Here’s what’s covered on this week’s episode:
Transcript (this is an automated transcript):
MPD: Welcome everybody. I'm Mark Peter Davis, managing partner of Interplay. I'm on a mission to help entrepreneurs advance society. This podcast is part of that effort. We've got our standard partner meeting format today. Pretty great to have the gang back. We had a lot of travel going on and everyone corralled back in the states.
We've got some interesting conversations for you. Mike and I dive into the impact of AI on Google and other search engines. Which could be pretty severe. Chris just came back from a trip to China gives us a market catch up, but also makes the point that from what he was seeing, the quality of life in China may already be five to 10 years ahead of where we are in America.
So we're gonna dive into that a little bit and then get some more on that in the coming weeks. Fong does a great bit on demand generation. We got Brett covering. Some of the major happenings in blockchain. So anyway, I hope you enjoy it. I think it's a good segment. And here we go.
What's up, Mikey? You're low energy today.
Mike Rogers: No, I'm good man. I'm vibing. Our coffee machine's broken, so I haven't caffeinated yet, but other than that, things are good.
MPD: We talk coffee machines for quick second.
Mike Rogers: Yeah, I think there's a train on coffee machines. They're all trying to get super techy. We have one, I won't name names cause it's not very nice, but like it breaks it never broke the old coffee machines.
They just made coffee. Like the coffee
MPD: thing. Yeah,
Mike Rogers: coffee. Mr. Coffee. Mr. Coffee. Yeah. You gotta cy a plastic with it every time.
Who didn't grow up with a cytoplast,
MPD: so I'll put a name in only because I'm having a good experience. I'm on the broy train. B R U V I.
And it's like a Keurig type pod thing, but the two things, it's tech enabled, all this other stuff that's like the given now, you know there's an app that you don't need stuff break. Yeah. So far it's been good, but the two things is, one is the decaf is Swiss water meth, the decaf. And two is the pods supposedly are reasonable in a landfill.
They break down Do, do you drink
Mike Rogers: less decaf coffee now because you have to make a new pod every time as opposed to just brewing an entire pot?
MPD: Probably a little less. How many pods?
Mike Rogers: Not a lot less. How many pods do you have today? Eight.
MPD: Five to eight.
Mike Rogers: Really, that's not good. Not gonna be happy about
MPD: that. I love coffee flavors, so it's, I'm trying to rotate between tea and coffee.
Every other drink. But in an old me would just, what about down cups of decaf? What about water? It's overrated. I don't What's water? Water's in coffee.
Mike Rogers: All right, so good transition for you here is when will our coffee machines use ai?
MPD: Okay. Forget coffee machines. Let's talk about ai. Yeah.
Here's a thread for you. Look, ai, all the hype this year open, AI pops out. Everyone's freaking out. The turns out the big tech companies have their own AI platforms. They've opened 'em up. It's not maturing, but the market's actually shifting a little bit now and things are advancing. It's no longer this instant hysteria, and now there's real operations and business decisions being made and starting enter the market. What are you seeing? Yeah,
Mike Rogers: We're seeing this application layer get built, and then on top of that application layer, we're starting to see lots of native apps get built.
So the kind of the metaphor for folks here is The iPhone to the app store to apps, right? The app store is the application layer that enables the apps to get built. On top of that sits apps where people can build things, leveraging the AI brain call it, and this says, say the iPhone of open ai or.
Eventually, I think it'll be Google's platforms too and other competitors also. I think people right now feel like it's a one or two or maybe three horse race. Clearly Google's missed a step here being there, that they were the kind of the core originators of this technology way back in the day.
It just didn't get there as fast soap and ai, which, is a conversation we were having the other day about large incumbents versus new entrants to the market and who can move faster, be more nimble and actually get shit done. And this is another example of a startup that came in and built the best, most efficient AI platform and is now, a 20, 30, 50 trillion company perhaps, right?
