn’t shown much at all, et cetera, around feedback and commentary, in particular during COVID, that was not favourable to them. It was not favourable to the position that they were manifesting to the market in terms of how the market should behave. We’re talking like this is one of these situations where I feel we need to put a little bit more of a moderate perspective. Nuno Goncalves Pedro I think free speech should be given. It is part of this country’s view, and it is part of the First Amendment, and it’s there to be enforced. At the same time, what happens if free speech promotes violence and it promotes bad attitudes? It’s whatever… What then do you do? Obviously, if it promotes falsities and untruths, there are other systems as well. People can take each other to court and all that stuff, but what’s the boundary conditions around it? I think it is a valuable discussion to have. All free speech, and we can say whatever we want is cool as an ideology, but then who has checks and balances? Nuno Goncalves Pedro If someone’s saying that’s something that’s fundamentally false, and it affects people’s lives, or it creates an incentive to violence, et cetera. I think somewhere in the middle, as you guys can imagine, I’m a moderate, I’ve said that before, would be how you need to go. You still have to accept that there are people that are going to have views that you’re not going to support. That’s life. But they do have the right to manifest it. Why wouldn’t they not have the right to manifest it? Bertrand Schmitt I think that’s important to be able to have frank, open, and honest discussion. Each time a government has tried to limit that, I think we have seen the consequences pretty quickly. On this topic, you could argue that a recent example has been the UK. It feels like since a few weeks, we are closer to 1984. Happening in the UK, if you remember this book, now you get put to jail for two or three years for a comment on social media, while at the same time, bring real dangerous perpetrators of some pretty bad things in order to make space for the grandmother who express a comment on social media who has to go to jail for that for two or three years. For me, this is exactly the logical conclusion of what you describe. Once you start to put a limit on free speech, it becomes pretty bad and pretty hard, and it hits you. That’s why I’m much more on the side of being absolutely for free speech, because the other side is just too scary. Nuno Goncalves Pedro Just to be clear, for those of us who haven’t read the First Amendment recently, two threats of violence are outside the bounds of the First Amendment protection. There’s some complexity then around that. What is a true threat of violence? But it is outside the First Amendment, and there have been cases on this, and it’s gone to Supreme Court, et cetera. Bertrand Schmitt It has been described very clearly. The Supreme Court has a lot of position on this topic for a long time, so it’s pretty established about what’s okay or not okay. But my take is that what’s okay or not okay as described in the US, in the US system, is where it should be, at least from my perspective. Any change to that is scary. Again, the example of even a country as close to us as the UK, it’s a scary reminder of what happens if you decide to change that. I’m not even going far. It’s very obvious what happens in some truly totalitarian countries. But the things at a place like the UK, this can happen to this level where, to be clear, people were not talking about violence. That’s where it’s scary. You realise very quickly if the law is not clear, if the law is new, it could be taken advantage by some courts. Nuno Goncalves Pedro Moving to maybe less complex issues or more impactful, maybe, but less complex, I’m not sure. Who knows? AI. There have been executive orders, actually, former President Trump, when he was in power, did have an executive order on, I think it was called maintaining American leadership in artificial intelligence. Bertrand Schmitt It was a very positive order when you read it. It’s not trying to push it back, but it’s more to push it up and push for American leadership and investment in that direction. Nuno Goncalves Pedro Yeah. Then there’s the executive order for the safe, secure, and trustworthy development and use of artificial intelligence, which is done under the current administration, Biden and Vice President Harris. I think there’s a lot of discussion around protection of AI, protection of American dominance or American competitive advantage around artificial intelligence. I don’t think this is an area of extreme disagreement between both parties. Bertrand Schmitt Yeah. From my perspective, there is quite a stark difference. It feels like the White House has limited capacity, luckily, to push too much legislation. I mean, its legislation is still up to Congress. But I feel that the White House executive order from the Biden-Harris administration has been actually trying to move more in the direction of what Europe has been doing, which is pretty bad around AI. I’m more worried that the mindset of Kamala Harris and our administration would be to keep going further in controlling AI, and I think for all the wrong reasons, just to be clear, I think AI is absolutely not where some doomsayers are saying it is, and it’s not close to be there. The last thing you want at this stage is to push regulation. You want the field to develop, to expand, to grow, to be successful. For that, I believe you need as little regulation as possible. On top of it, I believe there are a lot of existing regulations that if you do AI, you will have to abide with already. Let’s not add regulation until it’s proven it’s really needed, versus just listening to the doomsayers who usually have no clue about what’s happening. Nuno Goncalves Pedro On that, probably a former President Trump would be more on the side of not too much regulation, and probably Vice President Harris would be more on the other side. Bertrand Schmitt Totally. Nuno Goncalves Pedro Yeah, but on the trade side, to my point earlier, they’re probably relatively aligned, trade controls, export controls. Bertrand Schmitt I think we might talk a bit more in the China section, but yes. Maybe one other point is that JD Vance has been very pro-open-source AI, which also I believe is a good thing. I think it’s great to have an alternative open-source AI versus only proprietary model, because proprietary models, from my perspective, will only benefit the bigger corporations that can afford billions of dollars of investment. I’m glad he’s on the ticket, at least from this perspective. Maybe on AI to finish, there is a very scary California AI bill that’s also insane. This one is really bad. It’s very dangerous. It’s artificially limiting what AI can do. They want to create crazy commissions and programs as if we are dealing with nuclear weapons. This makes no sense. This is packed by doomsayers. I’m worried, because obviously Kamala is from California, is from the California Democrat establishment. Hopefully she won’t be influenced by this mindset, and hopeful California AI bill will be vetoed by giving you some, potentially it might land on the governor’s desk, and hopefully will listen to reasons. There will be enough influential voters who will push against it, so we’ll see. Bertrand Schmitt But that’s a scary development because this one might be even more crazy than the European AI bill, and that’s to say something. To be clear, this could have dramatic negative impact on California competitiveness in the US if this California AI bill is put in place. I mean, many companies might decide to California if they are involved in the act because the risk will be too high for them to stay and be regulated by this bill. Nuno Goncalves Pedro Yes. Maybe you can go a little bit faster through some of these, but crypto, it seems like Trump now is pro-crypto. The Biden administration wasn’t very pro-crypto, anti, if anything. But just to be clear, we’re investors. I have investments in blockchain companies, and we hold crypto assets and stuff as well. Just a disclaimer, so people know where this is coming from. But yeah, I think crypto is going to happen no matter what, so you might as well figure out how to create boundary conditions around it, et cetera. Obviously, the use of crypto for avoidance of KYC and all of these other things is negative. There’s a lot of money being laundered and moved around using some facilities for sure as well. There is need for regulation, there’s need for rules to be put in place, there’s need for a variety of things to be done. But on this one, I’m sitting a little bit more on the pro side that maybe things should be a little bit more positive towards crypto. At some point, have very clear boundary conditions as well. I think part of the issue with crypto over the last five, six years, also including former President’s Trump tenure, is there was very little clarity on many areas. Nuno Goncalves Pedro Is this taxable? Is this not taxable initially? Is this okay? Is this not okay? Nuno Goncalves Pedro Now we’re getting all this slew of cases being judged back and saying, Well, that this is wrong. You shouldn’t have done that. I think clarity as well probably matters most, even beyond being pro or anti. Let’s be clear, I think, on boundary conditions. The whole crypto situation, it feels to me like, obviously, we have the more positive side on one side and then the less positive side on the other. I think what we’re missing is clarity. It’s an area where being more pro-crypto, anti-crypto, question mark, maybe more pro-crypto is better for investors and the crypto people, those who are involved in blockchain. But I feel for many years, what we’ve lacked is clarity. The lack of clarity goes back to former President’s Trump own tenure in the White House and continue through the last administration or through this current administration, rather. Clarity, I think, would be a good way forward on the crypto side. Bertrand Schmitt It’s clear that the current administration has been doing everything they can to destroy crypto. I guess lack of clarity is better than trying to actively destroy crypto. But I agree with you, we need both. We need to stop trying to destroy crypto without any good reason. We need more clarity so that people need to know what are the rules. I think that has been the complaints by a lot of players like Coinbase’s Brian Armstrong, saying, “Hey, just give me the rules and I will play by the rules. But if I don’t know the rules, and you try to hit me left and right without sharing any of the rules, then it’s impossible to do my business.” It wasn’t that, it’s extremely risky to do this business. That’s why many companies left the US because of that risk of being an actor in the crypto space. Nuno Goncalves Pedro There’s been a lot of post hoc decisions and rulings, and things that have happened where some of them were blatantly fraud and stuff like that, but others were like, rules were not specified. Now, I’m going after you because I think you broke rules that didn’t exist back then, which is interesting. Maybe we switch topics to the energy, electric vehicle space? Maybe starting with energy, maybe the higher level topic in terms of where they’re headed? Obviously, from a President Trump, not a renewable energy kind of guy. Bertrand Schmitt Drill, baby. Drill. Nuno Goncalves Pedro Drill, baby, drill. Good. So clear on that. On the other side, we’ve had anything from the Green New Deal, and how do we scale renewable energies. Obviously, from my end, I come from a country that… Portugal, originally, that is, they surpassed 51% in the use of renewable energies within the country by consumers, so what was actually by consumers. In 2017, we had six straight days last year where all the consumption was coming from renewable energies in Portugal, 100%. Nuno Goncalves Pedro I feel in Portugal, to be honest, there wasn’t a tremendous amount of government involvement. The original company that runs energy in the country still has a gold share from the state, but it was really motivated by market dynamics, the situation in Portugal, and the use of several other types of renewable energy. Question mark on whether the polls on renewable energies is enough. It’s very clear. For example, in Portugal, we had a very large coal plant that got shut down finally in 2021, 10 years late. We sometimes get things a bit late as well. But that accounted for Portugal for 12% of all the carbon emissions of the country, that plant. Nuno Goncalves Pedro Obviously, there are big gains here. There are big wins to be had. But it’s clear that we still have dependency on petroleum and oil-based products. That’s not going to go away. From a cost perspective, it’s still pretty essential. But there needs to be a move, at least in my opinion, towards more renewable energies in this country, even more. I’m not saying that necessarily means I’m siding on current Vice President Harris’s side, but probably, again, in the middle lies the right way to go on the energy side. Bertrand Schmitt It’s clear that there is a big gap on the other side. You have the Trump administration that was friendly on oil and gas, that was definitely not supportive of electric vehicle mandate and subsidies on that plan to actually keep it that way. But surprisingly enough, Elon is fine with that. From his perspective, actually, it will provide a more clean competition without any disruption in the real price of gas. I think it’s pretty stark. On one side, you have pro-green, anti-oil and gas, pro-electric cars, as long as they are made by unions. On the other end, you have a more pro-oil and gas position on the Trump side, even support for nuclear energy, actually, and fewer incentives for electric vehicles. Nuno Goncalves Pedro Yeah, and nuclear, I know you’re a huge fan of it. Bertrand Schmitt I am. Nuno Goncalves Pedro France, a huge fan of it as well. Certainly from a startup and venture capital perspective, it seems to have a renaissance of sorts in the last six years in the US. If I go back five to six years. Basically, Y Combinator, all the cohorts had several companies doing nuclear reactors, et cetera. The MARVEL Project, which I think was initially sponsored by the Department of Energy, has rippled a lot of startups out of it. There has been a spawning of startups out of it. There’s funding in it. I’m now starting to see companies that are coming up for Series Seed or Series A rounds at scale. We have a lot to go, but definitely, it seems to be a bit of renaissance of nuclear in the US, which I’m sure you will welcome. Bertrand Schmitt I’m French, and I think that one of the best example of a good governmental policy was a French investment going all in on nuclear in the ’70s, ’80s, which resulted in independence from an energy perspective. Mostly independent, with nuclear providing up to 70% of all electricity in France. France has been, from that point on, the most green country on Earth, probably, at least of a reasonable size country. I don’t think we have found any other source of energy as of today that is as a safe, as cheap in terms of resource, and as cheap in terms of overall cost of electricity, as long as we don’t have a long list of unnecessary regulations on top of it. These so-called regulations were just added and pushed by the green movement in order to make nuclear less competitive. What’s interesting, in terms of safety, is that with the latest generation of nuclear reactors—like the ones that are being deployed right now in China at scale, we’re talking about hundreds plus reactors—we can have reactors that are now extremely safe. Meaning, that if there is a breakdown in the reactor itself, now you have reactors that are going to safely shut down by themselves. Bertrand Schmitt In the past, they used to necessitate some external source of energy to provide a safe shutdown of the reactor. It’s not the case any more. It’s actually changing dramatically the nuclear energy business model, because you have completely decreased the risk level to zero. That changes everything, because let’s not forget, nuclear is a source of energy that is non-stop. It doesn’t stop when there is no wind, it doesn’t stop when there is no light. It’s always on. It takes very, very little space. You need very little resources. Ultimately, you can even use what’s left from a nuclear reactor to be used in some other types of nuclear reactor. It can be a very, very efficient process. Nuno Goncalves Pedro Maybe switching gears to China. Now, this is actually one area where probably Vice President Harris, and former President Trump will have fewer disagreements. We have to give credit where credit is due. I think it was under former President Trump’s administration that he went after China with tariffs, and a bunch of sanctions and things that were really put in place. I think the Democratic Party, President Biden, and Vice President Harris have followed suit on it. I don’t see dramatic differences between both sides in that sense. It feels both of them are going to be basically a relatively tight point of view on how China plays in the global economy. There will be pretty aggressive trade controls on China, not only on exports from the US to China, but also from importing stuff from China into the US. It doesn’t seem super mega dramatic, in terms of policies on both sides. This is probably one of the few areas where there’s relative agreement. As we know, Donald Trump is a pragmatist, so we don’t know where this will end up. Things might change, but it seems like this is an area where they’re definitely in agreement. Bertrand Schmitt Yeah, there seems to be an agreement. I would say, what’s more extreme is actually the stance of the two VPs. If you look at Walz, he apparently has a history of deep China ties, spending quite a lot of time organizing “exchange programs” in the late ’80s, early ’90s. We are talking post-China, Tiananmen Square incident. It’s surprising how long, how much time he has spent. On the other end, JD Vance has been pretty much very against China as a dominant power, so we will see. As you said, Trump started changing the view of the establishment against China in the US, and at the same time, he’s seen as a pragmatist. But it seems that he’s planning to put more tariff on goods from China that we currently have. Nuno Goncalves Pedro And TikTok. Bertrand Schmitt What about TikTok? Nuno Goncalves Pedro This is what we all want to know. TikTok. Can we keep TikTok, please? We want TikTok. Bertrand Schmitt I’m lost at this stage. Who wants to stop it, keep it going? It looks like they’re both happy to keep it running for the elections? Nuno Goncalves Pedro Yes. Bertrand Schmitt Both elections, I have no clue. I think it’s definitely a clear question for both candidates, but I don’t think anyone is committing at this stage. Nuno Goncalves Pedro We will keep our TikTok. That’s great. Let’s move maybe to DEI and ESG. DEI, for those who don’t know what it stands for, it’s Diversity, Equity, and Inclusion. ESG is Environmental, Social, and Governance. These are measures that have been adopted throughout the world, not just in the US, both around DEI and ESG, to enforce more equity or diversity on the one hand, on the other hand, more around either socioeconomic benefits or environmental benefits, et cetera. Nuno Goncalves Pedro Some examples of this might mean some enforcement, like we see in companies that are in a couple of stock exchanges. You have to have a minimum number of board members that are female. But there are countries that have obviously put in place a variety of rules around this. Very opposed views on DEI and ESG by former President Trump. I think Vice President Harris and President Biden have been all-in on this DEI, ESG trend, and former President Trump has been all-out on it. It’s a good way of saying it. Bertrand Schmitt Yeah, this is quite representative of the woke movement at large, DEI and ESG. Some of these policies have been proven in the US to be illegal. To be clear, you cannot discriminate when you hire people, when you promote people, when you fire people in the US. You cannot discriminate based on multiple categories: from sex to race to different things. That’s why some universities lost their appeal at the Supreme Court and had to change their hiring policies for new students. Nuno Goncalves Pedro For our listeners, because they may get confused, you can’t discriminate both ways. You can’t discriminate because the person is African-American negatively, but you can also not discriminate positively. Positive discrimination being also illegal is basically what was [inaudible 01:09:44] on. You can’t give a benefit because someone is African-American, Latinx, or whatever. Bertrand Schmitt Yeah, because by definition, positive discrimination is going to discriminate negatively on everybody else. Let’s not forget that piece of the puzzle, and that’s what Supreme Court in the US judged upon. So yeah, very clear opposite. Of course, this has an impact on businesses. At the same time, let’s not forget, especially in the US, most of the DEI, ESG regulations were not really low, per se. It was more what some investors have been pushing, what some NGOs have been pushing, some shareholders. But there is no legislation coming from Congress