Today, we are talking about Blumhouse Productions. Jason Blum’s horror film studio pioneered a unique Hollywood business model and gave us movies such as Paranormal Activity, The Purge, Get Out, Obsession and Whiplash (not a horror but still a banger).

Also this week:

• Berkshire’s $26B Google Bet

• Eric Tulksy: The Chemistry PhD in the NHL Finals

• And some wild memes (including LEGO’s La Sagrada Familia set)

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Green Eggs and Ham is one of the best-selling children’s books of all time.

It is also the embodiment of the aphorism that “constraints breed creativity”.

As the story goes, Theodor Seuss Geisel — aka Dr. Seuss (who was def not a doctor) — wrote The Cat in the Hat in 1957. The book had 236 different words. Enter Bennett Cerf, Geisel’s publisher and co-founder of Random House. Cerf challenged Geisel to write a children’s book with only 50 different words.

They bet $50 on the outcome.

In 1960, Geisel delivered his orange-covered classic with exactly 50 different words. He won the bet and the book has sold ~10 million copies over its lifetime (personally, I prefer Hop on Pop).

Can constraints be applied to an entire business model to yield creative results?

The answer is “yes,” and one of the best examples is Blumhouse Productions, the film and TV studio founded by Jason Blum in the early 2000s. It took him nearly a decade to score a smash hit with 2009’s Paranormal Activity.

It quickly became a horror hit-making machine, turbocharged by a first-look deal with Universal Pictures in 2014 (the agreement gave the major studio first dibs to finance and distribute Blumhouse projects).

In 2024, Blumhouse merged with Atomic Monster, the production house founded by James Wan (the mind behind Saw, Insidious and The Conjuring).

The merged entity is called Blumhouse-Atomic Monster and these two giants of horror are on a heater right now with two of the top-grossing films in America (both of these films were directed by under-25 Gen-Z talents that came up through YouTube):

• Backrooms (May 29, 2026 release): In 2022, 16-year-old creator Kane Parsons made a YouTube series inspired by a 4Chan post about an eerie building with endless hallways and rooms. The videos garnered tens of millions of views and Wan reached out to Parsons without realizing he was a teenager. Parsons’ father managed the connection and Wan (along with Blum) brought on A24 and Chernin Entertainment to develop a film on the concept. They convinced the studio to let Parsons direct it. After one week, the film has made $141 million on a $10 million budget.
  

• Obsession (May 15, 2026 release): Curry Barker built a YouTube channel with more than 1 million subs based on comedy skits and short horror ideas. He then filmed a 62-minute horror on a $600 budget before making Obsession — a film about a guy who makes a Faustian bargain for his crush to fall in love with him — for less than $1 million at the age of 25 (he is now 26). Blum saw it at the Toronto Film Festival and knew it was a hit. His partners at Universal’s Focus Features bought the distribution rights for $14 million. After three weeks, the film has made $151 million on that sub-$1 million budget.

These low-budget horrors are popping off at the same time that Disney’s first Star Wars film in 7 years has been a dud. The Mandalorian and Grogu is tracking to $350-400 million at the box office on a $165 million budget (and another $200-250 million on marketing).

Backrooms and Obsession are tracking to hit a comparable box office gross on a fraction of the spend.

On a pure budget-to-box-office basis, Obsession ranks near the top of all Blumhouse-affiliated films (take a look at that bonkers return column):

I have a confession before we dig into the numbers. The only films I’ve seen on this list are Get Out, BlacKkKlansman and the A+++ gem Whiplash ("Not my tempo. Were you rushing or were you dragging?")

Trung Phan does not do horror. My brother was a huge Stephen King fan and convinced me to watch The Shining when I was 8. I had nightmares for weeks. Redrum. Nope nope nope. Not for me.

Thankfully, someone took The Shining trailer and turned it into a comedy including an incredible use of Peter Gabriel’s “Solsbury Hill.” This parody video completely defanged the original film in my mind.

I am aware of all these horror film plots, though. How? I’m that dude that reads Wikipedia summaries for scary flicks. It’s pathetic. I know.

Still, I appreciate an outrageous investment track record and Blumhouse films regularly post double-digit returns on the production budget.

The biggest home run was Paranormal Activity, likely the most profitable film ever on an ROI basis.

Made on an original budget of $15,000 — which jumped to $18 million including distribution deals, re-shoots and marketing — the film grossed $193 million worldwide.

The origins of Blumhouse Productions actually traces back to another low-budget horror film that crushed at the box office: The Blair Witch Project.

Released in 1999, the “found footage” horror was made with an original budget of $60,000 and went on to gross $249 million.

At the time, Blum was working under (the now very disgraced) Harvey Weinstein at Miramax, which produced major commercial and critical hits in the 1990s including Pulp Fiction, Scream, Good Will Hunting, The English Patient and Shakespeare in Love. The latter two won Best Picture in 1997 and 1999, respectively.

Miramax didn’t make The Blair Witch Project, though.

It passed on the project multiple times and the film’s massive ROI would change the trajectory of Blum’s career.

“I watched [The Blair Witch Project] marching towards success and was reminded by my bosses what a dope I was,” Blum told Nightmare Magazine. “What was formative about the experience is that people who were older than I was and who knew more than I did also passed on this movie.”

In 2000, Blum left Miramax and formed Blum Israel Productions with another producer, Amy Israel. Two years later, Israel left and Blum launched Blumhouse Productions.

Blum made the leap at 31 years old, and Blumhouse Productions was in many ways a Venn diagram of his early life.

The Blum family had Hollywood connections dating back decades. His father was a noted art dealer and once asked comedy legend Steve Martin to read a project Blum was developing with his then roommate Noah Baumbach. That film (Kicking & Screaming) came out in 1995 but Blum and Baumbach had a falling out a few years later.

Blum also had an entrepreneurial streak. He learned how to sell and “eat what you kill” after working sales jobs in cable TV and real estate.

So, it was natural for him to eventually set up his own Hollywood production shop.

After fumbling around for a few years, Blum watched Paranormal Activity in 2007 and immediately saw the potential.

He told Nightmare Magazine that he moved quickly on the project, thus rectifying his earlier mistake with The Blair Witch Project:

When I first saw Paranormal Activity, I had gotten it in the context that it was going straight to DVD and that it wasn’t going to be distributed.

Then I watched it with an audience to check myself and saw how the audience responded and said, to the filmmaker, ‘I think there is an audience for this movie and I think it could work in a movie theater.’

And even though everyone said ‘no,’ everyone said no to Blair Witch and look what happened to that. That gave me the strength and conviction to hang on when everyone kept saying I was a dope.

As we know, Paranormal Activity went nuclear at the box office and its remarkable success showed Blum the path forward: make a lot of low-budget horror films and hope a few break out.

The Blumhouse model was to produce 10 or more films a year with each film getting a budget in the $5 million range. That is cheap by Hollywood standards (one reason the Blumhouse approach works less well in TV is that streaming platforms throw funny money at TV show-runners; top talents don’t even have to go the budget route).

Compare that with a major film studio, which puts $200 million behind a few blockbusters every year.

Once when asked what he’d do with a $50 million budget, Blum replied “I would still make ten $5 million movies.”

Part of Blum’s cost-conscious lore is that he still flies coach while Blumhouse offices are barebones (unlike major Hollywood studios).

The Blumhouse strategy is similar to that of an angel investor who is trying to find the next startup unicorn. Instead of giving a single $500,000 check to one company, he cuts $10,000 checks and hands them out to dozens of intriguing founders.

But why horror? It is the best genre for fictional low-budget films. You don’t need special effects, because gritty and raw are actually scarier. You don’t need superstar talent, because an A-list actor can actually detract from the scariness (if you’re watching Tom Cruise, you’re thinking “wow, that’s Tom Cruise…Edge of Tomorrow was dope” and not “dude, get out of the house!”).

With a $200 million superhero or summer action film, you need to have CGI and A-list stars as table stakes.

Furthermore, horror films travel internationally much better than low-budget alternatives like drama or comedy. Anyone can pee themselves watching Paranormal Activity — again, this is why I read Wikipedia summaries — while the latter two genres are more dependent on local cultural knowledge (as much as I love The Big Lebowski, the subtle jokes do not land in Southeast Asia).

In a 2017 NPR interview, Blum explained how budget constraints influence specific filmmaking decisions. He called it the “three rules” of cheap films:

• Fewer speaking parts: “Extras are a union. And extras are paid — I think they're paid $80 or $90 or $100 a day. Now, the funny thing is if an extra speaks, you have to pay an additional $400. So you'll notice [in our movies] when the waiter doesn't say anything or this post office clerk doesn't say anything…there's a reason. Because as soon as they do say something, you got to give them a check for 500 bucks. So you don't want extras to talk because it really costs you.”
  

• Not too many locations: “The most economical way to shoot a movie location-wise is to have it take place all inside a house. And you will notice a lot of our movies, in fact, do. But I would also say that [a house is] where you're most vulnerable because you're not expecting it.” (Blumhouse films that fit this bill include Insidious, Ma, Get Out, Invisible Man, Unfriended and Paranormal Activity…and, yes, I have read the Wikipedia summaries for all of these films)
  

• Pay as little salary as possible (but offer a lot of upside): Blum employs union staff on all his shoots but they work at “scale”, the minimum pay rate for unionized actors, writers and directors with an opportunity for profit participation (Blum says, “So what we do is we have box-office bonuses. If you have made a million dollars on a movie in the last two years upfront, I say to you — If the movie makes X amount of money, we're going to get you to your million dollars. If it makes beyond that, we'll get you more than a million dollars.”)

To keep these lean budgets, Blum has a formula as he explained at the Decoder Conference in 2017:

Our [$5 million] number is actually totally reverse engineered. So the number used to be $3 million then $4 million. Now, it’s $5 million.

Besides inflation…we get to the number by worst-case scenarios: what are we going to lose?

Studios do low, mid and high-ranging cases. But [their] movies can come in below their low case and often do. We can’t get worse than our low case.

[If we think we can only] get $2 million out of the United States…you don’t even put it [in theatres].

It’s a pillar to our strategy, which is: “no distribution guaranteed.”

We don’t decide how the movie is going to be distributed until it is finished. I say to the directors, “I guarantee your movie will be seen, but I’m not guaranteeing how it will be seen.”

So it might just be seen on iTunes or it might be in 3,000 theaters. We make that decision after the fact.

The “being scared with a bunch of other people in a dark room” is so important for horror films.

Compared to other film genres, horror makes much more of its total pull from the box office vs. secondary income streams (which has gone from VHS —> Cable runs —> DVD —> iTunes —> streaming).

How does Blum decide if a film is theatre-worthy?

He does multiple screenings with the director:

When you screen a movie with an audience in Burbank or Westlake Village…99 times out of 100, if you were there and I’m there and the director’s there and Universal’s there…we kind of all agree. […]

[The concept is] almost director-proof…because the bar is so low. The movie cost $5 million. If it opens to $10 million and gets to $23 million, it’s not like a home run but it’s a success.

Everyone made a little bit of money.

If the movie doesn’t come out well, it goes to iTunes and kind of disappears.

This approach is only for originals. Established IP and sequels do get a guaranteed release and the budget range is $10 million or more.

“[Sequels] follow much more closely to a traditional studio movie,” says Blum. “[Our films] are still a lot less expensive. We still don’t get paid [upfront], but they follow a line much more like a traditional studio film.”

These costs constraints on original projects unlock creativity in two major ways.

First, Blumhouse can take chances on many more scripts and directors (a $5 million flop won’t hurt as much as a $200 million flop). Second, Blumhouse offers its directors final cut in exchange for staying under budget and having compensation weighted towards a box-office bonus (which means a lower guaranteed salary).

Final cut is hugely important for creativity. In major Hollywood productions, the studios and producers often have the final say, leading to middle-of-the-way or cookie cutter compromises. This is the reason why the HBO show Entourage has so many people complaining about “bean counters” and “suits”.

“Jason gives us final cut, which is unheard of,” says Veena Sud, a showrunner for a Blumhouse TV show The Lie. “It means he trusts the artist 100%. And when you trust us, you teach us to not work in fear.”

One interesting case study from Blum’s NPR episode is the film The Boy Next Door, a thriller starring Jennifer Lopez which mostly takes place in a house. Its director — Rob Cohen — had previously worked on big budget films like The Fast and The Furious and talked about the challenge of working with much less money (in this case: $4 million):

“You're going to have to be clever. And that cleverness stretches you and makes you think outside the box because the money panacea isn't in your arsenal anymore. You have to fix the problems another way.”

If a film screens poorly, then Blumhouse and Universal don’t have to spend on marketing. A common heuristic for >$50 million films is that the marketing budget is equal to the production budget.

This additional financial pressure can also unduly influence the creative process (which is why the way Blumhouse selects distribution is helpful).

The spectre of a large check also hampers film creativity because the financier has every right to influence the process. On The Town podcast, Blum tells Matt Belloni that it is “morally objectionable” not to listen to someone who has given you $100 million.

Directors in this situation — without final cut — have to make compromises and integrate dreaded studio notes.

More money equals less control, which leads to fewer creative risks.

I previously wrote about how Rick Rubin and Steve Jobs both shared similar thoughts on the creative process. One common theme was the importance of being stubborn in one’s taste and seeing it through to the final product. By setting clear financial constraints and offering big upside, Blumhouse gives its directors an opportunity to actually see their tastes through.

In a glorious meeting of the minds, Blum actually talks about this dynamic on Rick Rubin’s podcast.

Blum: I’m sure you’re the same, but I’m a huge believer that if you reduce capital [then] more creative, better decisions get made.

Rubin: Always. We see so many projects that just have money thrown at them and it’s all decoration. There’s no substance underneath. Because the ideas are not expensive. The breakthrough ideas are not expensive.

Blum: I think the reason why it’s so rare that streaming movies break out into the culture and have a cultural impact is…[they use too much money] and they’re too expensive.

Overall, the Blumhouse model maximizes the odds of scoring an unexpected outcome.

This is how you get films such as Get Out (Jordan Peele), BlacKkKlansman (Spike Lee) and Whiplash (Damien Chazelle). These three were passed up by traditional Big Studios, yet — under Blumhouse — they went on to win Academy Awards while also making very healthy returns.

“A risk-taking creative environment on the product side requires a fiscally conservative environment [on the business side],” Steve Jobs said in the early 2000s. “Creative people are willing to take a leap in the air, but they need to know that the ground’s going to be there when they get back.”

In recent years, Blum has adapted the model because the theatre game has changed post-COVID.

Hollywood faces as much competition as ever to get people off their phones and out of the home.

Blumhouse’s two M3GAN films help shed light on how to engage audiences.

The first M3GAN came out in 2023 and made $182 million on a $12 million budget.

The much-hyped sequel (M3GAN 2.0) in 2025 disappointed by making $40 million on a $25 million budget.

Blum went on The Town podcast after the sequel’s first weekend flop. He said they took two risks that didn’t pay off: 1) genre swap (the first M3GAN was a horror while the second was a comedy thriller); and 2) they tried to make M3GAN 2.0 a summer film.

The latter point speaks to what young audiences — and the key viewer for a Blumhouse film has traditionally been women under 25 — look for in the theatre experience: a live event they can go to with all of their friends.

Blumhouse thought M3GAN was a lovable character with event potential.

It wasn’t. The first film became an event after catching a viral social media wave. But it’s very hard for studios to predictably drum up that excitement. It has to happen organically.

“I think you need theatrical events and that’s a big thing that we are looking at,” says Blum. “That’s what we have. Black Phone 2 is a theatrical event. Five Nights at Freddy’s is a theatrical event. [These are] more expensive movies. Our friends at Atomic Monster have The Conjuring and Mortal Kombat coming out.”

One interpretation of this framing is that Blumhouse will go more traditional Hollywood and lean into IP and sequels.

The success of Obsession and Backrooms points to another direction.

At the top of this piece, we talked about how directors Curry Barker and Kane Parsons learnt their craft on YouTube.

Another YouTuber — Markiplier (who has over 30 million subs) — also scored a major success in January with Iron Lung. That horror film was based on video game IP but it needed Markiplier hyping up his audience to score $50 million at the box office on a $3 million self-financed budget.

Across all three films, between 75-85% of the audience was under the age of 35.

These YouTube stars — through the parasocial relationships they develop on the platform — have passionate Gen-Z audiences they can mobilize to theatres to create an “event”.

The current YouTube-to-Hollywood wave is drawing comparisons to:

• The “New Hollywood” of the 1970s: After World War II, the Hollywood studio system put a ton of money into musicals and historical epics. In 1969, Dennis Hopper and Peter Fonda spent $400,000 on Easy Rider and scored a $60 million smash hit based on countercultural themes. Easy Rider opened the door for studios to cede authority to young auteur directors. This led to the “Movie Brats” — the most baller group of young directors ever (Francis Ford Coppola, George Lucas, Steven Spielberg, Martin Scorsese, Brian De Palma) — over the next decade.
  

• MTV in the 1980s and 1990s: A number of influential directors cut their teeth on music videos including David Fincher (Madonna’s “Vogue”, Aerosmith’s “Janie’s Got a Gun”), Spike Jonze (Beastie Boy’s “Sabotage”, Weezer’s “Buddy Holly”) and frickin’ Michael Bay (Meatloaf’s “I'd Do Anything for Love”).

The main caveat to the recent YouTuber Hollywood breakout is that these were all horror films. As we’ve discussed, this genre frequently delivers an engaged audience with high ROI films on low budgets. Also, Iron Lung and Backrooms were also existing IP to some extent.

When a YouTuber brings a smash hit comedy or drama to theatres, then we’re really cooking.

Either way, Hollywood is a full-on copycat industry and we’ll see them backing more YouTube talents to flood theatres with horrors and thrillers.

But, at the end of the day, the films actually have to deliver on narrative.

Barker and Parsons are clearly special story-telling talents (Barker is working with A24 on a reboot of The Texas Chainsaw Massacre).

As Blum explained on Hot Ones in 2025, it’s not easy making a good horror film:

[Blumhouse] looks for basic things.

First of all: is it really scary? Is the movie scary?

Not gory. Not bloody. Not gross. But scary. It’s easy to do gross. Anyone can do gross. If you have great visual effects, you can do gross. It’s really hard to do scary. Really hard.

A lot of people say, “Making horror movies is easy.”

Well, go try making a good one. It’s very, very hard to do.

Which is why I have so much respect for the artists we work with who make the movies scary.

Number two: is it suspenseful? Is it compelling?

Number three: Is it new? Does it feel different? Is it not a knockoff of something else?

We don’t achieve all three of those things on all the movies that we do, but those are the three most important things we look for going into it.

Fourth, which is really number one: who’s the director?

What I’m really interested in: what can you do on a very low budget that has mass appeal?

Tie it all together and the Blumhouse model reduces financial risk…which allows the studio to take more shots…which lets directors express their taste…which creates unique films.

This increases the odds of producing more horror hits. I will watch none of them. But I will marvel at the success (and read the Wikipedia summaries).

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Berkshire Hathaway’s $26B Bet On Google

Warren Buffett retired at the end of 2025 after a 60-year run as Berkshire Hathaway’s CEO. In the final years of his stewardship, Berkshire’s cash pile basically doubled from $200 billion to $400 billion.

In a May 2025 interview, he told CNBC’s Becky Quick that he was hunting for a $100B deal but couldn’t find anything on the stock market (counterpoint: he could have bought Wendy’s 200x over):

“I’m willing to spend $100 billion this afternoon. I’d rather have $100 billion and a really good business at a sensible price than $100 billion in cash. At certain levels, cash is necessary, but cash is not a good asset.”

Well, it looks like new Berkshire CEO Greg Abel may have found a suitable target to soak up that cash: Google.

Berkshire has now done 3 major buys of the Big Tech Giant:

• Q3 2025: $5B

• Q1 2026: $11B

• June 2026: $10B private placement (at a 6% discount)

The $26 billion Google investment is now ~$32B after gains. That is 12% of Berkshire’s equity portfolio and its 3rd holding after Apple and American Express (ahead of Coca-Cola, Bank of America, Occidental Petroleum, Chevron).

For reference, Buffett put $36B into Apple before clearing over $160B on that investment since 2016.

Berkshire has come full circle with Google. In 2019, Buffett and Charlie Munger explained why Google’s 2004 IPO was one of the only tech investments they actually regret passing on:

Munger: We screwed up.

Buffett: We did have some insights into that because we were using them at GEICO Insurance, and we were seeing the results produced. We saw that we were paying $10 a click — or whatever it might’ve been — for something that had a marginal cost to them of exactly zero. And we saw it was working for us.

Munger: We could see in our own operations how well that Google advertising was working. We just sat there sucking our thumbs. So, we’re ashamed. We’re trying to atone. Maybe Apple was atonement.

Abel has probably found his Apple. He probably won’t get a 5x on Google but the investment makes sense for two major reasons.

First, there are only a handful of companies in the world that can move the needle on Berkshire’s cash pile and the Big Goog-A-Doogs is clearly one of them.

Second, Berkshire’s $10 billion private placement is part of a larger $85B equity raise by Google to fund its AI data centre buildout (and also help offset some employee tax bills tied to equity rewards).

Abel comes from the infrastructure and energy world. About 25% of Berkshire’s $1 trillion market cap is tied to energy including oil production and utilities. Berkshire also owns one of the largest freight railroad networks in North America and spends a ton of maintenance CapEx. The compute trade is building massive data centres to turn electrons into intelligence.

This is right in Abel’s wheelhouse. In fact, Berkshire Hathaway Energy already powers a ton of data centres in America. Abel says that 15% of all America’s natural gas runs through its pipes and a number of end customers are the hyper-scalers.

Berkshire investing in Google is form of vendor financing. Abel cuts Sundar a fat check so Sundar can build data centres that will use Berkshire’s energy assets…while Berkshire gets some upside from the equity.

The initial reaction was negative for Google with its shares falling 4% the next day. Investors didn’t like the dilution and signalled that Google was hedging on its own data centre buildout by sharing the risk with Berkshire (Google’s CapEx spend will be ~$190B in 2026 and similar for 2027).

While Google does have $126 billion cash against $81 billion — meaning it could still raise debt without impairing its balance sheet (although it already has raised $37B in debt this year) — getting the Berkshire seal of approval was probably worth it for Sundar…even if Buffett’s retired.

Analyst Rihard Jarc has an interesting take:

There are a few possible options why Google went this path:

• Option 1: They see another big step up in accelerating demand for [Google Cloud Platform] and their Gemini models and need to increase CapEx substantially more than they already did.

• Option 2: They want to front-run OpenAI, SpaceX, and Anthropic IPOs and drive some liquidity out of the market — and with the cash — lock up more of the semi supply chain for them to not be locked out by OAI or Anthropic.

• Option 3: They have reached an internal breakout in their model development or some other front, and they see they are going to need a lot more compute to serve this and want to get ahead of it while the market is still sentiment positive on it.

Google could also be doing the massive equity raise so its next massive debt raise doesn’t throw its balance sheet out of…errr…balance. The company isn’t just looking at a 1-year outlook. It’s considering the 5-year and 10-year timelines. Its equity multiple may not be as juicy a few years out. Meanwhile, the business could turn and the debt looks more onerous.

By the end of the week, GOOGL’s shares had clawed back most of those initial losses. Now, Meta may be trying its luck. On Friday, news leaked that Meta was looking to raise “tens of billions of dollars” in an equity offering. The stock sold off over 5%.

Anyway, Abel closed a second big deal during the week by acquiring a homebuilder (Taylor Morrison Home) for $6.8 billion. He’s putting his stamp on the company.

Eric Tulksy: The Chemistry PhD in the NHL Finals

I love me a good career pivot story.

Colonel Sanders went from lawyer to insurance salesman to history’s greatest slanger of fried breaded white protein. Arnold went from bodybuilder to actor to Governor of California. Julia Child went from intelligence analyst during WWII to celebrity chef. Kim Kardashian went from…never mind.

Here’s a relevant one now that the NHL Finals has begun between Las Vegas Knights and Carolina Hurricanes (tied 1-1): the Hurricanes GM Eric Tulsky did AB Chemistry and Physics at Harvard before getting a PhD in Chemistry at Berkeley.

He spent the first part of his professional career doing research on science that I literally only learned about by Googling last week (“quantum dots for LCD screens”, “nanoparticle ink used to print low-cost solar cells”).