MPD: Hold on here. This is where, what I'm hearing from my con private conversations differs from the media thread, what you just dropped as a video thread, as OpenAI is going to eat, the AI become the AI platform of choice record. That's not what I'm hearing from people at the big companies. What I'm hearing from people at the big companies is we all have crazy internal AI that is better than open ai.
Now that Open AI has made theirs public, the big companies are now rolling theirs out and doing it slow and systematically, but that the technology's better. I don't know if that's true or not. There's no, this is just word of mouth. So there's a real question and the reason apparently why Microsoft invested in Open AI is they weren't the only ones who didn't have a play internal already.
So I think where this evolves to on the platform level is we're gonna have a Microsoft AI platform at Google, a Facebook AI platform. Whatever. It's big tech. Yeah. This is gonna be another major, just like everyone's compet, there's Amazon Web Services and Google. It's and there's Google Cloud.
This is gonna be just another division. And then all of the entrepreneurs out there, g can't bear the a zillion dollars. It takes the upfront cost to build out a platform. At this stage, we're gonna be building application layer on top, and we're starting to see application layer. Now we're seeing it integrated into all sorts of a apps from office productivity to other things, and it's just starting.
Yeah. The applications are gonna be immense. It's gonna become part of daily life for almost everybody I think. Yeah, it's gonna be everywhere.
Mike Rogers: I think the biggest so guess to your initial point. I think, I'm sure that others have interesting platforms. I'm a little bit of as skeptic to think that they're better or more powerful than opening eyes.
Just given that, like why wouldn't they have weaponized them first? This is gonna hurt Google. There's no way. It's not, so if Google really had the best platform, Why wouldn't they have leveraged this into their Google search platform or try to steer the market in their direction? So I'm not saying you're wrong, I'm just saying it, it does bear some
MPD: thought on, on strategy.
I'm not telling my sources are right either, but Yeah, no, they, the Google side is really interesting in particular, and as Microsoft got Bing and that's their play on the search engine division of the big tech. When you look at what AI is being used for a lot right now, this is like when you're going to a destination versus kind of a, all these applications, it's gonna be integrated in so many different things that we're, other apps we're using other things.
So it's not gonna be just about search, but the first core use of search, there's two types of search right there, is I'm looking for a destination website. Which Google and others are really good at. And then there's, I have a question. I'm looking for information, and this is where they don't hold much of a candle to the AI platforms.
And those, I don't know what percentage of search is the information gathering. But if Google has had this and hasn't integrated launched it, used it, it all shake out. But big strategic, let me say it this way. OpenAI has been a catalyst for the market advancing, at the very least.
Yeah. And. I agree with everything you're saying.
Mike Rogers: I think the search question is an interesting one. I don't know what search will look like going forward with this, right? Because in some sense it's all information seeking. So unless you're going to watch a video, which is not in the open AI or chat g p t kind of mainframe right now, maybe it will be Kind of everything you do on Google, whether you're asking a question or not, is information seeking that in some way, shape or form.
Like you can get the answer from chat g p T, right? And probably better and faster and today, maybe not more accurate, but soon to be more accurate, right? So I think this is the first fundamental shift that actually represents a core risk to go Google's search business.
Yeah. And then what
that means going forward is very interesting.
So if you're a brand right now, you're reaching your customers through seo, what does that look like in the world of chat? C B T? Is it? If you say, Hey, what's the best deodorant? It says, here's the best deodorant, or there's a sponsored deodorant above the ones that it thinks are the best deodorant based upon whatever criteria the AI model thinks.
It makes the best deodorant. So there's a whole layer of consumer advertising that I think is actually the most interesting part to think about this right now, because that, I don't know what's gonna happen long term. We don't know what's gonna happen long term, but short term, we know people are gonna move from Google search to asking questions to an ai.
So when that happens, what happens to seo? And I think that's the trillion dollar question that a lot of companies have to think about right now.
MPD: My hypothesis is the two are gonna integrate. It's gonna be, it at, from a consumer interface perspective, it's a search bar. It doesn't matter what website it's on.