on this topic. Nuno Goncalves Pedro This is an area where I think both candidates are wrong, and let me explain why. I feel the piece of the puzzle that need to fit in is in the middle. There are some guardrails you need to put in place, both on the DEI and ESG, and behaviours that absolutely are unacceptable on both ends. But at the same time, I think having too much positive leaning in or too much negative leaning out is not advantageous. In some ways, the notion that by having some of these metrics, and big corporations are saying, “Oh, I’m doing this on DEI, I’m doing this on the ESG,” I apologise in advance for the terminology, but this is like putting lipstick on a pig. Not many structural things are being done, really, by some of these corporations. They’re filling checklists, they’re BS-ing some of their numbers, they’re massaging something else. They’re using it for marketing purposes. A lot of this has come out when people are using this specifically for marketing purposes. It’s very hypocritical, because maybe they were the guys who created the problem in the first place. In certain areas, that’s certainly the case, for example, in environmental stuff. Bertrand Schmitt Totally. Nuno Goncalves Pedro The core remains undone. Certainly at our firm, we’re very thoughtful, for example, around diversity. That’s a topic that matters a lot to us. But it doesn’t matter to us just because we want more gender diversity, or we want more racial diversity or background diversity. It matters a lot to us because the points of view that come from very diverse team members are very valuable for us in our job. We get angles that we might otherwise lose in the analysis of a company, the analysis of a market, et cetera. In all honesty, it’s a bit of a mixed thing. We don’t have any mandates. Our investors have not forced any mandates on us in terms of DEI and ESG, in terms not only of our own firm, but also in who we invest in. On the positive side, out of the gate, our fund, currently, first three investments, founder CEO is a woman. Our first three portfolio companies that we invested in, the founder CEOs are all women. On the other hand, we’ve tried to hire—for example, for our deal team—female associates, female analysts, even female principals were looked into, and it’s extremely difficult. Nuno Goncalves Pedro It has to do with the industry. It has to do with how many people are in the market. It has to do with maybe venture capital, still needs to go through its own moment of increased diversity in talent, which we all know it’s probably true. But how can one do more than that? If we had a mandate on number of people we had that are, for example, female in our team, how would that work? There isn’t enough talent out there for us to have the pool that we need to hire from, to have full equality in terms of 50/50 between women and men, for example, on that specific field. Again, it’s difficult. It’s a difficult conversation. It has a lot of nuances to it. I think creating the awareness of it and having very aggressive guardrails whenever there are issues of discrimination, for me, is pretty fundamental. Bertrand Schmitt I think we want to preclude the team to discriminate against special categories of people. However, I think you certainly want to hire, promote, and fire based on merit, and that should be the key criteria. Personally, at companies, the business I built over 10 years, it was key for me to, on one side, hire a very diverse set of people in terms of where they come from, their mindset, their approach, their nationality; at the same time, make sure everyone is properly motivated, and everyone sees we are hiring the best, we are promoting the best, and it’s a natural competition for talent. If we talk about some other topic like pay gap analysis, I still remember our new head of HR, when running an analysis, comparing male versus female, she was surprised to see a non-existent gap. I think it was less than 1%. I think that’s what ultimately happens if you are really focused on the merit. If you focus on merit, you end up, again, hiring, promoting, and paying people the same way as long as they deliver the goods. I think that’s what ultimately you will probably end up, but personally, I’m against some of these mandates. Bertrand Schmitt They are not natural. You don’t want to force them. Nuno Goncalves Pedro Maybe we move to how Silicon Valley and some of the larger tech business leaders are coming in and inputting onto this election. I think very different from previous elections, certainly in Silicon Valley, a lot of polarisation. I think Silicon Valley is historically extremely pro-democratic. Whenever there were manifestations, people were, “I’m for that Democratic candidate.” On this one, not true. I mean, we definitely have, obviously, JD Vance, who’s putting money where his mouth is, I guess, because he is the vice president candidate. Elon Musk, Marc Andreessen, and Ben Horowitz are very publicly saying why they are supporting former President Donald Trump. Peter Thiel, obviously a huge backer of Trump in this first election, and has continued in this one. David Sacks and Chamath at all-in, and a variety of other people. Bertrand Schmitt Yeah, Peter Thiel, and many other partners at Founder Funds. The whole team is pretty clear on this at that fund. I think we have Sequoia, Delian, and Shaun McGuire, who have been pretty pro-Trump. Nuno Goncalves Pedro I’m not sure, for example, that Marc Andreessen and Ben Horowitz represent Andreessen-Horowitz. I’ve seen Andreessen-Horowitz, general partners, signing up for VCs for Kamala website. I suspect it’s not a firm-wide view, but it’s certainly the two-names-on-the-door view, so that should matter, I guess. Bertrand Schmitt To be clear, I don’t think you can do a firm-wide view. Nuno Goncalves Pedro This is the Andreessen and the Horowitz. Bertrand Schmitt Sure. Nuno Goncalves Pedro As big as it gets, I guess. Bertrand Schmitt But I don’t think it would be fair to force anyone to vote in your team. Nuno Goncalves Pedro Of course not. Everyone should have their own individual perspective. Bertrand Schmitt Exactly, to vote or to contribute. We have to be careful as well. Nuno Goncalves Pedro But this is very uncommon. I don’t think I ever remember, certainly, since the time I’ve been here. Just in a nutshell, having become American a couple of years ago, first election I’m voting on, et cetera, I have followed previous elections, and I’ve never noticed so much on, “What camp are you?” kind of thing. People are like, “If you don’t talk about it, it’s because you don’t want to talk about it.” It doesn’t mean necessarily that you’re voting Republican, but right now, there are people very specifically saying, “I’m going Trump,” right? That’s the way I’m going. That’s sort of unheard of, certainly since I’ve lived here for more than 12 years, and since I’ve been following politics in Silicon Valley for some time and tech. Very unique. But there’s also people that are pro-Vice President Kamala Harris, some notable ones as well. Bertrand Schmitt Yeah, we have Rudolf Mann of LinkedIn Fame. We have Mark Cuban, now technically in Silicon Valley, Vinod Khosla of Khosla Ventures, Aaron Levie, from Box, Chris Sacca, Mark Suster, Ron Conway, even Steve Wozniak, co-founder of Apple, who have signed up a VCs for Kamala List. But honestly, it’s not so much clearly pro-Kamala in terms of big name VCs. It feels relatively balanced on the Trump side. We have also quite a few people from the crypto space like Winklevoss Brothers, Ryan Selkis. It feels pretty even. As you say, in the past, I think if you were a Republican, you would hide it, more or less, given how pro-Democrat was California and Silicon Valley at large. But yeah, I think it’s a very different trend. If we remember, in 2016, probably only Peter Thiel from Silicon Valley was pro-Trump, and I think he had to leave. He decided to move to LA first. I’m not sure if he had to leave, but he was definitely an outcast at that point. But it’s a very different game now. I mean, at the end of the day, you have the most talented entrepreneur of our time, Elon Musk, who very clearly show his weight behind Trump. Nuno Goncalves Pedro Again, to your point, which is, I don’t want to force it too much, but it is quite important. It’s not this love fest for Vice President Harris as a candidate in Silicon Valley as everyone probably would have expected it to be. If I had to hypothesise on the factors, one is the whole tax situation, in particular, the unrealised capital gains situation. I think that’s a super big deal for VCs and for startups here. It matters, right? It matters tremendously. Bertrand Schmitt That’s the key. Nuno Goncalves Pedro All the other taxation effect: How are you charging the things and capital gains? How are you taking them into account? Et cetera. Then, maybe second order, maybe the whole antitrust situation, and where the current administration has been, how aggressive they’ve been, et cetera. I do think that those are probably two of the largest levers at the table right now that are tilting things more towards former President Trump than one would assume in Silicon Valley. In Silicon Valley, you assume most people are going to go the other way, and… There are some shocking things. As I said, the Marc Andreessen and Ben Horowitz thing, we knew some of their leanings, but publicly? This is a huge deal. It’s very big deal. Bertrand Schmitt To be frank, I feel it’s time that people are not afraid to share their perspective on backing one candidate, one side or the other. I mean, 50% of the country, more or less, is for Trump, 50% is pro-Kamala, at least from the voters. I don’t think it’s okay that you have to hide yourself, that you are a pro one side or the other. Of course, it’s better if you have arguments to defend your position as usual, or to explain it. But at the same time, why one side should have to hide itself, especially at a time when, to be clear, as you just said, this tax unrealised capital gain has the ability to destroy this tech industry. I guess every side has some issues to deal with in the sense that I don’t think anyone is perfect. Nuno Goncalves Pedro The implications for the rest of the world, we discussed China already a little bit. Obviously, there will be more of an antagonistic perspective on China going forward. Yeah, maybe not a huge escalation, but maybe the same line that we’ve been in before. Obviously, it depends on who gets elected. If former President Trump is elected on certain aspects of, for example, taxation, it might be more beneficial for people that are quite wealthy, millionaires and above. Although the US has a lot of millionaires, someone was telling me this the other day, some pretty ridiculous numbers. Someone was telling me, I don’t know if this number is true or not, so I would fact-check, but that there’s one million Americans that have an asset and net worth above 10 million, and that’s mind-boggling to me. Anyway, if, for example, in that case, on the taxes side, there might be a little bit of an exodus of millionaires or very wealthy people outside of the US if there’s aggressive taxation. If there’s taxation on unrealised capital gains, I do think over the medium to long term, it will affect Silicon Valley, and it will affect how Silicon Valley can become and be still the centre of gravity of tech of the world. Nuno Goncalves Pedro There are some implications around that as well. We talked about immigration policies. And on that, obviously, Vice President Harris, if she’s elected, probably will be a bit linear or more pro-immigration than former President Trump. That’s probably a little bit more advantageous to Silicon Valley. But the rest of the world will have the effects of that. Everything that affects negatively Silicon Valley or the US in tech affects the rest of the world positively and vice versa. In some ways, the discussion you can have right now, you can take your own conclusion conclusions on who do you prefer to be elected. If you live in France, or if you live in Portugal, or if you live in Japan, or in Korea, or whatever. It’s a little bit of an à la carte decision in some ways. Bertrand Schmitt In terms of our take, I think we just wanted to make this episode to try to clarify the points of difference between the two candidates in terms of what impact they might have for the tech ecosystem. As you started the episode with, I certainly agree that all the points, when you vote for a candidate, are not just about the economics and your industry you work with. But we felt it was important to try to highlight these points, given the importance of the presidential election for the US, and by extension, the rest of the world. This is it for today. Thank you so much. Thank you, Nuno. Nuno Goncalves Pedro Thank you, Bertrand.

AI is literally everywhere… in our mobile phones, laptops, their chipsets, etc. As integrations increase, what are the implications for everyone? Why are all the announcements from Microsoft, Google, Apple, Open AI and others, important? One of those episodes that you really need to listen to, as this IMPACTS YOU and all of us Navigation: Intro (01:34) Getting us all on the same page This matters TO YOU!!! Open AI launching 4o The responses So… What? Conclusion Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Bertrand Schmitt Hi, welcome to episode 55 of Tech Deciphered. In this episode, we will talk about open versus closed and proprietary. What does it mean in technology to be an open or closed application? You have all heard about open-source, I guess. There is a saying in Silicon Valley, if you are first, you close it. If you come late, you open it. Bertrand Schmitt Basically, it means that you might have an advantage being the first player on the field. You might afford to be able to close-source your product, your software, your application. But if you are late to the game, late to the party, and it’s difficult to fight the leading player in the marketplace, maybe an alternative strategy in order to gain distribution is to open-source your product. There have been many examples of this through Silicon Valley history. Today, we are going to talk more about all of this. Good to see you, Nuno, today. Nuno Goncalves Pedro Nice to see you as well. Shall we start with history—the history of open-source? It’s apparently the first known system that was supposedly open-source or in public domain was in the ’50s, the A2 system in 1953. Basically, it was a compiler. A compiler is what turns source code into binary code that gets run by a machine. Nuno Goncalves Pedro It’s what allows you to run apps on, for example, your phone and things like that, a compiler. I know some of you that are like, I’m a computer engineer. Is that a compiler really or is it an interpreter? Let’s forget that for a second. Let’s call it a compiler just to make life easier for everyone involved. Nuno Goncalves Pedro That was the first public domain open-source thing that we know. Then there isn’t much, ’50s, ’60s, ’70s, there isn’t much. Obviously, there was the summer of love at some point in the late ’60s, and maybe through the ’70s, people started thinking through, shouldn’t we be doing things that are more open? One of such people was a gentleman called Richard Stallman, who’s still alive, so you’d shout out to him. He was part of this “let’s call it hacker community” from those days and was doing some interesting things around it. Nuno Goncalves Pedro There was this belief that source code shouldn’t be closed, that if you were monetising something quite a lot, and you were putting even certain things in your code, that if, for example, you were using unlicensed applications, so unlicensed binary, that you would run into trouble and have other issues. So he manifested himself against it and came up with something that we’re still using till this day, the GNU or the GNU Project and GNU Manifesto. Now, GNU, this is the funny part—some of you will find it funny, others might not—stands for GNU’s Not Unix, which is a recursive acronym. You have to appreciate computer scientists and computer engineers coming up with things like that. Nuno Goncalves Pedro But its GNU is GNU’s not Unix, because at that time, Unix was a proprietary or had been made over time a proprietary platform by a couple of big companies in the market. There was this view that they wanted to, in some ways, get out of that space. The GNU project was born, and we, till this day, have what we call GNU general public licences, GPLs. You probably have heard about this. Now, it’s in the ’90s, early ’90s, that we have the biggest movement, I think, in the history of open-source with a gentleman called Linus Torvald. Nuno Goncalves Pedro I probably butchered his name. Linus Torvald, something like that, pushed a version of a kernel that he had. Actually, the first version he had was not open to the public, but then he released it to the public under a GNU licence. And that operating system was called Linux. And the rest is history. Linux has led to many other things after that. It’s a wildly used operating system globally, in particular on the server side, with many variations, and we’re off to the races. Nuno Goncalves Pedro That’s the shortened version of how we got here in some ways. Then there’s a lot of cool things that happen afterwards, but that’s like seminal moments are GNU and Linux. That’s the two things you need to remember. Bertrand Schmitt Yeah, and if I may say, Linux is really the kernel, and then you have by extension, Linux, the operating system are actually combining a kernel plus many tools from GNU or not GNU. Just to remind everyone, the Internet is running on Linux. Nuno Goncalves Pedro On Linux? Bertrand Schmitt We’ll talk later about a lot of our other open-source software. It’s not just Linux, but so many components of the Internet that are running on open-source software. Also, just to be clear, the first definition of open-source was coming from our friends at GNU, but ultimately, there has been competing initiatives to define or redefine what is open-source. Bertrand Schmitt One organisation in particular, the open-source Initiative, OSI, has tried to codify their own way and probably in a different way, what is considered open-source or not. They have this official definition they published in 2006, and they keep updating them for GNU, they keep generating new definitions and creating new or updating licences. Bertrand Schmitt We have multiple licences possible when we talk about open-source, which can create some misunderstanding about what is exactly open-source or not. Nuno Goncalves Pedro We’ll come back to the more bad use of open later in this episode where obviously there are people that use open, and it’s not open at all. Bertrand Schmitt Yes. Nuno Goncalves Pedro But these are seven moments in real open-source. It created a movement, it created a way of doing things. It created a mindset on how people can share each other’s source code. At the very nature, open-source starts from there. It starts from the notion that source code, not the binary, not what’s created by the compilers that then is run as an application, but the source code itself can be shared for free. Nuno Goncalves Pedro That’s incredible. That’s like the religion of the time was a religion of we have all these big monolithic companies like IBM, Microsoft emerging, etc. It’s someone that’s saying, “No, we don’t accept the closed ecosystem play. We want to have code that is shared globally.” In some ways, that movement is now probably the dominating movement in the world in terms of source code sharing. Nuno Goncalves Pedro Obviously, as we know, there’s a lot of people profiting out of code today. There’s ways of keeping your code intact and keeping things in-house. But the open-source movement has changed how things are done. It is a quasi-religious movement. It’s this notion of you have… There’s copyright. I enforce my copyright, the entitlement I have to this thing that I developed. Nuno Goncalves Pedro There’s copyleft, which is a term that came from open-source, which you are obliged to share under certain licences all the stuff that you developed around it. To your point, there are coexistent pieces. We’ll come back to that later when we talk about Android and Google and the Android open-source project versus Android itself. What is closed? What is open, and how do some companies do well in maintaining these two aspects working really well, like the openness and the closeness piece? Nuno Goncalves Pedro I think Google does a decent job on Android. We’ll argue later if that’s the case or not. And yeah, it all started, similarly, with this gentleman Richard Stallman, and then with Linus just giving us Linux, and everything changed. Bertrand Schmitt Yeah, it’s really amazing when you think about what was happening at the time. If you think about the ’90s, it was the rise of Microsoft, from DOS to Windows, and Microsoft becoming at some point one of the most valued company and at the time certainly fighting tooth and nail against. Bertrand Schmitt Open-source was considered evil by some corporations when actually no, it was just a movement and a different approach to business and willingness to develop things in a different way and a way that was more open, transparent, collaborative, and especially