The entire time he was writing on hockey blogs. Pseudonymously at first but then as a public figure. He presented at the 2013 MIT Sloan Sports Analytics Conference showing that a controlled entry into the opponent’s zone generated 2x the scoring opportunities compared to a “dump and chase” strategy.

In 2014, he had a job offer from Apple to work on battery technology.

Tulsky turned it down and took a job in the Hurricanes’ analytics department and has since hired neuroscientists and mechanical engineers for the team.

The Athletic profile of Tulsky has this great anecdote about his unorthodox approach:

In 2021, Tulsky was the Carolina Hurricanes assistant GM and had built a small analytics department in the organization, with a web developer, a data engineer and a neuroscientist helping him lead the team’s push into new frontiers for the sport.

But because of what he saw in the tracking data, Tulsky believed his next addition needed to be someone who was working on autonomous vehicles — perhaps “a robot submarine,” he says now — and had an advanced mechanical engineering background.

“I knew that that was the kind of problem that put people thinking about the kinds of data that we had and the kinds of problems we faced,” Tulsky explained.

It goes without saying that there aren’t many robot submarine engineers working in NHL front offices. So Tulsky began a deep search through universities’ mechanical engineering departments.

He would scour the faculty listing and professors’ research interests to see if they might align with what he was looking for, then reach out to learn more about their work. He started with the top schools in Canada, reasoning that there was a greater chance he would find someone interested in working on a hockey problem.

And that was how an NHL team came to fund the PhD research of a young engineering student named Jonathan Arsenault at McGill University in Montreal.

His thesis, the first to be backed by a professional hockey team? “Quantitative Analysis of Hockey Using Spatiotemporal Tracking Data.”

Check out this legendary LinkedIn profile including a glorious “skills” section for the sporting world.

Links and Memes

Some other links for your weekend consumption:

• Paul McCartney is 83 years old and just released a new album. Been listening with my son. He says its inspiring someone that old is still doing his art. I agree and “Ripple In The Pond” goes hard.

• How Europe’s “forced heirship” inheritance laws…disincentivize entrepreneurship (via John Arnold).

• A Business Breakdown of Toast. The cloud-bases restaurant SaaS platform might have an interesting moat with the tablets that it manufactures. Those things are everywhere. I didn’t realize they were custom made to handle kitchen heat, drops and water damage. Way better than an iPad.

• If you only invested in stocks located on New York Route 237…you’d be laughing. LAUGHING. Companies include Marvell, Micron Tech, Arm and Sandisk…also In & Out Burger but that’s a private firm unfortunately

• Anthropic released a blog post with a very not scary title “When AI builds itself”…the AI startup says “today, Anthropic engineers on average ship 8x as much code per quarter as they did from 2021-2025.” It believes recursive self-improvement is on the horizon and makes the case for why AI labs should consider “world to have the option to slow or temporarily pause frontier AI development to enable societal structures and alignment research to keep up with the advance of the technology.”

• Steph Curry signed a 10-year deal with Li Ning. It pays $40 million a year and Curry gets to expand his own brand. The Chinese sportswear firm has $6B market cap, so betting he got huge equity too. Can only assume they’ll somehow make a robotics AI play like the automated rebounding and passing machine the Warriors use.

• We knew FIFA was going to get greedy and milk fans. Seems to be evidence that the official website prices are grossly inflated but FIFA won’t reduce it because it’ll piss off fans that did buy and now they’re dumping giant blocks of tickets on SeatGeek.

• SpaceX amended its S-1 to show a new contract with Google paying $920m a month for compute (or $11B a year). Combined with annualized Anthropic contract ($15B), SpaceX is selling $26B a year in compute. That is 40% more than SpaceX’s entire revenue in 2025 of $18.7B. Also, S&P will not fast-track any mega-IPOs and all new public companies will have to wait at least a year for entry in the index. I wrote more on these storylines in a deep dive of SpaceX’s S-1.

• “Hackers simply asked Meta AI to give Them Access to High-Profile Instagram Accounts. It Worked”. This is a wild story from 404 Media. Somewhat ironically, Meta unveiled AI Business Agent across “WhatsApp, Messenger and Instagram to respond to customer inquiries, recommend products and book appointments.”

• The Hidden Tech Behind an NBA Broadcast! Very cool behind-the-scenes video from MKBHD.

• Bill Simmons and The Rewatchables podcast brought on Steven Spielberg…to talk about 2001: A Space Odyssey. Some incredible details on Spielberg’s relationship with Stanley Kubrick and how much Kubrick influenced an entire generation of directors. A positive thing about rise of podcasts is the GOAT directors will go on awesome shows and shoot the shit to promo stuff (Spielberg’s Disclosure Day comes out next week).

…and them wild posts (including Victoria Secret, which saw its shares pop after a strong earnings report…the Ozempic Effect is a boon for lingerie…also, the company changed its stock ticker)

Finally, Norway’s World Cup team dropped a team photo as vikings. The comments and quote RTs on the team post is absolutely out of control…and Erling Haaland played the part to perfection (acclaimed British photographer David Yarrow took these photos and said, “If you had to choose one sportsperson in the world that doesn’t need much hair and make up to look like a Viking, it’s Erling Haaland. And so it was easy to shoot with him.”)

Today, we will talk about the very controversial launch of the Ferrari Luce EV.

Also this week:

• IMAX’s random business line

• The Pope’s AI Encyclical

• …and them wild posts (including FB Marketplace)

Subscribe now

The Ferrari Luce was unveiled on Monday.

It is the luxury carmaker’s first all-electric vehicle and its first 5-seater. Starting at $640k, the car was created in collaboration with LoveFrom, the design firm run by Jony Ive, Marc Newson and dozens of former Apple employees that were bored of making the exact same smartphone (except with a slightly better camera) every year.

The internet is full of cynical trolls (*raise my hand*), so obviously the backlash was intense and immediate. We just went through this with the Audemars Piguet and Swatch collab.

But you don’t have to listen to the cheap seats.

Listen to Luca di Montezemolo. The Ferrari legend spent 28 years at the luxury carmaker including as Chairman during its modern “Golden Age” — from 1991 to 2014 — when its F1 team crushed and the brand became very exclusive.

He shared these thoughts when Italian media asked him about the Luce:

I don't like commenting from the stands. When I was in the game, it annoyed me when people did that. I think for now, the electric Ferrari could have been avoided. But clearly Ferrari made huge investments in plants and the car itself for their own reasons. Maybe Porsche's lesson is useful for reflection.

If I said what I really think, I'd harm Ferrari. We're risking the destruction of a myth. I'm very sorry about that. I hope they at least remove the Prancing Horse from that car. This is definitely a car the Chinese won’t copy.

Wow.

WOW!

Luca. Tell us how you really feel.

Best part is that Luca says, “If I said what I really think [about the Luce], I’d harm Ferrari”…but is so obviously annoyed that he proceeds to say what he really thinks lol.

To be sure, Luca’s not exactly an unbiased observer. In 2011, he said Ferrari would “never” build an EV because he doubted the technology and preferred hybrids (which Ferrari has done). He also had an acrimonious split with its management and is on the board of Ferrari’s British rival McLaren.

However, the market channeled Luca’s disappointment with Ferrari’s incredible ticker (RACE) falling 8% the next day. It’s since recovered a bit and the market cap is $60B.

The initial reaction across tech and the auto world was largely negative, even as most of the people (*raise my other hand*) taking potshots will never own a Ferrari. Hell, the only time most of these people might even walk into a Ferrari dealership is because they had a massive kebab plate for lunch and really had to take a dump while walking down the street and it was the nearest storefront (*raise both my hands*).

Ferrari is one of the most iconic brands in the world, though. You don’t have to own one of its cars to love the Prancing Horse. There are 900 million F1 fans and Enzo Ferrari is a GOAT in the racing world and among luxury car brands.

In a pretty slick promo video with Lewis Hamilton and Charles Leclerc, Ferrari’s head of marketing Enrico Galliera knew what was coming with the Luce launch: “We’re going to have some great lovers. And a lot of haters.”

Sure enough, top comments on the YouTube video deliver on that promise: 1) “The boldest thing [about this Luce video], is leaving the comments open.”; 2) “I wonder if Lewis imagined that after joining Ferrari he would be asked to promote the iPhone car”; 3) “Blink Twice if you're in trouble”; and 4) “Oscar Worthy Performance From Lewis and Charles”.

But here is the reality: Ferrari only sold 13,640 cars in 2025. They don’t need to sell many Ferrari Luce EVs (Luce is Italian for “light”) for it to make business sense. There will be buyers and I imagine management baked a little bit of margin into that $640,000 price tag.

To see how this might play out, let’s cover these topics:

• Ferrari Luce’s Backstory

• Luce’s Design: Polarizing Exterior, Beautiful Interior

• The Luxury EV Market is Hurting

• Aiming for Tech and Chinese Buyers

Ferrari Luce’s Backstory

Two quotes help provide context on the Ferrari Luce journey.

First is from Enzo Ferrari, who founded the Ferrari racing team in 1929 (and first production Ferrari was 1947): “I don't sell cars; I sell engines. The cars I throw in for free since something has to hold the engines in."

Second is Ferrari’s current CEO Benedetto Vigna: “We are not an automotive company. We are a luxury company that is also doing cars.”

Any fully electric Ferrari would have courted controversy because it strays from Enzo’s engine-centric heritage.

But aggressive EU emission rules in the late-2010s meant that every carmaker had to have an EV strategy.

When Ferrari Chairman John Elkann — who is heir to the Italian Agnelli family’s fortune (the Exor family office owns Stellantis, The Economist Group, Juventus) — reached out to LoveFrom on an EV project in 2019, the EU was preparing to mandate that all new cars sold by 2035 had zero emissions. Two years later, they signed an official partnership.

The mandate has been loosened and low-volume automakers (eg. Ferrari) have certain carve-outs, but the die was cast: Ferrari was going to make an EV.

Ferrari spent over $200m creating a 42,500 sqm “e-building” so it could manufacture much of the EV stack in-house including drivetrains, motors, axles, and battery packs Located at its historic HQ in Maranello, the project broke ground in 2022 and was completed in 2024.

Elkann had collaborated with Marc Newson on a Ferrari luggage in the early-2010s and met Jony Ive in Milan during the launch of the Apple Watch in 2015.

Since then, the Apple Watch has sold over 300 million units and Elkann believes it is probably the best example of “an analog product being reinvented digitally” (I will say that cigarettes to vape pens were pretty crazy too).

By the time Ferrari and LoveFrom started talking, Tesla had proven the market for EVs and did so from a tech-first angle.

The EV play is very risky for Ferrari because it is a luxury brand and luxury brands have to be carefully managed.

Last year, the Wall Street Journal wrote about “Wild Economics Behind Ferrari’s Domination of the Luxury Car Market” and I updated some stats to illustrate the point:

• Since its IPO in 2015, Ferrari’s market cap has increased ~7x to $60B.

• In 2025, it only sold 13,640 vehicles for $8B (average of ~$587k a car).

• The luxury positioning is why Ferrari has a 30% operating margin while Volkswagen has an operating margin of 5% (VW sold 9 million vehicles in 2025 and its market cap is still less than Ferrari: $54B).

• That’s comparable operating margin to Apple (32%), Hermès (40%) and LVMH’s leather goods segment (35%).

• German carmaker Porsche IPO’d in 2022 and tried a similar luxury playbook but is down 1/3 since then, to a market cap of $49B. It sells way more cars as compared to Ferrari (279,449 in 2025; total sales of $42B and average of $151k per car) and is having difficulty transitioning to EVs (we will talk more about this, which is probably why Luca called it out in his Ferrari Luce roast).

• As with any luxury brand (Ferrari’s former CEO compares itself to Hermès), Ferrari tightly controls supply based on this saying from founder Enzo Ferrari: “Ferrari will always deliver one car less than the market demands.”

• Ferrari restricts who can buy its vehicles with waiting lists and prioritizes existing owners (owners refer new owners to get on the buying ladder).

• The top models such as LaFerrari (F80 and Enzo beforehand) are now reserved for customers that own multiple vehicles, bought one in the past 3 years and are active in the Ferrari community (”the algorithm [to select car buyers] has grown more sophisticated...to include the events customers attend, whether they take part in Ferrari’s racing program, whether they have had heritage models restored in its classic-car workshop, and many other variables”.)

• This luxury setup means many Ferrari cars keep increasing in value (a well-preserved LaFerrari can sell for $3.8m on secondary markets).

Not only does Ferrari sell few models, its customer base is repeat buyers (“Ferrari sold approximately 81% of its new cars to existing Ferrari owners and 48% to buyers who currently own more than one Ferrari”) and 88% are males. One (admittedly kinda suspect source) says the average Ferrari owner is 51 with annual income of $1m+.

These customers made an emotional connection to Ferrari as a petrol-powered car manufacturer.

The Luce is courting new customers (it expects 80% of Luce owners to be first-time buyers, which impacts exclusivity) and it isn’t built around an engine (which breaks nearly a century of heritage).

On the popular Netflix series Drive to Survive, F1 pundit Will Buxton made the point with a banger quote: “There are two religions in Italy: the Catholic Church, and there is Ferrari”

Going away from that tradition is very challenging for a luxury brand.

But if Ferrari had to go EV — and, as they say, EVs are really “smartphones on wheels” — then tapping Ive and Newson is a reasonable decision to make the transition.

***

Luce’s Design: Polarizing Exterior, Beautiful Interior

Jony Ive named his design firm LoveFrom in honor of Steve Jobs, who said one of the ways to express appreciation for humanity was “the acting of making something with a great deal of care and love”, per NYT.

LoveFrom apparently charged $200m a year for top clients and I’m guessing Ferrari falls into that bucket (other clients include Airbnb, Moncler, Christie’s Auction House, King Charles III on his Coronation Emblem and OpenAI, with the startup acquiring Jony’s separate AI hardware startup “io” for $6B in equity).

Despite the negative Luce reaction, there is no question LoveFrom put care into the Ferrari project.

Jordan Golson has more details on the origin of the Luce:

Before LoveFrom drew a single line, they spent six months on research. They presented Ferrari with four books — substantial, rigorous volumes printed in both Italian and English, left page and right page, covering philosophy, design history, the cultural significance of Ferrari within Italy, the relationship between human attention and physical interaction.

These weren’t mood boards. They were arguments — about why certain assumptions held, why others didn’t and what first principles should govern the design of a car interior in 2026.

Ive and Newson had brought a car to production. But Ive did spend half a decade trying to make the Apple Car work including a self-driving vehicle that looks like a 1960s Fiat van with no steering wheel.

Ferrari’s e-building provided the chassis, drivetrain, battery technology and suspension. LoveFrom designed the interior and exterior.

In February, the Luce’s interior and interface were unveiled in San Francisco (a foreshadowing of the vehicle’s minimalist techy look and future target market).

Ive — the man who pioneered multi-touch screens — created a driving experience that was all about tactile touch including handles, knobs and toggles.

“[Apple developed touch as] a general-purpose interface that could be a calculator, that could be a typewriter, could be a camera, rather than having physical buttons,” Ive told Golson. “To use touch in a car is something I would never dream of doing, because it requires that you look at what you’re doing. Touch was seen as almost like fashion. It was the most current technology. ‘We need a bit of touch.’ And, ‘You know what we’re going to do next year? We’re going to have an even bigger one.’ That’s just the wrong technology to be the primary interface.”

Jobs and Ive believed the tactile experience unwrapping was “theatre”, which is why they literally patented the iPhone box. The equivalent “theatre” experience on a traditional Ferrari is the iconic roar when the engine turns on. For decades, Ferrari has designed the engine intake and exhaust to make a specific dick-measuring sound.

How do you create “theatre” with an EV?

To start the Luce, LoveFrom created a special key fob with digital yellow ink that “transfers” to the gear shift and turns the car on. They also created a sound signature. A device captures the audio of the drivetrain starting and amplifies the vibration using a special algorithm that pumps a “musical sound” through speakers playing inside and outside of the car.

Ferrari didn’t demo the starting sound at the launch event. My guess is it is really meant to be an “in-person” experience and a flaccid engine sound — as compared to the typical ICE engine roar — would have been even more fodder for internet trolls.

But, boy, did Ferrari show everything else on the official website: “Ferrari-engineered engines and advanced drivetrain afford a radically new architecture that uniquely combines extraordinary Ferrari performance with the luxury of spaciousness.”

But what dafook? That looks nothing like a Ferrari. Giant wheels. No curves. Same side profile as every EV on the market. It looks nothing like a muscular Italian race car.

The basic specs with European delivery by Q4 2026 and US delivery expected in Q2 2027:

• Range: 280 miles (expected EPA)

• Peak charging speed: 350kW

• 122 kWh battery

• 1,035 horsepower

• 0-60mph: 2.4s

• Weight: 4,982 lbs

• Front motors spin to 30,000 rpm, rears hit 25,500 rpm

• 197.9 inches long, about as long as a Tesla Model S

Almost instantly, dozens of netizens burnt every lake in North America to create AI-generated mock-ups for other Ferrari EVs.

Italy’s Transport Minister piled on:

“Electric, outrageously expensive (550 thousand euros!) and, from an aesthetic point of view, it speaks for itself... It looks like anything but a car from the Prancing Horse. And this is supposed to be ‘innovation’? Who knows what [Ferrari founder] Enzo Ferrari would say... ,”

I’d highlight two reasons why the Luce looks the way it looks.

First, LoveFrom probably only agreed to do the project if it had significant editorial control. The Luce has more than 60 patents and dozens of new pieces — many specially designed with Apple’s long-time partner Corning — were created in-house to make a “singular design language” uniting “the exterior, interior and interface with clarity and refined simplicity throughout.”

Apple was not a democracy either.

As M.G. Siegler points out, the Luce’s all-glass roof sure does look like another Jony Ive classic from the top view. That Corning glass is the hero for both.

A second reason for the Luce’s design is just physics. EV platforms have such different constraints as compared to internal combustion engine (ICE) vehicles. Sticking a massive battery into a Ferrari frame (and keeping decent performance) isn’t really possible. Maybe Ferrari could have done it with its Purosangue SUV but even that’s a stretch…and Ive isn’t signing up for that

Cleo Abram interviewed Ive and Ferrari’s Chief Design Officer Flavio Manzoni for the launch and Manzoni dives into the challenges of designing an EV:

Normally, when we design another type of Ferrari in terms of aerodynamics, the main objective is the downforce. The car must be stuck on the ground…[The main objective for an EV] is the drag coefficient. The parameters are totally different. [The EV] must be like a kind of solid object, very pure. The body’s side must be almost continuous. Almost flat. Even the wheels must be flat.

A Ferrari EV has that heavy-ass battery so it doesn’t have to worry about downforce to keep the vehicle low and “stuck on the ground.” However, battery efficiency is crucial…and the drag coefficient is particularly important when driving at high speeds.

Abram created these useful graphics showing the different points of focus between an ICE Ferrari and an EV Ferrari.

The Ferrari Luce website makes the aerodynamic look a central selling point: “Designed for efficiency” and “The lowest drag coefficient in Ferrari history” (it better be at $640,000).

Somewhat ironically, Enzo Ferrari once said, “Aerodynamics are for people who can’t build engines.”

Anyway, Marques Brownlee also toured the Ferrari Luce and made a similar observation about how the constraints of an EV dictate design:

I’m trying to figure out what is happening because I think everyone would agree if they had just taken one of the older Ferrari designs everyone loved and just made that electric, [the launch] would have gone a lot better.

Unfortunately — with today’s battery tech — that just wouldn’t be a good car. There’s a reason why you don’t see a bunch of small two-door electric sports cars driving around today. There’s not enough space. The battery wouldn’t be big enough. The range would be terrible. The center of gravity would be too high. It just wouldn’t be a good Ferrari.

If they want to go electric, they’ve got to go bigger. Like SUV bigger, which they already know is going to make a lot of Ferrari people mad.

So, [Ferrari had] a choice. They can either try to keep it kind of Ferrari-ish, but it still has to have a pretty smooth coefficient of drag and not be too aerodynamic.

Or they can just totally throw that out and start fresh and that’s what they did. That’s what they did when they collaborated with Jony Ive and Marc Newson and their design firm, LoveFrom. As far as I can tell, they’ve never designed a car before, ever. This is literally their first try. […]

The outside does…kind of look like a BYD knockoff of a Ferrari.

The Luce’s rear lights are one of the few design elements the EV shares with other Ferrari whips.

Porsche’s EV adventure is quite instructive here.

The Porsche Taycan EV was built to share some of the same design language as the iconic Porsche 911.

The Taycan is a 4-door and much longer, though. We know the reason. Because there is a large-voltage battery in the floor of the vehicle. Porsche even cut segments out of the battery (the cutouts are called “foot garages”), so that it could mimic the low sports-car seating of the OG Porsches while people are inside.

Speaking of interiors, MKBHD says that LoveFrom knocked it out of the park with its seats and tactile controls. This seems to be a consensus across the board from all the Luce reviews I watched.

The glass, metal and high-quality leather look truly luxurious. Rolls-Royce or Maybach style (which is very un-Ferrari).

Without a transmission, the Luce is not only Ferrari’s first 5-seater but also its most spacious car ever. It better be at $640,000.

Do you know how much scrolling of the X timeline I could do with these suicide doors and these roomy backseat?

“It is not that we’re taking away something,” Ive tells Cleo Abram. “But we’re adding a new choice, which in some dimensions is unambiguously better. And in other dimensions you will understand them in terms of what is lacking. Perhaps it was reckless of us to do that, knowing that we will in some people’s eyes be destined for failure. But I think we also love these absurd challenges.”

This isn’t Ive’s first consumer electronics rodeo. He knows the good and the bad. His team was responsible for two of the most egregious charing ideas ever (bottom-charging port on Apple Mouse and sticking Apple Pencil into iPad port).

LoveFrom knew criticism was coming and the luxury EV market is even more challenging than when they started the project.

***

The Luxury EV Market is Hurting

There was an exchange on the r/CarTalkUK subreddit that I think did a good job of articulating the Ferrari Luce bear case:

gazchap: [What] are you getting for your £440,000 [$640,000]? It’s not as if you’re getting an engine with lineage going all the way through the annals of motorsport, and all of the expertise and knowledge that Ferrari’s engine design team can muster.

It’s some batteries, which will be identical to other cheaper EVs. Some electric motors — which may have something special to them (but it’s unlikely) — and the rest is just stuff that is artificially scarce and only valuable because of it.

What an absolute travesty of a car, from concept to execution.

Nomad624 I would have hoped the electric Ferrari would be the CHEAPEST in the lineup. Electric propulsion is simple and once your battery is good, the rest is cheap and simple. Plus given emissions targets, they should have expected this to ship a lot of units. The lack of “specialness” due to the lack of an engine would have justified a lower price. But instead they did the opposite and made it look like a wooden Ikea toy.

While Ferrari is the best in the world at building engines, it is a new player to battery technology. Ferrari has no authority in this domain yet it’s charging 10x the price of EVs with comparable propulsion tech (e.g. Tesla and premium-end Chinese EVs).

It is very aggressive positioning.

To compound the issue, the EV luxury market is facing serious headwinds. A major reason why is that the battery platform lends itself to the business cycle of consumer technology like a smartphone. At the high end, this leads to rapid depreciation as compared to a luxury car with traditional engine.

An EV battery today is much better — on range, charging speed, lifespan — than an EV battery from 5 years ago. This will also be the case in 5 years with major innovation on the horizon: solid-state batteries (which will replace the flammable liquid electrolytes found in lithium-ion batteries powering current EVs and all consumer tech).

Looking at every Ferrari built since 1947, over 90% of these 300,000+ vehicles are still on the road (Enzo would be proud). On a very related note, Ferrari has a robust secondary market with many older models still appreciating in price.

In comparison, the luxury EV market has been absolutely bodied in the past few years with poor resale values and manufacturers forced to scale back plans.

Here are some details from Wired:

[Sales] of the seemingly much-anticipated electric Mercedes G-Class SUV have been poor. Actually, that’s an understatement. They’ve been woeful.

And it’s not the only e-flop from a legacy automaker…Porsche has cut back its plans for EVs amid soft sales of its electric Macan SUV and Taycan models. Indeed, depreciation on the Taycan is so eye-watering that some Porsche dealers have supposedly refused to take their own brand’s performance EV from owners looking to offload or upgrade. […]

“The transition to EVs is not just a case of putting a battery in a vehicle,” says Peter Wells, a business professor and director of the Center for Automotive Industry Research at Cardiff University in Wales, UK. “Large premium EVs require very large batteries to match anything like the performance of typical ICE versions, and this increases their price.”