And I, and I'm saying this and I feel the same way about messages like email, text messages, slack, that should all be in one feed. I do not care what platform it's on, put it in one feed. And unfortunately APIs are not open and do not allow that right now. But the Where I think this goes, if Google does have a good technology, is I think we're gonna start seeing components of this show up.
This is what I would assume in the Google interface. And so the question then is, would this, there's two dimensions to the. Ai, right? One is the opening the API of it to support a whole myriad of other applications. But within search itself, I think it's gonna start to get integrated. So if I was Microsoft and they're behind open ai, I would be having this integrating into banging.
I'm sure they're already working on it.
Mike Rogers: There is. Yeah, there you go. Yes. So it's in bang and like Google has their version of this. When you ask a question in Google you get answers now.
MPD: Even before this. But it'll be different. When you, and I know once you do the chat G B T experience, you can see but that's my
Mike Rogers: point, man. My point is, Google can't go that far because Google makes their money on you searching for something, them giving you an answer, and then there's five paid links for relevant sources below that. Where does that business go when you're used to going to chat G p T and just getting an answer,
Yeah, it has to. It has to evolve. The advertising medium has to evolve for sure. Because the way the information's gonna be delivered is different for sure. But
Mike Rogers: this isn't like the old media days when you were writing your first checks back in the under years. It is, oh my God. Where, you add moderately large ad budgets online, but really nothing like the scale we see today.
You're talking about Google's basically 60% of their entire revenue stream. I think it's something like 60%. That's huge. Is this business. What happens to that in this game? It's not gonna go away overnight, but it's the first real threat they've faced in their core search business in Yeah.
MPD: A decade,
at least food for thought. It's gonna be an interesting ride to watch. Yeah. But this is certainly the mega trend happening right now. All right. Thank you, Mikey. All right, Fong. Hi, mark. What do you got for us this
Phuong Ireland: week? Yeah. Today I'm gonna take everyone back to the very earliest stages of starting a business.
So before you built a team, before you reach product market fit, before you even have an M v mvp, I'm gonna talk about how after coming up with a business idea, do you go about validating that idea before seeking resources into developing an M V P. Now, the first thing you should do before you even talk about the product is to validate that you have a real pain point.
Are you solving a real problem that a lot of people have and feel passionate about? The answer has to be, yes. Your product needs to be a painkiller, something that people have to have, right? It can't be just a vitamin that people think it's nice to have, but could live without. So the best way to validate this is to talk to potential customers, people in your target market that you suspect have the problem when you talk to them.
Don't even mention the product idea. Instead, you can describe the pain point and ask open-ended questions around it. Some questions you can ask are, describe your experience around this problem. I know that's not a question, but that's a good, that's a good thing to ask them to do. How do you currently solve this problem?
How often do you have this problem? Have you tried to find a solution? If so, what's worked? Why did it work? Why did it not? And then finally, how much would you pay to solve this problem? I think once you start asking these questions, you'll get a feeling of comfort around whether this is an actually a true pain point.
And then it's time to validate the product idea, right? So once you feel like it's a true pain point and you have the idea for the product, you can validate that. Get reactions from real people so that you can, one, understand whether the product idea really solves the pain point that you've identified.
And two, you need to gather feedback so that you can best communicate your product to customers. And so that's what you're doing here, and you can do that by creating a landing page or a marketing website. So the idea is, make a really simple landing page, but make it look as real as possible, as if the product and the company actually really exists.
Describe the product. Communicate what it is, who it's for, how to use it. You can use imagery if possible to bring it more to life. And then include call to action buttons, buy now or learn more or sign up. I think if you do this, you can quantitatively measure the click through, engage if people are really interested and would be willing to buy.
There are a lot of tools you can do to. To you could use to do this. Wix, Squarespace, Figma, whatever is easiest for you. Once you have the website, it's gather, you should gather reactions to the website so that you can fine tune the messaging, figure out whether you're communicating it right.