important you could argue in the age of deploying applications everywhere, depending on these applications’ stability over time. It is a significant evolution of the history of computers and programming. Nuno Goncalves Pedro Microsoft will keep popping up in this episode. Just to be very clear, this is not their first rodeo. They’ve been having these fights or antitrust cases, etc. In some ways, a lot of the reactions we saw, even with Linux, Linux becoming such an important operating system, certainly server-side globally, has to do with a fight to Microsoft. Nuno Goncalves Pedro Because obviously, as you said, Microsoft went DOS to Windows, and then they were really managing a closed ecosystem. There was this view like an operating system is critical. An operating system for those who are listening to us who are not computer scientists or computer engineers is what makes a specific device work. Nuno Goncalves Pedro An operating system for your computer, for your laptop, let’s say you’re running Windows or macOS, is what makes the device work. Without it, there’s nothing else. It’s the core. It’s what makes it boot up, and it shows something in front of you and all that stuff. And then there’s things on top of it. As Bert talked about it earlier, even in the case of Linux, there’s device drivers. There are things that make other devices that connect to that device work. For example, if you have a keyboard or a mouse, et cetera, you need to have device drivers that support certain types of keyboards and certain types of mouses. Nuno Goncalves Pedro And then on top of that, you have user interface, which in general is extended by the operating system, so it’s part of the operating system these days. But you could argue it’s a different logical piece of it. Then you have all the apps, what you run on it. Microsoft Word, PowerPoint, your email client, all of that are apps. They run on top of the operating system. Operating systems are critical because without operating system, the device is a piece of hardware. Nothing happens. There’s nothing happening to it. Bertrand Schmitt Yes, totally. Operating systems are critical. Maybe we can go a bit quickly about what is open-source. What is the definition of open-source. If I take the OSI open-source initiative definition, open-source needs to meet multiple criteria in order to qualify as being open-source. One is free distribution. You should not restrict any party from selling or giving away the software. It has to be a free distribution, no royalty, no fee. Bertrand Schmitt Then the source code must be included, and you must allow the distribution source code as well as in compiled form. That’s another critical part. You need to be able to inspect that software as a developer, be able to inspect it if you want, so that it’s clearly understandable, and you can make sense of it and potentially do something about it. The third condition is about derived works. It must be authorised. So you must allow modifications and derived works. Bertrand Schmitt You must allow them to be distributed about similar terms. Fourth, it’s about integrity of the author source code. There are different ways you can authorise that, but basically creative-derived worked might need to carry a different name or version numbers. Bertrand Schmitt There is still a support to make sure that It’s clear what is the initial author source code and what is not. You can modify it, but you cannot mislead people about what is the original product or not. No discrimination against persons or groups. No discrimination against fields of endeavour. You cannot restrict a program to be used in a specific field or in a certain way. Distribution of licence. The rights must apply. Bertrand Schmitt There should not be a need for additional licence. So what you distribute has to be all included. Licence might not force you to use a program as part of another product. You might not restrict other software. And it must be technology-neutral. That’s the OSI definition. So if you want to say and claim that your product is open-source, it has to follow these criteria laid out by the OSI. Bertrand Schmitt Typically, what people do is that they will choose a specific licence that has already been developed. Basically, instead of recreating your licence, you will pick an existing open-source licence that has been fine-tuned to follow these criteria. Nuno Goncalves Pedro Yeah, so there you have it. If you want to do something open-source, that’s basically it. We’ve talked about the terms of licensing already, copyright versus copyleft. Open-source is copyleft. You have to pass it on and it’s free. This gets a little bit muddy because we’ll discuss a few companies later on where some elements of openness, and then there’s some elements of closeness. We’ll talk about Android and obviously Google’s stake in that ecosystem on Android. We’ll talk about actual lies around openness when things are not open at all. Nuno Goncalves Pedro Maybe we’ll start with one firm that has gotten quite a lot of heat that now seems to be changing their ways, we’ll see. But certainly many years ago was getting a lot of heat for taking advantage of open-source but not giving back, which was Amazon, and in particular, Amazon Web Services. The reuse of a lot of code that was seen as open-source code, taking it, playing with it, doing things to it, forking it, as we call it, forking is creating an alternative version to it that goes into the future. Think of it as if you watch science fiction, parallel universes. In another universe, something else happens. That’s the fork. It’s like a fork on the road. Nuno Goncalves Pedro They got a lot of heat for it, certainly back in 2018, on the fact that they were using but not contributing. Recently, it seems that that attitude has changed, that they’re now much more strongly contributing, but that led to a variety of things from the market, from to the Commons Clause, to the server side public licence SSPL from MongoDB, which tried to address some of the concerns and issues that were happening with some of these big giants just reusing a bunch of code that was out there and then appropriating it as themselves but not contributing back to those repositories. Nuno Goncalves Pedro One important piece to take into account is we talk repositories, think of it as containers, things that have the code in it, that makes over time that code to be compiled and then to be executed, so to run as binary code, to make something then work. The importance of this is in all these open-source projects, there are different roles in the open-source projects. Open-source projects themselves have their own governance. There are people that can commit to the open-source project. Nuno Goncalves Pedro There are people that can review stuff for the open-source project, and there are people that at the end can approve changes for new versions of the code. Even in these things, even though it’s all open, et cetera, for some of these big repositories where there’s a lot of code being maintained, there’s still governance. It’s not like there’s no governance. This is an anarchical system and people do whatever they want. There is still a governance system. Nuno Goncalves Pedro The issue with Amazon is they were appropriating all this code, using it for themselves, which is fine, but they’re not giving anything back in the shape of things that they might have evolved and improved in the code that might have been valuable for the open-source repositories that they were taking source code from. Bertrand Schmitt Yeah, I think also in a way, and we’ll talk more later about business models, but it was in some ways probably connected to open-source business models. When you make open-source software, like the Linux kernel, everyone around it is going to help contribute to that kernel because at some point, they will have no direct real benefit except contributing for it or because the development is sponsored partially by big corporations, we intend to use a Linux kernel in some of their other products. So they see a benefit to help contribute to that. Because it reduces dependence on third parties. Bertrand Schmitt So you end up having more control. But for some of the open-source projects, let’s say a database, for instance, and we can take the example of MongoDB, part of the business model of that company might be, you know what? We are going to provide the software for free, MongoDB. But at some point, if users want us to host the database in the cloud, that sort of stuff, we are going to simplify and streamline and host it for them and manage it for them. It will be easier for them. And that’s how we are going to make money. Bertrand Schmitt On one side, they build a software for free, available for free. But in exchange, if you have some specific use, it was expected that you might use them for that specific host use. But when Amazon comes, take over the source code and host it, it becomes very difficult competition. As a result, your business model is not working any more. So that’s what many open-source companies were facing, basically. It’s the end of their open-source project. Because if they have no more money to deliver on it and Amazon is not contributing, the project is going to die. Bertrand Schmitt They felt they had to make a decision. The decision led to new licences or new clause added to existing licence in order to prohibit the Amazon use of just hosting the open-source software and making money out of it and at the same time destroying the business model that have evolved from the open-source community. Nuno Goncalves Pedro I know. Just to maybe finalise this discussion on this, this is when then lawyers get involved. Heather Meeker is probably well known. She’s based in the Bay Area, I think still. That’s where lawyers get involved because at some point there has to be a legal framework around all of these things. You can’t just operate outside some line. There needs to be a line on the sand that can be enforceable, where people can take each other to court. We had huge fights in the past. Nuno Goncalves Pedro The Oracle fight with Google because of the Java situation after the Sun acquisition. These things matter. Who owns something obviously matters when it comes to code as much as it does to anything else, like a house. That’s why these new rules that were put in place, these new types of agreements, were there to try and frame a different perspective on how things were evolving. Things were getting extremely complex, and there was a need to clarify things and make them more explicit. Bertrand Schmitt At the same time, not everything is all good and well under the open-source sky and environment. There might be some issues. Typically, the one people know in a tech industry is a risk of using some copyleft-licensed software. So for instance, if we take a GNU software, many are using the GNU General Public Licence, the GPL licence for short. This one can be pretty dangerous because it’s a copyleft licence. But the problem with a copyleft licence is that you are forced to share everything you built with this software with everybody else. Bertrand Schmitt If you are a closed-source business, create new software that is leveraging GPL software, you might be in trouble and might end up being forced to open-source your product and provide it for free. Typically, that’s something you want to be very aware. The GPL is not the only licence that might cause trouble, but it’s certainly the most common one. When you are developing a software these days, typically what do developers, if they are working for a closed-source company, is making sure that they absolutely never used any GPL-licensed software in the process, unfortunately, given the restrictions. Bertrand Schmitt As you said, there has been fights in the past. There has been some pretty famous fights of companies who tried to basically leverage new licensed software, GPL software, and that didn’t end up well for them. They had to either settle like VMware or some others like Verizon to open-source their product. Bertrand Schmitt As a company, what you do typically would be to scan your source code for different type of licence in order to understand what licence is being used, because sometimes you don’t know when your developers have introduced some software, libraries, copy-paste even some stuff. This stuff could be really dangerous. It’s a big question you have when you do, for instance, financing of the business. When you exit a business, you need to make sure you understand your risk profile and potentially have an alternative to some software before you can go to the next stage. Nuno Goncalves Pedro This is a big deal because it’s human nature. Developers can be brilliant, but at the same time, they can be lazy. They just copy-paste something. They’re like, “I have no clue where this is coming from”, and they just use it. That piece of code might have come, to be honest from something that is under a licence that is not beneficial to the company that they’re developing it for. Again, it’s a little bit like, people are like, “Oh, but that’s silly.” It’s not so silly. Nuno Goncalves Pedro I mean, think of it, if I’m developing something, it’s like writing a book It happens to be a book that manifests itself in many weird ways. If I’m reusing lines from another book, I need to know what I’m using it from. I tend to understand what’s the right quotation, what’s the right source, what’s the right licence. This is the analogy for this. Nuno Goncalves Pedro I know it’s a little bit more complex than that, but it’s the analogy for this. If you’re using and borrowing code from somewhere else, you need to really make sure that you understand where that code is coming from, so that you’re not infringing on anyone’s licences or not embedding your own code with stuff that can come back to haunt you as Bertrand was mentioning. Bertrand Schmitt I think the book reference, Harvard lost its President on some copyright issues. It was not copyright, but it was- Nuno Goncalves Pedro Quotations. Bertrand Schmitt Quotations that were missing. Nuno Goncalves Pedro I don’t want to get into a fight with Bill Ackman because I think… No, this was afterwards, right? This was the post. It started with quotations on his wife, and then it extended to Harvard, and obviously, they kicked out. Bertrand Schmitt I think it started with Harvard. No, it started with Harvard. Nuno Goncalves Pedro No, I think it was the other way around. Eager then got… Then they went after, no? Anyway, we don’t want to go into political quotation issues and have Bill Ackman tweet on us. We’re okay, we’re good. Bill, we love you. Bertrand Schmitt I think it’s proving the importance of basically copying someone’s work. It can be a book, it can be an article, it can be a reference, it can be source code. Source code is written work. You want to be careful before doing that. If it has the right licence, it’s okay. If it has not the right licence, then it’s not okay. Nuno Goncalves Pedro The open-source projects, and as you mentioned, mindset and movement, this is a movement, open-source movement, has given us a lot more things than just code. It’s given us a lot more things than just software innovation. Given us, for example, very deep organizational shifts. We now talk about remote teams as if it’s, “Oh my God! We discovered remote teams.” Nuno Goncalves Pedro The first guys at scale to have remote teams were companies or organizations or projects that were open-source. Because of the nature of it, because there were thousands of contributors from around the world, they were not co-located. In many cases, they were doing this part-time. They were doing development part-time. Linux is a great example of that. Nuno Goncalves Pedro These teams were what in the open-source world have come to be known as fully liquid teams. Everyone’s around the world. There’s no real hubs. It’s a fully distributed team. Those projects, those companies that were focused on open-source projects were the real pioneers on fully distributed. That shifted in many ways, for example, on how engineering is done today. Nuno Goncalves Pedro Because if you think about it, it’s not just the organization’s different and everyone’s working from around the world. How do you coordinate people on code? How do you bring code pieces together into something that works? When do you compile? When do you launch into production? Who’s doing the testing before all of this happening? How are they doing the testing? It changed everything around software engineering and software development. Bertrand Schmitt I guess no surprise that Git was created by Linus Torvalds to help him better manage the development of the kernel. Git is a way to basically to synchronize and historize and a branch source code. We need that first because of that unique aspect of very remote distributed teams that is inherent to many open-source project. Bertrand Schmitt It was open-source that created the need and ultimately found solutions to solve these needs. A scale development globally at any time zone, anytime, definitely an innovation from open-source and not just an innovation itself, but they build the tools to get the job done and the processes to get the job done. Nuno Goncalves Pedro Git, if it’s familiar to you guys, because you’ve heard about a company called GitHub that was a massive acquisition, and a few other companies, is a source code management tool. It’s a way to basically verify which control version are you guys on in the repository. We’re not putting pieces of code in the wrong version, effectively. Think of it as many of you might not be developers, but if I’ve had this issue, you’re working on one document, which version of the document are you working on? Bertrand Schmitt Yes. Nuno Goncalves Pedro It’s the same problem, right? You want to make sure that you’re working on the same version, and it’s properly maintained and sustained. Bertrand Schmitt If now we talk about open-source as innovative in business model, because again, as we discussed at some point, except some rare exception, there is a need for some business model. If you develop the Linux kernel, you might not do it directly for revenues, but indirectly you will sponsor developers, pay them, or they are employed by your company. Bertrand Schmitt They are working on the Linux kernel because your company benefit from the Linux kernel because maybe it’s building hardware that needs an operating system. You don’t want to pay fees to Microsoft. At the same time, you want this Linux kernel to leverage your new hardware. You need to have people who developed for that kernel. That’s one type of very indirect business model. There are other types. We talk briefly about companies like MongoDB that basically does a business model of hosting. Bertrand Schmitt Basically, we probably use a source code, but if you want to have a simplified hosting solution for it, we are here, and we are going to give you a subscription. Another typical business model has been around support, of course. The Red Hat probably innovated a lot in there, in terms of subscription model for what was at the source an open-source product, but ultimately became the Red Hat distribution, and they made you pay the subscription, mostly because they will provide you a high level of service and more advanced enterprise-class type of version of the products that were initially open-source. Nuno Goncalves Pedro Open-source is supposedly free, but there are hidden costs. If you have a release of something in open-source, the early releases of Linux were appalling, very difficult to maintain. How do you run, for example, a UI framework? UI framework is like you see windows in front of you instead of just text. On Linux initially, it was extremely difficult. You’d have to compile it, you’d have to attach things, et cetera. You need to decide which UI framework you’re using. Nuno Goncalves Pedro Then players like Red Hat with their distribution, simplify that greatly and created value for end users by making these things automated, more simplified for a regular user to be able to use at length and therefore charged for it, as Bertrand was saying, for the support of the ecosystem and support of their releases, et cetera. Nuno Goncalves Pedro In some cases, the other piece is enterprise-grade. You might have something that’s open-sourced, and it’s been compiled, and it works, but it’s like, does it have the right level of optimal security for you? That obviously generates some options for players to then make money on top of some of these stacks as they move along. Nuno Goncalves Pedro Buying large, as Bertrand said, people make money out of support or services, support services. Companies like Docker, for example, initially made a lot of money out of services. They make money out of other variations of the software as it scales and companies come into that ecosystem to create bundled versions of it that are more closed in nature. Nuno Goncalves Pedro There’s ways to make money, but the ultimate effect is this is for all mankind. The reason why it matters that there is open our software is, think about it, if it’s free at the point of consumption, it allows people that have less resources, companies that have less resources, countries that have less resources to be able to use