And after the February closure of its Belgian factory, Audi’s Q8 E-tron has been discontinued. The shuttering of the Brussels plant, says Audi, was due to a “global decline in customer orders in the electric luxury class segment.” […]

Volkswagen’s luxury marques, including Porsche, Bentley, and Lamborghini, are reassessing their EV strategies. Porsche has scaled back plans for an all-electric lineup following a 49 percent decline in Taycan sales. Bentley has pushed back the launch of its first EV from this year to next, and extended its gas-engine phase-out deadline to 2035. Lamborghini has delayed its Lanzador EV until 2029 at the earliest.

The luxury EV segment is hurting all while total EV sales are booming.

Between 2020 and 2025, the EV share of new car sales grew from 4% to 25% (there were 20 million EVs sold last year with China leading the way). By the 2030s, this share is projected to grow to 49% of all new car sales per the International Energy Agency (IEA).

Ferrari’s former head Luca di Montezemolo specifically called out Porsche as a cautionary tale and for good reason, per Carscoops:

It turns out that Porsche’s aggressive push into the world of EVs has not paid off the way the company hoped…[In September 2025] Porsche made the sudden, but not unexpected announcement, that its new flagship SUV, currently known as the K1, will not launch as a fully-electric model as originally planned and instead debut with combustion and plug-in hybrid powertrains. Porsche also confirmed that range-topping versions of the next-generation 718 Cayman and Boxster will be offered with combustion engines, despite the new models originally being designed exclusively as EVs.

The move is meant to stabilize margins, but it also makes clear that the brand’s earlier electric strategy was both too costly and out of step with what its customers actually wanted.

I know some of you are thinking, “But Trung, Porsche produces 20x the amount of cars as Ferrari. They aren’t even playing the same game.”

Fair.

So, let’s look at an ultra-luxury peer: Rolls-Royce. The legendary British car and engine manufacturer launched the EV Rolls-Royce Spectre in 2023. Starting at $400,000, the car saw strong demand out the gate. But the early momentum didn’t hold and, just a few months ago, Rolls-Royce scrapped its “goal to go all-electric by 2030”.

The crazy thing is that one of EV’s signature features — near-silent and low-vibration driving — is a hallmark of Rolls-Royce. They pad the F out of the car so the comically-rich passengers can sit in the back in peace. But they still want that fresh V-12 engine

Conversely, Ferrari is all about the noise.

While Western luxury brands are flubbing the EV market, China is dominating. A classic example of leapfrogging technology. China’s industrial base never developed around internal combustion engines. The country turned into a manufacturing powerhouse with the rise of smartphones and the related supply chains (batteries, microcontrollers, chips, software know-how) were an ideal match for EVs.

There are a number of 6-figure luxury EV options in China.

Perhaps unsurprisingly, China’s newfound affinity for EVs is a bull case for Ferrari Luce and its $640,000 price tag.

***

Aiming for Tech and Chinese Buyers

Luxury car blogger and Ferrari collector Tim Burton (aka Shmee150 on YouTube) whipped up a solid 30-minute video with his notes from the Luce unveiling.

He says that Ferrari expects 80% of Luce buyers to be new to the brand.

That’s a big deal. Ferrari’s list system means that 60-80% of its vehicle sales in recent years have gone to existing owners.

Burton says Ferrari’s messaging is that current owners do not have to buy a Luce to stay in good standing. Existing criteria (How many Ferraris do you own? How many events do you attend? How much mileage is actually on the cars?) are more important.

I’ve seen a few forums where Ferrari owners are a bit skeptical that Ferrari won’t care if they pass on the Luce. So, game theory wise, I bet a lot of petrol-head Ferrari owners (*my hand not raised*) will bite the bullet.

But who will be the majority of these new buyers?

Burton says the tech rich are a key market. If that’s the case, Ferrari may have lucked into a jackpot. The Luce was delayed by two years and will hit the market right as upcoming IPOs for Anthropic, OpenAI and SpaceX will create 16,000 new millionaires.

“[The Luce] is for somebody maybe with more of a tech background who wouldn’t have even considered buying a Ferrari,” Burton said of his experience at the Luce event. “They have a Tesla or maybe they’ve had a [Porsche Taycan] and this is something that’s even more luxurious. Generally speaking, if somebody had a smartwatch on their wrist, they liked [the Luce]. If they had a traditional watch on their wrist, they didn’t like it.”

That take echoes what Ferrari Chairman John Elkann told the Financial Times:

I think there will be people who will be compelled by it, who know the subject matter, and others who might be disappointed. And then there are people who couldn’t care less about cars or about Ferrari, but are interested because this is a very, very novel and interesting way of putting all these technologies together.

So, if I’m a 25‑year‑old founder of a technology company, or if I’m interested in all energy‑related subjects, or if I’m interested in being able to drive a car that is different because I’m compelled by things that are new and different — that whole world, which is far bigger than our current customers, might find it interesting.

Ferrari has been moving in a younger direction in recent years. Between 2022 and 2024, the share of new buyers who were millennials (under 40) went from 30% to 40%.

With that in mind, it makes sense that two of the biggest launch media reveals were from the tech world and not the automotive world: Cleo Abram (8m subs) and Marques Brownlee aka MKBHD (Brownlee has 1.2m subs on his AutoFocus YouTube channel but his original tech review channel has 21m subs).

The Luce is also less loud than the other Ferraris. While loudness is the point for many, younger generations have also shown an affinity for quiet luxury. Think Hermès or The Row rather than Gucci or Louis Vuitton.

As hinted in the previous section, the other target market for Ferrari is China.

Mainland China, Taiwan and Hong Kong account for 12% of the Ferrari’s sales, up from 6% pre-COVID. Women make up 26% of those sales…by far the highest share for any country in the world.

Comparatively, just Mainland China accounts for 20-25% of sales for Hermès and LVMH.

China has seen a steady rise of ultra-high net worth individuals (UHNWI) — of which there are more than 121,000 people worth $30m+ — over the past few decades and they’ve become an anchor buyer for the world’s top luxury brands.

I know because I have personally benefitted from this trend. Not from actually owning luxury goods. But I can now walk into any luxury store in the world wearing basketball shorts, flip flops and a backwards Vancouver Grizzlies cap without getting hassled by security. Why? They can’t risk insulting me on the 0.0000000007% chance I’m a Chinese billionaire.

Anyway, Ferrari has been in China since 1992 and made some custom vehicles for the market over the years.

But there is room to grow. Just so happens that the iPhone is probably the best-selling Western product in China ever. China makes up 15-20% of iPhone sales every year and over 300 million units have been sold in the country’s history. In Q1 2026, Apple sold a record $26B of iPhones and a major reason was the Cosmic Orange colorway looked Hermès-esque.

Meanwhile, in 2025, over 50% of new car sales in China were either EVs or hybrids. If everyone is getting an EV, the ever-present status games mean that a $640,000 price tag from Ferrari (!!!) is instantly desirable. It’s a Veblen good.

Long-time tech analyst Robert Scoble makes a similar observation about the Chinese buyer:

[The new rich in China] want to stand out. Often they are running factories or tech companies where most of the engineers have Teslas or one of the new Chinese brands. How do they stand out?

Roll up in [a Luce].

And now you understand why the design of this car is so ugly. Ferrari doesn't want its traditional consumer to buy it. And didn't want a mind-blowing aggressive design that would make its traditional customers pissed that it was "going electric."

It's all about trying to regain share in China.

Also worth noting that in China (and East Asia broadly) the UHNWI are often driven around in Rolls-Royce, Bentleys and Maybachs. As with most EVs, the Luce looks to be an everyday car and is really the first Ferrari made for chauffeuring (all that trunk and frunk space slaps, too).

To summarize: very rich people + very much want EVs + very much want to flex on each other + Ferrari is a top luxury carmaker + Jony Ive = I bet 30%+ of Luce sales will be in China while the top-selling colors are orange and Ferrari red (side note: Ferrari also caps the % of its vehicles it will sell to one region, so 30% might be aggressive…although EV markets a different game than ICE as we’ve discussed).

Ferrari is probably fine with that.

Even better that the OG petrol-heads in America won’t have to see as many of the Luces driving around and insulting their image of Enzo’s Ferrari.

***

Final Thoughts

Ferrari and LoveFrom knew they were creating a polarizing product and they were pot-committed after making the $200m investment into the e-building.

The decision made sense in 2019. The EU had forced all car manufacturers to have a post-ICE plan. Meanwhile, Tesla’s Model 3 ramp had only taken off the year prior.

EVs were not as ubiquitous — China’s parabolic rise was years away — and the category still had a new cool tech factor.

Once Ferrari started down the EV path, it couldn’t just shoehorn a battery into an existing Ferrari vehicle.

The car needed to be aerodynamic and optimize the drag coefficient…and that’s why we got a lot of “if you squint your eyes, it looks like a [Honda/Tesla/Audi/BYD] EV from the side.”

Ferrari may also be heading off future business challenges.

The market has an appetite for larger cars (sedans, SUVs, crossovers) and these types of vehicles typically provide automakers the best margins (the Luce better be able to do that at $640,000).

“Maybe Ferrari kind of needs a fresh SUV,” Marques Brownlee said in his video on the Luce. “The Macan and the Cayenne saved Porsche when they were about to go bankrupt. Now, those sales fund the rest of the exciting sports cars. Three out of every four Lamborghinis sold is [the SUV] Urus for the same reason.”

Ferrari’s CEO says the Luce is already sold out through 2027.

The SUV Purosangue was also roasted at launch. It was Ferrari’s first 4-seater and SUV. Many commented that “Enzo must be rolling in his grave”. Still, Purosangue went so gangbusters out of the gate that Ferrari had to cap its production to 20% of total sales, which would be ~2,500 vehicles a year. Mind you, people

If the Luce can hit half of that figure, it’s making some serious dough. Especially when you consider that personalization and customization are 20% of total revenue.

The Luce has 35 colors to choose from and dozens of configurations for the interior.

Some napkin math: (1,250 x $640,000 x 1.20) = $960,000,000 (or 12% of 2025 sales).

At a 30% operating margin, that is $288,000,000 (which covers the e-building investment).

In our analysis of the Swatch and Audemars Piguet, we talked about the “dream equation”, the luxury marketing concept about how brands have to maintain a balance between awareness and accessibility (actual sales).

The Luce is a way drum up interest large swathe of rich buyers who may never have wanted a Ferrari and just didn’t care about the technology. But Ferrari controls that demand by saying “uh, we are actually unable to make any more…just put your name on the list.”

Ferrari also seems to be hedging its EV effort with the LoveFrom collaboration.

If this is a total bust, then Ferrari gets to wash its hands and call the Luce a one-off. If it becomes the start of an entire EV line, then that’s a W (and Ive will be laughing his way to the bank because LoveFrom owns the design language).

That’s my read of this statement from Ferrari’s CEO Benedetto Vigna: “When you have a new technology, you need to make sure that that technology is properly represented in the design, so the design must be different.”

Same messaging from Ferrari’s Chief Design Officer Flavio Manzoni: “The problem is that we are living in an era where the nostalgic approach is very high. Everybody’s looking at the past, not the future.”

Or instead of reading between the lines, just look at the fact that Ferrari’s launch campaign highlighted the light blue color instead of its classic red.

The Luce really is a different product (also probably not a coincidence that Ive’s first major hit with Jobs — the iMac — was prominently unveiled in a “Bondi Blue” colorway).

The split really stood out to me when Ferrari had Pope Leo XIV tour the vehicle as part of its PR campaign. Compare the Luce image to that time Pope John Paul II subbed out his Popemobile for a Ferrari convertible to tour the streets of Ferrari’s Maranello HQ in 1988:

Since we’ve seen all the hot takes — including from Luca the Legend — I’ll wrap this up with a few words from Jony Ive. Specifically, this passage from the LoveFrom book research that kicked off the Luce project:

“We often think of the Swiss watch industry during the electric quartz revolution. It’s hard not to see parallels between valuable historic brands like Patek Philippe, who survived and grew through the transition primarily because they retained their traditional mechanical movements. If it had been legislated that Patek Philippe had to transition its entire product line to quartz, the resulting challenge would appear similar to the transition Ferrari is facing. While we’re mindful of the enormity of this transition, we know that pursuing well-founded, big, ambitious ideas will enable the most powerful, compelling, and profoundly successful outcome.”

Them Wild Ferrari Luce Post

Finally, we gonna need to talk about what the ease of AI-generated videos and images means for brands controlling their image…

Links and Memes

Some other links for your weekend consumption:

• IMAX put itself up for sale. Whoever buys it — currently $2B market cap — will get a tiny (but interesting) part of the business: IMAX Enhanced, which builds custom IMAX theatres for homes or yachts starting at $500k.

• Last week was the 50th anniversary of the Judgement of Paris. The famous blind wine taste testing when California wines surprisingly beat French wines. Time Magazine wrote about it a few weeks after it happened and the quotes when judges misidentify the wine are incredible: 1) Sips Napa wine (“Ah, back to France.”); and 2) Sips French wine (“This is definitely California. It has no nose.”).

• The Enhanced Games only saw one new world record set in 10 events. It was for 50m freestyle swim, which came with a $1m bonus. The event is now offering $10m to someone that can break Usain Bolt’s 100m run (9.58 seconds) at next year’s event. Here is a video of what people actually wanted to see happen.

• Simon Willison makes the case that OpenAI and Anthropic have fully found product-market fit with enterprise agents/coding. A key stat: 33% of OpenAI and 26% of Anthropic open job listings are enterprise sales and support type roles.

• A solid thread about Law & Order…and how the writing was much tighter before the streaming era.

• Conan O’Brien gave the Harvard commencement speech…and dropped some absolute gems including, “No university in our nation has produced more Nobel laureates or white-collar criminals. So, whether you choose good or evil, know that you are among the very best.”

• This dude on FB Marketplace has multiple listings for heavy Caterpillar industrial equipment…superimposed with AI-generated female models. Must have industry-leading click through rates.

• Blue Origin had a massive explosion…on the launchpad (thankfully no one was hurt). I wrote about the SpaceX IPO last week and they’ve gotten so good at the launch business that I think we forget how hard it is to actually put mass into orbit.

• Pope Leo XIV’s Encyclical on AI. Linch Zhang did a deep dive on the 40,000 word document and finds “evidence that the first papal encyclical on AI was substantially written by AI” (it looks like a number of different authors working on different sections; Pope Leo XIV is in the clear).

…and them wild posts:

Today, we will look at some numbers from SpaceX’s S-1 document in advance of a June IPO.

Also this week:

• The Enhanced Games

• MacBook Neo & How Apple Uses Defective Semi Chips

• …and them wild posts (including Victor Wembanyama)

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SpaceX dropped its highly-anticipated Form S-1 filing on Wednesday.

The document arrives as SpaceX eyes a mid-June IPO and it officially unveils financials for the space rocket startup founded by Elon Musk in 2002.

Elon is looking to raise $75 billion at a $1.75 trillion valuation. If you’re a value investor, please be sitting down for this next sentence: SpaceX’s revenue in 2025 was $18.7 billion, which works out to a potential price-to-sales (P/S) ratio of 93x.

Here is the P/S ratio for the current Mag 7:

• Amazon: 4x

• Meta: 7x

• Apple: 10x

• Alphabet: 11x

• Tesla: 16x

• Nvidia: 25x

Not the cleanest comparison but it’s worth framing the SpaceX valuation ask. Just put your spreadsheets away. The fundamentals are not the most important part of this S-1.

It is May 2026, people. Which means we are still very much in the AI bull cycle and the SpaceX S-1 has a lot of AI.

To be sure, the S-1 does highlight two of SpaceX’s dominant old school business lines:

• Launch: 650 launches all time and its rockets sent 80%+ of global mass to orbit in 2025.

• Connectivity: 10 million Starlink subscribers using 9,600 low-earth orbit satellites (75% of active maneuverable satellites in low-earth orbit).

We also got dozens of #SpacePorn calibre photos of rockets, satellites and various manmade objects in orbit.

SpaceX is almost 25 years old but check out how often the AI business — which was only roped into SpaceX over the past 6 months — gets name checked (bolded) relative to space stuff.

• “launch” (835 mentions)

• “compute” (507)

• “connectivity” (427)

• “xAI” (400 )

• “Starlink” (381)

• “Grok” (243)

• “Starship” (222)

• “Falcon” (184)

• “data centre” (154)

• “rocket” (148)

• “Colossus” (79).

• “Macrohard” (17): Had to include this agentic AI platform that is an incredible riff on Microsoft.

• Venta Nitro Cold Brew (0)

Searching for "AI" (3,789) or "X" (4,838) comes up with a quite a few false positives (eg. "train" or "external) so we can put those to the side.

The “Market Opportunity” section is really when “AI” shines. If you have a CFA, you’ll want to sit down for this:

We believe we have identified the largest actionable total addressable market (“TAM”) in human history. We estimate that our quantifiable TAM is $28.5 trillion, consisting of $370 billion in Space from space-enabled solutions; $1.6 trillion in Connectivity across $870 billion in Starlink Broadband and $740 billion in Starlink Mobile as well as additional opportunities in enterprise and government; $26.5 trillion in AI across $2.4 trillion in AI infrastructure, $760 billion in consumer subscriptions, $600 billion in digital advertising, and $22.7 trillion in enterprise applications. For illustrative purposes of sizing our addressable market opportunity, we exclude China and Russia from our global estimates.

Looking at SpaceX’s stated opportunity of $28.5 trillion, about 93% of that TAM is related to AI. Even more specifically, ~80% of the overall TAM ($22.7 trillion) is classified as “enterprise applications” (AI agents automating knowledge work).

The entire US GDP in 2025 was………..$31 trillion (there are so many of these big numbers that I’m forced to write out the full word instead of using “M”, “B” and “T” as I usually do).

Like I said, “It is May 2026, people.”

We just had semiconductor chip startup Cerebras finish its first day as a public company with a $95 billion valuation. The market cap has since declined to $61 billion but it still sports a P/S ratio of ~100x. No investor is thinking about that metric. It’s all about future of AI and Cerebras has a new solution for a compute market that will see Big Tech spend over $800 billion on capex in 2026 and ~$1 trillion in 2027.

That capex spend is a touch lower than $28.5 trillion but it’s still a massive number and people are chasing the narrative. Cerebras is carrying that massive P/S multiple without having the benefit of the “Elon Markets Hypothesis” (Matt Levine explained this key investment concept in 2021: “the way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk”).

Let’s put aside $28.5 trillion and just say: Elon and SpaceX are going after a multi-trillion dollar AI opportunity.

Currently, 17 of the 25 largest public companies in the world either design, manufacture or deploy AI semiconductor chips (as an aside, the 26th largest company in the world sells comically large party size bags of potato chips).

With that in mind, the SpaceX S-1 has one very important detail to support an AI narrative: beginning in May 2026, Anthropic has agreed to pay $1.25B a month to SpaceX to use compute from its two Colossus AI data centres in Memphis. There is a slight discount for the first few months but, broadly, this works out to $15B on an annualized basis.

That’s almost as much as SpaceX’s entire revenue of $18.7B in 2025.

SpaceX is probably headed to $35-40B in 2027 with half the revenue coming from this new AI neocloud business. Amidst a global compute shortage, Elon says there are already interested parties other than Anthropic.

Over the past 3 years, Elon has been in a rush to get into the AI game (while also making his Twitter co-investors whole…and one of those investors told the FT, “Never bet against Elon.”):

• October 2022: Elon buys Twitter for $44B.

• March 2023: Founds xAI.

• July 2023: Twitter rebrands to X.

• May 2024: xAI raises $6B at a $24B valuation.

• July 2024: xAI completes the first Memphis Colossus Supercluster (100,000 GPUs up in 122 days when this type of project usually takes 2+ years).

• December 2024: xAI raises $5B at $50B valuation.

• March 2025: xAI acquires X in all-stock deal, which values xAI at $80B and X at $33B ($45B less $12B debt) and starts building Colossus 2 (>500,000 GPUs).

• June 2025: xAI raises $5B at a $136B valuation.

• January 2026: xAI raises $20B at a $230B valuation (then, is acquired by SpaceX).

• May 2026: SpaceXAI agrees to a deal with Anthropic to provide compute for $1.25B a month (or $15B a year).

• June 2026: SpaceX IPO at $1.75T.

• 2027 & Beyond: Inevitable merger with Tesla ($ELON ticker).

The new cloud computing venture has already been dubbed Elon Web Services.

Nvidia’s Jensen Huang said that the speed that xAI built its first data centre is something that has never been done before. There may not be anyone better in the world than Elon & Co. at putting a data centre up quickly. A major issue that Jensen frequently brings up is that data centre shells are not always complete when Nvidia chips are ready. Longer term, Elon Web Services may be the go-to partner for getting compute online as fast as possible.

This singular ability to attract top talent, deploy funds, secure industrial supply chains and bring ambitious projects online is why Elon gets some of the lowest cost of capital in the world for hardware ventures.

The S-1 flexes the F out of this skillset:

In order to bring compute clusters online as fast as possible, we employ a vertically integrated, nimble approach to construction. We brought the first cluster of COLOSSUS online in 122 days, repurposing the shell of an existing factory, and the first cluster of COLOSSUS II online even faster in 91 days. As an illustrative comparison, an industry benchmark to bring online a 100 megawatt greenfield data center is approximately two years

Now, does this mean xAI is throwing in the towel as a frontier AI lab? Has it given up on its race against OpenAI, Anthropic and Gemini?

No. Bloomberg reports that SpaceX will go ahead with its option to acquire AI coding startup Cursor for $60B a month after its IPO…using that brand new SpaceX stock.

Coding is AI’s killer app right now. Anthropic’s Claude Code and OpenAI’s Codex are the driving force behind each startup’s ~$1 trillion valuation (and both are headed to $100B in annual recurring revenue by the end of 2026).

Cursor is at $3B a year and has a very strong enterprise sales muscle to combine with SpaceXAI’s compute (now at 1 million H100-equivalent GPUs) and X’s distribution (550 million users).

The $15B a year compute deal with Anthropic “may be terminated by either party upon 90 days’ notice”. This is something to keep an eye on since Cursor and Grok are competitive with Claude (Cursor’s early rise was with Claude Code under the hood).

For the most part, the SpaceX financials by Q3 2026 will look a lot different than in Q1 2026…except for one detail: massive cash burn.

In Q1 2026, SpaceX had revenue of $4.7B (70% of sales was from Starlink) and recorded a loss of $2.5B as AI-related capex reached $7.7B.

With only ~$16B in cash & equivalents, SpaceX really needs the $75B IPO to fund the AI ambitions (SpaceX will be the largest IPO raise ever, topping Saudi Aramco at $26B in 2019 and Alibaba at $22B in 2014). The rest of the Mag 7 has mostly funded their AI capex with operating businesses but have started tapping debt markets as the spend dial turned to 11.

We haven’t even talked about the orbital data centres. Orbital. Data. Centres.

I’m in the camp that the demand for intelligence on tap will be basically infinite within the next decade. Land-based data centres are currently so unpopular — 14 states in America are floating bills that could ban their construction — that the idea of satellites beaming AI to earth looks increasingly viable every single day.

Per the S-1:

We believe these AI compute satellites in Sun-synchronous orbit will be able to handle energy-intensive AI workloads, such as inference demand, at far greater scale and efficiency than terrestrial alternatives, with Starlink providing low-latency, global connectivity linking these orbital AI systems to people around the world and delivering real-time intelligence. We expect to begin deploying our orbital AI compute satellites as early as 2028.

SpaceX has more of the engineering chops for this challenge than any other company in the world:

• The first private company to develop and launch a liquid-fuel rocket to reach orbit (2008)

• The first private company to successfully dock a private spacecraft with the International Space Station (2012)

• The first to successfully propulsively land (2015) and refly orbital-class rocket boosters (2017)

• The first to begin deploying a large-scale LEO broadband satellite constellation (2019)

• The first private company to transport astronauts to orbit, returning America's ability to fly astronauts to and from the International Space Station (2020)

• The first to manufacture consumer-grade phased-array user terminals at scale (2022)

• The first to deploy a large-scale LEO satellite-to-mobile constellation (2025)

• The first to build a gigawatt-scale AI training cluster and largest coherent supercomputer (2026)

• The first gigawatt-scale Megapack battery installation (2026)

Orbital data centre sounds sci-fi AF. But Google — which invested $900m into SpaceX in 2015 at a $10B valuation (and now owns 6% of the company) — is in talks with SpaceX on a roadmap for future deployment.