So you can do this by sitting with potential customers, either in person or with a screen share, and show them on the website. Don't interrupt them, don't try to explain anything. Don't leave them, but just watch how they interact with it. And then again, ask open-ended questions. What do you think this is?
Who's it for? What do you think it does? What stands out most? What do you like or dislike about this? And then once you have this feedback, you can refine the messaging on your website. And at this point, you are ready to run a paid advertising campaign. You can drive potential customers to your website, and then this way you can get quantitative feedback from a completely independent.
Unbiased group of potential buyers, you don't really need to spend a lot of money on this campaign. I think maybe a hundred or 200 bucks can get you a statistically significant sample size. And then when you're assessing campaign results, look at metrics such as, the number of views the ad had click through from the ad, the website traffic that the ad generated how long people are staying on your website.
And then, really important is to look at the click throughs on your call to action buttons, because this is gonna give you an idea of purchase intent. So then with this information, you can really assess whether you have a product idea that's worth pursuing if the results don't look great. And you're sure it's not a communication issue.
And I think if you did all the steps that I previously discussed correctly, then it shouldn't be. Then you need to pivot your product and then if you're getting really great feedback or great feedback, then you can start spending money and resources to build out your m p. Yeah, and that's what I have today for validating your business idea.
MPD: That is super useful. I want to add one thing. Here's what's not validation. Someone who will be worried about hurting your feelings, either cuz they already know you or because you're standing in front of them and them saying, yeah, it's a good idea. Like your mom. Because people will lie to you to be polite.
Yep. And that is the reality of a mistake. I've made plenty in my younger years. You need to sell something to people who actually want to buy it. And that is a foundational basic thing and it's a lot cheaper to test that before you build anything. That's the whole lean method is putting the, switching the order of those two.
So my strong recommendation, everyone is y and having started a lot of companies in my career, there's a vacuum silence. When you try to sell something people don't want. And when you find product market fit, people are asking you for it. Oh, you have more of that. I want that. So if you're not hearing it, cha, make it, make a move, change something.
There's a real, you can hear demand, right? If you can't hear any demand. Don't do that business. Change something and do it fast because the cost is your time. Yeah, for sure.
Phuong Ireland: And make sure that you're talking to people who are the right target market and to your point, not biased in any way and not being polite.
Yeah. Go. And I think having these different go sell it to people methodologies. Exactly.
MPD: And even if you don't have it, go sell it. And if people say, I wanna buy that, I'll pay, then you make it.
Phuong Ireland: And I think using different methodologies in, really speaking to people, having ads speak for themselves, having your website speak for themselves I think that will give you a mixed mixed feedback.
That will really give, get to a true answer of whether or not you have demand for your product.
MPD: Thank you, Fong. Thanks. All right, Brett. CR crypto prices are up. Bitcoin hit 30 K. Which I love that smile that just hit your face. I know.
Brett Palatiello: It's like a breath of fresh air
MPD: and all the stuff that's we're also hearing different tone and energy from the investment community now, and we're talking to people the.
The dark cloud of the FTX scandal is starting to dissipate, and people are starting to talk about investments and strategic opportunities again. Fear seems to be dissipating and opportunism seems to be returning. So early days of that, but refreshing.
Brett Palatiello: Yeah. No I've definitely felt more positive vibes.
Now that the FTX event is more or less in the rear view people are really starting to forge ahead and pick up where they were prior to All these bad incidents last year. So it's great. And a lot of the people that I've been involved with for some time are still in it, still thriving and yeah, it's just, it's great to see that enthusiasm starting to, to return.
MPD: That's awesome. Okay. What else do you got for us this week?
Brett Palatiello: Yeah. Something that's exciting for me it's a little bit more on the technical side but I think it's something everybody in crypto should appreciate, but Ethereum upgraded to they, they upgraded, it's called the Shanghai Fork also known as Chappelle.
So when in order to secure Ethereum, you need to stake Ethereum. Earlier this year Ethereum switch from proof of work to proof of stake. So in order to secure the network, you need to stake a certain amount of Ethereum. People have been unable to withdraw the Ethereum that they've de deposited.