software that is high-quality graded software. It allows for people to keep innovating on software without necessarily always having the objective of making money out of it. It’s because people want to contribute back in some ways, the hacker culture. Nuno Goncalves Pedro When I was in college, people had this strong objection to hackers, and we always used to distinguish between hackers and crackers. Cracker came from the term used for telephony systems. You tap into telephony systems and get free calls. Crackers were the bad guys. Hackers were not. Hackers, and today we use that white hat-black hat term. White-Hat hackers are the ones that identify issues and raise them and maybe get bounties out of it and do the proper thing. The Black Hat ones are the ones that make the news by taking over services, et cetera. Bertrand Schmitt Yes, totally. Going back to the business model, one that I found interesting was used by Databricks, where, for instance, you get the slow version of the software for free. If you want the fast version of the software that has been optimized for much higher speed, maybe 10X improvement, Then you have to pay for the Databricks version. It’s compatible. API is the same everything, but the engine itself is much faster, but you only get the fast engine if you pay your fees. I think that was another interesting innovation. Bertrand Schmitt To go back to your point about for all of mankind, that’s typically also one reason why you would pick open-source as a strategy, because as a distribution, open-source can be very strong because people get excited because it’s free, people get excited, they want to contribute, and you don’t even have to potentially pay the developers. It can be a very writer’s model if it finds its market and a very strong alternative to other business approach. Open-source can truly be not just a development approach, but really a go-to-market approach. It’s considered one of the very effective product-led growth strategy, open-source. Nuno Goncalves Pedro Indeed. Moving to open-source for the win. The big achievements of open-source. We already talked about one, so that’s pretty obvious. Let’s get the numbers in on Linux. Linux is one in servers. I mean, around 97% of the… Certainly in web servers, 97% of the top million web servers in the world run Linux, 97% of the top million. Top 90% of the cloud runs on Linux. That’s what I call a knockout win by open-source. There’s variations on the Linux that are deployed here. There might be some distributions, but we’ll take it as an open-source win. I mean, huge user open-source win. Bertrand Schmitt What’s amazing, we talk about Git that is also open-source and could be also a part of the internet infrastructure, or at least the world coding infrastructure. Let’s talk about some other tools that you might have earned that are open-source. Python, one of the most famous, most used development language is open-source. The Apache HTTP server, which is another part of the internet infrastructure. Nginx, the acceleration caching engine is also open-source. We have Node.js, which is another development language. Bertrand Schmitt In terms of database, we have MongoDB we talked about, but there’s also PostgreSQL, MySQL, as open-source version. Going back to coding or environment, we have Electron that is open-source. React as a front-end development language is open-source. And if we go to AI, it’s actually amazing to see how much is open-source. I mean, Python is a part of most AI projects, of course, but PyTorch, SensorFlow, Keras, all of this is open-source. In a way, AI was such a race that in order to participate, you better have to move very fast, convince others to use your product, and what better way than to open-source it. Bertrand Schmitt Obviously, it’s not the case of the CUDA language. That one is actually not open-source and has been developed over for a very long time by NVIDIA, and is still a key competitive advantage for NVIDIA. Nuno Goncalves Pedro On the consumer side, things that you use on a daily basis that are open-sourced, Firefox, if you use it as a browser, actually, it came from the Netscape opening of the world when the huge fights with Internet Explorer happened, and they decided to open it up. Chromium also came out of that, which is Google Chrome uses it, but Chromium is the open-source piece of it. Nuno Goncalves Pedro A signal on the messaging side, bring the fight back to WhatsApp and the big Facebook, which is funny because obviously it was largely funded by Brian Acton. After he made all that money within WhatsApp. It’s funny how these things happen, like Elon Musk with OpenAI and stuff. Anyway, we’ll get back to that later. Nuno Goncalves Pedro Open Office, obviously, was a potential alternative in a fight being brought to Microsoft Office, maybe less successful on that side of the fence. You have, I’m sure… Most of you today would have something open-source that you’re using on a regular basis. Again, even on the consumer side, It’s well noted. It’s not just a B2B tools or platforms discussion. It’s more broadly than that. Bertrand Schmitt We talked about Databricks, a closed-source company that is actually built on top of an open-source product that they initially built called Apache Spark. Docker was also part open-sourced. Nuno Goncalves Pedro Docker scaled on open-source, right? It was a company that was having tremendous difficulties. They scaled on open-source, and then obviously, they created a business model around it to make money themselves. They scaled on open-source. I mean, it’s incredible. Bertrand Schmitt Then we have some interesting stories. If we take AI, and we’ll go deeper in other situation, but one pretty famous model, Mistral, pretty new company actually, but already famous in term of models, I shared in an open-source way under Apache 2 licence, three different open-source models, Mistral 7B, 8X7B, 8X22B, that are usable and customizable for a lot of use cases. Again, we see open-source goes, of course, with the business model. Bertrand Schmitt If you want to use the optimized commercial models, then you have to pay. The commercial business models, them are not open-source, and you will buy them because they are more efficient, they have higher performance, they have extra capabilities, easily available, hosted. We can see that even with new LLMs, AI is trying to find its way. Open-source is trying to find its new definition in a way with AI and LLMs. Nuno Goncalves Pedro Exciting times. Obviously, open-source is one in many dimensions, and I think the world is better off because of it. Companies have been built on top of this notion of there’s an open-source component and ecosystem-building piece around it, but then there’s pieces that are maybe less well-framed. Maybe as a last example, Android. Now, Android, just to be clear, as a trademark, it’s owned by Google. If you put Android in your device, Google is saying this is Google-approved. Now, Android has a project behind it, which is the Android open-source project, a OSP, where you can pick up the kernel. Nuno Goncalves Pedro What makes it run effectively, and a variety of other pieces around it, and fork it, as we discussed before, create a new version of it and go your own separate route. There’s a couple of players who have done that. More recently, Huawei has had to go full fork because of the issues we know happened in the US, where Google was not allowed to give them a licence. Part of Android is open-source, clearly at its very core. And there are pieces of it, even some device drivers, et cetera, that are open-source as well. Nuno Goncalves Pedro There is an ecosystem around it. There are device manufacturers that make a living around variations, very strong variations on that project, on the AOSP. Now, there are pieces of Android that are absolutely closed. The way I think Google did it is, to be honest, for me, it’s clean. I think some people will probably disagree, but it’s clean. Google, when they launched Android, they launched, I think it was the Open Handset Alliance, OHA, right? Around Android to really make sure that it was going to be an open-source core operating system, etc. Nuno Goncalves Pedro Then obviously, Google is Google. There’s pieces that you guys that are using Android today on your mobile devices are running which are not open. Obviously, some of the apps clearly are not open, like the Snapshots of the World, etc. Even one level below, the Google Mobile Services and the Google Play Services piece. Nuno Goncalves Pedro The Google Play Services piece is what Google Play is implemented on the ability to develop your own apps on top of that framework is on Google, just shockingly enough. Google mobile services, which includes core services that you guys all properly use as well, like Google Play itself, the App Store, Google Chrome, et cetera, is owned by Google as well. Nuno Goncalves Pedro For you to run GMS, this is the issue that happened with Huawei, Google has to have a licensing agreement with you. That’s what allows you to then say, I’m running Android, because as I said before, Android is a trademark owned by Google. It’s open on certain extent. It’s closed on others, but it’s running the world now. It’s doing what Linux did on the server side. It’s doing the same in mobile devices. Obviously, the world is mostly running on Android today or a variation of it of the AOSP. Bertrand Schmitt Yes. Without going into too complex stuff, If you build, for instance, a handset on the base of Android. First, we just said that some services, Google services, might not be available if you don’t comply with some Google request, but also some Google apps might not be available. You might not be able to have YouTube, Gmail, and other stuff. Bertrand Schmitt That could be huge trouble. In a way, even if the operating system itself is free and available and the core libraries, if you want to be successful in the marketplace with device using Android, you better follow the different guidelines that Google is giving you in order to have their apps installed, to have Google Play, and even to have some apps compatible. If you don’t have these Google mobile services, that might be really big trouble for the success of your device. Nuno Goncalves Pedro I was on the other end of a couple of very significant negotiations with Google back in the day, early days, and it’s been always a little bit tricky. So It’s not totally clean, but I would still say for the most, it’s an interesting ecosystem that has worked relatively well for all involved, even when Google now is competing, obviously, through several acquisitions like the HTC smartphone team, and that sort of we want it, but we don’t really want it. Montreal acquisition where they got a bunch of patents. I think they’ve done a pretty good job, but maybe switching to Lies. Lies when open is not open, but it’s more of a [inaudible 00:39:59] or a bridge for a close, as I call it. Bertrand Schmitt Yes. I mean, not wanting to point fingers too hard. I mean, business is business. Nuno Goncalves Pedro Microsoft? Bertrand Schmitt Yeah. On this one, if you are old enough to remember the old Microsoft approach, embrace, extend, extinguish to open-source and open standards. That was in the late ’90s, early 2000s. At least it was alleged that Microsoft had this behaviour. If we’re on acronyms, there were many acronyms connected to Microsoft, fear, uncertainty, and doubt, presenting vaporware in order to block your competitors. Bertrand Schmitt At the time, there was a lot of approaches of Microsoft that were not so great, business-oriented, but definitely not very friendly. So at the end of the day, yes, Microsoft has been accused in the past by a lot of open-source promoters, companies to have a very negative approach to open-source. I think it has changed. I don’t think the new Microsoft is representative of the old. Bertrand Schmitt I mean, a great example, you talk about GitHub. GitHub was acquired by Microsoft a year ago. In a way, it was a litmus test for the open-source community because so many open-source projects were hosted on GitHub. And I would say it flourished. Microsoft, in a way, has proven that it’s very supportive of open-source project. Bertrand Schmitt Microsoft Visual Studio Code, for instance, is an open-source project and has taken the development world by storm. I’m still impressed how so many developers are using it, even people who might not have said good things about Microsoft years ago. It has been a revolution. The old Microsoft 20 years ago was not a friend of open-source, but now at least it’s not an enemy. Nuno Goncalves Pedro Just to explain to our listeners the Embrace, extend, and extinguish. It was based on a memo written internally at Microsoft, which said Embrace, extend, and innovate. The extinguish came as an adaptation for the trial. Bertrand Schmitt Yes. Nuno Goncalves Pedro Embrace is basically you go into a technology stack, open-source, you embrace it, you’re part of the community, you do commits, you involve your engineers, you do stuff back, et cetera. The extent is then you pick up from there, and you start extending functionality, creating your own functionality, the forking piece I was mentioning earlier. Creating your own functionality, added features, et cetera, that go well beyond the core capabilities of the initial repository’s code bases that you were using. Nuno Goncalves Pedro Then the experience goes without saying, what it is. Once you have the extra features, you’re like, “I close this, and now you have to pay.” I would allege, maybe I have a slight disagreement with… It’s nuanced, this agreement with Bertrand. I think they’ve changed their ways. They’re maybe slow-pacing us as well on GitHub. Nuno Goncalves Pedro I think what they’re doing with OpenAI right now is magically looking a lot like appropriation of something that initially was not an open-source project, but an open project for the benefit of humanity. Obviously, there’s the case in court that Elon has taken them to court because he obviously funded them originally, and he’s like, “This is not what I funded you guys for.” Nuno Goncalves Pedro Now, they’re acquiring a lot of stuff around the stack, inflexion, et cetera. I don’t know if they’re slow-pacing us or not. I’ll give Satya, a walk on that and suspension of disbelief. But I don’t know. It’s always the same name that we talk about from the late ’80s, well, even before, right? So ’80s, late ’70s, ’80s, ’90s. Microsoft keeps coming back, so I’m not sure if it’s in the ethos of the company or not. Bertrand Schmitt If I remember, actually long, long time ago, maybe was it in the ’80s, but Bill Gates was famous to write a letter explaining how bad was open-source. That was this lecture a long time ago. So, yeah, it’s a long debate. Nuno Goncalves Pedro The browser wars. There have been so many of these things that have happened, right? I mean, it’s incredible. Bertrand Schmitt It’s as long as a fight between Apple and Microsoft, I guess. The fight between Microsoft and open-source. I think there has been significant improvements, but it’s not as if Microsoft is fully embracing open-sources or built on open-source. Other certainly is being built more and more on open-source. Like a AWS. You were talking about OpenAI with Elon Musk. I mean, definitely, it’s a weird name for a company that is anything but open. Nuno Goncalves Pedro That’s not open. Bertrand Schmitt I don’t know. Your chips in a package like healthy good food. No, it’s on a healthy good to eat chips or drink Coke, but then they call themselves OpenAI. Personally, I don’t care, except that it feels very much like marketing that is, I mean, basically a lie. Bertrand Schmitt Obviously the first and the most important shoulder of OpenAI and the one who helped attract some of the best talent to OpenAI disagree as well with OpenAI and feels he has been cheated. So Elon Musk filed a lawsuit recently in March against OpenAI and actually even said that if you guys rename the company Closed AI, then I will stop my lawsuit. Nuno Goncalves Pedro We just call it Closed AI. Bertrand Schmitt We can see the power of a name. It can have in the public’s mind. Nuno Goncalves Pedro Just to be clear, OpenAI, to my knowledge, was not ever an open-source project. It was a non-profit. It still is actually. It’s a non-profit. Bertrand Schmitt It was a non-profit. Nuno Goncalves Pedro It’s always been a non-profit. It still is. Just happens that now the non-profit has a for-profit below it. That was created afterwards. As I said, I’ve been involved in something like this in the past. It’s not as shocking as it may seem. It sometimes happens, but it was never open-source. It’s open in the sense that it was a non-profit for the benefit of mankind kind of thing. Bertrand Schmitt When you accept donation in that context, I can imagine how it might be to see suddenly everyone trying to make huge money out of it. Actually, Sam Altman is not directly making any money, given he’s not a shareholder. But I understand that he has a way to leverage his OpenAI position to build all the stuff around, and then he directly benefit. Bertrand Schmitt What’s surprising is that a lot of general public, even developers or authors, might think that there is something open. But as far as I know, there is not much, if anything, open. There has been some tools that have been open-source, I believe, by OpenAI, but ultimately the core of the company is not open. Bertrand Schmitt Another company—and this time I would say that they are much, much closer to being open and being closed—is Meta with LLaMA 3, LLaMA 2. They have released the weights, so not the source code, but the weights of their LLMs. Basically, anyone can run it. They have put a few restrictions that limit you if you have hundreds of millions of users. There are some others for specific conditions. Bertrand Schmitt Ultimately, there are some constraints, so it cannot meet any definition of open-source. But I would argue that it can certainly claim some level of openness that is very valuable, especially in the face of OpenAI and other closed-source initiatives. Nuno Goncalves Pedro I was just at a session with Chris Messina, who obviously still credits with having invented the hashtag, and it’s like, yeah. When Meta talks about this, but then there’s a limit on how many users you have, is it really open? Then the stuff they’re doing around mixed reality and augmented reality now, I’m not sure I fully trust that this is an open-sourced endeavour. Nuno Goncalves Pedro It is for scalability purposes. I don’t know if it’s an embrace, extend, and extinguish playbook play, but it feels a bit like that. It feels a bit like let’s run the open-source gamut in the playbook and then see where we head. In the worst case, if it fails miserably, it fails miserably. If it works well, then I can’t possibly think that they won’t take over the ecosystem. Bertrand Schmitt It’s tough to say. Me, I’m just judging based on the licence of the current product. Apparently, there are rumours that they won’t share the weights of the new version with a huge number of parameters. So LLaMA 3 might be the last version, or maybe they will have different branch or pro-version. I don’t know. For me, I’m more judging them based on what they release. Bertrand Schmitt For sure, there is no source code, so again, it’s not open-source, but there is open weight. It’s huge because it means that a lot of use cases, 99.9% of use cases, you can use that and pay no licence for it. I would take it as a huge win. Bertrand Schmitt It’s definitely challenging the OpenAI of the world and others because when you see the investment from Meta to build this models, we’re talking about hundreds of millions and probably sooner in the billions. It’s not a small gift. It costs real money, so I cannot complain if Meta has a business strategy with that. As we have seen, most open-source companies have to have a business strategy to keep it sustainable. Bertrand Schmitt For the other piece, the mixed reality approach, Meta Horizon OS and Horizon Store. Here less clear about what’s really open. This one is certainly stretching it. There might be some openness in the sense that now you can access the store more easily as a developer. You are not relegated to a lab section of the app store for the Quest. That’s it. They are going to licence their operating system to other manufacturers. It’s open in the sense of windows is open. So this one you can laugh as much as you want about the openness, I guess. Bertrand Schmitt To be clear, I’m not judging. Every company has to have a business strategy. What you can, however, have an opinion like I have, I believe, is, what’s the marketing you use? To call it open when it’s fully closed in every way, but you are open to even third-party licensing your product? That’s a bit much on the openness. Bertrand Schmitt But I guess, you know what? Consumers, developers, companies just have to learn things through the marketing. But again, I will take what is really open and be happy about it. I think that on the mixed reality side, it’s a good strategy, to be frank, for Facebook to licence their product. It would be even better if they don’t push it too much on the marketing side. Nuno Goncalves Pedro Yeah, they keep talking about it like it’s open as well, and