The compute crunch on earth is very very real.

While the compute situation is driving SpaceX’s 2026 pitch of “we are going to AI harder than anyone has ever AI’d in the history of AI”, the longer term space story is worth keeping in mind.

“Our mission is to build the systems and technologies necessary to make life multiplanetary,” the S-1 writes of Elon’s OG mission. “To understand the true, nature of the universe, and to extend the light of consciousness to the stars.”

Elon has recruited some of the most talented engineers in the world — with business humming day-to-day under the guidance of COO Gwynne Shotwell — and SpaceX’s aim is still to put 1 million people on Mars.

FYI. We know about the “put 1 million people on Mars” because it is literally in Elon’s performance-based compensation. He is eligible for up to 1 billion SpaceX RSUs (roughly $750 billion at current private valuation) by hitting these two goals.

• hitting market cap milestones (up to $7.5 trillion in $500 billion increments)

• establishing “a permanent human colony on Mars with at least one million inhabitants”

There is a similarly lucrative performance-based compensation if SpaceX delivers “non-Earth-based data centers capable of delivering 100 terawatts of compute per year” (the current global power grid is under 10 terawatts…so — like the Mars colony — it’s a stretch goal).

Getting any serious compute in space via orbital data centres will be an important source of funds to fund any and all future Mars missions.

The launch window to go to Mars is only available every 26 months.

SpaceX is still working on Starship. The largest rocket ever built that can carry 100 metric tonnes of cargo to orbit and will be fully re-usable. Elon’s stretch aim is to launch multiple times a day at an airline-like cadence. We are a ways from that future. But even when it arrives, Starship has so much cargo space to fill for the 25 months outside of the Mars launch windows.

Orbital data centres will be one important revenue source. Another speculative — but extremely baller looking — option is an “earth-to-earth” transport system that uses Starship to transfer people anywhere on earth in under an hour. Feel like this is even more sci-fi than orbital data centres.

Finding new business lines using Starship’s lower cost of sending mass to orbit is a repeat of history.

For the past decade, SpaceX’s workhorse Falcon rockets have sent thousands of Starlink satellites to orbit. The connectivity play developed because Elon had so much excess capacity by unlocking rocket reusability.

It historically cost NASA $18,500 to send a kilogram to space. The Falcon 9 dropped the price to $2,700 per kilogram and the Falcon Heavy is at $1,400 per kilogram. A fully working Starship at a regular launch cadence could send a kilogram to space for $200 (a 99% cost decline compared to that original NASA figure).

The S-1 highlighting potential opportunities that could be unlocked by such extreme cost reduction:

• Space tourism

• Asteroid mining

• In-orbit manufacturing

• Energy production on the Moon and Mars

• Manufacturing capabilities on the Moon and Mars

• Passenger and cargo transport to the Moon and Mars

During the week, CNBC’s Andrew Ross Sorkin asked Jeff Bezos about SpaceX’s potential $1.75 trillion valuation. Bezos — who owns competing space startup Blue Origin — hadn’t seen the S-1 and said, “One thing I can tell you for sure is that space is going to be a gigantic industry.”

Translation: TAM IS HUGE!!!

Since we brought back the word “TAM”, let me share one valuation exercise by The Information’s Martin Peers. He thinks SpaceX’s operating business is worth $678B based on an old school sum-of-parts analysis:

• Starlink ($150B): He projects $15B in revenue by end-2026. Comcast has 29 million subs and trades at 2x forward sales multiple but is growing slower. Starlink still only has 10 million subs. If revenue continues to grow at its Q1 pace (+32% YoY), he gives it a 10x multiple and that puts the connectivity business at $150B.

• Launch ($300B): Starship isn’t fully operational, so let’s use the $4B sales figure from 2025. Publicly traded Rocket Lab is worth $73B, or a 73x forward sales multiple. That puts SpaceX’s launch business at $300B.

• X ($3B): The artists formerly known as Twitter has ~$1.8B in ad sales. Give it Snap’s 1.6x forward sales multiple and that is $3B in market cap value (sometimes I forget SpaceX owns X).

• SpaceXAI ($225B): By end 2026, compute revenue could hit $20B a year with Anthropic as the anchor client. Two other neoclouds (CoreWeave, Nebius) are trading at 8.2x forward sales. So, that puts SpaceX’s compute business at $165B and we’ll add another $60B for Cursor.

All that adds up to $678 billion. In Peers’ take, the extra ~$1 trillion for the target SpaceX IPO is paying for Elon (the “Elon Market Hypothesis” strikes again).

I do think this analysis undersells Starlink. As with the launch business, it’s currently a monopoly and the global coverage in just 10 years is very impressive (with a lot more coverage to come).

The Economist’s breakdown of SpaceX’s S-1 covers the range of opinions on long-term prospects for the satellite service:

Starship’s main job will be to bolster Starlink, the fastest-growing and only profitable part of SpaceX’s business. Since its debut in 2021 the service has signed up airlines, shipping firms and more than 10m individual customers, revolutionised warfare in Ukraine and spawned a secretive offshoot called Starshield for government customers. The firm’s newest “direct-to-cell” (D2C) satellites can communicate directly with smartphones and other devices on the ground, with no need for the special pizza-box-sized antennas that its residential plans require. Starlink’s revenue grew by 50% between 2024 and 2025, from $7.6bn to $11.4bn.

There is clearly more room for growth, says Mr Farrar. He notes that in one 80-day period in 2025 the firm added 1m new customers. He thinks Starlink may eventually sign up anywhere between 20m and 50m residential subscribers, although average revenues per customer are likely to decline as it adds users outside the rich world. At the moment, though, Starlink’s growth is held back by the size of the satellites that SpaceX can fit onto a Falcon 9. It plans “version 3” satellites that will each add 20 times more capacity than the “v2 Minis” it currently uses. But they are so big they can be launched only with Starship.

SpaceX is investing heavily to keep Starlink growing. Last year it spent $19.6bn to acquire spectrum from EchoStar, an American telecoms firm, to bolster the nascent D2C business, and has sought authorisation to launch 15,000 specialised satellites. PitchBook, which gathers data on venture-capital-backed firms, notes that these are expensive wagers. The EchoStar deal represents more than a year of SpaceX’s revenues. But it expects Starlink to top 1bn subscribers over the next 15 years.

Analysts are divided over Starlink’s potential. “I think D2C is just not going to live up to the hype,” says Mr Farrar, arguing that it will be used mostly in places where there are no terrestrial phone masts and therefore few people. Simon Potter of BryceTech is more optimistic: “It could enable ubiquitous connectivity between devices using standard smartphone kit. That could be transformational in applications such as cars, agriculture, logistics—and maybe in military ones, too.”

Franco Garda, at PitchBook, thinks that Starlink and SpaceX’s launch business could justify a $1.75trn valuation by themselves.

Wherever you think of SpaceX’s valuation, it was probably inevitable that Elon would merge space and AI. Peter Thiel — who is set to make $80B on the IPO — tells this story of introducing Elon to DeepMind founder Demis Hassabis in 2012:

The rough conversation was Demis tells Elon: “I’m working on the most important project in the world. I’m building a superhuman AI”.

Elon responds to Demis: “Well, I’m working on the most important project in the world. I am turning us into an interplanetary species.

Then Demis said: “Well, my AI will be able to follow you to Mars.”

Then Elon went quiet.

To see through both missions, Elon has kept ironclad control of SpaceX. He owns 42% of SpaceX equity but will own 85% of the voting power via Class B shares (super-voting shares).

Over the past few years, Elon has been in high-profile shareholder lawsuits over his compensation plan at Tesla (he doesn’t have a special share class and owns ~15% of voting power). The SpaceX structure ensures this won’t happen. Anyone investing in SpaceX post-IPO should fully understand the setup, per the aforementioned Matt Levine.

If you are buying SpaceX stock to tell Elon Musk what to do, you should stop. If you are buying SpaceX stock because you want exposure to the space/AI business but you have your doubts about current management, you should stop. If you are buying SpaceX stock because you like Elon Musk and want to go along for the ride with him, yes, that’s correct, that’s the investment thesis here.

If, later, you are disillusioned with Elon Musk, if you feel like you were misled and he didn’t do the stuff he promised to do, I mean … that’s also kind of his whole thing? It is possible that, in hindsight, you will find something bad about SpaceX that was not specifically disclosed in this prospectus. But at a meta level everyone knows everything about SpaceX. Musk’s gonna do whatever weird stuff he wants, and if you don’t like it that’s your problem.

On the day that SpaceX’s S-1 came out, news “leaked” that OpenAI was eyeing a September IPO. Then, Anthropic latest financials “leaked”, showing that its Q2 2026 revenue will hit $10.9B and the maker of Claude may even turn an operating profit in the quarter.

The day prior, Andrej Karpathy (OpenAI co-founder and former head of Tesla AI) announced he was joining Anthropic right before Google started its annual IO developer conference.

Hard to believe the timing of these “leaks” and announcement are coincidental. We are in the AI PR spin zone right now. While there is a lot of money in the capital markets, it is not infinite money.

Based on standard float percentages for a new IPO, investor Tomasz Tunguz estimated SpaceX, Anthropic and OpenAI would need to as much as $576 billion from public markets. That’s more cash money than the $469 billion that every single US IPO raised between 2015 to 2025.

This situation is further skewed by the fact that NASDAQ has loosened index inclusion rules to win SpaceX listing from the New York Stock Exchange. Typically, a newly listed company isn’t included in the index for 90 days. It’s a “cooling off” period to let public markets digest the new entrant. The NASDAQ created a “fast-entry” exception — which may also be used by OpenAI and Anthropic — to put a new size-able IPO into the NASDAQ-100 index after 15 days. This move leads to forced buying from passive index funds. Forced buying also means forced selling of other stocks in the index.

The flood of money won’t happen right away. SpaceX’s initial float in public markets will be 5-10% of the entire company. Elon and other insiders are locked up from selling for 366 day. That’s about half the equity. The other half of shares will expire in various milestones: 1) insiders can sell 20% of shares after the first quarterly earnings (August or September); 2) another 10% of shares can be sold if SpaceX stock is 30% above IPO price at the time; and 3) various tranches after the second quarterly report.

Once Anthropic and OpenAI hit, I don’t know if the math can keep math-ing for all three IPOs.

Which is why SpaceX has been pushing to get out first — it even structured its deal with Cursor to close after the IPO (because it if happened beforehand, SpaceX would have to update and delay its filings) — and hoover up as much capital as possible.

The IPO race is perhaps the best way to view Elon’s recent court case against OpenAI. He donated ~$40m into the organization in 2015 and says they defrauded him by transitioning from a non-profit to a for-profit. Elon lost after the jury ruled that the statute of limitation had lapsed. But the lawsuit tied up OpenAI’s resources and probably delayed its IPO plans. That’s a win in the race to go public.

It’s May 2026, people. Nvidia just reported $82B in its latest quarter, surging 85% YoY on 75% margins and an absurd operating profit of $54B. For now, the AI trade is still AI trading.

That is why I think the date SpaceX was able to file its S-1 (and confirm an IPO date) is more important than anything inside of the document. You don’t need a spreadsheet to figure out.

***
UPDATE Friday, June 5: SpaceX amended its S-1 to show a new contract with Google paying $920m a month for compute (or $11B a year). Combined with annualized Anthropic contract ($15B), SpaceX is selling $26B a year in compute. That is 40% more than SpaceX’s entire revenue in 2025 of $18.7B. Also, S&P will not fast-track any mega-IPOs and all new public companies will have to wait at least a year for entry in the index.

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The Enhanced Games

On Sunday, athletes will gather in Las Vegas for the inaugural Enhanced Games (aka “The Steroid Olympics”).

Backed by Peter Theil and Donald Trump Jr., the games will see nearly 50 athletes — across swimming, track and weightlifting — trying to break world records while on doping protocols under the guidance of medical teams. Protocols include mixes of testosterone, HGH, peptides etc.

The visual spectacle will be used as top-of-funnel to help sell performance-enhancing drugs, as explained by The Economist:

Up to $25m in prizes will be awarded, with $250,000 going to those who win first place and bonuses of up to $1m to world-record breakers. Around 2,500 people will watch from the stands of a purpose-built arena, where they’ll also be treated to a Super Bowl-style closing ceremony—The Killers, a rock band, are playing—and have the chance to mingle with scientists, crypto investors and celebrities. The games will be streamed on YouTube and Roku: Bryan Johnson, a venture capitalist who has become famous for trying to chase immortality by tweaking every aspect of his body and lifestyle, will be one of the commentators.

This spectacle is an advertisement for Enhanced’s other business: selling performance-enhancing products to non-Olympians. The company has pumped its competing athletes with drugs over the past three months in the hope that their achievements will inspire viewers—from ordinary gym-goers to grandparents trying to keep up with their grandchildren—to also get enhanced. A dizzying array of injectable drugs is already for sale on Enhanced’s website, promising to support everything from “sleep, energy and sharper mornings” to “healthy ageing”.

Unsurprisingly, event has courted controversy.

I’m pretty open-minded about it tbh… because let’s not pretend that the Olympics are clean ethically or business-wise.

In 2024, founder Aron D'Souza went on the Joe Rogan Podcast and it’s a simple pitch:

D’Souza: I learned some key statistics: 44% of Olympians admit to using banned or performance-enhancing drugs [in 2023] according to research commissioned by the World Anti-Doping Agency (WADA).

Rogan: The other [56% are] probably lying or losing.

D’Souza: Then, I learned that the average American Olympian only earns $30,000 a year and I thought to myself there’s something really wrong in the system. Instead of you know trying to reform it, let’s take a blank slate of paper and invent the third Olympiad from scratch.

Rogan: Well, the Olympics is kind of a scam because it generates billions of dollars in revenue and the people that are there to perform make almost none of that.

D’Souza: That’s correct. The International Olympic Committee (IOC) doesn’t pay any of the athletes. Incidentally, they may get some money in sponsorship or from their national Olympic Committee. Ultimately, billions of dollars come into the Olympics and none of that goes to the athletes. It gets wasted building stadiums. It gets wasted paying officials. We thought there’s a way to do a better and more honest model that inspires us to believe in the future of science and technology in the 21st century.

Two other notable stats from their chat: 1) 25% of the items you can buy off the shelf at GNC will get you banned by WADA; and 2) the year Lance Armstrong was banned from Tour de France, the first person that didn’t dope would have placed 18th.

On the first point, the Olympics bans substances not from a health point but a competitive point. I obviously don’t want people ruining their endocrine systems but “doping” is a large net to cast.

The point about Lance Armstrong is not to defend cheating but let’s the worst place to be is to pretend it doesn’t exist. It does and it can’t be 100% stopped.

THIS IS NOT AN ENDORSEMENT OF CHEATING OR DOING DRUGS.

BUT I CHOOSE TO LIVE IN REALITY.

Which is why I’ll be watching the Enhanced Games in Sunday.

One athlete I am particularly interested in is James “The Missile” Magnussen.

Australian swimmer with an Olympic silver medal. Said he’d “juice to the gills” if offered $1m to break 50m freestyle record of 20.88 seconds (he did later regret framing it like that and is actually interested in safe anti-aging procedures).

Enhanced Games agreed. A short video of him is most viewed on its YouTube channel and top comment is incredible: “you can see his back from his front”.

Absolute tank. 6’6 and will weigh ~250lbs for the swim.

For the inaugural Enhanced Games this weekend, Magnussen will also wear a full-body polyurethane super swimming suit that was banned after 2008 Beijing Olympics (he’s been training and doping at a facility in Las Vegas).

Enhanced Games is actually a listed stock with the ticker ENHA and is valued at ~$670m right now.

A big opening event could juice (sorry) the market cap.

MacBook Neo & How Apple Uses Defective Semi Chips

Carl Weathers (RIP) had one of the best cameos ever in a sitcom.

The actor — who legendarily played Apollo Creed in the first four Rocky films — was asked by a producer of Arrested Development to redo the famous (and frequently mocked) beach running scene Weathers had done with Sylvester Stallone.

Weathers was interested in the role but didn’t want to just be the butt of jokes. He pitched the idea of playing an over-the-top version of himself as a cheap grifter.

This cameo peaked during a dinner scene when Weathers sees a member of the Bluth family about to throw out some chicken leftovers and stop them with this line:

"Whoa, whoa, whoa. There's still plenty of meat on that bone. Now you take this home, throw it in a pot, add some broth, a potato. Baby, you've got a stew going!"

Anyway, I thought about that scene when reading on how Apple has mastered the art of re-using defective semiconductor chips.

Its low-end MacBook Neo came out in March.

The smell that permeated the tech industry at the Neo’s launch was a bunch of Windows PC manufactures (Asus, Dell, Lenovo, HP) shitting their pants when Apple announced the laptop would cost $599.

A huge reason Apple was able to pull this off was because it re-used slightly defective A18 Pro chips used for the iPhone 16 Pro in 2024.

So, Apple needs chips for over 200 million iPhones a year. The manufacturing process is obviously imperfect. A bunch of the chips don’t pass the quality bar for the phone but are fine to power cheaper devices.

The A18 Pro chips that powered iPhone 16 Pro has six GPU cores. Apple had millions of those chips slightly degraded with only five GPU cores…but the neural engine and CPU still fully intact. This was more than enough for the MacBook Neo, per the Wall Street Journal.

Aside from MacBook Neo, Apple has now sold numerous products since 2021 on slightly defective A-Series chips:

• defective iPhone 13/14 Pro chips (A15 Bionic) used for iPhone 13 Mini and iPhone SE

• defective iPhone 15 Pro chips (A17 Pro) used for iPad Mini

• defective iPhone 17 Pro chip (A19 Pro) used for iPhone Air

Apple has been doing some version of this since its first chip: A4, “which powered the first iPad, then months later the iPhone 4, and after that the second-generation Apple TV box.”

Then, “the A8 chip first appeared in 2014 in the iPhone 6, then in 2015’s iPad Mini and Apple TV, and finally in 2017 in the first HomePod.”

A major reason Apple has to pull off this defective chip jujitsu is because the Big Tech Giant went all in on its own custom silicon in 2008 (when it acquired PA Semi for $278m).

Previously, Apple relied on Intel or Samsung to design and manufacture the chips. These companies only sent Apple the good chips. Now, Apple works directly with TSMC and takes all the chips, including defective ones.

The MacBook Neo — which was spearheaded by incoming CEO John Ternus (or so says Cupertino PR) — has been so popular that Apple has run out of defective A18 Pro chips. It ordered a new batch of normal ones. But even if a few of those are effed up, we all know they’ll find a way to use them.

Next move: give away slightly defective AirPod buds (that still kinda work) for free because literally every single person I know has lost at least one bud in their life. C’mon Apple, let us make some audio stew out of those metaphorical chicken bones.

Links and Memes

• Students have been booing the mention of “AI” at a number of commencement speeches…including one given by former Google CEO Eric Schimdt. A total 180-degree turn from last year when the running joke was a student “showing off” how ChatGPT got him a degree. There is a legit job angst but AI leader messaging has also not been…ugh very good.

• Shein acquired Everlane for $100m…the sustainable fashion startup hit a peak valuation of $550m. The fact that it’s now owned by the fast fashion Chinese platform which is the complete opposite of “sustainability” is peak irony. Well, almost as ironic as Everlane’s 2nd-to-last Instagram post.

• Literary magazine Granta granted a short story prize and published on its website what looks to be AI slop. The internet is losing its mind over the apparent snafu, as detailed by Max Read.

• The quant hedge fund arms race over posting promo videos about data centre water usage is getting out of control…with recent entries from Hudson River Trading and Jane Street.

• Singapore’s Foreign Minister built a NanoClaw AI agent on a Raspberry Pi. Dr. Vivian Balakrishnan is a former eye surgeon serving government. He talks to his AI agent on WhatsApp to prepare for meeting. The reason he built it is because “Reading the executive summary tells you what the technology does…building with it tells you where it breaks, what it costs, and what it cannot yet do.” Just perfect example of how Singapore pays politicians top dollar to attract best talent. Has another foreign minister anywhere else in the world done this?

• Google IO’s round-up in 15 minutes. A good round-up. One thing Google did was to overhaul its search experience. Instead of the traditional “10 blue links”, the search experience is built around an “Intelligent search box” with access to AI tools including agents. The overhaul is so major that Google clearly hasn’t ironed out the edge cases…and, for a while, you couldn’t Google “disregard”.

• New results from Eli Lilly’s weight drug are astounding…leading Daniel Friedman to ask, “I wonder what will happen in the economy if 80 million people who have reliably consumed 3500 calories of food each day for the last 30 years suddenly start eating only 1800 calories.”

…and them wild posts (including this gem about Vanguard…the Acquired podcast just did an episode on how Jack Bogle’s investment management company pioneered low-fee indexing, which has saved investors $1 trillion in fees. #BogleHeads rise up):

Finally, we have to talk about Wemby. The 7’4 San Antonio Spurs superstar played one of the greatest playoff games every earlier in the week. ESPN’s Ramona Shelburne had an incredible article detailing two weeks he spent with Shaolin monks last summer to build up his mind:

Throughout his time at the monastery, meditation had been the most difficult aspect for Wembanyama to embrace. It’s hard for someone 7-foot-4 to sit cross-legged at all, let alone silently for up to 90 minutes, without moving.

But he kept at it. Each night he slept in three single-size beds that had been pushed together to accommodate his frame. Each morning he rose at 4:30 to train. The monks would have him run through the forests near the monastery or along an uneven 200-meter hillside track, doing frog jumps, sprints and one-legged hops uphill and downhill to build his balance and stamina. […]

Several times a day Wembanyama meditated with 100 other monks, each session’s length determined by the length of the wick of incense that burned in the center of the room. Thirty minutes was doable. But sometimes the incense burned for 90 minutes, and it was agonizing for the then-21-year-old Wembanyama to sit that long.

“I knew he could do it,” Master Yan’an said. “Because when he trains, he always tries again and again until he is the best.”

Master Yan’an recognized then what the basketball world is recognizing now: that Victor Wembanyama has perhaps the most unprecedented set of skills and untapped potential anyone has ever seen, and that he requires a similarly unprecedented training regimen to realize it.

Also, recall the Swatch x Audemars Piguet collab we talked about last week….so I can show you this meme comparing Wemby to OKC Thunder centre Chet Holgrem.

Today, we’re talking about the Swatch x Audemars Piguet collaboration.

Also this week:

• Cerebras, Nvidia & Speed in AI

• Jensen at the Trump & Xi Summit

• And them wild posts (including Claude Code spend)

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Super-duper ultra luxury watch brand Audemars Piguet (AP) has partnered with (much less ultra super luxury watch brand) Swatch on a pocket watch called the Royal Pop collection.

They teased a collaboration last weekend and it led to a number of AI-generated mock-ups. The riffs included lower-end plays on AP’s Royal Oak staple and higher-end plays on Swatch’s popular mid-1980s Pop Swatch, which was a detachable watch dial that fit on a lanyard, fabric, wristband and clothes.

The potential collaboration also led to one of the most amusing meme cycles of 2026.

An official launch video came out on Tuesday. It was indeed a riff on the Pop watch (hence, Royal Pop). The collection offers 8 configurations, a nod to the Royal Oak’s octagon bezel. It starts at $400 and comes with a calfskin lanyard. The product starts selling this Saturday. Only in-store and there will assuredly be some hilarious moments when you find out someone that owes you $70 just waited in line for 96 hours to spend $400 to say they “own an AP”.

Again, the memes delivered.

All snark aside, this collaboration will do numbers.

There is precedent: in 2022, Omega and Swatch created the $260 MoonSwatch. The collaboration has sold over 5 million units and now accounts for 60%+ of Swatch’s total unit sales.

I know. It’s not a perfect analog. Omega and Swatch are both part of Swatch Group and the two watchmakers share design elements. Meanwhile, Audemars Piguet is on another tier of luxury. It is the watch “holy trinity” along with Patek Philippe and Vacheron Constantin. The 150-year luxury brand is also a recipient of numerous hip-hop shout-outs:

• “Ric Flair Drip”: The Offset, 21 Savage and Metro Boomin’ music video features many APs and Ric Flair himself (“Goin' to the jeweler, bust the AP, yeah / Slidin' on the water like a jet-ski, yeah”)

• “Rich Spirit”: Kendrick Lamar calls out AP’s former Head of Complications (“AP, Michael Friedman, my friends cooler / Primary, so the resale value stupid”)

The MoonSwatch outcome does set the bar for Royal Pop, which is a very interesting bet for both brands. They both need it. But for different reasons.