So the Chappelle upgrade now allows validators to withdraw their stake which is great. The staking rate on Ethereum is about 15% whereas other proof of state networks are about 50%. And part of that reason is the uncertainty around withdrawals people. Didn't know when they would happen, how seamless they would be.
I anticipate that we'll see the staking rate go up and and that's a great thing for the security of the of the network. And another thing to do sorry,
MPD: go ahead. Yeah, I was gonna say so what this means though is people are saying, Hey, I'm in a stake. I'm gonna put my money up to say that when my computer determines what transactions were done, it's right.
I'm guaranteeing it. Yeah. But they couldn't get their money back.
Brett Palatiello: Yes. And now they can. Yeah. Yeah. And there was a lot of uncertainty around that, so that's why the staking rate was so low. And yeah, the staking mechanism is used to enforce rewards. It's also used for consensus in terms of waiting how many votes certain validators get.
So it's very important to the protocol. But now that people have liquidity, it's it's, it should open up the door for. For more people. Lending, essentially their e to secure the network and a testament to the e to all the hard work by the people involved at the Ethereum Foundation and other adjacent companies.
It went very smoothly. I think there was about 10 million worth of eth. That was withdrawn within the first hour, which is about 10 million bucks, which isn't bad. There was a lot of speculation that there would be mass withdrawals in sales, which would be detrimental to Ethereum's price, but it's held up relatively well.
And my hypothesis is that the people that were willing to stake without knowing when they can withdraw, were people that had a lot of conviction. In Ethereum. So it wasn't necessarily that, they're strapped for cash or that they no longer believe in Ethereum or the price. Their staking is more sticky.
And yeah it's great to see everything went
Mike Rogers: smoothly.
Chris Zhang: Got it. Very cool. Very cool.
MPD: we haven't recorded it a little bit. It's great to have you back. You were in China for a while seeing family.
Chris Zhang: Yes, that's right. Finally adjusted for jet lag. Oh my god, it's awful. Horrible. 12 hours, the worst possible jet lag you can get.
I was an eye-opening experience this time. We'll talk about it offline more.
MPD: Yeah. When was the last time you were back before this
Chris Zhang: trip? Four, four years ago. Pre pandemic. Anything Change, lot, everything. It felt like a different country to me this summer. Infrastructure, lifestyle. Honestly, EVs technologies in general, I think they've made leaps that we've never seen before in the past four or five years.
MPD: Yeah. What do you wanna hit this week?
Chris Zhang: I feel like, it's been a, it's been about a month since we last chat, and I think we should do a bit of a recap. Yeah. And a summary of what has transpired since the collapse of svp. So let's start maybe with the economy and just want give you some highlights on what I've seen since I've been back.
The broader picture is that the US economy has started to weaken which is actually a good news for especially in the battle for inflation. Retail sales has gone down and in fact, the one for Mars, it just came out as negative 1% as, which is two, two times as bad as expected. Import export prices are falling.
C p, which came out also for March. This week is at the lowest we've seen since this whole inflation battle has started. Headline is still around 5%, but core CPI month on month for month, which is what really matters here is at 0.4% and lower than expected, and we're definitely treading in the right direction.
The fat minutes that came out which showed detailed the conversations the Fed officials had in, in March when they were hiking showed that overall the Fed officials are less inclined to hike rates this year as markets was pricing in, especially in the aftermath of svb. But they are still determined to fight inflation until, the headline rates goes back down to 2%.
So the net result of all that, weakening the economy and fed, is that the job mark is also cooling down. So we're seeing, initial jobless claims climbing. So everything's really trending in the right direction here when it comes to the battle with inflation, which is good. Now, that's the economy.
So what, how has the market responded to all that? Before I left we, in the immediate math of s svb, the market reaction was so drastic that it's something that we haven't seen for a long time. We went from a hiking path straight to a cutting path. I think at the time mark was pricing the Fed would be on pause and a hundred basis point worth cuts.