it’s not. I mean, it’s not their definition of open. It’s true already with LLaMA, right? I mean, with LLaMA 2, et cetera. There are special licences, there’s limits on what you can do, ton of limits, so it’s like… Bertrand Schmitt Not tons of limits. It’s not too much. Nuno Goncalves Pedro I mean, come on, prove it. It’s used for training other language models. Requires a special licence for deployment in app or service with more than 700 million daily users, which basically means the big competitors, right? Bertrand Schmitt Means Google cannot use it. But if you’re not Google, you can. Nuno Goncalves Pedro Then they can change the licence tomorrow. It’s not 700 million, it’s 100. Bertrand Schmitt No, they cannot change the licence. I mean, LLaMA 2, as is- Nuno Goncalves Pedro For future versions of LLaMA, they can. Bertrand Schmitt Sure, but that’s their prerogative. But that’s also because it’s not open-source. If it was open-source, it would be easier to- Nuno Goncalves Pedro But that’s why I’m saying they’re calling it all of these efforts open, Bertrand. They’re not open. They’re basically saying, “We’re investing a bunch of money into these things, and we’re making this super usable by you guys for free.” It’s like Facebook is open. Facebook is free to consumers, so they’re going to make money somewhere else. That’s the Facebook playbook, free at the point of consumption. Bertrand Schmitt But that’s fair. I think that the definition of most open-source businesses today, they have to find a business model. Nuno Goncalves Pedro But this is not even open-source, Bertrand. There’s no open-source here. Where’s the open-source of this? Bertrand Schmitt For me to have an LLM that I’m free to run in 99.99% of the use cases, as long as I’m not Google. I mean, it’s magic, to be frank. It’s a huge competition. That’s why we have probably some competition like Mistral, is going even more open-source. I’m all for it personally. Again, if you’re a developer, if you’re a company, what are your choices? To pay OpenAI, to spend a billion, to build your foundational model? You don’t have a lot of options, and this is super high quality. This is not trash what they are giving. Nuno Goncalves Pedro I don’t see how this doesn’t become an embrace, extend, distinguish play. Bertrand Schmitt Potentially, I cannot judge, and I can imagine that they have a strategy. Will it become that? I don’t know. For me, it’s tough to judge before something bad happens. Right now, I’m just, “You know what? Let’s use it, and if it changes, let’s not use it.” Or potentially, of course, let’s consider an alternative. You might say, “No, I’m going to use Mistral because I believe in their strategy, I believe in their approach, and I believe in years to come, they will keep doing that way.” But it’s a much smaller startup, so it’s also tough to know where it’s going. Nuno Goncalves Pedro There’s obviously the angle on geopolitics. You mentioned some of the tweets from Vinod Khosla recently on AI staying closed-source because of China, et cetera. Bertrand Schmitt It is obviously a famous investor, an extremely successful investor. Personally, I feel he’s defending too much his own investment. He has a big investment in OpenAI, and congrats on Vinod. By the way, I have nothing against OpenAI per se in their product, but is part of that regulatory push to even forbid open-source AI, which for me is insane. It’s like, “What? Are we serious? The world is built on Linux. Do you know the world is built on Android?” Bertrand Schmitt Open-source is part of our life. To suddenly say that you have to close AI for what reason? Sorry, can we repeat again? Because you fear the rise of CI robots or something? I’m pretty angry. I mean, it’s one thing to say, you forbid some exports, and you do some export control on some technologies. That’s one thing. But to say, “No, guys, because it’s AI, you cannot make it open anymore,” it’s pretty, for me, unacceptable. To see him with so much vested interest to lobby for this, it just doesn’t feel right to me. Nuno Goncalves Pedro I agree with your overall view. That obviously calling it with parochial interests at the table, et cetera, when there’s other things you can do, export controls. I think that’s true. I would also say that’s the advantage of closed. The advantage of closed is it’s closed. Nobody knows what is underneath it. Reverse engineering it is extremely difficult, et cetera. Nuno Goncalves Pedro Is there a geopolitical fight right now with China? Clearly. We’ve talked about it in previous episodes. Does that mean that there are areas of development in the US and other parts of the world, also in Europe, that need to be more cautious in how these instances are manifested to the rest of the world? Probably, yes. Nuno Goncalves Pedro Is it a matter of closed versus open? In some cases, it might be, actually. Obviously, it’s a little bit parochial. I feel it’s a little bit like a bit of a spin on the situation in terms of comms and communication. But honestly, some of it might be warranted. I think at some point people do need to have that notion and take into account. Bertrand Schmitt You’re right to have your opinion. Personally, I’m totally against it. I think it makes no sense. We accept what is next. Is he going to make sure that Linux is becoming closed-source and forbidden to export anywhere? I mean, it’s too late. Nuno Goncalves Pedro No, but because that cat is out of the bag. The AI cat is not out of the bag yet, right? I think that’s the difference. Bertrand Schmitt AI is similar. Chinese scientists are doing great work on AI. I mean, if you look at labs across the US, AI labs, how many from Chinese descent? It’s not fair for me at this stage to try to close it, to block some business model, and more important, this is based on total bullshit assumption. Bertrand Schmitt This is based on AI is going to take the world. AI is too dangerous. AI can be used by others. Others are going to invent and to invest, and I don’t see why forbidding open-source is going to help. What is going to help is going to entrench some corporate interest. That’s what we know for sure is going to happen. I don’t see that as good anyway. Nuno Goncalves Pedro The world goes around, Bertrand. That’s how the world goes around. Bertrand Schmitt No, the world had alternatives. Nuno Goncalves Pedro It is as it’s been around for the last many decades. Bertrand Schmitt No, that’s not true. The internet is running on Linux, not on Microsoft Windows. With initiative like this, it would have run on Microsoft Windows. Nuno Goncalves Pedro It’s running on Cisco routers and stuff like that, or people that have made a ton of money out of it. Bertrand Schmitt No, there are alternatives in terms of, and Cisco is a shadow of what it used to be. Nuno Goncalves Pedro Well, the Chinese also came into that market. That’s a different discussion. I feel it’s warranted, and it’s a decision of the company and the shareholders and who’s in there right now. I’m not here to opine whether OpenAI raised money under the wrong construct. It is the construct of the shareholders, and it is the definition of the shareholders. Nuno Goncalves Pedro They’re subject to regulations in the specific markets that they operate in, and they can get slapped if they break those regulations, but it is. The case of OpenAI, I think the situation is, I don’t know. I don’t know what was agreed and what is written down in terms of agreements between Elon and Sam and all these guys initially. What was the agreement they had? Is this a legally binding agreement or not? It’s as simple as that. Nuno Goncalves Pedro Are they now changing tech on OpenAI? The discussion is, can they now be fully closed or not? They were never really open. It was more of a non-profit or a for-profit. Bertrand Schmitt No, that was not my point. My point was about regulating and forbidding open-source AI. If you are talking about OpenAI, different story. I have no problem. They do what they want. But if they are pushing regulation to limit competition, that’s a different story. Nuno Goncalves Pedro But Bertrand, I agree with you. Regulation that makes it impossible for someone to have open-source AI in the US, I think is silly. Now, for many companies to close their stacks, it is what it is, right? Bertrand Schmitt I think we are not disagreeing. I don’t know what happened, but me, I have only been talking about open-source AI being forbidden by regulation and regulatory captures. That’s the only thing I talk about. Nuno Goncalves Pedro Should not be. Bertrand Schmitt OpenAI as a company, as long as they don’t cheat their shareholders, they do what they want and they follow regulation. But for me, what is critical is to let AI develop itself as it wants in a way so that we don’t add some level of interdiction by regulations. I’m very worried, to be clear. Bertrand Schmitt It’s not just that, it’s also regulations that are coming to AI. If you think about what happened recently in California, they are proposing some new regulations than are scary about blocking innovation in AI. I think we have to be very worried and careful and have our eyes open that a lot of regulatory capture is being prepared by some actors, and we have to push back, I believe. Nuno Goncalves Pedro I agree on that. But the option for specific companies and ecosystems to just say this is closed now, I think it is what it is. Bertrand Schmitt Companies, yes. I have no problem, so I’m not sure about that disagreement. Nuno Goncalves Pedro There’s going to be a point in time where I feel we’re going to have a discussion on more complex industrial policy, whether it is right for a country to nationalize the technology, for example, and say this tech is now owned by the country, or this tech is now forbidden to be taken by anyone else outside of the world. For example, we could have an argument also around imports and export laws. Is there a mandate that I could take on that? What I’m hearing from you is you’re okay with that, that within certain boundaries, they can do that. Bertrand Schmitt Yes, but again, it depends on what. I understand that there are some products you can limit, but to say I’m going to forbid open-source and forbid company to have an open-source approach is very shocking. After that, export regulation will say, “You know what? This product is open-source, but I’m trying to forbid some countries to access it.” Okay, sure. But again, the most successful open-source project is not American. It’s called Linux. What do you do about that? Nuno Goncalves Pedro I’ll solve the problem. Let’s charge $1. It’s not open-source. I’m sure there are lawyers working on a solution already if in case this ever happens, which I think will not, but yeah. Bertrand Schmitt I just think it’s important to not retroactively change the law, not retroactively change some business approach. But I understand some level of regulation and to consider that you regulate some use of some technologies, but I think you have to do it in a way that’s reasonable and achievable. I think that’s happening in some other sectors of the AI industry, not the software side. And that I’m fine. Nuno Goncalves Pedro On this violent agreement, maybe we conclude today’s episode, episode 55: What is Open versus Not Open in Tech? We went through history lane on open-source software. We defined it, we talked about some of the core innovations that happened in the space that were well beyond just software development, organizationally business model-wise. Nuno Goncalves Pedro We talked about lies when open is not open, but it may be a mode or breach for closed. I think a little bit more optimistic on Bertrand’s side, maybe a little bit less on my side in some areas. Then we got to some of the geopolitics of AI and what’s happening right now where we ended up on this violent agreement. Thank you, Bertrand. Bertrand Schmitt Thank you, Nuno.

The truth, the whole truth and nothing but the truth. Can you handle the truth? What is the future of news? Are we at a Spotify moment? Do we even care about the truth? Navigation: Intro (01:34) Mainstream vs Niche News (02:09) Are we Close to the Spotify/Netflix moment? (29:30) State or Government Ownership and Influence of Media (46:06) Polarization & The Truth (58:36) Year of Election (1:05:10) Conclusion (1:09:21) Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Nuno In today’s episode of Tech Deciphered, we will be discussing the truth. Can you handle the truth and the whole truth? More specifically, we’re going to talk about the future of news, where we are today. Obviously, a lot of discussion around fake news, polarization of news. Nuno We will go into a conversation on whether we are close to the Spotify moment of the news space, and whether how we’re caring for the truth is still actually true. Do we still care for truth or do we just care about our own opinions and to reinforce them over time? Bertrand That’s a big question. I think to start about this topic, we probably want to start from this big debate that has gone pretty big over the past 10 years, but maybe even more the past five years. It’s maybe the mainstream versus niche news and all the dramatic changes that have happened in a way, thanks to internet. Nuno There’s the mainstream versus niche, there’s the mainstream versus speciality. Maybe let’s start with mainstream. What is mainstream news? Is it just news or do we get news through mechanisms that sometimes are not news anymore? Bertrand Is it still mainstream? Nuno Clearly, there has been a decrease in viewership of the newscasts, the news programs that we used to watch in our own countries, in the US. Now people can watch whatever they want whenever they want it. In some ways, there’s still maybe some flagship national news shows that people listen to. Obviously, there’s dedicated news channels like CNN, Fox News, of course, as well. Nuno Is it really where we consume our mainstream news? My view is obviously with the decreasing of viewership across the top channels, one would say maybe less so, but clearly still there is mainstream news. Fox News represents a specific side of the spectrum, but it is mainstream. CNN is as well. What’s your view, Bertrand? Bertrand I was asking this question only jokingly because I don’t know many people who still watch some of these mainstream news channels. My impression is that actually, first, the metrics are pretty clear. It’s a significant decline in viewership. You talk about TV, but the price is the same. A few managed to, I would say, stay somewhat relevant. Take a New York Times, take a Wall Street Journal, but even that definition of relevant is a very small viewership. Bertrand The numbers are extremely small in terms of who is paying for a subscription to these services. We are talking about millions at best, so that’s very small. One thing I noticed, I think that is pretty clear across the board is that, most of what we call mainstream media is more and more watched by the older generations, meaning people who have very long habits of watching their news that way from a TV channel. And two, who have not gone to the internet for their news because they were stuck in their old ways in some ways. Bertrand Obviously not everyone is like this, but my understanding is that they are all facing growing, older and older generations. Of course, there’s a question, what does it mean in term of advertising? Because if you’re not able to target 30, 40-year-old mom, that’s a problem. That’s really, for me, a big question. It’s not only becoming less and less relevant and mainstream because of the smaller and smaller viewership, but it’s also a different kind of viewership. Bertrand There’s, of course, a question of, is this viewership going to stick or actually just going to die? Sorry to be very abrupt, but if your target audience is mostly 70 plus and everyone younger doesn’t want or care or consume their news that way, that’s a huge trouble for these companies. Obviously, they know that. Nuno On the TV side, I think a couple of things. One, local news, in particular, if you look at the US, still has a bit of a role. If you want to know what’s happening, if there’s a storm coming, I think weather is a great example of why you check the news. In principle, it should have some directionality. Obviously, national news is a different ball game. Nuno I feel there’s many ways of consuming news today. In some ways, actually, news channels, the classic mainstream news programs, are competing with things, for example, like social media. A lot of people consume news, shockingly enough. We’ll talk about Twitter later, but a lot of people even consume news on TikTok. The latest thing that came out on TikTok, and people will share things, for example, on Instagram, on stories, et cetera. Nuno It’s just these tidbits that have very little context. I think TV is It’s a bit under attacked with low attention span. To your point, maybe, certain older generations, they have more the appetite to trust certain newscasters in what they say, the George Stephanopoulos at ABC, whoever else at Fox, et cetera. There’s this notion of maybe there’s a couple of generations that trust the newscaster for presenting news in a way that they think represents either some neutrality or whatever. Nuno If we step back on journalism, journalism was always supposed to be a counterpower. It was the fourth power, the counterpower. It was about keeping the powers in check, the judicial power, the legislative power, et cetera, in check. I think that’s changed. It’s changed because of the internet. It’s changed because of rapid access to information. Radio, for example, in some ways has been totally under attack. Podcasts have taken over on that side. Nuno Press has been under attack as well. Who are the publications that are still thriving? The publications that relatively thrive are the big guys, New York Times, Financial Times, The Wall Street Journal, The Economists, where there’s either a quality expectation in reading them, or there is a notion of the number of journalists that they can throw at specific articles. Nuno A little bit the opinion pieces and the investigative journalism piece of the puzzle is what I think still makes press work, because you have the time to put stuff together, the time to really go under the hood and generate newsworthy things out of it. In some ways, the clickbait thing has changed the world. It’s like, can you get my attention or not? If you can’t, I’m going to just tune out and go somewhere else, and I’ll consume my news in some other way. Bertrand Two good points. One, local versus national. The other one about the clickbait. Local versus national, that’s true. I register to my local newspaper to get the local news because I want to know what’s happening. Unfortunately, I find it biased, so I’m not always super happy reading that. The other piece that is clear is, I don’t care whatever they publish on national news. Bertrand For national news, I have my Wall Street Journal subscription, I have my Bloomberg subscription, and that’s what I will use for national or world news, actually. In the past, if we go back a long time ago, when you have to print newspaper and journals and stuff, there was some logic to combine national and local news because it’s not efficient to have different newspapers for everything. Bertrand I think now it’s quite clear that you won’t get the best quality, get national-wise, global-wise from your local newspaper. In a way, why bother? That has definitely been my approach. Clickbait, that’s a great point. Bertrand I also remember reading stories, not just stories, but data analysis about how the news in term of, not just what’s in the title, but once in the body of the news, how it has gone downhill in the past 50 years. The language has become worse and worse in terms of making it scary at every level, from car crash to the Earth is dying, the world is burning. Bertrand There was this famous comparison I think it was on German TV where they were showing a weather forecast basically on TV, it looked like everything was burning in Germany. If you take the same news report, weather forecast report five years back with similar temperature, there was certainly not this impression that was shared by making the graphics looks very dangerous. Bertrand There is definitely a change. My take is that, consumers are noticing. People are not as dumb as some of the people in the news seem to think. People might think by themselves, notice a change, notice when it doesn’t correlate with the reality they live. We might talk more about this, about the brainwashing that some news organization have been trying to do. Bertrand I think it’s also part of why mainstream media has been dying because that propaganda part is becoming more and more visible. It probably went overdrive and as a result has become more visible. I think that’s totally part of why people are looking for more, there niche source of information, or new internet platform to get access to consumer journalism. Nuno It’s a tale that is important. We define our own canons. We define what are the things that we trust and the journalists that we trust and the things that we don’t trust. I’m similar to you. I consume my per local news. Actually, I think it’s probably the only subscription I have. Obviously, we have some corporate