Let’s unpack the collaboration with two of my favourite luxury concepts: the Dream Equation and the 3% Rule.

Audemars Piguet and the Dream Equation

Jean-Noël Kapferer is the author of “The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands”.

The book is regarded as the industry Bible. It’s the “Eat, Pray, Love” for luxury marketing. Instead of explaining the psychology of solo female global travel in the early-aughts, it explains how luxury brands are built.

Kapferer says the reason he put “strategy” in the title is because it is not enough to just create a great product. Nor is it enough to call something “luxury”. There have to be “obstacles” in the buying process. The three main ones he highlights are price, distribution and availability.

I’ve written on the canonical luxury brand example of Hermès. A Birkin Bag starts at $9,000. That’s a price obstacle. Buyers have to build a relationship with the store by purchasing smaller items before getting “offered” the bag. That’s a distribution obstacle. Each bag is hand-crafted, thus limiting supply and Hermès manages inventory to make people wait. That’s an availability obstacle.

Obstacles create social desirability which feeds into what Kapferer calls the Dream Equation, a concept in luxury marketing about how brands have to maintain a balance between awareness and accessibility (actual sales).

Also worth noting that “social desirability” really means “humans are obsessed with status and luxury brands are happy to create products for people to flex on each other.”

To wit: a lot more people know about the Birkin Bag than can actually afford or acquire it from Hermès.

But Hermès needs potential future buyers in the pipeline. So, it offers less expensive items — scarves, fragrances, slides, leather goods etc. — to get people on the purchase ladder (forget B2B SaaS, this is an incredible recurring revenue business model).

Is Wendy’s Coach a luxury brand? No. The quality is not as high and there aren’t any obstacles to purchasing a delicious breaded spicy poultry sandwich.

True luxury brands have to manage the balance between desirability and accessibility, as Kapferer explained on a podcast:

You need to be visible to be desirable. But not accessible enough so that too many people can buy your brand.

The [Dream Equation] is a statistical model we’ve developed to explain the relationship between desirability and accessibility.

We ask two questions. The first question is, do you know these brands? And we list 50 brands. Second, have you ever bought anything from these brands?

If we take Chanel, it can be a lipstick [or] it can be a fragrance. It is not always haute couture. It can be anything from that brand.

[Then, there’s a] third question: how much do you dream of this brand?

We noticed that desirability was a function of the difference between level of brand awareness and level of ownership. Which means that if you have no brand awareness, you cannot have desire.

The second thing is when this thing is too ubiquitous and too many people are own it. It’s not a problem in normal marketing. Everyone knows Zara and everybody buys Zara. But they are not in the luxury market.

Because desirability at some point in time has a price, and there is desirability at £20 and desirability at £2,000 and desirability at £20,000. In fact, it is this tension of “I know there are obstacles to ownership” which is the basis of desire in the luxury market.

The more desirable the luxury brand is, the more it sells. [But] the more it sells, the less desirable [it becomes].

Creating too many obstacles has a problem. [There is too little volume] to be profitable. But if…there are no obstacles, you are not in the luxury business. You are in the premium business.

There is a very clear application of the Dream Equation to AP.

The ultra-luxury Swiss watchmaker has seen its sales grow from $900m in 2015 to ~$3B in 2025. But its volumes are still very very low. AP sells 50,000 watches a year. Compare that to a Rolex, which sells 1.3m units a year with total sales of $14B.

Price definitely plays a part in AP’s lower volumes: an entry-level AP is ~$20K, while an entry-level Rolex is ~$6K.

It’s a similar situation to Ferrari vs. Porsche. Ferrari sold only ~14k cars in 2025 with revenue of $8B. Meanwhile, Porsche sold ~280k cars in 2025 with total revenue of $40B+. Ferrari is much more of a luxury brand than Porsche.

AP definitely won’t flood the market with 1m+ units. It also doesn’t have the same purchase ladder like Hermès since it doesn’t offer <$1,000 products. But, AP does keep customer purchase histories and allocates inventory to valued clients.

However, there is clear room to sell more watches and AP has identified a market: women.

Audemars Piguet’s CEO Ilaria Resta took over the job in 2023 after spending the past two decades marketing for beauty products (Firmenich) and hair products and homecare (P&G).

In an interview last year, she said:

In terms of opportunities, we are underdeveloped with women. We are in the range of below 20% of buyers of our watch are women. [It’s estimated that] by 2035, 45% of women will buy a mechanical watch.

The scene is changing because in the past women were not so much into mechanical watches. Now, they’re getting more and more interested.

AP has started making designs in smaller dimensions to cater to women’s rising interest in watch complications.

Something that many people pointed out about the Royal Pop collaboration is that its design is ready-made for AP to ride the Labubu keychain bag trend that’s gone wild in recent years.

The pocket watch is a great entry point. The design will also likely keep the existing owner base happy; a LOT of its OGs — including Eric Clapton and John Mayer — would probably be pissed if Royal Pop was a wristwatch (although you know those 3rd-party bands are already popping).

Resta doesn’t directly call out women buyers. In fact, one of her first moves as CEO was to get rid of the men’s and women’s categories. She wants every AP watch to be unisex.

However, the language in her official announcement seems pretty clear (bold mine):

At its heart, this project has a single purpose: perpetuating the love for mechanical watchmaking. To love something, you must first encounter it. To desire it, you must first understand it. That is why Royal Pop reimagines traditional codes through a bold mechanical pocket watch, available in eight models and designed to be worn in many ways: in the pocket, as a pendant, a bag charm, a personal statement. Because redefining how we wear time is also a way of redefining how we relate to it.

It is a measured risk.

The women’s market is so undersaturated that AP can serve it without putting the Dream Equation out of balance (and risking its ultra-luxury positioning).

One demographic that Resta does call out in her post are young people:

This project resonates deeply with me. My first watch, at thirteen, was a Swatch.

With Royal Pop, our ambition was to create a mechanical object that younger generations could access; one that might begin their journey with mechanical time. Perhaps as future collectors. Perhaps as future watchmakers.

But first, simply as curious minds who understand how a watch works, why it matters and why it is such a beautiful object. Because it is understanding that drives appreciation.

Royal Pop is a way for these demographics to get emotionally invested in the brand with a purchase. It’s all about planting seeds for future customers (AP is donating 100% of Royal Pop proceeds to provide financial support for watch artisans and related education programs).

When the Omega MoonSwatch came out a few years ago, Swatch Group CEO Nicholas Hayek also called out the younger generation as a target market:

Young people everywhere in the world [don’t] know the story of Omega.

It has been on the moon. You have to tell this story.

So, Omega increases in sales after we launched. The young people are fascinated. They want to know what is happening. Swatch was the perfect means to do it. Swatch was always a communicator and brought new people to buy watches. It was like this in the past and it will be like this in the future. […]

AP’s previous CEO François-Henry Bennahmias echoed those thoughts: “[The MoonSwatch] collaboration is a great idea, which does not affect the integrity of Omega at all, contrary to what you may have heard. Why is that? Because it educates the younger generation about the icons of watchmaking.”

AP and Omega have to keep that pipeline fresh or the brands won’t be as socially desirable in the future.

Cool, what about Swatch?

Swatch and the 3% Rule

Swatch Group owns 16 watch brands across a range of buying power from basic (Swatch) to middle-range (Tissot) to high-range (Longines) to luxury (Omega) to super-duper ultra luxury (Breguet).

Quick note on Breguet. If a key part of luxury is the brand’s heritage…then it’s hard to beat an influencer sponsorship as powerful FRICKIN’ Napoleon Bonaparte.

Good lord. AP might have top hip-hop artists but Breguet has the guy that said maybe the hardest bar in history: “I found the crown of France in the gutter, and I picked it up with my sword”.

Anyway, Swatch Group is valued at ~$14B and its the world’s top watch seller by volume. Annual sales of ~$8B puts it 3rd overall with a 15% market share (behind Rolex at 26% and Richemont at 16%; further down, LVMH is at 7% and AP is at 5%).

Nick Hayek Jr. has been the CEO of Swatch Group since 2003.

His father Nick Hayek Sr. is an absolute Swiss legend and the Swatch Group empire owes its existence to the namesake brand. Swatch is short for “Swiss watch” but also for “second watch” (as in, this was meant to be an every day watch people owned after their main baller piece). The £50 product had such mass appeal that it saved the Swiss watchmaking industry from Japan’s cheap quartz products (namely Seiko and Casio).

Swatch turned watches from precious timepieces to a fashion accessory and form of self-expression. Something people could swap in and out depending on their mood or fit.

The Wall Street Journal wrote this in the obituary for Hayek Sr., who died in 2010 while on the job:

Mr. Hayek, who was born in Lebanon in 1928 to a Lebanese mother and Lebanese-American father, studied physics, mathematics and chemistry, moved to Switzerland in 1949 and set up a consulting business in Zurich in 1957.

Among Mr. Hayek’s clients were troubled Swiss watchmakers such as Asuag and SSIH, which Mr. Hayek recommended to merge in 1983.

The newly founded company, Société de Microelectronique et d’Horlogerie, or SMH, in which Hayek took a stake, developed the plastic watch Swatch, which consisted of around 50 parts and was much cheaper to produce. Due to its low price of less than $100 a piece and continually changing pop-art look, the watch became an immediate success around the world.

Mr. Hayek remained a key shareholder of the group. Together with other shareholders such as the pension fund of Swatch, Mr. Hayek held a stake of about 39% in the company’s voting rights.

The success of the Swatch revived the Swiss watch industry and helped boost interest in Switzerland’s luxury watches, which dropped out of favor during the 1970s when customers preferred futuristic electronic watches. As a result, brands such as Breguet, Blancpain, Jacquet Droz and Longines drew broad interest and helped transform Swatch into the world’s largest watchmaker.

There have been hundreds of millions of Swatch watches sold in the past 4 decades (some of the most popular Swatch riffs re-sell for 5-figures on secondary markets).

Swatch’s signature round shape is known as “the Gent”. It’s simplicity — including the basic wrist band — has become a canvas for hundreds of collaborations with celebrated artists, designers, architects and IP!!!! So much IP!!!

I got one. My kid got one. You definitely got one. I may or may not also have another Mickey Mouse one.

Here are some gems from left to right:

• original 1980s look (initial run of watches had basic colorways; if they flopped, Hayek Sr. had planned for any unsold inventory to go to the Swiss military)

• Keith Haring

• Alessandro Mendini

• Alfred Hofkunst

• Sam Francis

• Nam June Paik

• Annie Leibovitz

• Museum of Modern Art

• Yoko Ono

• The Louvre

This “Gent” shape is an ideal canvas for Virgil Abloh’s design approach known as the “3% Rule”.

Abloh is the late streetwear designer who founded the Off-White brand and was artistic director of menswear for Louis Vuitton.

Famously, Abloh did a line of Nike collaborations where he took well-known shoes (eg. Air Jordan I) and made slight changes (some text here, an accessory there).

During a 2018 Harvard lecture, Abloh explained that Nike “products were so good” and “so perfectly put together” that he only wanted to make slight edits for his collaboration. He wanted to “recognize the shoe he already had” but with a personal touch.

Abloh called this the 3% approach (or The 3% Rule): you alter a product or idea by only 3% to create something new. Why does the approach work? Humans desire two competing things: familiarity (to give us comfort) and novelty (to fulfill our curiosity).

Whatever you think of Abloh’s work, the psychology behind the 3% rule is very sound.

In a piece for The Atlantic, Derek Thompson relays the story of French industrial designer Raymond Loewy, who was a master of combining familiarity and novelty.

Working in the mid-20th century, Loewy’s firm created some of the most iconic designs in American culture including logos (Shell, Exxon, TWA, BP, Greyhound), consumer products (Coca-Cola vending machine, Lucky Strike box), and vehicles (Air Force One nose, Studebaker Avanti). In 1950, Cosmopolitan Magazine wrote that Loewy had “probably affected the daily life of more Americans than any man of his time.”

The Frenchman’s design philosophy was summed up by 4 letters — MAYA (bold mine):

“Loewy had an uncanny sense of how to make things fashionable. He believed that consumers are torn between two opposing forces: neophilia, a curiosity about new things; and neophobia, a fear of anything too new. As a result, they gravitate to products that are bold, but instantly comprehensible. Loewy called his grand theory “Most Advanced Yet Acceptable”—maya. He said to sell something surprising, make it familiar; and to sell something familiar, make it surprising.”

The preference for familiarity and tendency to gravitate towards things we see more often is known as the “mere exposure effect”. This is evolutionarily sound: humans are cautious around new sights and sounds because they might be dangerous (but become more comfortable if the supposed threat turns out to be harmless upon repeated exposure). Thompson says that the “mere exposure effect” is one of the “sturdiest findings in modern psychology”.

However, there are limits to how much we want to see the same thing (eg. Marvel and Star Wars reboots). But a small change can provide the novelty humans also crave (fine, I’ll watch if there’s a random Samuel L. Jackson cameo).

Thompson cites two other examples of familiarity meeting novelty:

• The Spotify team found that the custom Discover playlists they created for users — which started as a way to recommend you entirely new songs — performed best when it included tracks you had previously heard (Spotify stumbled on this after a bug mixed up people’s Discover playlist with songs that they had previously listened to).

• Harvard and Northwestern researchers studied how the US’ National Institute of Health (NIH) assessed research submissions. They found that the NIH gave the worst ratings to papers with “the most novel proposals” whereas the best-performing papers only made slightly new discoveries. The conclusion: there is an “optimal newness” for ideas (I don’t know if optimal newness is 3% but you get the point).

With cultural icons as famous as Swatch and AP, any collaboration shouldn’t veer too far from the familiar aesthetics. Why throw away decades of built-up brand equity, mind-share and marketing spend?

AP’s octagon bezel is prominent. So is Swatch’s colorful and playful aesthetic.

It’s worth noting that the Royal Pop collection comes after AP lost some high profile trademark cases in America and Japan, per Complex:

In February, 2020, AP sent an application to the Japan Patent Office to trademark the Royal Oak design. Specifically, they said that the features that made the Royal Oak distinctive were “a dial with a tapisserie pattern and hour markers, minute track, date window, an octagonal bezel with 8 hexagonal screws, case, a crown, and a lug of the famed ‘ROYAL OAK’ watch collections.”

They took the case to the Japanese IP High Court, and in March, 2024, they lost there, too. One Japanese law firm summarized the decision as: “[G]eneral consumers, as the target audience, do not distinguish the product in question based on its shape but rather identify it through the letters displayed on the dial or the descriptions provided in advertisements.” […]

The U.S. story played out similarly. Back in July, 2020, AP tried to trademark two basically identical watch designs…Both of them had features that should be familiar to Royal Oak lovers: octagonal bezel, eight screws, Grande Tapisserie decorative pattern, etc.

After a lot of back-and-forth, the US Patent and Trademark office submitted a final refusal to both in January of 2024. Their logic was that the features AP wanted to trademark were “nondistinctive” and “highly common in the watch industry.”

Understandably, AP and Swatch won’t address the theory. But if AP can’t trademark its trademark look, it makes total sense for AP to tie itself to the octagon bezel with new demographics by doing a splashy drop.

Remember, the Dream Equation requires attention and visibility.

The brain seeks familiarity. And if you can mix in novel repetition, it’s a potent combination. As Napoleon Hill said “Any idea, plan, or purpose may be placed in the mind through repetition of thought.” Or in marketing speak: the rule of 7 states that a prospect must see a brand at least 7x before making a buying decision.

In an essay, Abloh further expounds on the 3% rule and why you only have to slightly innovate an existing project to create a new one:

3 % is applicable across practices and fields, different media, eras of our history. Our future.

A series of 3%’s brings the classics to modernity. Connects icons to burgeoning talent.

[…]

3% is packaging, 3% is marketing.

3% is a single sneaker with Nike, executed 50 different ways.

[…]

The 3% ideology has its advantages. It recalls an eye-to-emotion-connection in the brain and adds an alternate voice. 3% expands our world view, without pushing our zones of comfort to the brink.

We’re exposed to “new”, but not eccentric or disconcerting.

Of course, Abloh has critics that call his approach unoriginal or borderline plagiarism. Abloh addresses this charge with a related concept: “Readymade”, the idea that people should build on what already exists. He cautions against the instinct to create stuff from scratch. You should build on the aesthetic of a mentor (whether dead or alive). Odds are, these mentors did the same:

“It’s important to recognize where we’re at in the lineage of art movements. I’m sure in your [design] class, you’re trying to challenge yourself to invent something new. To be so like avant-garde. The thing I’ve figured out through working is that we exist off the backs of many other things in iterations before us. So once you think about us as a collective, you then realize that we’re all tracking towards the same direction”

I mostly agree with this take. Now, I’m not saying plagiarize or “take inspiration without credit.” I’m saying that unless you’re a creative genius that can truly muster original masterpieces out of thin air (David Bowie, Jimi Hendrix or — my fave — Guy Fieri), the approach of building on top of what works is sound.

There’s a reason why the Hero’s Journey for film and same “Four Chords” for hit music keep on resonating decade after decade.

Same thing with Swatch. Over the past 43 years, the form factor has proven itself an ideal vehicle for brands to apply the 3% Rule.

The strategy worked with artists. It worked with world-famous museums. It worked with pop culture icons. It worked with MoonSwatch. It’ll probably work with Audemars Piguet.

Final Thoughts

The Omega MoonSwatch launched in March 2022.

There were many many doubts about the release. As we know, it became a massive success. Hodinkee named it the “Watch of the Year”. Time + Tide called MoonSwatch the best thing to happen in the watch industry over the past decade:

Omega was coming off the success of No Time to Die and the delayed Tokyo Olympics happening the year previous. Swatch was continuing to release fun, creative watches, and they also introduced their first models in their innovative Bioceramic material in early 2021. […]

[MoonSwatch was] a mixing of high and low in a way that brought the very concept of Omega into streetwear culture, flipper culture, and hype culture, a move no one could have predicted.

The collaboration sold 1m units in 2022. Then, 2m units in 2023. It fell to 1.5m units in 2024. Even with the drop-off, MoonSwatch had grown from 60% of Swatch Group’s total volume sales in 2022 to 64% by 2024 (Omega accounts for ~1/3rd of Swatch Group’s revenue by value).

The watch probably sold another 1m+ units sold in 2025. At $260 a pop, that’s ~$1.4B in lifetime sales across 5.5m units.

The MoonSwatch’s financial success hasn’t been able to balance out some larger Swatch Group issues.

Its stock bounced in the year after MoonSwatch’s launch but has been mostly downhill since…down more than 30% from 2023 highs to a market cap of $14B.

Swatch Group pioneered the vertical integration model for watchmakers. All of its brands benefit from the parent company’s control of parts, R&D and raw materials.

The company may be spread a bit thin, though.

Per Bloomberg, the model is struggling against three macro headwinds. First, customers in Asia — which makes up 42% of the business (China itself is 25% of total sales) — have tightened up their wallets. Second, American tariffs have targeted Swiss exports. Third, mid-range watches are getting absolutely clapped over the past decade.

So much of consumption is going to the low and high segments (Wendy’s or Michelin)…and the luxury end of the equation dominates the total sales for Swiss watch exports.

Also didn’t help that Apple released the Watch. The iPhone maker has sold over 300 million Watches and taken over the $300-$1000 price range

Swatch is one of the most shorted stocks in Europe and activist investors have been putting heat on Swatch Group. They want the watchmaker to really focus on the higher-end brands including Omega, Harry Winston and Breguet.

However, Nick Hayek Jr. and the family control about 40% of voting rights, far above its 25% ownership stake in the business.

Just last week, shareholders voted against an activist investor trying to take a board seat.

I guess when we examine the stock chart over the past two decades…the activist effort kinda has a point.

The Hayek family is very much still in control, though. They want to keep focusing on buyers across the income spectrum as Hayek Jr. explained while reflecting on the success of the MoonSwatch launch:

We did not do a limited edition [launch]. It costs $260 and it’s really accessible for everybody. That’s what it is about. The luxury industry must be careful. If you always go higher in prices, you exclude more and more people.

So, your exclusivity is excluding people. You only serve an elite of people and that’s not the future. You have to seduce the mass of people. The middle class. The entry class. Not just the rich

Audemars Piguet CEO Ilaria Resta shared a similar sentiment about the Royal Pop collection.

“There is, of course, a tension between exclusivity and inclusivity,” Resta wrote in her announcement post. “This is a one-off collaboration with a singular ambition: to ignite collective desire. To spark the kind of cultural conversation that makes people feel about watches the way they feel about art or great cars — making mechanical watchmaking something cultural, emotional, alive. Because every generational shift is a reminder: an industry that turns inward and stops connecting does not just lose relevance, it loses its meaning.

That terminology is straight off the pages of “The Luxury Strategy”.

I think both brands will get a serious boost from the Royal Pop collection. But AP will win more from the perspective of the Dream Equation. Resta only has to worry about one brand and says the it’s a “one-off” collaboration.

Meanwhile, Hayek Jr. won’t get to do double dip on sales like Swatch Group did with MoonSwatch. Will a Royal Pop halo effect extend beyond Swatch? Unlike Resta, he’s dealing with 16 brands and has a number of larger trends going against Swatch Group that can’t all be solved by the 3% Rule (or a Napoleon shoutout).

***
UPDATE 7am on Saturday, May 16: Lines got so crazy around the world that Swatch had to cancel the AP Royal Pop Collection at a number of boutiques for safety reasons. Swatch had to emphasize that the collection is not limited edition (it is a one-off but they will produce more than this first run) so that everyone can chill out.

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Cerebras, Nvidia & Speed in AI

Semiconductor startup Cerebras Systems went public on Thursday.

In the least surprising result ever during this insane AI bull market, Cerebras popped by +68% and finished its IPO day with a market cap of $95B. It did fall 5% on its first full trading day on Friday but, yeah, what a run. Last September, Cerebras — which was founded in 2016 — raised at an $8B valuation.

This $90B+ valuation is based on two key items:

• 90% of AI data centre usage has moved to inference (the majority of workload a few years ago was for training large language models; but, now that they are trained, inference is providing outputs for user queries, tasks, agent work, a lot of coding and me generating an image of an Audemars Piguet as a chicken nugget)

• OpenAI has $20B+ of commitments to use Cerebras chips over the next 3 years (this makes up 85%+ of Cerebras revenue and is what some folk may call customer concentration risk; OpenAI has also secured warrants to own ~10% of Cerebras).

Ok, so what is OpenAI buying?

My “I read 3 blog posts and watched 2 YouTube videos” understanding of the startup is that Cerebras designs a “wafer-scale” chip that provides high-value inference tokens and blazing fast speeds.

It’s called “wafer-scale” because Cerebras makes the largest semiconductor chip in the world. By manufacturing large wafers — instead of slicing the silicon into smaller pieces — Cerebras is able to maximize on-chip memory and deliver performance on certain inference tasks (medical research, high-level coding) where speed and quality matter.

A good way to frame this IPO is to revisit Jensen’s GTC keynote in March: he called the image below “probably the single most important chart for the future of AI factories”.

The Y-axis is “Throughput” (total volume) while X-axis is “Token Speed” (more tokens per second = more interactivity for a user + more context + more reasoning).

Firms market and price token offerings on those two variables (throughput vs. token speed) which are in tension.

Leading semiconductor research firm SemiAnalysis made this analogy about Jensen’s chart:

As Jensen repeatedly emphasized during this year’s GTC, throughput (tokens/sec/gpu) vs interactivity (tokens/sec/user) is the fundamental trade-off for inference. In our original InferenceX writeup, we described it as a bus vs a Ferrari: you can choose to serve lots of users slowly, a single user quickly, or anything in between.

A free tier typically is high throughput but lower token speed. Meanwhile, the priciest tier would have lower throughput but high-value tokens (eg. research, coding)

Nvidia’s challenge is to build systems that lift the entire line up and to the right.

This is why Jensen spent $20B to acquihire the Groq team and license its technology.

Groq is most useful for delivering the higher value tokens at speed, which is the same market that Cerebras is targeting.

Cerebras is attacking the problem with a massive, single-wafer design. Meanwhile, Groq uses multiple, smaller, connected chips and a specialized processor architecture design (Language Processing Unit aka LPUs).