By the end of the year, since I've been back, that picture has changed. Especially since market has calmed down quite a bit since then especially in the financial sector and inflation is also coming back down a little bit as expected. So now the market is pricing in a final hype in the main meeting that's coming up of 25 basis point, which will bring us to the lower bound of 5% and a 50 basis point cut by the end of the year as opposed to a hundred basis point.
Which is much more reasonable in my opinion. In fact, my personal opinion is that, given how volatility has gone down and inflation is also turning in the right direction, but not there yet, I think the Fed will be at around 5% and then stay there for the rest of the year. So there's still a little bit of a disconnect in terms of what the market is, what the market wants, and what I think is reasonable.
Markets are usually optimistic. And in the stock markets you can see that very clearly. Before I left, I also predicted that big tech will definitely benefit from all of this and sure they did. Apples up 8% in the past month. Amazon up seven, meta up 14, alphabet up 15.
Netflix up 15. The biggest names have all but recovered fully from their pandemic lows. And SV v Lows, s and p overall is up five 5%. So we're at a point where, there're more bulls now than bears in the market. And when it comes to public stocks which I think is a point for caution.
I think people should realize that the Fed is not gonna be as accommodative as they think. And. And the stock market is a little bit overheated at the moment. We're, from the invest investing side in the family office, we're also seeing quite a lot of activities picking up in the private markets too.
I'm sure that's what the venture side is seeing and, deals are getting done. Of course, that as still reasonable valuation and things are definitely trending back and
MPD: it's been great. Do you think this is, Us entering back into normalcy and, there'll be some bumps in the road, but things are normalizing and we're on, we've reset and we're on our new trajectory.
Or is this a momentary moment of bliss? That things are positive, but there's a shit storm coming around the corner. Yeah,
Chris Zhang: great question. I think the immediate risk of market collapse has, at this point, dissipated and gone away. So we, looking at the horizon, there's not a lot of risky events that are foreseeable that the market is preparing for and being cautious about.
Which is why there's a momentum to go up. That's not to say that we don't have things to worry about in the medium term, or of course in longer term the war is still not over. The battle with the inflation is not over the the overall employment picture is not over. The labor market is still very tight, and we need to correct that in, in order for the economy to be in the right condition for the longer term and.
The economy is weakening. So I don't think, if you ask me what my prediction is for let's the end of the year where we would be, I think we're gonna be largely flat or unchanged and from here on. So it'll be some volatilities up and down, but there's no immediate concern up or down from here.
So it's very difficult to say. That this is it, and we're at the bottom. I don't think that's the case. There's still a lot of instabilities globally and as we've seen what's happening in France and away from the US let's say and we need to con take those into consideration.
MPD: Okay. Good recap. We're warm back up, so next week we'll hit something new. Yeah, a hundred percent. Let's talk about China. Yeah, no, I, based on some of the side convos we've already had about your trip. I'm very eager to learn more. I think the perception of China for most Americans is not aligned with what the current state is.
Chris Zhang: For a reason, I think politically it's, we're inclined to, to always think the worst of our strongest enemy. And it's but if you're, when you're on the ground and locally and you see what's actually happening not in just the, primary cities, but in a secondary, tertiary cities it's it's at this point, I think, lifestyle wise they're five, 10 years ahead of us oh yeah, we gotta pay attention.
MPD: you, Chris. Have good one. And a quick reminder for everybody. Chris is an s e c registered, r i a. So nothing he said should be construed as investment advice. All right, everybody. Thanks for listening today. We are hearing all this stuff. One thing to keep in mind as we're talking about China changes in AI and Google is the only constant is change.
And when you talk, we talk a lot about an interplay. You gotta surf the wave you're given. So under it's important to understand these con, these concepts and what's happening, but better not to get stressed about it. Be action oriented and think about what you can do and how it can impact your life positively.
Thanks for listening. We'll catch you next week.
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