subscriptions through our firm. Nuno My subscription that I subscribe to personally is a local review, which is the Half Moon Bay Review, which is the local newspaper. I consume it because I want to know news and what’s happening, et cetera. Then there’s canons that you build. You’re like, “What are the things that I trust?” If I want to read an in-depth analysis on macro, I can’t say The Economist is without flaw, but it’s pretty decent most of the time. There is actual research behind it. It’s well thought through, et cetera. Nuno Interestingly enough, if you’ve noticed on The Economist, those who have read, there’s no bylines. It’s like The Economist takes responsibility for articles posted. There’s a couple of exception on opinion pieces, but in general, The Economist, there’s no byline. It’s like I’m not saying it’s me or whatever. It’s basically assumed by the newspaper. The Economist looks like a magazine, but it’s a newspaper. That’s how they call themselves. Nuno Obviously, on Economic news, Financial Times, Wall Street Journal, in some aspects, I’ll look at New York Times, actually, for example, in arts, et cetera, I’ll go to New York Times. I will still consume breaking news as it shows up in my Google Now feature on my Android devices or whatever pops up on my Google Chrome first page, what’s the news of the day and whatever, just for breaking news. Nuno I do like to spend more time reading in-depth analysis, research, opinion pieces that are clearly put as such rather than the breaking news stuff, et cetera. Because to your point, it is there to make us feel a little bit more depressed overall. In some ways we’re all creating our little canons, our little things that we trust and the things that we don’t trust. Nuno There was this professor in Portugal. He wasn’t my professor, he was a humanities professor in university, quite well-known pundit as well on TV. He once came to a small group of university students. I was a university student back then, and I still remember this to this day, which is he said, “I always do this exercise at the beginning of my class.” Nuno It was on something, some critical evaluation of journalism, whatever the subject was that he was teaching. He said, “I always ask my students at the beginning of the course, have you ever been in a situation where there was news in a moment that you’re in? There was a situation that you’re in, a car crash, whatever, and there was news out of it that you saw later, either on radio, TV, press, whatever.” Nuno A very significant part of the class always raises their hand. Then I asked them to keep their hands up, and I said, “Do you think that the situation was accurately described by the journalist once you saw it later described?” Almost nobody keeps their hand up. I was a university student, so this conversation happened 20-something years ago. It didn’t happen in the time of Instagram and TikTok and fake news and all that stuff. It’s absolutely mind-boggling. Bertrand At the time when it was still somewhat trustworthy. Nuno Yeah, it’s absolutely mind-boggling, and this was back then. Bertrand That’s very interesting. Nuno Just to finish the story, his advice was, “If you want to have canonical views on things, doctrinal views on things, it is my doctrine that I believe in this versus that, read books. Read books, inform yourself. And anything that’s very short term, the last six months, the last three months, suspend this belief for a while. Create that doctrine over time in some ways.” I found it fascinating, but I think it’s really du jour. It works today. Today, that could be a good advice that we could give people. Bertrand To jump on that, actually, and I will go back on The Economist, but that’s one thing I notice more and more, and in a way, it’s obvious. The more you know a space, the more you know an industry, the more you realize that generalist journalists don’t know much at the end of the day. A specialized journalist might know more, but even then you see up to a point. It’s so much true of the generalist journalist, how bad it is at every level. Bertrand Still, they are designed to make you feel that they know a lot, and they spread stuff a lot. I think that’s part of the issue. Just to be clear, 20, 30 years ago, before Internet, you couldn’t spread one-to-one messages or one-to-few messages. You had to go one-to-many and broad, and so that might make some sense. Bertrand Today, I think the paradigm has changed. To go deeper on The Economist, actually, I stopped my subscription as The Economist, I forgot how long ago, but I actually disagree with what you say. I find them, first, late to the news. On any interesting topic, I will get better information on Twitter quicker. Nuno They’re not in that business, Bertrand. They’re in the business of investigative journalism, research-based stuff. They’ve never been in the breaking news business, The Economist. Bertrand No, because they will always have news that is relatively relevant to what happened a week ago, two weeks ago, three weeks ago. They do once in a while some deeper research, but it’s still timely news. They are not going to talk about stuff that happened some time ago. The most important point for me is that, as you say, there is no byline, and that’s something that they are known for. Bertrand I started to feel that actually I was certainly not in agreement with some of The Economist position and The Economist perspective. For me, they were just wrong in terms of perspective and analysis, and therefore more and more useless as a paper to follow what’s going on over the world because I certainly think they don’t represent basically the world and the economy and how it’s truly working, but they have this fancy perspective on how they think things works. Bertrand Personally, I’ve been disappointed over the years. I used to read that every week, 10 years ago. For me now, I don’t want to say it’s super bad, but it’s bad enough that, from my perspective, has become useless information. Nuno Slightly different perspectives, and maybe that is an actual thought to be had. At the end of the day, to your point, speciality journalism versus generalist journalism. But even in speciality journalism, there is more and more the tendency to create mythology. It’s mythology cells, in particular, negative mythology. We’ve talked about the myths of Silicon Valley in the past and myths of tech. Nuno I think tech journalism right now is going through this ‘tech is bad’ notion. Founders, in many cases, are bad. These people that were maybe five years ago idolised, and they were the best ever, and now they’re the worst ever. Why is that? Because it sells. Because people click through, and they go and listen to the last story about Elon Musk and the board still fighting his package. It’s like, cool, but it’s in some ways we know this as human beings. The reality, the truth is normally much more nuanced. Nuno It’s where we’ve gone. A lot of amazing tech entrepreneurs have been edified as the new people that are going to save us all just to be thrown down a couple of years later because maybe it sells more, maybe because there’s more clicks on it, and that’s the tendency of the market at that stage. Bertrand That’s really one of my issue is that, it’s not about long-term trend analysis. Most journalism that we see in the mainstream media, for instance, it’s always being sensational. It’s the news of the day, “This one was killed,” and, “Look at that big bad trend,” when actually there is no trend. Actually, typically, they will either show no metrics or they show metrics that have been manipulated so deeply that it’s totally untrustworthy. Bertrand I would advise anyone, obviously, who is looking at any stats shared by journalist, analyst, to truly take time to understand what it truly really means, and how it has been changed and tweaked over time. Actually, on this one, there was a very interesting tweet storm from the ex-Harvard President, Larry Summers, and he was showing a GDP metrics as they reported religiously from a Wall Street Journal to a Bloomberg to The Economist over the past 30, 40 years. Bertrand He treated that data by showing, you know what? Actually, there has been multiple change how GDP is calculated over the years. Obviously, it has been treated only one way. Sorry, I’m talking about GDP I wanted to talk about inflation rates. GDP also, by the way, is being manipulated over the years by changing definitions. Tricks of how GDP has been calculated for 70 years is also very interesting. Bertrand Going back to inflation and Larry Summers, he was showing how actually, if you were to use how inflation was calculated in the ’80s, and apply it to what happened the last few years, we will not have picked at 6%, we will have picked close to 20%. We were at 20% inflation rate based on previous definitions of inflation. Bertrand That’s pretty insane, because some experts will run this analysis, some hedge funds will run this type of analysis, but the mainstream journalists, even the specialized one in economy, they didn’t talk about that. They had no point about that. I don’t know if they didn’t care, they didn’t know, or if on purpose, they tried to play that game and keep misleading their readers about where we stand, really, by just publishing without thinking too much, government statistics, and without trying to make sense out of them. Bertrand That would be what I would call true journalism in my mind. I don’t think we get much of that anymore from this so-called journalist, to be frank. We need to get to the true experts who dare to share the truth. Nuno In some ways, and this is maybe a good segue for us to talk about niche journalism and niche news, et cetera, it was broken by the internet. Let’s be very honest. The internet broke everything. The digitization of how things get transmitted in a much more meaningful way, taking away the broadcasting aspect of it, which was radio and TV, changed everything. Nuno It changed it so dramatically that now we are looking for a couple of things. We’re looking for specialists or people that we perceive as potential specialists in a certain area to have an opinion on it. Sometimes maybe even misguided. Sometimes, to your point, you might be looking for something that is trying to reinforce a position that you have. It could be an educated position, or it could be an absolutely BS position. It depends on the person, I guess. Nuno That is where niche came in. Niche came in with speciality, with blogs, with people recording their own stuff on YouTube, with small channels that immerse to become relatively big channels. If you remember The Young Turks in the US. Guys that went after specific demographics in terms of news, shorter news, bites, et cetera. Nuno Everything changed there. Journalism changed because in some ways, to your point, we know the people that back in the day had the big scoops, that told us that Watergate had happened, people that changed how we saw government, and rightfully so. Now that’s not it. Now it’s like, how many followers do you have? How much click-through do you have? How much money do you make out of it? If you have a YouTube channel, how much are you making out of that advertising? That’s what matters. Nuno In that world, to be honest, being very truthful implies doing a lot of analysis and research, which implies a lot of time, which probably implies not putting as much content out. For example, just content cadence is a big deal. If you can’t put a lot of content out, you’re at the disadvantage. Monetising stuff, we’ll talk about business models later on, but monetising stuff, what are you monetising? Is what I’m seeing news? Or is what I’m seeing an advertisement for a brand or for something? Nuno What is your conflict of interest? Conflict of interest used to be a big deal around journalism. Are you trading stock on this company or whatever? It’s seemingly disappeared. We don’t talk much about it anymore. I’m like, “Surely now there’s more conflicts of interest than ever.” I might do a hatchet job on a founder of a company that I want to short, and I might actually be super supportive of a founder that I’m long on his stock or her stock. Nuno Honest, I feel we’ve lost the counterpower. News is no longer counterpower. News is another power, and it’s being exercised. We’ll talk about it later because some of these media platforms are very clearly an exercise of power, not a counterpower, an exercise of power. Bertrand I think that’s always the question when you say a counterpower is, who is the counterpower to this power of mainstream news organisation? There was no one actually until recently, where now you have what you could call citizen journalism or analyst experts sharing their opinions, either through their own newsletter or through Twitter, YouTube. That’s becoming the real counterpower. I agree with you. I feel that the mainstream media of today is not the one who would have investigated or published the Watergate. It feels the opposite. It feels the mainstream media that would have hidden the story. Nuno But I would push back on the niche thing is always a positive thing. Obviously, we have found people that are very thoughtful about their analysis and numbers and all that. There was this joke going on for a while that in some ways the comedians that decided to go and relate to news like Jon Stewart back in the day, well, he’s back now. John Oliver, et cetera. All of these guys, by making comedy out of news, are the new newscasters and investigative journalists. Nuno They have their own skews, and we know what their skews are and some of the stuff that they’ve portrayed. John Oliver, I used to be a huge fan of his program, but there have been a couple of shows that I’ve watched that I’m like, “This is a clear hatchet job, and it’s not comedy. This is not comedy either. He’s just gone after a company, or he’s gone after a person.” Sometimes he’s right, sometimes he’s not. You could see that in the way it’s translated if you have some information behind the scenes on what’s going on. Nuno But the citizen journalism thing, there’s pieces, again, of it that are good, like breaking new stuff, what’s happening, people doing a little bit more in depth, going behind the scenes, figuring out stuff that was said before. All of that, I think, is very, very powerful. But honestly, not everyone is a journalist, and not everyone should be. Nuno During COVID, we had this. Everyone was an expert on what was happening in COVID. Everyone was a virologist. Everyone was an expert on everything that’s just going. That’s not true. There should be a number of specialists that know what they’re talking about. Nuno I work in venture capital, I see these posts posted by people. Some of them are not even venture capitalists. They have no clue. They probably have never even made an investment in their life at scale. Some that post are very young VCs. They’re like, okay, this person has been doing this for six months. Why are we reading this? Nuno I call the attention to this because, for example, at Chamaeleon, we share news between the team members just to talk about strategy every week, et cetera, and sometimes one of the team members will share something. I’m like, “Who wrote this?” “It’s very well-written.” It’s like, “Understood, it’s very well-written, and it’s very compelling, but who wrote it?” I want to know. I want to attach credibility to the buy-line. Who wrote it? Who’s this person? What experience does this person have in this industry? What investments has this person made? Why are we listening to this person or reading this person? Nuno Even in mediums like ours, and just to be clear, the mediums that people right now are listening to are probably mediums like ours, people that are more educated, more thoughtful, that are willing to listen, that have a degree of openness that is a little bit superior to the mass market, so to speak. Nuno Even us, we’re being subjugated now because of noise, because there’s so much noise like, “You should read this. You should read this.” Sometimes I’m reading, I was like, “Why am I reading this thing? Who wrote this?” That generates fake news. That generates the worst of fake news. It generates things that are just fundamentally flawed in their analysis and their research. They’re just well communicated, but they’re flawed. Bertrand Of course. You could argue that the definition these days, more or less of mainstream media are well communicated, but not well thought and sometimes pure propaganda piece, I would say. Nuno You keep going back to mainstream. It’s niche as well, right? Bertrand It’s niche as well. But the big difference is about freedom. You have freedom of choice, freedom of information, freedom of speech. This platform, like Twitter, mostly a YouTube podcast, you are free to listen, you are free to read, you are free to watch from many sources. It’s not coming from the top, it’s coming from the bottom up. Bertrand Where I agree with you is that, of course, there is crap, but I much prefer to be able to filter out the noise by myself, find reliable sources of information, check over time how these guys are talking, explaining things, and does it match what I’m seeing from the world? Does it match my understanding of the world? Does it have some predictive power? If it has, then you know what? I’m going to listen and read more of this person. Bertrand We just talk about Larry Summers. He was one of the first to talk about inflation risk in the US, and he was right. I was certainly following his perspective, but at the time, he was widely ridiculed by his peers. I much prefer a situation where there are multiple choices, multiple voices, and I can use my brain to search, match and ultimately select, than the other old traditional approach where you had little choice. You were stuck with it, and you could potentially discover some issues, but it was harder because less voices to give you a different perspective. Bertrand But totally, there is total bullshit that can come up. For me, that was especially clear during COVID because you could see globally how things were changing very fast in terms of how news was spread, how stuff was explained. Let’s not forget how from one day to the next, COVID initially was not a problem. “Don’t worry, nothing will happen in your country, in your state.” The next day, everything changed in terms of story. Not just one journalist, one magazine, but every journalist, every mainstream media would change their mind and opinion in 48 hours. You would see that change because I’m reading news from multiple countries happening. That was pretty disturbing to see that level of control and manipulation from state entities at some point. That’s what it is. Bertrand To go back to your point, yes, of course, I want to hear from infectious disease expert when it was time of COVID, I was looking for this news from different experts and collecting on Twitter names of people who were interesting, trustworthy, and were sharing news before others. Bertrand I never become an expert, of course, but I learned to search for the truth in a way. It’s obviously not easy, but it was amazing how early you would get ahead of some news. How early you would get in terms of government perspective on, “You should do this, you should not do that.” It has been in a way, for me, a wake-up time to realise that the government was not right on so many topics in France, in China, in US, in multiple countries, in Australia. And at some point, you need competition for source of news in order to make your own opinion. Bertrand It has been proven time and time again that many things, many decision were actually not only wrong, but were pure propaganda in the sense of not based on science. At the time where we were told to trust science, decisions were not based on science, were based on misunderstanding, political calculations, many things, but certainly not always about science. Bertrand You don’t want to hear and listen from any crackpot out there, but at the same time, I learned that mainstream media, government sources, were not as reliable as you would thought they were. Nuno Maybe just as a bookend to this section, bundling of news has happened. It’s done. We went from maybe listening to that radio show in the morning that we really liked and the news of the day in the evening to the channel that we prefer to a world where we consume news whenever we want, however we want it, video, short form, articles, whatever. Nuno Maybe the biggest shift of them all has always been social because we share news with each other. We share things. If I agree with Bertrand on many things, I’m going to listen to Bertrand when he said, “You should read this.” That becomes our focal point, the trustworthiness of the person that sends us those news. But in a nutshell, We’ve gone from a very bundled world, very massage into broadcasting to us into a super unbundled world, super noisy, with the pluses and minus that we just discussed. Nuno Maybe switching to where we are today in terms of some of these new platforms, are we close to the Spotify-Netflix moment? Are we close to having news providers to us that find interesting business and business models and products that basically attract us in the same way that Spotify was able to revolutionise music or the Spotify model was able to revolutionise