Jensen says Vera Rubin architecture improves revenue opportunity 5x vs. Blackwell. Then, if you add Groq to Vera Rubin, that revenue opportunity is up 10x vs. Blackwell.

SemiAnalysis had this to say about the growing importance of speed for the inference market:

[Many] previously believed that raw intelligence/capabilities mattered far more than speed, but our revealed preferences ended up proving that there are times when the opposite is true. Past a certain threshold of intelligence, developers prefer faster tokens to smarter tokens. And in a world where AI is involved in almost every aspect of your workflow, the speed at which tokens are generated can be the bottleneck to “flow state”, i.e. how much productive work is completed.

A few months before Groq was acquired, the startup’s CEO Jonathan Ross went on the 20VC podcast and compared speed in digital services to dopamine hits from consumer products:

I want you to rank the consumer package goods (CPG) by margin. At the very top is smoking tobacco. Below that is chewing tobacco. Below that is soft drinks.

You keep going down and you get to water and other things like that.

What is the number one thing that um a high margin correlates to in consumer packaged good? It’s the speed with which the ingredient acts on you. So, that dopamine cycle — how quickly something occurs determines — your brand affinity.

When something uh has a very quick response you associate to that brand and then you accrue brand value.

This was the entire basis of Google focusing on speed. Facebook focusing on speed. Every 100 milliseconds of speed up results in about an 8% conversion rate.

With the vast majority of AI data centre usage going to inference, there are so many different performance demands and use cases that Nvidia will face many challengers…including Cerebras.

Anyway, here is one of those YouTube videos I watched. Cerebras CTO Sean Lie explains how they manufacture their giant chip.

Jensen at the Trump & Xi Summit

President Trump flew to Beijing for a 2-day summit with President Xi.

There was no grand bargain and the readouts from each side emphasized points that played well to domestic audience (The Economist has a good round-up).

Let’s zero in on one of the funnier timeline trends: in the lead-up to the trip, there was a list of top American CEOs invited to the summit. Elon, Tim Cook and heads of Goldman Sachs, Qualcomm, Mastercard, Boeing, Micron etc…but Jensen was not on the list.

Nvidia chips are mostly not being sold in the Chinese market right now as we’ve discussed in recent months.

Then, Trump dropped this Truth post that invited Jensen and — hilariously — brought back Tim Apple.

The last-second invite led to a photo of Jensen with a backpack waiting on a tarmac in Alaska for Air Force One.

Incredible meme-age here:

This also became a massive meme on Chinese social media and some creative Weibo users AI-generated Jensen going full Tom Cruise Mission Impossible trying to catch the flight.

Then, it escalated to “Jensen carrying various gift liquors to the meeting with Xi” as one does in the Asian business community.

During the summit, President Trump announced a list of 10 Chinese companies that could by Nvidia chips (notably, China did not comment on this list and Nvidia chips still haven’t started selling).

But that news story led to this incredible GPU riff:

Finally, Jensen peeled off from the official summit to sample the soy bean paste noodles (zhajiangmian) from Michelin-recommended Fangzhuan shop followed by a bubble tea. The noodle shop has already added a “Jensen” meal option on its delivery app.

Yes, it’s PR. But damn was it done well…including him sampling some mystery drinks:

To summarize: Jensen took a last-minute flight to Beijing. Only brought one bag and two outfits. Landed for a party, then spent a day eating mystery street meat and noodles while drinking any beverage that was offered.

Classic early-20s Asia backpacking trip.

Links and Memes

Shannon Sharpe interviews former NBA player Michael Beasley. This is one of the hardest podcast episodes I’ve listened to in a while. For those that don’t follow basketball, Beasley was a top college player and #2 pick in the 2008 NBA draft.

His career was a bit of a letdown and he struggled with family and personal issues.

Sharpe did a super viral interview with comedian Katt Williams a few years ago. Williams just unloads in that chat about Hollywood. Beasley basically does the same thing with the NBA. It’s so raw.

One part of the 2.5 hour interview is when Beasley goes off on parents that pressure their kids to turn sports into a career and to make money:

[When I played in high school] I didn’t know about the money they was getting. We played for the love of the game. We played for a chance to go to college. We played for a chance to get an education. Then we played for a chance to take care of our family.

[Name image and likeness, NIL, payments in college] opened up the gates all the way down to 10 years old.

News flash, people. Only 60 [players] get drafted a year and 20 of those get cut. There’s only been 4800 — roughly 5,000 people — that’s ever made it to the NBA. Chances are your son won’t. They need to have fun first before they make money. That’s what’s wrong with AAU today. Everybody trying to make money and be the best fourth grader and the best third grader.

It’s like “dog, play for the right reasons and the right things will come.”

Kids only know what you tell them, right? You know, a 2-year-old thinks he’s God. Why? Because he doubled his life in the last year and he was just a blob getting fed everything. Now, he climbing all over. The bro think he conquered life. You going to let him make a decision?

These parents need to stop thinking everything financial. Why are you so worried about how much money he make or doesn’t? You should just be worried about him becoming a good person. You should be worried about the good morals. You should be worried about discipline. You should be worried about good health.

There were parts about his childhood and losing his mother that I legit teared up.

***
Some other links for your weekend consumption:

• Anthropic co-founder and head of policy Jack Clark…assigns a 60% probability that AI will be able to automate AI research (“where a frontier model is able to autonomously train a successor version of itself”) by end of 2028. He highlights improvements in coding, AI managing other AIs and the ability for AI to work for long periods uninterrupted.

• Indian CEOs really do deliver alpha: Deedy Das found an interview where nillionaire Michael Milken joked “if a US company replaces the US-born CEO with a CEO born in India, I buy the stock”…but Milken actually back-tested the idea and its true.

• How many golfers can Rory McIlroy identify just by watching their swing silhouette? Impressively…alot including Shaq and Charles Barkley lol.

• Claude helped someone recover $400k in lost Bitcoin…the AI tried 3.5 trillion passwords to figure out a key that was lost 11 years ago. The user may now name his next kid “Dario”.

• Air Transat has a very good billboard campaign…it compares the ticket prices for a World Cup games (NOT LOW) to a flight ticket of the countries playing (much more reasonable).

• Digital artists SHL0MS posted a Monet painting on X…he called it an AI-generated image challenged users to critique it. Next level social experiment. People that hate AI called the image crap.

• Someone created a riff of “The Office”…with Michael Scott having to deal with Claude. A reboot of this series starring Claude would single-handedly be worth $2T in AI capex.

• People have started making AI-generated radio stations…and the results are (ummm) interesting.

…and them wild posts:

Finally, the X timeline was FLOODED with Ed Harris from The Truman Show. For those that have forgotten, Harris’ character Christof is the creator of the “show” that stars an unwitting gentleman played by Jim Carrey. The screengrab is of Harris “directing” the events around Truman.

It went nuclear last week with every user making of version of Christof putting people into unfortunate situations.

Today, we will talk about all things airline industry including Spirit Airlines shutting down, Delta’s absurd credit card business and what happens to retired planes.

Also this week:

• Nvidia’s $3B Deal With Glassmaker Corning

• RIP Ted Turner

• …and them wild posts (including the Met Gala)

Subscribe now

Spirit Airlines shut down last Saturday after a failed attempt by the US government to bail out the 34-year-old budget carrier.

We’ll discuss more on how the business collapsed in the next section.

But first let’s cover a less consumer-facing part of the airline industry: the business of storing, refurbishing, converting and dismantling planes.

Spirit Airlines’ employee count has shrunk from 17,000 to less than 100, and most of the remaining executives are figuring out what to do with the company’s fleet of Airbus planes.

For some reason, Spirit didn’t do the most obvious solution:

Instead, here is the state of the fleet per USA Today:

According to data from Cirium, an aviation analytics company, Spirit had 172 planes in its fleet when it shut down on May 2. Of those, 95 were in active service and 77 were in storage, largely in Arizona. A majority of Spirit’s planes (124) were leased, which means they’ll automatically be returned to the lessor.

Some of the 48 owned planes were also signed over to a lessor previously, meaning the bankruptcy proceedings will only result in a direct sale of a few of the aircraft in Spirit’s fleet.

Many of those active planes flew to Arizona in the days since Spirit closed shop.

Why? Arizona’s desert climate makes it a go-to spot for what is known as airplane boneyards.

“The sun shines for some 300 days a year,” explains The Economist. “Humidity levels hover in the low double digits. It is so dry that the soil, known as caliche, hardens to a cement-like consistency—ideal conditions for storing planes, heavy things whose enemy is corrosion-causing moisture.”

Arizona has about 4,000 airplanes stored at various sites including the military-focussed Davis-Monthan United States Air Force Base (which you may or may not have seen in Transformers) and the commercial-focussed Pinal Airpark (which you may or may not see in this photo below).

Other major plane storage areas are located in similar climates including Southern California (Victorville, Mojave Port), New Mexico (Roswell International Air Center), Spain (Teruel Airport) and Australia (Alice Springs).

The Economist provides more detail on how the Arizona airplane boneyard ecosystem works and it’s fascinating:

• Storage: It costs $5,000 a month to park a single-aisle plane or $10k for larger jets. Some of you space-strapped NY or SF readers are probably running the math to see if it makes sense to just live in Pinal Air Park and work remotely.

• Disassembly: A large jet (e.g. Boeing 777) has over 130k unique parts (~3m total) including bolts and rivets. Airlines need a “reliable supply of all these bits and pieces” or the “global aviation industry would grind to a halt without them”. All parts have to be certified and need a comprehensive maintenance history to retain value.

• Parts Resale: Cockpit instruments “can be removed and reused in other aircraft of the same type” and “sometimes the entire cockpit is repurposed as a simulator for pilot training”. Avionics, instruments, wiring and hydraulics are sold or stored based on demand. Luxury seats at the front of planes are re-sold to 2nd and 3rd tier airlines or aviation collectors.
  
  As with real life, the “least desirable” parts of the plane are the economy seats. These are made with 20-30 different materials and shredded for waste. Some airlines try to limit the waste by using higher-end material (e.g. Emirates has 14 tailors to “repurpose materials from its cabins into bags, wallets and suitcases, with proceeds from sales going to charity”).

• Refurbish or convert: Older planes on the brink of retirement are able to stay in the air if smaller carriers — particularly from developing markets — buy them up and update parts. Richer airlines “prefer factory-fresh aircraft because of fuel efficiency and customer expectations”.
  
  Another common way for old commercial planes to stay in the air is for them to get converted to cargo planes. This adds 10-20 years because “despite higher operating costs, second-hand planes offer better value to logistics firms than more efficient but pricey new ones because freighters clock fewer hours in the air than passenger services.”

The Spirit Airlines fleet is mostly spoken for but the ones that do go on sale will probably end up with other low-cost carriers…which means we won’t get to see this Project Hail Mary.

Why The Airline Business Sucks (and How Delta Is Making It Work)

David Oks wrote a very insightful piece on why the airline industry is so prone to bankruptcies.

The statistics are actually jarring:

• “From its deregulation in 1978 to the end of 2025, the airline industry has cumulatively lost money: its net profit over those 47 years sits at negative $37 billion.^”

• “Between 1978 and 2005, more than 160 airlines filed for bankruptcy.”

• “In September 2005, every one of the four largest American airlines—United, Delta, Northwest, and US Airways—was operating simultaneously under Chapter 11 protection.”

Warren Buffett has gotten burned by many airline stocks.

Probably (but also maybe not) in jest, wrote in his 2007 annual letter that: “A durable competitive advantage [in the airline industry has] proven elusive ever since the days of the Wright Brothers…indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down.”

So, what gives?

Oks gets deep into game theory and a key part that stood out was how huge fixed costs and volatile cyclical demand entices new entrants before flushing them back out:

Suppose you’re managing an airline that does flights from San Francisco to Tokyo. (A flight I’m considering taking, by the way.) Most of your costs, you’ll find, are fixed. The aircraft itself — let’s say it’s a modern widebody, like a Boeing 787 — will cost you somewhere in the low hundreds of millions; that’s a fixed cost. So are the gate slot for your departure from San Francisco and the landing rights for your arrival in Tokyo.

Labor costs might seem variable, but they’re actually not: pilot, flight attendant, and mechanic compensation in the United States is governed by the Railway Labor Act of 1926 (which was extended to airlines in 1936), which stipulates that collective bargaining agreements don’t actually expire but rather remain in force until they’re replaced. So even your wage bill is more or less fixed over multi-year horizons. The most variable major cost you’ll have to deal with is jet fuel; but given that spiking fuel prices aren’t your friend, you’d rather hedge fuel costs aggressively to smooth out cash flow. So fuel also acts more like a fixed cost.

All of which is to say: you have a lot of fixed costs.

Now let’s suppose daily demand on your route from San Francisco to Tokyo is roughly 800 passengers willing to pay a price that covers the full cost of flying. A widebody seats around 250 to 300 people. Perhaps you offer one flight per day, and you have two competitors that also offer one flight a day. This puts about 750 to 900 seats into the market: close enough to demand that fares stay healthy and the route covers its costs, plus a bit extra that you and your competitors can take as profit. Some customers don’t fly, and fares get bid up; but this is fine enough, at least for you.

But there’s a problem with this situation: there’s enough slack in the market —enough customers paying more than they could, and enough margin that you’re taking — that a new entrant could see an opportunity to enter. And once that new competitor has entered, you now have 1,000 to 1,200 seats chasing 800 passengers, which means that somebody has to lose out. The efficient number of daily flights is somewhere between three and four; but capacity is lumpy. So whereas three was somewhat too few, four is definitely too many. So you enter the instability part of the cycle. Fares collapse; margins take a hit; eventually someone has to exit. Once the weakest competitor has exited, the market consolidates again, and fares recover; but then someone sees the unmet demand and enters again.

So even in the best of times, there’s a deep structural instability to the airline industry: margins are structurally depressed and companies are unable to recoup their cost of capital. And that is in the best of times.

Because of this dynamic, a 100% competitive free market leads to repeated failures and airlines frequently operate while in Chapter 11 bankruptcy protection in an effort to reduce these fixed costs (e.g. union negotiations).

While Spirit was profitable in the 2010s, the broader airline industry has very much not been in the best of times since COVID.

Spirit Airlines tried to merge with JetBlue in 2024 but that deal was blocked by the US government on anti-competitive grounds. The reality was that 80% of the US airline market is controlled by 4 companies (United, Delta, Southwest, American Airlines).

A JetBlue tie-up with Spirit Airlines would have allowed the combined entity to better manage the industry volatility…including the spiking fuel prices since the start of the Iran conflict.

But we know what happened.

It’s unfortunate because Spirit — and other budget carriers — do keep the major airlines on their toes. In 2010, Spirit became the first domestic airline to charge for luggage. The aggressive unbundling of the flying experience allowed them to cut tickets to the bone. It also made Spirit one of the most aggressive monitors of those baggage sizer things at the gate…they were on you like white on rice if your laptop backpack was too big.

That’s how we got $25 one-way flights from Atlanta to Fort Lauderdale, which was Spirit’s HQ.

Per WSJ, Spirit had 5% of the domestic air travel market in 2023 but fell to 1.8% in 2026…and when it exited a route, the ticket price increased by 23%. Expect some ticket prices to go up.

The way to make airlines work in America has been to avoid a perfectly competitive market (internationally, the most baller national carriers get ALOT of government support e.g. Singapore Airlines, Qatar Airways, Emirates, Turkish Airlines etc.).

This explains why airlines team up in “alliances” (Star, SkyTeam, Oneworld). They do codeshares and scheduling to limit competition. Another way is the hub-and-spoke model. The Big 4 Airlines funnel flights through key differentiated hubs and basically have regional monopolies:

• Delta (market cap = $47B): Main hub is in Atlanta (followed by Detroit, Minneapolis, Salt Lake City)

• United Airlines ($30B): Main hub is in Chicago (followed by Denver, Houston, San Francisco)

• Southwest Airlines ($19B): Main hub is Denver (followed by Chicago, Baltimore, Dallas)

• American Airlines ($9B): Main hub is Dallas-Fort Worth (followed by Charlotte, Miami, Philadelphia)

New budget airlines often enter by trying to monopolize secondary airports (basically how Ryanair dominated Europe) or certain routes (eg. Allegiant Air and all things Las Vegas).

But the real way airlines in America try to make the business of airlines work is to not be in the business of airlines at all. Just as McDonald’s is a real estate company disguised as a fast food company, the Big 4 airlines are credit card loyalty programs disguised as winged transportation.

In 2024, the four largest airlines in America made a combined operating profit of $14B. Per The Economist, the profit was almost entirely from credit card issuers paying airlines for points (every airline operated its passenger business at a loss):

• Amex paid $1.2B to Delta Airlines (the airline’s entire operating profit for the year)

• Citigroup paid $1.4B to American Airlines.

• JPMorgan paid $800m to United Airlines.

Incredibly, ~1% of US GDP is spent on Delta-branded Amex credit cards (Amex paying for those juicy juicy business travellers...let's just say there was never a Spirit Airlines Amex card).

All of these airline loyalty programs are floated by the ~2% credit card interchange fees paid by merchants, reaching a total of $160B a year (on a $100 transaction, the credit card issuer takes $2 and typically gives $1.50 as reward/rebate/points back to the customer while keeping the remainder).

In the past 8 years, Delta and American doubled revenue from selling airline points. When the airlines were shut down during COVID, the value of the points program was worth more than the actual flying operation…and the airlines borrowed money with the loyalty programs as collateral.

The budget carriers forced the Big 4 to create the comically narrow seats Basic Economy price option and they’ll continue to float it because of the credit card cash machine (in other words, prices may actually not rise that with Spirit gone).

One caveat: anyone that has recently been to an airport lounge knows that these credit card programs are hitting the limits. The Centurion Lounge doesn’t feel so lounge-y when there is a 27-person line wait for the pesto pasta in the salad bar (which does slap).

Delta has taken the “do non-airline stuff” to another level. In 2012, it bought a Pennsylvania-based refinery from ConocoPhillips for $150m and another spent $100m to upgrading it. Its subsidiary is called Monroe Energy and it refines 200,000 barrels a day. Half of the barrels are refined into jet fuel and the rest is gas and diesel, which Monroe then sells on the market or trades for more jet fuel. Overall, the operation supplies 75%+ of Delta’s domestic fuel needs.

Every other airline and most energy expert laughed in Delta’s face when they made the move. While the logic is straightforward (fuel is 20-30% of an airline’s operating cost), owning a refinery is so far outside of an airline’s circle of competency.

The airline industry was content to hedge fuel prices to manage volatility, but that practice mostly stopped by the start of 2026. Why? Airlines decided it was easier to pass any price increases onto customers as a fuel surcharge.

Delta was able to make back its investment within 5 years but it has now spent $1B+ in maintenance and the operation is still very cyclical.

During COVID, the refinery lost $140m in Q2 2020 and Delta considered selling the operation. When the Ukraine-Russia war began in 2022, Monroe saved Delta a lot in fuel costs as oil prices jumped. Then, in 2025, the refinery business hit $5B of sales in 2025 (~8% of Delta’s total) and saved the airline 4 cents a gallon on jet fuel compared to the market (~$100m cost savings). Due to the current Iran conflict, it is expected to see a $300m earnings gain in Q2 2026 as the “crack spread” (price difference between oil vs. refined products) is at all-time highs.

So, yeah, Delta is showing that the most profitable way to run an airline business in America is really to not be in the airline business. No guarantee it’ll save them from future bankruptcy (unless it pivots to AI data centres).

***

Here are some other relevant airline links:

• The pilot announcement from one of the final Spirit Airlines flights…might put you in the feels.

• Another Spirit Airlines pilot was supposed to do his retirement flight on Saturday…but the airline shut down before he could. He boarded a Southwest Airlines plane to head home and the flight’s crew found out. When he arrived in Baltimore, the Southwest staff waited for him at the gate, gave a bottle of champagne, then let him do a water-cannon salute in a Southwest plane.

• Speaking of Southwest Airlines, its legendary founder Herb Kelleher…once got into a trademark dispute. Back in 1992, Southwest Airlines had the motto “Just Plane Smart”. Another aviation firm had the motto “Plane Smart”. The beef was resolved with an arm-wrestling match between the CEOs. It was dubbed “Malice In Dallas” and held at a 4,500-seat wrestling venue. Despite smoking a cigarette, legendary Southwest CEO Herb Kelleher somehow lost to Steven Aviation’s Kurt Herwald. In the end, Southwest kept its slogan in exchange for a $5k charity donation.
  
  Honestly, Spirit Airlines CEO should have gotten a chance to arm wrestle the airline’s creditors to save the business.

Finally, here are some related posts:

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Nvidia’s $3B Deal With Glassmaker Corning

My favourite iPhone launch story is when Steve Jobs dug deep in his reality-distortion field bag of tricks to convince the CEO of glassmaker Corning to commercialize Gorilla Glass.

In his book “The One Device”, Brian Merchant gives a play-by-play:

Jobs told [Corning CEO Wendell] Weeks he doubted Gorilla Glass was good enough, and began explaining to the CEO of the nation’s top glass company how glass was made.

“Can you shut up,” Weeks interrupted him, “and let me teach you some science?”

Jobs was sold, and, recovering his Jobsian flair, ordered as much as Corning could make — in a matter of months. “We don’t have the capacity,” Weeks replied. “None of our plants make the glass now.” He protested that it would be impossible to get the order scaled up in time.

“Don’t be afraid,” Jobs replied. “Get your mind around it. You can do it.”

According to [Walter Isaacson’s biography on Jobs], Weeks shook his head in astonishment as he recounted the story. “We did it in under six months,” he said. “We produced a glass that had never been made.”

The speed with which Jobs was taught science then incepted Weeks is unreal.

Anyway, I bring this up because Corning recently struck a new deal with Nvidia which may be just as transformative.

The 176-year old Corning has ridden various waves as the world’s top glassmaker.

Through most of the 20th century, it was known for its heat-resistant kitchenware (e.g. Pyrex). During the Dotcom/Telecom Bubble, its fiber optics were in demand. Then, it rode the mobile revolution after Jobs distorted Wendell Weeks’ reality field.

Now, it’s the AI wave. Earlier this year, Meta agreed to a $6B deal to lock down Corning’s fiber optic cables for its data centres. Nvidia just agreed to invest up to $3.2B into the company and Corning will build three factories in North Carolina and Texas specifically for Nvidia products.

The plan is to replace the >2 miles of copper inside of every Nvidia GPU server rack with something called co-packaged optics. Why? According to Weeks, moving photons (via optics) requires 5-20x less energy than moving electrons (via copper). Optics also provide much lower latency to produce tokens.

CNBC has a solid explainer video on the manufacturing process for Corning’s fiber optics:

• a combustion process deposits glass soot on the outside of a rod

• a machine applies extreme heat until the glass is clear and remove any impurities because impurities lead to signal loss (crazy fact: if the Indian Ocean was covered by this glass, you could see all the way to the bottom)

• another machine draws the glass fiber until it’s hair thin (125 microns in diameter)

• Corning then applies coating and color codes the material (for end buyers to identify use cases)

• the fiber is then wind onto spools (one spool can go as far as 31 miles)

• last step is to bind a bunch of fibers (up to 288 different ones) together and add a protective outer jacket

In 2025, optical communication was Corning’s largest division, accounting for 40% of its $16B in revenue (overtaking the glass business for smartphones and TV in the past few years).

Corning’s market cap has tripled in the past year from $50B to $150B. Wild.

RIP Ted Turner

The media mogul behind died at age 87.

Super interesting career. Turned his family’s outdoor advertising business into a cable TV empire anchored by TBS and TNT. Was also a star sailor who won the America’s Cup in 1977. Turned love of sports into the ownership of Atlanta Braves and Atlanta Hawks. Used those assets to fill up countless hours of TV time. In 1980, he launched CNN and pioneered the 24/7 news model. Then, launched WCW Wrestling, Cartoon Network and Turner Classic Movies (after spending $1B+ on MGM’s film library).

Live sports and around-the-clock news is still with us today for better and worse (CNN really surged in late-1980s and early-1990s for its coverage of the fall of the Soviet Union and the First Gulf War).

Turner had a lot of demons, was very outspoken and held contradictory opinions on everything. The absolute best long-read on his life is this 2001 New Yorker piece titled The Lost Tycoon. It was written following his divorce from Jane Fonda and Time Warner’s disastrous $150B merger with AOL, which pushed him out of his companies (Time Warner had acquired Turner’s networks in 1996).