music, where we consume whatever we want, it’s not prepackaged, we know the cues that exist, and that’s it? Are we there yet, I guess, is the question? Bertrand It’s a good question. I’m fundamentally not so sure. Don’t get me wrong, YouTube is huge, for instance. Facebook is huge, but the news part of this organisation is actually quite small. If I pick Twitter, it has gone through some changes. Ultimately, in term of revenue generation, I don’t think it’s that big, that transformational at this stage. Even if for me personally, as a source of truth, X/Twitter is definitely a reference. Bertrand In term of business model, personally, I’m not so sure a true at-scale business model has been found. Of course, we have heard about other solutions like Substack to let writers monetise, but it’s still at a relatively small scale. Nuno The platform still owned today. We have obviously Apple with Apple News, which is almost like a loss-leader for them from a product standpoint. They just bundled it in. Either you want it or not, but it’s cool, and it’s not that pricey if you have a bundle. Google with Google News, obviously. Google News itself has a little bit disappeared from focal point, but they injected it into Google Chrome page, they injected into Google Now on the left side of your mobile phone on Android, so it’s there. They are serving you news that they think you want. Nuno I think those two experiences, honestly, you could argue they’re not great, they’re not fantastic, but they work. You’re being given news that they think you want to see. Obviously, we know there’s issues with that as well because they might be skewing towards your last searches and the last things you did, and they’re obviously mining your data. They’re doing a bunch of things. But those experiences in some ways have worked, but the platforms are using them as loss-leaders. They’re not really using them as the next Spotify. It’s another product that you get through a bundle that you consume. In the case of Google, it’s free because we then get other stuff from you, advertising, search revenue, whatever it is. Bertrand They want to be the gateway. I must say, personally, I used to use Google News back in the days quite a lot. Apple News as well at launch, but I’m definitely much more on Twitter or X, and specialised newsletter. I feel what they are distributing through Apple News and Google News is really one limited view of the world, not really providing wide perspectives. Nuno There is a new generation of players out there that are trying to bundle these subscriptions for things that you really want. Some of them are very creative. They give you credits and you can spend your credits. Whatever publications is attached to it, it’s a use of one credit if you want to read through one news, and you have a bundle of credits and that’s how you consume it, you just choose. Nuno There’s others that are trying subscription-based models with a baseline for certain publications. Then above that, you need to pay per article, or you need to maybe extend your subscription. It’s complex. The problem is why it’s complex is because of what we just talked about. It’s been unbundled. There’s a lot of news sources out there that you want to consume. Even on mainstream, we talked about a bunch, let alone on the niche ones. Nuno If I really want something that’s adequate for me, I might be interested in something that the Wall Street Journal published this month, but maybe not want to read anything by the Wall Street Journal for the next two months. Then I read New York Times every week, I don’t know. Maybe there’s this one economist article that I want to read every three months, I don’t know. How do I bundle for that as a product? Nuno In that experience, I’ve seen some interesting attempts at it, but I haven’t seen the untapping of that. One problem I see on this is when it’s product. It’s just generally product. How do you make the product seamless? How do I interact with the article? How do I make sure that I access the article under whichever browsing experience I’m having or every consumption experience I’m having? Nuno It’s complex because every provider has their own app, and then what browser are you on, and then how are you going through the paywall, and how is the paywall treating you, and how you register? It’s not easy to make a seamless experience work. I think that’s a product issue, and I haven’t really seen beautiful solutions to it. Maybe Apple News is one of the more elegant ones, but I haven’t seen any beautiful solutions. Nuno The second piece is actually business model. It’s like, “What do I charge for?” I charge a subscription, which people understand. That’s how news has always been working, even newspapers back in the day. Do I get money out of advertising? Again, very well understood, et cetera. Sponsored content, which for a while was tricking us all. They started making you have to put that little sponsored content down there. It’s like, “This is actually not news. Someone paid for this article.” Mysteriously, the company that they’re saying good things about. Nuno There’s all these business models. In my opinion, subscription probably is the way to go if we believe this will go the route of other content streaming, like video and audio, but it’s still not nailed because of the multifaceted nature of the providers, very unbundled. Nuno Every time we look at the space as a VC, we have this doubt around market size. How big is the total addressable market? How big is the serviceable addressable market? How easy is it to scale to that level? Everyone’s like, “This is huge.” I was like, “I understand it’s huge if you put everything together, but if you put everything together, how fragmented is everything you just put together?” Bertrand That’s a big question. Let’s not forget, one big issue with all these models is that you have a wealth of free information, free news, either reading Twitter or YouTube or just browsing the web. The Reuters of the world, the CNN, ABC of the world. I mean, it’s free content. You have to fight against that. Of course, you don’t just have to fight against that. You have to fight against other opportunities from watching a movie, watching a TV show, listening to music. Many sources are fighting for your attention. It’s a tough place to be. Bertrand Maybe going back to the business model, obviously, there has been some tentative from some governments. We can talk about Canada, Australia, trying to force Google News and other platform like them, Facebook, to do some revenue share or direct taxation of their news activity, which has led to some of these companies stopping their product in some markets. Bertrand California looks like if they can pick any bad idea somewhere, they will. They are looking into that as well. It has been somewhat a trend, but I have the impression it’s not going too far in that direction. What do you think of this one, that revenue share? Nuno If the music industry is anything to go buy, if some of these news providers do have some strength, which to be honest, some of them are relatively big, as I said, the market’s quite fragmented, there will be more and more legislation around those ways because you’re giving content that we developed that we are charging for, for free to your users. While that’s wonderful to your users, we’re getting nothing ourselves, and we develop the content, we own the content. Nuno Interestingly enough, the problem becomes even more difficult with AI and with ChatGPT-like functions like Gemini, et cetera, because then I’m searching for it, it could tell me the source, and then what happens? Does it send me the source? Then the source has a paywall, but I just saw the result synthesised for me. It defies the purpose. How do you deal with that? I think we’re going to have even a next wave of issues, which is with AI and summarisation, and you ingested this content, and you couldn’t have ingested this content, and whatever. Nuno I think this is going to happen more and more. The big search providers, et cetera, we’re going to have to figure out a way of compensating some of the content developers and content providers, not just, to be honest, news providers, but also people that do their Substacks or whatever. I think we’re going to have a little bit of that going forward. I think this is the beginning, not the end. Nuno It happened in music as well. Music was less fragmented. Obviously, the big record labels were the big record labels, and there was more power. Maybe it won’t go that direction. It was very person-to-person driven. The issue with music started when people were just able to share stuff between themselves, the Napsters of the world, et cetera. Here it’s different. It’s the big players in the middle that are acting as the hub. Bertrand I would disagree actually with that perspective because music is pretty obvious for me. When you share the full song, high quality, you have to find a way to make people pay for it. Nuno But why is that news not the same? Didn’t someone spend a ton of time developing an article, and it’s shown by someone? Bertrand I will tell you why, because they are linking to free news. If the news on cnn.com is free and available to anyone, it’s free. You are not paying for it. I don’t see the problem. Obviously, you don’t get The Economist news from Google News because they have put a paywall. If you want to read their news, you have to go through their paywall. Whether you are Google or you are directly a consumer trying to get access to The Economist, and the same for Wall Street Journal and other sources. Bertrand If they are pointing to free news sites, I don’t see why they should pay for anything. If these sites want to close themselves down and put a paywall, sure, go for it. I have no problem with that. But I don’t see the problem when the base source is free and freely accessible, what is the issue? Nuno I think there’s two problems. One is years ago, maybe before today, the crawlers and scrapers that these guys were to get their searches were going into information that was not supposed to be publicly available. Bertrand I don’t think so. Nuno They did. No, that’s true. You can go back in history and see it. Google was showing you news that were behind paywalls for certain players. You could say, “Maybe they didn’t define their paywall in the right way. Maybe their security wasn’t done in the right way.” I don’t know, but they did. There have been cases in court because of that. Nuno The second thing is now, and we’re seeing the same thing now with AI, the building of these large language models, where are the data sets coming from? We already saw this issue with things like Getty Images, where you have images that are Getty Images being used, and there are specific licensing agreements to it that are not being respected because AI doesn’t care. It’s just basically putting that forward. Nuno I think you’re oversimplifying the discussion. “There’s a paywall, whatever.” The data set is a data set, and it’s getting just worse because you’re getting underneath these data sets, and you’re getting information that probably you shouldn’t be able to share. Bertrand First, I don’t think as of today, you have any trouble to put a paywall that would block Google Crawler to scan your content and publish it on Google or Google News. All news maybe, but today it’s irrelevant. Two on AI, I think it’s an extremely different topic and happy to talk about it. I cannot say I have a firm opinion at this stage on the AI side, except that you have to remember there are two questions. Are you training a model and are you trying to get paid for feeding that model? Bertrand I think from my perspective, it’s the same story. Do you have a paywall or not? If you want to block from a scraper, you should be able to decide to block and the scraper should agree to follow this direction. If Google Scraper has a clear instruction to not scrape, it should not scrape, and it should not use that as a source for its training and the same for OpenAI and others. For me, it’s pretty basic. Obviously, you can have a bigger, more complex paywall, and that should be even more clear that you cannot access it. If you go around that, there is an issue. Bertrand After that, as an IP provider, you might decide to say, “You know what? I don’t care if these people are scraping, even if technically they are not right, I let them do so.” Apparently, that’s what YouTube is doing. OpenAI seems to ingest YouTube content. We saw a specific approval from Google, and I’m sure Google could block OpenAI from doing that. Bertrand The other question is output. What type of output are we talking about? If we have an AI system that’s going to replicate a song, for instance, or a book, we obviously have an issue. If it’s not replicating, but following some styles or some approach, I think it’s a different story because you could argue that’s how humans are creative. They are not creative out of nowhere. They are creative based on their histories, their culture, by listening, by reading, by somewhat copying. Bertrand Of course, if it’s go too far, you’re in trouble. But there is a lot of inspiration done by artists, so you could argue AI is the same. It’s taking inspiration. We could say, you know what? Even if it’s a similar process as an artist, we decide we want to treat that differently because it’s an AI, and that would be a fair discussion. Nuno Maybe at some point we should have the news being done by AI agents. They have video, they look at it, and they make a decision, and they summarize what happened. Bertrand It’s coming. We are talking about months, probably, before we have, and I’ve seen already, some prototypes, I mean, some AI broadcaster taking a piece of news, ingesting it, and showing you a virtual news anchor, reading the news, presenting it. I don’t know which form it will be, but it’s for sure 100% coming. Nuno Going to happen, yeah. Bertrand Is it a good thing? I don’t know. Nuno We shall soon find out. Bertrand Maybe it will be forbidden. But from a technical perspective, it’s becoming possible. For sure, we are talking of months, potentially. Nuno We shall soon find out if it’s good or not. Actually, the reason why we decided to do this episode in the first place was we saw this emergence of incredibly talent once in a generation, twice in a generation kind of entrepreneurs going into this space. Nuno The more obvious one is Elon with his acquisition of X and Twitter. We could have an argument whether it was for free speech or whatever, but it is a key media platform, and Elon went after it. Clearly that’s number one, and it cost him a bunch to go after it. Nuno Noam was the original CEO from Waze that then sold to Google, is doing post news. Unclear how much money is raised. I know he’s raised some money from Andreessen Horowitz and Scott Galloway. Unclear how successful they are today, but again, a great, great entrepreneur, a great executive, an amazing person. Nuno Kevin and Mike from Instagram did Artifact, which actually was just bought by Yahoo undisclosed. We suspect it wasn’t an amazing acquisition. Also, unclear how much money they raised in the first place. But I mean, Kevin and Mike that did Instagram going after news was a big deal. Nuno Back in the day, Eve Williams, obviously, of Twitter Fame, did Medium, which is obviously still out there, probably the biggest evolution after Blogger that we can think of, and a bunch of other things that have happened in the space that I feel are quite exciting. You have people like Kevin Systrom, Noam Bardin, Elon Musk, going after this space. Back to the point we made earlier, it is the power. It’s not a counterpart to the power. Nuno I would be a mess if I had forgotten to mention Jeff Bezos bought The Washington Post for a bunch of money, 250 million, or something like that. Clearly, news, there’s interest in this. There’s interest in big media and news platforms. Nuno We would expect a lot more innovation by now. We’ll see what Noam can come up with, what Apollo acquired, Yahoo will do with Artifact, how does Medium scale further, Substack, and all these guys. It still feels for all this talent that we haven’t had that seminal moment, the moment that changes everything, which is interesting. Bertrand Yeah. To jump on that, Elon Musk acquiring Twitter, from my perspective, there was a lot of uncertainty, but I feel at this stage, there’s definitely some stability from the platform. From my perspective, getting a lot of value from X, I should stop saying Twitter. But in a way, it was the biggest billion type acquisition by a billionaire of a media organisation when you think about it. Bertrand At the end of the day, it has been very typical of extremely wealthy individuals, at least some of them, to want to have some impact in politics. Let’s call it that way. The way to do that has been through acquisitions of magazine, newspapers, TV station, that, quite frankly, if it was just from a cash flow perspective, would not be such a good acquisition, such a good investment. Bertrand My point that it has been happening forever. I can tell you that in France, for instance, most of the press of a significant size is owned by specific family who have been very successful in their business life. I’m not saying that was a good thing or bad thing. I cannot say I have a strong opinion on this topic, actually. It has been very typical. Bertrand When people were surprised of Elon Musk acquiring Twitter, yes, it was a lot of money, but at the same time, as you say, Jeff Bezos acquired the Washington Post and so many other magazines, press, TV stations have been owned by billionaires as, I believe, a way to influence politics. Is it for personal gain or is it just because they care? I guess it depends, and you will have to ask them. Nuno There’s political notions. If it’s weaponized in a specific way, it’s propaganda. It just drives people’s opinion, it drives how they vote, it drives how they do things, it drives their mindset and how they think through things. Obviously, it’s very powerful. We’ll talk about state-owned and government-owned and government-linked news and how that’s been used, but it’s historically been that. Nuno There’s a couple of dimensions. There’s the dimension of ownership and these big players owning them, there’s the dimension of innovation, big entrepreneurs that go into the space and try to innovate the space and create new products that radically look different. Nuno There’s also the people that are the journalists that write things. I remember Ignacio Ramonet was the Chief Editor of the Le Monde Diplomatique. I think he was the guy who actually spun it out from the editorial Responsibility of Le Monde. He wrote a book called Geopolitics of Chaos, I think I’ve mentioned in a previous episode. This notion that because of historical reasons, certain parts of the world might have media that is skewed towards a specific political preference versus other parts of the world. He was talking about most parts of Europe. Nuno There was a strong left-leaning view by a lot of journalists in Europe. It had to do with Europe having been under Nazi rule and having had a World War II that was devastating to Europe. That was the counterpower. The counterpower was left. Therefore, he had this notion of the gatekeepers. I think he called it the worst thing that I’m going to say here. But the gatekeepers, they tended, at a certain point in time, that might not be true today, but when he wrote the book, it probably was, that it would be much more lenient on left-wing governments in specific countries than on right-leaning governments in specific countries. Nuno That still exists. If your country, for example, is coming out of a dictatorship, or it’s moving from a quasi-dictatorship to democracy, et cetera, it’s likely that the journalists that are writing these articles, that are writing these pieces, that are putting them together on TV, et cetera, will have their own skews. It’s not mutual. It probably never was, but that is the ultimate piece of it. It’s the person who wrote it or who put that piece together. Bertrand That’s pretty interesting. I would say the big counterargument on this is the US because there was no dictatorship, there was no war, but still, we have a very left-leaning mainstream media and journalist in general. I’m not sure how Europe has really gone through a different, I would say, exercise. I don’t know if it’s left-leaning people being attracted by media or vice versa. I’m not so sure. Nuno Maybe talking about the propaganda and the fact that we have had some recent news that are bombastic on programs and entities that we thought were amazing and walking on water in terms of their neutrality. We’re coming to a conclusion that they probably are not like NPR. Bertrand I think that a very interesting piece for me is I’ve always been surprised being originally from France, how much the state owns still some media organisation. You have many French TV stations that are owned by the state, France 2, France 3, you have radio station. It has always surprised me, and it’s quite significant. I don’t know the exact percentage, but it’s significant in term of viewership. One thing personally I like about the US is that there is no such thing except NPR and the Voice of America. Nuno There’s a couple of