One of Turner’s favourite quips was “"Early to bed, early to rise, work like hell and advertise"…and the New Yorker article has a perfect anecdote for that motto:

In November of 1996, for instance, the Friars Foundation honored Turner at a lifetime-achievement black-tie dinner. After he received his award and made a short speech, the lights dimmed, and then, as various entertainers, including the comedian Alan King, prepared to roast him, Turner, who insists on getting to bed early, grabbed Fonda’s arm and departed, leaving the crowd gasping and King bellowing, “Rupert Murdoch was right—you are nuts.”

Turner spent final decades of his life focussed on environmental, conservation and humanitary work (although, he was very wrong about the threat of overpopulation).

My favourite random Turner nugget is how he is prob most responsible for the wild popularity of The Shawshank Redemption (still #1 rated IMDB film).

In 1993, he buys Castle Rock and gets the film rights to Stephen King’s novel. The film flops in 1994. For the record, it’s an incredible flick but just not super commercial. It was also part of the great “Best Picture nominee” class ever along with Forrest Gump, Pulp Fiction, Four Wedding & a Funeral and The Quiz Show.

But then it went HAM on cable TV.

Director Frank Darabont said, “Turner started airing [it] on TV like every five minutes for years. There was this endless opportunity for people to catch up with it on a Turner network, and so I bless Ted Turner as well. Because he played the heck out of it."

The Shawshank Redemption only made $16m box office in first run but hundreds of million in second life as VHS, DVD and licensing.

As Bill Simmons would say, one of the ultimate films where no matter which part of the film you stumble on, you’ll want to finish the rest of it.

Among most shown films on cable ever (need to fill that airtime) and I probably watched it 25x to 35x because of Turner.

One last amazing detail: Stephen King never cashed the $5,000 check he got for film rights. King framed it and sent it to Darabont with a note: “In case you ever need bail money. Love, Steve."

Anyway, TNT had a solid video tribute before recent NBA and NHL playoff games…and here are some related posts:

Links and Memes

The economics of thoroughbred horse breeding: Last weekend, Golden Tempo won the Kentucky Derby in an amazing sprint from last place. The $3.1m winning purse is split with 10% to the jockey ($310,000), 10% to the trainer ($310,000) and 80% to the owner ($2.48 million). But the most interesting part business angle is that Golden Tempo is now highly in demand as a mating partner and could be worth $25 million to the owner, as explained by Joe Pompliano:

The economics are driven by pedigree: winning major races like the Kentucky Derby or producing champion offspring can dramatically increase a stallion’s fee and lifetime earning potential. Top stallions then breed 100–200 times per year, turning a single elite horse into a multi-million-dollar annual revenue stream.

The entire multi-billion-dollar breeding economy rests on a single rule enforced by the Jockey Club, horse racing’s North American registry. This rule states that every thoroughbred must be conceived through “live cover,” a witnessed natural mating between a stallion and a mare. Or, in other words, artificial insemination, embryo transfer, and cloning are all explicitly banned, which effectively caps supply and supports the premium pricing that makes a $250,000 stud fee possible.

This is straight econ 101. Just as Louis Vuitton controls the supply of its luxury products by monitoring inventory and going after fakes…horse breeders have to do the same, including paying someone to “live cover” — aka watching horses bone — to maximize value.

***

Some other links for your weekend:

• “How Istanbul Won the Mobile Puzzle Wars”: Great episode of GameCraft podcast explaining how Turkey is a world leader in mobile games. Part of it is talent. Part is the government directly supporting the industry. Part of it is talent arbitrage…local developers paid in inflationary Turkish Lira while games mostly bring in USD and EUR.

• 10% of AMC movie showings sell no ticket… and someone created a site to find these showings so you can “go enjoy your private theater”.

• Greg Abel had Warren Buffett speak at start of the 2026 Berkshire Hathaway AGM…Buffett spent most of it praising Tim Cook, seated a few rows behind next to John Ternus. Since 2016, Berkshire’s $35B initial investment officially grew to $185B.

• If EU built ChatGPT…it would almost certainly look like this.

• An X thread of what websites used to be…including OpenAI (a homepage for a guy named Glen), OnlyFans (a music site) and you will never guess in a million years what DoorDash used to be.

• Anthropic is buying compute from xAI…this comes a few weeks after xAI (really, SpaceX) agreed to acquire AI coding startup Cursor. Basically, Elon went all-in on building compute but Grok isn’t using up the capacity. But there is such a shortage of chips that he’s been able to leverage xAI’s massive Memphis data centres for other companies desperate for compute (really, Anthropic). Makes sense on both sides. Claude gets to increase capacity while SpaceX’s upcoming IPO can report a ballpark ~$6B compute business from its AI arm (compared to only $500m from Grok itself).

• The Odyssey trailer…man I hope Nolan doesn’t flub this.

• The iPhone Fold (aka Ultra) is coming…and Unbox Therapy has a solid hands-on breakdown of the form factor based on leaks.

• GameStop is trying to buy eBay. One problem is that GameStop is a $10B company while eBay is $50B. GameStop CEO Ryan Cohen went on CNBC and said the deal was “1/2 stock, 1/2 cash”. Asked to clarify, he repeated “1/2 stock, 1/2 cash” and that’s it. Problem is that GameStop only has $9B cash and one bank has apparently agreed to extend $20B in debt. That leaves $25-30B. GameStop isn’t allowed to issue that many shares and stock would collapse if it did.

  
  Anyway, I’m telling you all this because as part of his campaign, Cohen listed items on eBay (used socks, a sealed box of Windows Server 2000) to “help” finance the deal then he proceeded to say that eBay suspended his account…then internet sleuths realized it wasn’t suspended. Incredible content…and it’s all happening because Cohen’s incentive package includes a massive amount of stock if he can make GameStop worth $100B.

…and them wild posts (including Sam Altman texts to former OpenAI CTO Mira Murati the weekend he got fired came out during Elon’s lawsuit against OpenAI...and, ugh, someone turned the exchange into a Hamilton musical):

Today, we will talk about how two beast athletes (Sabastian Sawe, Yomif Kejelcha) did the previously unthinkable: run a sub-2 hour marathon.

Also this week:

• GE’s very profitable break-up

• Why AI sucks at reading PDFs

• …and them wild posts (including Russell Brand)

At the London Marathon last week, two runners — Sabastian Sawe (Kenya, 31) and Yomif Kejelcha (Ethiopia, 28) — broke the 2-hour marathon mark.

Sawe clocked in at 1:59:30 while Kejelcha finished the race in 1:59:41.

Incredibly, this was Kejelcha’s first official marathon and he STILL ONLY GOT 2nd PLACE!!!!

Humans are awesome.

The marathon’s outcome led to perhaps greatest use of the Anakin Skywalker meme template ever:

Alex Hutchinson — a former national distance runner, author and performance expert — reflected on the unlikely milestone:

To understand the significance of someone running a marathon in less than two hours, you also need to understand that, until recently, the notion of this actually happening was truly, utterly absurd. Sure, a physiologist named Michael Joyner had floated the idea that such a feat might be humanly possible in a journal paper way back in 1991. But his peers laughed off the idea, and not much changed over the succeeding decades. In Runner’s World in 2014, I predicted that it would happen in 2075. Frankly, even that forecast seemed overly optimistic to me, but I figured I’d be dead by then, so no one would be able to call me on it.

Unofficially, there was one person before Sawe and Kejelcha.

Kenyan marathon legend Eliud Kipchoge (Kenya, 41) ran a 1:59:40 in 2019.

But that was for a staged event with ideal conditions: Kipchoge ran on a specially prepared flat course in a Vienna park with a rotating cast of 41 other runners in V-formation and a car laser pointer to keep him on pace.

I mean, obviously, Kipchoge’s achievement was incredible and motivating. When Roger Bannister ran 4-minute mile basically wearing leather dress shoes, the rest of the world knew it was possible. Top-tier marathoners saw Kipchoge’s record-breaking run and knew the human body was physically capable of the milestone.

A year prior to Kipchoge’s special Vienna run, Runner’s World created a great piece of marketing for the sport: the magazine put a 20-foot long treadmill (aka "The Tumbelator”) in a bunch of public locations and let randos to try and match Kipchoge’s pace of 13mph (or 21km/h).

Comedy ensued.

If you ever been on a treadmill, you know how aggressive that thing gets when you crank it up. Hell, some treadmills don’t even have Kipchoge’s top speed. I would probably pull my hamstring just pushing the speed button past 15km/h.

Back to Sawe, his new record run broke the previous official fastest marathon time by 65 seconds. Kenyan runner Kelvin Kiptum had notched 2:00:35 at the 2023 Chicago Marathon (he was only 23 and looked certain to break the 2-hour mark but tragically died in a car accident one year later).

Every one of these athletes accomplished something amazing.

Take the time splits for Sawe’s marathon run…they are mind-boggling:

• a pace of 4:33 per mile (the record for one mile is 3:43 and he kept the pace 26x)

• or 2:50 per kilometer (he did it 42x)

• his 100m pace was 17 seconds (which he did 422x)

• he was faster in the second half (59:01) as compared to the first half (60:29)

• the average speed was the same as Kipchoge’s at 13mp/h (21km/h)

• the average men’s marathon time for 5km is ~30 mins (Sawe’s 5km pace was 14:10 mins, which he did ~8x)

• the world record 10km track run is 26:11 (Sawe’s 10km pace was 28:19 which he did ~4x)

Dammit, just pulled my other hamstring typing those bullet points.

BBC reporter Matt Graveling may have also injured his vocal cords with this incredible live call: “ARE WE GOING SUB-2?!?” (also shoutout to the Google PM who gave Sawe and Kejelcha props when you Google their names).

An important detail of Sawe’s record-breaking run is that he voluntarily did multiple anti-doping tests in the year prior to the race. He must have known it was coming and didn’t want any doubts, per BBC.

Sawe runs about 200km per week — averaging almost 30km every day — at altitude, and credited his increase in volume as one of the key factors in his progress. […]

However, amid the spate of high-profile doping cases involving Kenyan athletes, including women’s marathon world record holder Ruth Chepngetich, he has also had an awareness for the need to instil confidence in these performances.

Determined to prove he is competing clean, Adidas provided $50,000 (£36,900) to the Athletics Integrity Unit, the sport’s anti-doping body, to frequently test Sawe over a 12-month period.

That began with a reported 25 out-of-competition tests in the lead-up to Berlin in September, continuing at a similar rate as he prepared for London.

Sawe said on Monday: “It’s very important to me because it gets out the doubt in my career of athletics and yesterday’s performance.”

Marathon runners don’t just have to contend with concerns over drug doping.

There’s also “technological doping”, which is when athletes benefit from advanced equipment or apparel.

In this case, the topic du jour was Sawe’s record-breaking running shoe: the Adidas Adizero Adios Pro Evo 3.

The craziest part of the Adidas story is that Kejelcha was also wearing the Adizero Adios Pro Evo 3 when he broke 2 hours…and so was Tigst Assefa, who set the women’s record at 2:15:41 at the same London Marathon.

Adidas may have just pulled off the most effective marketing campaign ever.

The shoe went for sale the day after the race. They cost $500 and were gone in 2 minutes. Then, some absolute savage resellers posted them on StockX for $1,900, the perfect price point for a shoe someone at your local gym will be wearing to use the recumbent bike while watching a Korean drama on their iPad.

The Adidas Adizero Adios Pro Evo 3 is an obnoxiously long name the latest in the arms race to make better running shoes.

This graphic below shows how Nike race-day shoes have morphed since the 1970s. Note the absolutely absurd soles, which are now foamier and bigger than ever.

In 2024, YouTuber Cleo Abram toured an innovation lab at Nike — which started making the first super running shoes in the mid-2010s (including the Zoom Vaporfly for Kipchoge’s sub-2 hour run) — and did a good explainer video on the trend.

The two key advances are in the foam stack and the carbon fiber plate. These shoe parts work together to maximize “energy return” to the runner. Higher “energy return” helps an athlete be more efficient. Every stride impacts the ground and, ideally, some of the energy comes back to the runner instead of just dissipating away.

Older shoe technology had 60% “energy return” while these high-heel looking kicks have 80% or more.

Another key advance is weight. Or the lack of it. Shoe companies have done some real material science and manufacturing jujitsu to get the number down as low as possible.

Per WWD, the Pro 3 is the lightest legal race day shoe ever, weighing 97 grams (3.4oz) for a men’s size 9 (about 50% the weight of a regular men’s running shoe). That’s less than a bar of soap or a medium-sized apple. Or 3 hard-boiled eggs you buy at an airport bookstore after the security gate in those plastic container thingies that somehow cost $8.99.

Adidas was able to reduce the weight of the Pro 3 by 30% compared to the Pro 2 model. Most of the improvement came from a lighter foam compound and the upper part of the shoe inspired by kite surfing sail material.

The U-shaped carbon fiber plate is lighter and the laces weigh less too. The laces!!

To make its special Lightstrike Pro foam, Adidas used a gas injection process (nitrogen) to expand billions of microscopic cells in the sole to make it light and bouncy.

Whatever sorcery Adidas pulled off with the foam also meant that the Pro 3 needs less carbon plate. Typically, the plate is there to support the foam. But look at the Pro 3’s innards.

“Adidas has now figured out a way to create a more stable foam, that doesn't need a full carbon plate or rods to support it,” writes Tim Roozendaal. “That's why they can move to this ring design to still give the shoe some lateral stiffness but reduce overall weight.”

These advances are bumping up against the official restrictions from marathon governing bodies:

• Foam stack height: Max 40mm sole thickness.

• Rigid plates: Only one allowed.

The most famous example of technological doping is probably in swimming. Per Scientific America, Speedo’s high-performance full-body LZR swimming suit was worn by 98% of the medal winners at the 2008 Beijing Olympics. Michael Phelps set 7 of his 8 records rocking it. The suit was made of polyurethane, a non-permeable material that trapped air and made the swimmers more buoyant.

It was later banned. A move that Phelps himself supported…and then he went on to win 15 more medals combined across the rest of his Olympics career.

This Phelps anecdote nods to a larger point.

Shoe technology isn’t going backwards, so it’s up to the governing bodies to set the red lines. The current running shoe restrictions on foam stacks and carbon plates have allowed for this pretty incredible chart showing marathon progression times.

In the 1950s, the 2:20 mark was thought impossible. Jim Peters broke it at 2:18:40 in 1953 and the record fell 9 in the next 17 years. The 2:05 mark wasn’t broken until 2003 by Paul Tergat at the Berlin Marathon (2:04:55). Since then, the record has been broken 10 times and it’s not just about the shoes.

Steve Magness — a distance running coach to many world champions — has a thorough breakdown on how the marathon has been transformed in past few decades:

• Fuel: Sawe downed 115g/hr of carb-heavy gels during his record run. That’s 230g or 920 calories for the entire race. A decade ago, a runner could comfortably consume 60g/hr without having potential gut issues (translation: explosive diarrhea). Elite marathoners train their guts for that high carb intake and the new Hydrogel delivery mechanism is less stressful on GI. Magness writes that the “end result is less bonking, and the marathon shifting from a fueling game to more like a half marathon or 10k where the fatigue mechanisms are muscular.”
  

• Depth: The popularity of the marathon means it’s a lucrative starting point for many running athletes. So, there’s more talent to break records. Per Magness, “A few decades ago, you spent your career racing on the track and then once your speed started to fade a bit you went to the marathon. Now, many skip right to the marathon. That’s where the money is.”
  

• Shoes (of course): Research has shown that super running shoes can save an athlete between 3-7% on energy output. The right-fitting shoe gets you near the higher end of that range.
  
  Magness talks about how this has greatly affected the marathon: “Normally, it takes years of lots of miles and strength training to boost economy. But now we get that instant boost that not only helps improve performance but often leaves us feeling less beat up in the later stages of the marathon. One overlooked component of the physiology of the marathon is our economy gets worse as the race progresses thanks to fatigue and damage. The slope of that drop off is now getting shallower. We’re closer to ‘fresh’ for longer. In many ways, we’ve shortened the marathon. It used to be at this perfect point where we couldn’t quite make it without running low on fuel, our muscles getting beat up from damage, and more. Now, thanks to tech it’s as if it’s now a 20 miler, just on the right side of what we can handle.”

These new shoes also play a part in attracting more depth to marathons. Why? If the physical impact from the 26 mile (42km) distance race is significantly reduced, it doesn’t take as much training for a runner to work him or herself up to that distance…thus attracting more athletes.

And now all these athletes are aiming for Sawe and he sounds like he is just getting started.

“It was possible to run faster,” Sawe said after the race. “Even 1:58 is possible.”

Crazy.

When? I dunno. Someone will do it and one thing is for sure: shoe companies are in the labs right now cooking up space technology to shave a few more seconds off.

Apparently, the shoes arms race can go as low as 50 grams for a men’s size 9 shoe.

That’s nothing. It’s air.

But there is one more level: barefoot, which is what Ethiopian runner Abebe Bikila did at the 1960 Rome Olympics marathon. Bikila won Gold while setting a world record time of 2:15:16.

Dude, we’re talking Rome during a summer afternoon. On asphalts and cobblestones.

I need aloe vera if I step on beach sand for more than 5 seconds.

The whole story is so insane I’ll just blurb from the official Olympics website:

Nothing about Bikila’s athletics career had ever been straightforward. The son of a shepherd, he was working as a bodyguard to the Ethiopian royal family when his athletic potential was first spotted and he was soon showing great promise in training.

However, his selection for the team was still a surprise, and when he arrived in Rome there were no shoes to fit him. He initially tried running with a pair that weren’t quite the right size but didn’t like them and so, on the day of the marathon, he reverted to running barefoot, just as he had in training.

His coach told him to look out for the Moroccan runner Rhadi Ben Abdesselam who, he said, would be wearing number 26. Instead, Rhadi ended up sporting the number 185 bib, which confused Bikila, who carried on looking for the runner wearing number 26, even though Rhadi was right next to him.

The race was unusual in that it started in the late afternoon, finished in darkness and did not enter the Olympic stadium for the finale. Yet there was no shortage of excitement and drama, with the barefoot Bikila only pulling away from Rhadi in the closing 500m, yet sprinting so hard that he won by 25 seconds, breaking the world record in the process. When asked about his decision to run in bare feet, he said: “I wanted the world to know that my country, Ethiopia, has always won with determination and heroism.”

He was the first athlete from sub-Saharan Africa to win an Olympic Gold Medal and is responsible for East Africa going all in on long-distance running (including many future generations of Kenyan legends).

In 1964, Bikila found some shoes and won a second Olympic Gold at the Tokyo games with a time of 2:12:11. He did so a week after getting an appendectomy. Unbelievable.

“Humanity just got faster,” Sawe says in a mini-movie from Adidas celebrating his achievement. “As long as people dream and as along as they believe...it will never end. Maybe somewhere in the world, on a quiet road right now...someone is running to what comes next. This is belief."

Shoes or no shoes, marathons keep on proving that humans are awesome.

Them London Marathon 2026 Posts:

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GE’s very profitable break-up

Last week, we talked about Tim Cook’s very impressive 15-year run as Apple CEO.

In a low-probability (but worth mentioning) hypothetical, the article notes that Cook’s CEO career has two potential landmines — Apple’s dependence on China and its decision not go all in on AI — could make future observers reassess his career in the negative.

Something similar happened to Jack Welch, GE’s CEO between 1981 and 2001. Welch briefly turned GE into the world’s most valuable firm but also created an internal time-bomb by financializing the conglomerate with GE Capital. Did a lot of “earnings management”. Welch left his successor CEO Jeff Immelt — who worked at P&G with Steve Ballmer way back in the day — a shit sandwich and it all blew up in the Great Financial Crisis.

I’m telling you all this because I really want you to read that Cook piece.

Also, because GE has spent the past 15+ years unwinding the damage…and has actually created a ton of shareholder value in the past few years, per The Economist:

• In 2023, GE was worth $120B before splitting off into three. Those firms — GE Healthcare ($27B), GE Vernova ($293B) and GE Aerospace ($295B) — are now worth a combined $615B (5x).

• In 2025, the combined $14B profit for GE Vernova (huge AI data centre demand for gas turbines) and GE Aerospace (sticky plane parts business) was more than GE’s total profit the decade before splitting off.

• In 2018, GE sold an on-site generator business to PE for $3B, and it is up 5x to $15B now.

• In 2019, GE sold its majority stake in O&G services business Baker Hughes and its market cap is since up 3x to $69B.

• Also in 2019, GE sold GE Transportation in an $11B merger with Wabtec Corp, which is now worth $45B.

Even the GE Capital debacle has come out on the other side:

What about the financiers who almost sank the whole ship in 2008? GE Capital, the firm’s financial arm, had grown to supply nearly half of earnings by 2005, from 8% in 1981. Its assets are now scattered throughout the financial system. AerCap, the owner of its enormous plane-leasing business, is thriving; Synchrony, which lends to individuals, is not. GE Capital is a source of great inspiration in some corners of Wall Street. No firm has made more effort to recreate its operations than Apollo—so far without, thankfully, GE’s reliance on short-term funding markets. The private-equity investor turned life insurer has assembled a similarly eclectic range of asset-based lenders through which to invest its policyholders’ premiums. They include an aircraft-lending business previously owned by GE and a mid-market corporate-lending division staffed with former GE Capital employees.

Shareholders just swimming in value right now.

Right now, the wildest story is GE Vernova…absolutely riding that AI story (specifically, its gas turbines are powering data centres).

In a chat with WSJ, GE Vernova CEO’s Scott Strazik shared some wild stats: Vernova turbines generate ~25% of global electricity (and 50% in the US).

Globally, electrons are still only 20% of global energy consumption (the remaining 80% is molecules such as coal, oil, nat gas).

Since GE Vernova spun off in April 2024, it’s up 9x from $35B to $294B!!!

Why does AI suck at PDFs?

One of my favourite online hobbies is downloading 50+ page academic papers in PDF format.

Do I read them? Mostly no. Instead, the PDF files ate up so much precious memory on my 2014 MacBook Air along with pirated TV shows and taunted me as a try-hard, that I had to finally get a new laptop.

I thought the arrival of AI chatbots could help me power through these PDFs with useful summaries but LLMs haven’t fully figured out how to read the format type yet.

AI startup founder Pierre-Carl Langlais has an incredible mock graph on the expected timeline of “PDF parsing” on the road to AGI:

Why is it so difficult to extract information from PDFs? Why do models mix up footnotes with sidebars and the body of text? Why do they hallucinate so much?

The Verge has a solid explainer and the jist is that the file format was never meant to be machine readable:

PDFs are notoriously difficult for machines to parse, in part, because they were never meant to be read by them. The format was developed by Adobe in the early 1990s as a way to reproduce documents while preserving their precise visual appearance, first when printing them on paper, then later when depicting them on a screen. Where formats like HTML represent text in logical order, PDF consists of character codes, coordinates, and other instructions for painting an image of a page.

Optical character recognition (OCR) can turn those pictures of words back into text computers can use, but if it comes across a PDF where text is displayed in multiple columns — as many academic papers are — it will plow ahead left to right and create an unintelligible jumble. OCR tools are designed to detect and correct for these sorts of formatting variations, but tables, images, diagrams, captions, footnotes, and headers all present further obstacles. If you give an AI assistant like ChatGPT a PDF, it will cycle through a variety of these tools, sometimes fail, sometimes pass the PDF to a large vision model to perform OCR, sometimes hallucinate, and generally take a very long time and use a lot of computing power for uneven results. […]

A further problem that arises from and compounds PDF’s inherent difficulty is that models rarely train on them. This has begun to change, partly because AI developers are increasingly desperate for high-quality data, and PDFs contain a disproportionate amount of it. Government reports, textbooks, academic papers — all PDFs. “PDF documents have the potential to provide trillions of novel, high-quality tokens for training language models,” wrote researchers at the Allen Institute for AI last year in a paper announcing a new specialized PDF-reading model.

A number of startups are trying to tackle the problem by treating it as a machine vision problem (not a text problem).

For all the drawbacks, the PDF is an incredibly resilient format.

According to lore, the IRS created the first PDF ever in 1994 with the 1040 income tax return form (I get PTSD just seeing the numbers “1040”).