others, like the PBS stuff, et cetera. There’s a couple of other things that are owned. Bertrand Yeah, there might be. I think in term of viewership, it’s just dramatically different to what you would have in France and maybe some other European countries. The Voice of America, I believe, has been more targeted about outside the US, so news from America to the rest of the world in a way. Bertrand NPR has been more very local. I had some respect. I’ve known some people from that organisation long time ago. For this news organisation, it has been a bombshell a few days ago, and we’re already planning to make this episode, so it was timely. Bertrand A journalist, Yuri Berliner, published a bombshell report about his organisation, NPR, where he has been a senior journalist for 25 years. It’s really damning. When we say it’s left-leaning, it’s like 100% left-leaning in the sense that there is not a single Republican in the news organisation on the journalistic side. Bertrand It’s very clear that you don’t dare to question the leaning of the organisation and the diversity of thoughts and opinion of the organisation. If you dare to question, then obviously you are going to close about the dirty secret about how it’s functioning. Bertrand Obviously, there has been, following this report, some digging about Katherine Maher, the new CEO. It’s pretty horrible, to be frank, to discover that such a person will be leading what should be being state-owned, a relatively neutral news organisation. She’s incredibly clear about personal allegiance. She’s incredibly clear that the truth doesn’t really matter. It seems for her an old concept, so it’s pretty shocking. Bertrand In some ways, for me, it’s representative of a lot of mainstream media news that I’ve learned to basically not think too much about because there is no point reading it, given how biased it has become. But to see that so clearly exposed, so clearly expressed in term of opinion by a CEO, and to have all of this, from my perspective, paid by taxpayer dollar, it’s pretty shocking. Bertrand If it’s private, their choice, their decision, me as a citizen, as a listener, viewer, my choice to read it, not read it, I have as long as I have options. But in that situation where my tax dollar should pay for that, it was always a big question for me in France. It’s now a question in the US. Nuno Maybe because of the tax situation, obviously, I’m coming from Portugal originally, and there’s that type of commentary as well. That we have a relatively state-owned broadcasting company, et cetera. Obviously, there’s now a lot more diverse ecosystem, but back then there wasn’t. Nuno We’ll come back to this topic when we talk about polarisation and the truth. There is fundamental polarisation. Some would allege that what we’re seeing with some channels like CNN and others is a response to the Fox News effect of going fully to the right and turning news in some ways, maybe into too much entertainment, some cases, maybe too less facts. Others would say, like you said earlier, that maybe the US is always very left-leaning on news, and Fox News was the knee-jerk reaction to that. Bertrand It is potentially true, actually. Nuno Which could be true I’m not sure. I’m not a Fox News watcher. I have difficulty watching it for a variety of reasons. I can go into in a more informal context, I think what’s happened to the news is that notion, the notion that it’s difficult to watch neutral news. I couldn’t really point you to many newscast, news programs where I’d say there’s an intrinsic neutrality. If there’s no intrinsic neutrality news, you have to go either to the edges that you’re more comfortable in. Nuno If you’re looking for reinforcement, you’ll go to my right-leaning or left-leaning news in terms of public opinion, policy, etc. Or if you’re more moderate, and you want to stay more in the middle, you have to find things on both sides that you can still consume and then educate yourself as much as you can to figure out, where do I lean on this? What do I believe in? What do I don’t believe in? What is important to me? What is not? Nuno Or you stop watching the news altogether, which is also a possibility. I have to be honest, I did it for a while. I consumed very little news for a period of time. It’s great. Your happiness levels definitely go up. The world is like, fine. Bertrand That’s a great point. My big issue is a lot of news from the perspective that if it’s not based on historical perspective, data analysis, for me, it’s not really interesting because ultimately it’s just an opinion. That’s why I don’t especially watch more Fox News than CNN, for instance. Bertrand To your point, I think more about Murdoch being a smart businessman. He probably saw that not as a knee-jerk reaction, but more like, “Hey, there is a business opportunity. This space is wide open. They are all on the left, or they all move to the left or to the centre left. If I go full in on the right, there should be an opportunity for me.” Bertrand I think it was more very calculated as rational, in a way, business decision, whether you like it or not. But again, from my perspective, it’s a private organisation. You are free to watch or not watch. You can subscribe for it, not subscribe for it. It’s an easier perspective. But to your point, I personally go back way more into, I want to find experts that over days, weeks, months, become more and more credible because what they say ultimately connect well to reality. That has been my perspective. Bertrand I must admit that X has been a great source for me of finding experts. From there, potentially subscribing and paying for newsletter to find not just news, but stuff that help me understand what’s happening in the world, what happened in the world, and potentially give me insights into where the world is going. Bertrand I want from my perspective, at least as close to the reality, because I care about the reality where I live, and I care about being able to predict where the future is going in some ways. That sounds maybe arrogant, but as someone who has a foot on the VC side, a foot as an entrepreneur, understanding where the world is going, I believe, is pretty important. Nuno Just to qualify a little bit, obviously, when we talk about left and right, these things are not magical things that we are pundits on that we can identify, but I would say there’s always a nuance on how we describe it. Left in the US is not the same as left in Portugal or France. The US, you cannot have a Communist Party. Full stop, done. Portugal, there’s still a Communist Party. They’re not very big. They’re not super significant. Bertrand Is it still true, actually? Is it still true? I don’t know. Nuno We’re talking about things in a nuanced manner, based on the history that they are. Again, we’re not political pundits. We’re not the best guys in the world to give views on this, but we’re just trying to frame the discussion in our perspective based on that, based on those nuances between countries and how we see them evolving, having lived in a bunch of different places all over the world, including, as you guys know, in China, both Bertrand and myself have lived in China. Maybe that’s a good segue for our next thing around polarisation and censorship and all that stuff. I have to be honest, I forget the name of the newspaper. What’s the name of the English newspaper published in China? Bertrand China Daily. Nuno China Daily, yeah. Everyone’s like, “Why do you read China Daily?” It’s like, “Because I know what their perspective is.” The great thing is once you know what the editorial perspective is, and then everything you see has a skew. It’s like there’s always a skew. Bertrand It’s like the old truth about the Pravda, the official magazine of Communist Russia. It could not be further from the truth in term of journal. I still remember that joke where they apparently made this article, I guess, in the ’80s. Bertrand Of course, it was well known that in Russia at the time, good luck finding bread. People would line up in front of bakeries to try to get some bread if you had the money to get some. At some point, they run a story about, you know what? It’s the same in France. They picked a very trendy high-end bakery where actually, indeed, people were lining up because it was considered the best bread of Paris. All the crazy is about bread. We go there and wake up early and get bread. But the Pravda version was, “That’s the same in France. They’re also in trouble to find bread, so they have to line up.” Nuno Yes. Bertrand From my perspective, yeah, China Daily is probably quite similar, unfortunately. But you’re right, at least you probably know what to expect. Nuno I know what’s the perspective. I think it would be great if everyone just published. This is most of our editorial team. This is how we’re leaning. That’s how we lean. Maybe they don’t put names, but like an anonymised data so that we have a view. Bertrand I actually have some anecdote I want to share about. You talk about stories where you have seen the news, and you have I have seen how it’s reported. I have seen that on China Daily. It’s pretty interesting to say the least. Nuno Obviously, news can be censored, and in many markets, it is. It can be used as propaganda. It can be even used as brainwashing. Totally changing how reality seen in certain places in the world. I suspect there aren’t many people listening to us in North Korea. Hopefully, we’ll be safe on that. Clearly, there is a specific line of what is being said and how they’re living versus the rest of the world. It’s a hard core brainwashing at the end of the day that the news can provide. Nuno I feel the more nuanced thing that’s happening nowadays is news is being used as a polariser, as something that pushes you to an edge or the other because of what we discussed earlier, because of that incentive to make money out of news that pushes you to go two extremes, you either really hate it or you really love it in some ways. Normally hate is more powerful. Normally a negative is more powerful. That is aimed at reinforcing your own beliefs. Nuno In the case that I was making earlier, either you’re moderate, and you want to read stuff in the middle, or you don’t read news at all because you don’t trust it at all. Or the other two extremes, you go one way or the other in terms of your view and what you read and what you listen to and what you watch. Nuno I’d say the one that’s winning is clearly the latter. That’s why, for example, this country is becoming so polarised because people want to listen and read and watch things that reinforce their views of the world. The pundits, the podcasters, the newscasters that play to that tend to win because it’s easier. It’s a path of least resistance. Nuno We talk about it in startups and consumer investing all the time. It’s the path of least resistance. Is this the path of least resistance for the consumer? Is this user flow, as we call it, the path of least resistance? News has figured it out as well. Nuno I think right now there’s a lot of stuff that just reinforces people’s beliefs. That dialogue in the middle is very difficult to find it, very, very difficult to find. To Bertrand’s point, then you need to have the people you follow on Twitter, see what we call Twitter is X now, people that have agreements, disagreements, maybe some more interested and instructed panels and discussions out there where you put people with very significantly different views with an amazing moderator and see what comes out of it. Nuno I don’t know, but certainly that is less and less. What we have more is more and more the pedalling up of animosity, extreme views, polarisation. Bertrand Yeah, it’s a good point. It’s very tough to see some very good, intelligent questioning discussion with strong moderators who are smart enough to really understand both sides of the equation and to understand that sometimes actually each side could have a point. To be clear, I think there are some truth that in some ways are self-evident based on maths and physics, and it’s pretty tough if you start questioning that. Nuno Even science changes, though, but yes. Bertrand You’re right. The definition of science is that you have to keep questioning it. At the end of the day, if you stop questioning it, it’s probably not science anymore. To be clear, it cannot be just dumb questioning. It has to be with relevant arguments, relevant experiments, relevant data, making sure that all of this is right. Again, personally, I think that way because that’s who I am, but that’s also who I want to be, and that’s also the world I want to live. Bertrand From my perspective, the truth matter 100%, but there would be, obviously, some points where people have to disagree. If you take religion, for instance, some will have strong opinion based on religious belief or lack of religious belief, it’s very tough to argument at some point. You have your opinion on this. It might be tough to say that is an obvious truth. Nuno It’s not that people can’t have opinions and strong opinions at that, I think my hope is that there’s just more dialogue than we’ve had in the last maybe 8-10 years. It feels like there’s less and less capacity for people to just stop and say, I’ll listen to you. I currently don’t agree with you, but I’ll listen to you. Let’s have the conversation. Nuno There’s less appetite to do that, and it’s a shame because I agree with you, the truth does matter, and in some cases, there is a truth that you can get to. Either because you were there, you saw it, or because you have enough data points to make that call. Sometimes it’s a little bit more tricky to know what the truth is, but the truth does matter. Bertrand To this point, I think you want to strive to find the truth. Ultimately, you talk about dialogue, and I totally agree, but I think dialogue has to be informed as much as possible. Part of being informed means running experiments or talking about the results of experiments or having deep data series on some specific topics, trying to understand carefully the data, trying to make sure the data is as clean as possible, and base your discussion on that. Because it’s okay to disagree about what should be done about some topics, but if at the root, you don’t even have the same data to comprehend, to share, to discuss, it’s hard. It’s very hard. Bertrand I’m always surprised when some topics have actually data available, but it’s not going back on that. On the contrary, when there is very few data, where there is questionable data, but this data is constantly put in front as if it was the truth. Nuno Yeah, the manipulation of data, the cherry-picking of data. There’s the famous book, the How to Lie Using Charts. Just change the perspective on charts and how you present it- Bertrand Totally. Nuno -and numbers. There’s many ways to do it. It’s getting worse because now we have deep fakes. Now you’re like, what do I trust? Bertrand There is manipulation and there is a fake. But data series is a great example. You can tell a story if you pick data for the past 20 years, if you pick data for the past 50 years, if you pick data for past 100 years, and you will have another story for the past 200 or 2,000 years. Bertrand For me, this one is really amazing because it’s very interesting how right now, for instance, I’ve noticed, I won’t go into details, but a lot of instances of data manipulation just based on how far back are you looking at? I would strongly suggest people listening, look at how far back is the data going, try to go as far as possible. From going as far as possible, usually you will be quite shocked by what you discover. Nuno Maybe just to end, what is the new counterpower? What are the checks and balances to news that has been hijacked by clickbait and other things out there? I’m not sure. I’m not sure I have a great answer. I think it’s hopefully more educated people over time. I don’t know. Bertrand I think it’s certainly part, as I was going to say, it’s you using your judgment to do that. People have to be educated and want to be keen on looking for the truth. I also believe that some platforms, if they are free of censorship, can be a solution for that. Personally, I see X as a solution for that. YouTube, partially, but there has been more censorship on this. Facebook as well, I seem to have had more censorship. For me, it’s combined with freedom of speech. If you don’t have freedom of speech, ultimately, very quickly, it might take you don’t have freedom of thought either. Nuno Very interesting. Education seems to be the key to this, or a founder that comes up with the ultimate solution that shows us news in probably not its raw state, but probably showing the cues that news have, what’s the balance of opinion. I think there was an app trying to do that. I’m not sure they’ve done well. Hopefully, maybe there will be some technology solution to this as well. Year of election in the US is always a bit of a tricky thing. Bertrand I think every election seems to have some story related to the spread or actually the blocking of news, depending on where you look at. I guess this year will be somewhat the same. I think from my perspective, it goes back to freedom of speech as a solution for that. It goes back to you doing your own judgment and analysis about the news. I think these two parts are critical because as you say, there is a lot of stupid thoughts out there more than before, and you have to filter more. Nuno I just had a conversation with a very good friend of mine who was someone very connected to public administration, public sector throughout his career, and actually owned a couple of local publications. I was telling him, this year I’m so concerned about what’s going on. My only wish is there’s no violence, that nobody dies, I think was the exact words I said, that nobody dies because of these elections. Nuno It was interesting the way he put it because I was quite concerned up until the election. He was like, I’m quite concerned on the after the election. I’m less concerned on the up to the election. I’m very concerned after the election. Nuno Obviously, January 6th and what happened last time. We were discussing the scenarios. Trump wins, Trump loses. I’m like, “I don’t see a good scenario here at all.” I still keep my wish that I hope nobody dies because of this thing, because an exercise of a democracy that should be relatively mature. Again, young country, but relatively mature democracy, hopefully. I hope not. I hope certainly that the news and media don’t have special effect on that. Maybe it’s just wishful thinking. Bertrand I don’t know. I feel it’s definitely critical I agree with you. I don’t know if nobody dies. I expect the US to be a quite stable democracy. I think at the end of the day, there is also, obviously, it’s not just news. If you go further in term of election, a big question for a lot of people, obviously, is around, is the election safe from interference? Bertrand Talking about interference, you can interfere with the news, with the discussion and all of this, but you could also interfere directly with the election. From my perspective, there is always a question of how safe is it from this, from interference? Bertrand I’m always surprised you cannot vote in France. I don’t think any other European country or Japan without a state-issued ID. The fact that it’s even a discussion is really a big question mark for me here in the US. I don’t really understand. Bertrand Obviously, we have more and more technology, counting vote, machines to convert. Being a computer engineer, I know stuff can be manipulated. Unfortunately, hacker can do stuff. I hope we are careful enough as this is important enough, make sure that we don’t just trust machines, but we can have a separate counting on paper to confirm anything coming. Bertrand Maybe the last piece for me it’s also, again, always a question mark, why don’t I get the results? I’m clear and certain the next day. This is what happened in most democracies, Western democracies, so I’m not sure why we cannot get that in the US. It feels like each time it’s adding to an additional layer of uncertainty that, again, I don’t feel I’m having in Europe. Nuno Indeed, and hoping for the best in the elections, at least, that the news doesn’t influence it too dramatic. I’m sure it will influence it, but not too dramatically, hopefully. Bertrand Going back to election, I think news is one part of the story. News are always influencing. The question is, do we have a nefarious actor or not? I guess some will always try, but the vibrancy of a democracy is measured to how it can withstand attacks, so I’m certainly hopeful. Bertrand In term of news, for me, the mainstream media is, if not totally dead, certainly a former shadow of itself. But that’s okay. That’s life. That’s evolution. There is not a single reason why one industry should be preserved from technology. Bertrand Technology enable, as you say, it’s not just about broadcast anymore. We can go one to few, one to one. That’s what happened with technology. I think ultimately it’s for the better. I feel I’m a more informed person now, today in that situation. I have to put more work, but by putting more work, I’m better informed. Sometimes the truth might be harder to take, but I prefer that. Nuno Very good. Bertrand Thank you, Nuno. Nuno Thank you, Bertrand.