“The IRS wanted a way to share forms that were absolutely consistent without printing and mailing every possible document,” writes Josh Dzieza in The Verge article. “So it mailed CDs full of PDFs instead. From there, PDF spread with email to become a fundamental component of digital work. Book publishers sending manuscripts to the printer, patent applicants submitting diagrams of new devices, anyone who needed to share a document that would look the same to whomever received it turned to PDF.”

If anyone wants a CD full of PDF papers I have on my desktop but will probably never read, hit me up.

Links and Memes

Some other links for your weekend consumption:

• The projected AI data centre spend for 2026 is now $700B…across the Biggest Big Tech Tech Plays (Google, Amazon, Microsoft, Meta). Good breakdown from Om Malik.

• Amazon product pages now have AI-generated podcast reviews…obviously, the output is high-level comedy.

• Lebron James tossed a pass to his son Bronny during Lakers game against Houston Rockets…and it led to a very very good post.

• Talent at top AI labs are wild…CTOs of Workday, You.com, Instagram, Box and Adept AI have joined Anthropic as members of the technical staff.

• The logo design for the upcoming golf Cadillac Champion…is something to behold.

• “Fifteen Comms Observations from Musk v. Altman”…Jim Prosser previously ran “point on comms for Google around Oracle v. Google”…and shares his take on Elon’s case against OpenAI for pivoting from non-profit to for-profit.

• An ophthalmologist in San Diego just performed the first Apple Vision Pro-assisted cataract eye surgery….very interesting use case for the $3,500 headset. Product was a flop but has clear industry applications and they are taking some of that $50B in R&D to make smart glasses.

• The Grid: The Largest Machine Ever Built. An excellent 4-hour podcast on the history of the electrical grid from the Stepchange Podcast.

• Former Republican senator Ben Sasse was given a terminal cancer diagnosis last year…and he spoke with the NYT’s Ross Douthat about his life, legacy and family. It’s one of the most impactful conversations I’ve watched in a long time.

...and them wild posts (including news that Spirit Airlines will shut down):

Finally, we have to talk about Russell Brand. He had the wildest interview of the year so far. Brand went on Piers Morgan’s show to discuss his new book “How to Become a Christian in 7 Days”. In a widely clipped clip, Morgan asked Brand to show his favourite Bible passage and Brand fumbled around the one he brought to the studio like the first time he ever saw one (this happened a day before the London Marathon, which lead to some incredible crossover memes):

Today, we are doing a deep dive on Tim Cook, who is stepping down as Apple’s CEO and will be replaced by SVP of Hardware Engineering John Ternus.

PS. Also lots of links and memes as always.

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On Monday, Tim Apple Cook announced that he will relinquish the CEO role at Apple in September. He will become Apple’s executive chairman and hand the reins to Apple’s SVP of Hardware Engineering John Ternus.

I had two instant thoughts when I heard the news.

First, I can’t believe Ternus was able to climb to the top of Apple with such a lazy LinkedIn bio:

No banner image. His profile photo is blank when LinkedIn users are logged out, which is a huge red flag for recruiters. He doesn’t break down the various positions he held at Apple. Nor does he itemize the role-by-role achievements. Most glaringly, he’s never done a social post to celebrate his wins or show thought leadership.

My second thought was that Cook had a pretty INSANE run as CEO.

He is 65 years old and will have served as Apple’s CEO for just over 15 years when the switch happens. Since Cook took over for Steve Jobs on August 24, 2011 — he was 50 years old at the time (same age as Ternus is now) — Apple has put up some video game numbers:

• Market cap increased by more than 10x from $350B to $4T ($700m a day during his tenure).

• Annual revenue went from $108B (2011) to $416B (2025).

• Net profit went from $26B (2011) to $112B (2025)

• Installed devices is now at over 2.5 billion.

• Services revenue — aka squeezing Google to be the default search on Safari and milking mobile game ads — is up 11x from $10B (2011) to $109B (2025).

• Wearables (Watch, AirPods) revenue reached $36B in 2025, more than AMD ($35B), Essilor Luxottica ($33B), PayPal ($33B), McDonald’s ($26B) or Adobe ($24B).

• The left bud of an AirPods set I bought got lost a record 3x in 2025.

Overall, Cook added $3.65T in market cap. Just silly. Granted, this took place during the ZIRP era. But we’re talking a only a handful of other CEOs that have added over $1T market cap.

Jensen and Nvidia. Satya and Microsoft. Sundar and Google. Zuck and Meta. Elon and Tesla/SpaceX. Bezos and Amazon. Hock Tan and Broadcom.

To be sure, Steve Jobs going HAM from 1997 to 2011 laid the foundation for Cook’s run by rebuilding the entire company and releasing the greatest sequence of consumer products in corporate history: iMac, iPod, iPhone and iPad.

Jobs also started Apple’s lucrative search partnership with Google, kicked off the services engine with the App Store and acquired PA Semi, which is the foundation for the crucial Apple Silicon.

Cook is the operations and supply chain savant, though.

As many noted, Jobs (together with Jony Ive) repeatedly took Apple products from 0 to 1. Cook took those products from 1 to 2.5 billion.

“Tim Cook couldn’t have done what Steve did,” Warren Buffett told CNBC in March. “But Steve handed him a hand Steve would not have done as well.”

Less in dispute is the fact that Cook is literally leaving at Peak Apple.

The last earnings report was in January and Apple announced a record $144B in quarterly revenue (Nvidia’s revenue for all of 2025 was $131B; like I said, video game numbers). Services hit a quarterly record of $31B. EPS hit a record. iPhone had record sales in every geography segment with the Hermes-like Cosmic Orange colorway leading to blockbuster iPhone 17 Pro Max sales in China…proving once again I know nothing.

Then, Cook got Paul McCartney to perform at Apple’s 50th anniversary on April 1st, 2026. Just winning.

While Cook is indeed leaving at the top — and by all accounts has chosen the right successor — there are two huge issues hanging over Apple: its dependence on China and its AI strategy.

We will talk through it all while enjoying some incredible memes by covering these topics:

• Steve Jobs Hires Cook

• Cook’s CEO Run

• The China Question

• The AI Question

• John Ternus & Apple’s Future

Steve Jobs Hires Cook

Man, if you thought John Ternus had a lazy LinkedIn page…Cook doesn’t even have a profile at all. Either something is wrong with LinkedIn or something is wrong with Apple. I can’t decide which one.

Anyway, someone on LinkedIn mocked up a fake Cook bio:

Before Apple, Cook — born in Mobile, Alabama — was the first person in his family to go to college and graduated from Auburn University with a Bachelor’s degree in Industrial Engineering (then later got a Duke MBA).

“Industrial engineering is essentially the study of people and machines,” Cook told the WSJ in 2025. “[It’s about] how the two working together can create things that they couldn’t create on their own. I’ve always viewed the supply chain to be a bit of a piece of art when it was done correctly. Because it’s a symphony of…1000s of different components and parts coming together to create something.”

Cook started his career making supply chain art at IBM, where he spent 12 years working on just-in-time manufacturing and distribution for the computing giant’s personal PC business.

Then, came senior roles at Intelligent Electronics and Compaq.

When Jobs returned to near-bankrupt Apple in 1997, he wanted to clean up the company’s bloated product line and bring back the Apple magic of vertical integration with as much control as possible of software, marketing, distribution, hardware and logistics.

Cook was one of the PC industry’s top minds on the latter two topics. Apple recruiters repeatedly reached out to Cook and he repeatedly turned them down. Fair enough. In the mid-1990s, most tech industry observers would have predicted a much more fruitful future for Compaq than Apple.

Cook said as much during his 2010 commencement speech at the University of Auburn:

Only a few months before I’d accepted the job at Apple, Michael Dell was publicly asked what he would do to fix Apple.

He responded, “I’d shut it down and give the money back to the shareholders.”

In making this statement, what distinguished Michael Dell was only that he had the courage to say what so many others believed. So, Apple was in a very different place than it is today.

My employer at the time — Compaq Computer — was the largest personal computer company in the world. Not only was Compaq performing much better than Apple, it was headquartered in Texas and therefore closer to Auburn football.

Any purely rational consideration of cost and benefits lined up in Compaq’s favor, and the people who knew me best advised me to stay at Compaq. One CEO I consulted felt so strongly about it. He told me I would be a fool to leave Compaq for Apple.

Indeed, when Cook joined Apple in March 1998, Compaq’s market cap was ~10x more than Apple ($40B vs. $3B).

So, what changed?

In an interview with Charlie Rose in 2014, Cook said he finally agreed to meet Jobs and it sure sounds like he got hit with that reality distortion field because that single chat was enough to sway Cook:

I was at Compaq and I was happy — or thought I was — and [Apple was] persistent. So, I finally thought, “I’m gonna go out and take the meeting” [because] Steve created the whole industry.

I’m just thinking "I’m gonna meet him” but all of a sudden he’s talking about his strategy and his vision and what he was doing. [Apple was] going 100% into consumer when everybody else in the industry had decided you couldn’t make any money with consumers.

[These other companies] were headed to servers and storage in the enterprise.

I had always thought that following the herd was not a good thing.

He was doing something totally different and he told me a little about the design [for the upcoming iMac and I was really interested].

The way the chemistry was…I could tell I can work with him. I looked at the problems Apple had and I thought “you know, I can make a contribution here”.

Working with him…would be the privilege of a lifetime. All of a sudden, I thought “I’m doing it, I’m going for it.”

You hear this voice in your ear, “Go West, young man.”

As an engineer, you want to write down pros and cons. The financial part of you wants to look at it…and sort of validate the decision.

It didn’t make sense, yet my gut told me “go for it” and I listened to my gut.

There was no one around me advising me to do it.

Cook was hired as SVP of Worldwide Operations with a base salary of $400k (and a $500k signing bonus).

Jobs told his biographer Walter Isaacson that Cook wasn’t “a product person” but was still the right fit: “He had the same vision I did, and we could interact at a high strategic level. I could just forget about a lot of things unless he came and pinged me.”

The Cook work ethic is legend. Gets up at 3:45am every day. Goes through hundreds of customer and employee e-mails. Gets to gym by 5am. Office by 6am. Has a photographic memory and can pick out random numbers in a 120-sheet spreadsheet. Works for 12 hours and is bed at 8:45am. Rinse, repeat.

There’s a line in Isaacson’s Elon biography — Elon was beefing with Apple’s App Store after he bought Twitter and Larry Ellison suggested he go to Apple HQ in person to iron it out — that what Cook’s dedicated work life created:

“Musk had a deep appreciation for the difficulty of supply-chain management, and he considered, rightly, that Cook was the master.”

Truly a hall-of-fame “trust your gut” call by Cook…also hall-of-fame blue denim-maxxing by the Apple C-Suite in late-2000s.

Cook’s CEO Run

When Apple made the Cook-to-Ternus CEO announcement, there were broadly two camps of reactions on the X timeline:

1. Cook never innovated and just built on Jobs incredible comeback

2. Cook built either the #1 or #2 most valuable business in the world and every metric is off the charts

As Buffett said, Cook and Jobs just had different challenges and each did as well as they could with the hand they were dealt.

Cook’s hand was to milk the iPhone and the ecosystem around it. If you want to feel old, the first one under Cook’s leadership was the iPhone 4S. Apple sold 60m+ in the first year. It would be moving 200m+ iPhones in a few short years.

In the past 15 years, Cook has ~2 billion iPhones with over $1T in revenue. Then, he built a massive moat around the product by adding complementary hardware products (Apple also shipped 400m+ AirPods and 100m+ Watches…outselling the entire Swiss watch indusry) and services (now a $100B+ a year business aka a toll Apple charges everyone to reach those high ARPU Apple consumers).

For sure, these moats have certainly attracted antitrust attention, including multiple lawsuits in America and Europe. Apple’s intransigence around its 30% App Store fee has pissed off a lot of people in the development community. Notably, many of the biggest tech consumer tech firms declined to make Vision Pro native apps when the headset launched…in a quasi-protest (which probably didn’t help initial sales).

Let’s focus in on the products and features.

Here was my first take when the news dropped:

The most common reactions were that I forgot the Apple Cloth (2021) and the internally-rebuilt Apple Maps that might actually be better than Google Maps (2020).

I got yelled by a lot of people for hating on the Apple Pencil.

Also, don’t forget all the security features (Touch ID, Secure Enclave, Face ID, Find My iPhone, end-to-end encryption, stolen device protection and App Tracking Transparency…which was a massive show across Meta’s bow).

Or the health features in the Watch (blood oxygen monitoring, fall detection, heart stuff).

Asking Cook to introduce a new product that outdoes LITERALLY THE GREATEST CONSUMER PRODUCT IN HISTORY…is a bit unreasonable.

WhErE iS tHe InNoVaTiOn?!?!?!

Worth noting that supply chain innovation is still innovation and Cook kept the trains running on time even as the business exploded in size. At Compaq, he had formed a relationship with Foxconn’s founder Terry Gou. Their partnership boomed when Cook arrived at Apple and was the manufacturing equivalent of Jobs and Ive for product.

Sure, none of these products were a “0 to 1” invention like the iPhone. But that’s a lot of stuff and the Apple ecosystem just works. iCloud sync has gotten really good. The blue bubble still gives me dopamine.

Take something like Apple Pay.

I use it at least 5x a day and I’m clearly not the only one.

Marc Rubenstein writes that, “Apple Pay is used by 785 million people worldwide. It is accepted at over 90% of US retailers where it has a market share of 14.2% in online payments and 5.6% in in-store purchases. Cook said on his latest earnings call that last year alone, it eliminated $1 billion in fraud.”

In the aforementioned Charlie Rose interview, Cook’s origin story for Apple Pay ticks both the innovation and consumer-friendly boxes:

“[Apple is about] making the user’s life better. Making the experience better.

We saw all the mobile payment stuff that had been done and none of it was making anybody’s life better. It was more about creating a business model for someone else to make money.

We started with the user and said, “What do they really want?”

Well, nobody wants to carry a wallet. You don’t want another thing that you have to remember to put in your pants when you walk out the door. You don’t want another thing to lose. You don’t really want this card with exposed numbers on it that has a huge security risk. So, we fixed the security issue. Our system is much more secure than the traditional credit card system is. We kept the thing that people liked, which is they do love their card.

And we said, ‘We don’t want any of this data. So we’re not doing what other companies are doing. We don’t want to know what you’re buying. We don’t want to know where you’re buying it. We don’t want to collect all this stuff.” […]

So, we firewall all the stuff. We don’t keep it. It’s not on our servers. And so we kept what’s great and fixed what wasn’t.”

Now, this isn’t all charity.

Apple makes money from the device so it gets to play the hand-wavey “we don’t want your data” play (the similar play it does around social media apps…and that’s why it has a bloodfeud with Zuck and Meta).

Back in 2024, Visa was involved in an antitrust trial. Apple is such a beast company that the iPhone maker caught a straty. Visa — making the case that it faces competition — said Apple Pay was an “existential threat” and the credit card firm has been paying Apple “hundreds of millions of dollars” a year so the iPhone maker doesn’t deploy a competing functionality (although, Apple’s bank card

The iPhone and its moat just delivers.

I drank the Kool-Aid on a LOT of Apple stuff…you did too…don’t pretend like you don’t have a Watch and some AirPods…also, don’t pretend like you don’t enjoy this gem 2FA feature, which has collectively saved humanity >100 billion hours searching through our SMS:

Apple revenue breakdown really shows the story of Cook scaling the iPhone and building complementary hardware and services to near the same scale. There is a limit to how many iPhones Apple can sell. So, sell each iPhone owner more things and he did.

Ben Thompson puts it much more eloquently in a piece titled “Tim Cook’s Impeccable Timing”:

The challenge for CEOs following iconic founders is that the person who took the company from 0 to 1 usually sticks around for 2, 3, 4, etc.; by the time they step down the only way forward is often down. Jobs, however, by virtue of leaving the world too soon, left Apple only a few years after its most important 0 to 1 product ever, meaning it was Cook who was in charge of growing and expanding Apple’s most revolutionary device yet.

Cook, to be clear, managed this brilliantly. Under his watch the iPhone not only got better every year, but expanded its market to every carrier in basically every country, and expanded the line from one model in two colors to five models in a plethora of colors sold at the scale of hundreds of millions of units a year.

Cook was, without question, an operational genius. Moreover, this was clearly the case even before he scaled the iPhone to unimaginable scale. When Cook joined Apple in 1998 the company’s operations — centered on Apple’s own factories and warehouses — were a massive drag on the company; Cook methodically shut them down and shifted Apple’s manufacturing base to China, creating a just-in-time supply chain that year-after-year coordinated a worldwide network of suppliers to deliver Apple’s ever-expanding product line to customers’ doorsteps and a fleet of beautiful and brand-expanding stores. There was not, under Cook’s leadership, a single significant product issue or recall.

Cook also oversaw the introduction of major new products, most notably AirPods and Apple Watch; the “Wearables, Home, and Accessories” category delivered $35.4 billion in revenue last year, which would rank 128 on the Fortune 500. Still, both products are derivative of the iPhone; Cook’s signature 0 to 1 product, the Apple Vision Pro, is more of a 0.5.

Cook’s more momentous contribution to Apple’s top line was the elevation of Services. The Google search deal actually originated in 2002 with an agreement to make Google the default search service for Safari on the Mac, and was extended to the iPhone in 2007; Google’s motivation was to ensure that Apple never competed for their core business, and Cook was happy to take an ever increasing amount of pure profit.

Yes, Tim Cook received a great hand and other Big Tech firms also did very well in the past 15 years: Microsoft is up 15x, Alphabet is up 21x, Amazon is up 30x and Meta is up 34x (from post-2012 IPO lows).

But there were a million ways to f it up. He mostly didn’t and Apple never dealt with the controversies that hit other Big Tech firms (its business model that lends itself to privacy-first helps).

The counterfactual of what Jobs and Ive would have done isn’t super helpful. Jobs was actually worried that Apple would become paralyzed after him the same way Disney was paralyzed after Walt Disney. So, he told Cook to not worry about “what would Jobs do?”.

Obviously, there were some fumbles.

Spending $50B on Apple Vision Pro looks like a major whiff. Although, it has clear industry use cases that justify the $3,500 price tag (a San Diego ophthalmologist recently did the first cataract surgery with a pair) a lot of that technology will probably be repurposed for the upcoming smart glasses (Apple is looking to differentiate against Meta by going more luxury and — shocker — tighter iPhone integration).

Former senior Apple exec Tony Fadell — who worked with Steve Jobs to create the iPod — said that Apple’s biggest recent fumble was a potential self-driving car. Cook spent 10s of billions on the project but shuttered it in 2024.

At one point, Elon says that during Model 3 “production hell” in 2018, he reached out to see if Apple would acquire Tesla ($50-60B range). Cook apparently wouldn’t take the meeting. Internally, Jony Ive designed a mini-van type product looked like the Fiat Multipla and just didn’t have the juice.

Fadell says the major mistake was trying to create a 4-wheel vehicle, instead of lightweight 2 or 3-wheeler. Apple had “redefined” categories (eg. desktop publishing with Mac, music with iPod)…so it should have redefined mobility.

When Steve Jobs and I would walk around the Apple campus back in 2008-9, we talked about the Apple Car. What would it be and he was really like ‘we need to do [something as] revolutionary as the Volkswagen (the people’s car).’ What’s the next-generation people’s car? What’s going to be used in the cities? […]

Now you’re seeing the [two-seater] Fiat Topolino. You see the [two-seat quadricycle] Twizy. You see all these different things [in cities]. I live in Europe, right? So, you see all this stuff running around and they’re selling out like crazy.” […]

Don’t make a four-wheel car that competes with everybody else and the Chinese. How would you change mobility in two, in three, and lightweight four-wheel vehicles? How do you do that? [Vehicles that 14-year-old kids] can use.

Jobs actually looked at buying GM during the 2008 financial crisis when the carmaker neared bankruptcy. Another what if. But obviously nothing materialized…and this is why Ive’s partnership with Ferrari is as close as we’ll get to an Apple Car.

In China, Xiaomi started with smartphones and home electronics. Then, its CEO Lei Jun (who is obsessed with Steve Jobs) decided he wanted to make an EV, which are basically smartphones on wheels. Well, he did and Marque Brownlee says the Xiaomi SUV7 is a luxury-calibre EV selling for only $42k.

Why not Apple?

Transportation is a massive TAM and you know Apple fanbois would happily spend 5-figures on a dorky Apple micro-mobile (hell, they spent $700 on Mac Pro wheels).

All things considered, Cook’s run looks incredible in 2026 but there are a few reasons why it may not as great in 2036.

Such a re-assessment of Cook’s career could echo what happened to Jack Welch.

In 2001, Welch retired from General Electric and people treated it like Michael Jordan leaving the Chicago Bulls in 1998. For decades, Welch was seen as America’s greatest CEO, mastering capitalism to briefly make GE the most valuable company in the world. But it turned out Welch was stripping away GE’s resilience and totally financializing the company to the point it blew up during the Great Financial Crisis.

There are two issues that could do the same to Cook’s legacy. One concerns a bet Cook made decades ago (China) and a bet he declined to make in the past few years (AI).

Let’s start with China.

The China Question

Last year, Patrick McGee wrote a book titled “Apple in China: The Capture of the World’s Greatest Company”.

It details how Apple was able to build the world’s most impressive electronics supply chain by investing untold sums into China:

By 2014, Apple was so frequently sending America’s best engineers to China — what one Apple veteran calls “an influx of the smartest of the smart people” — that the company convinced United Airlines to fly 6,857 miles from San Francisco to Chengdu three times a week, pledging to buy enough first-class seats to make it profitable.

Guthrie quickly realised this wasn’t the industry norm. Although suppliers resented the intense pressure and the soul-crushingly low margins offered by Apple, they put up with it because they derived something far more valuable than profits. The deal — let’s call it the Apple Squeeze — was that Apple would exert enormous power over its suppliers multiple hours a day, for weeks and months leading up to a product launch, and in return, the suppliers would absorb cutting-edge techniques. [...]

As one former industrial designer put it: “I don’t remember, ever, a strategic withholding of information. All we cared about was making the most immaculate thing Every day you’d invent your way through a problem. It was absolutely wonderful as an experience. But I guess we were unwittingly tooling [China] up with incredible knowledge — incredible know-how and experience.”

As Apple came under political pressure to “give back” to China, Guthrie advocated that the company change tack. “China wants the constant learning,” he told colleagues. “The fact that Apple helps bring up 1,600 suppliers for China — it’s an incredible benefit.”

When staffers added up Apple’s investments in China — mainly the salaries and training costs of three million workers in the supply chain, as well as sophisticated equipment for hundreds of production lines — they realised the company was contributing $55 billion a year to China by 2015: a nation-building sum.

Honestly, kind of disturbing. Why? When I’m on a United Airlines flight and want an extra bag of pretzels or one of those shitty airline headphones that last for 1/4 a film before breaking, they tell me it’s $7.50. When Apple is flying United Airlines to Asia and doesn’t want to make a connecting flight, they ask for a special route between two unprofitable cities and United Airlines bends over backwards to make it happen. Ugh.

Anyway, McGee calculates that the $55B a year investment Apple made in China was 2x the annual spend that America made in Europe during the post-WWII Marshall Plan reconstruction (on an inflation-adjusted basis).

Here’s a crazy stat: since the iPhone was launched, Apple has trained over 28 million Chinese workers on high-tech manufacturing. That’s more workers than the entire state of California and a key reason why China leads in so many next-gen industries (EVs, solar, drones, robotics).

A key point that McGee makes is that there was no real alternative to China for the type of scale that Apple required. In 2007, Apple sold 1m+ iPhones. By 2012, they were moving 100m+ iPhones. China was the only country that could scale with Apple’s requirements on precision, speed and a flexible workforce.

In an interview with The Free Press , McGee makes an analogy: imagine 500,000 people were dropped into Boston to work on the iPhone, then the next week that group of 500,000 people went to work on another electronic project in Milwaukee. That’s basically the type of labour flexibility that China brought to the table.

Steve Jobs had tried to make automated plants in America but the iPhone requires a ton of human labor.

As Jobs’ supply chain guru, Tim Cook started moving production to China when the iPod took off. The portable music player was initially manufactured in Taiwan but Cook soon realized only China could hit Apple’s ambitious goals. In 1999, China manufactured 0% of Apple goods but it was 90%+ a decade later.

In a 2017 interview with Fortune, Cook explained the Chinese manufacturing edge in an interview:

There’s a confusion about China…the popular conception is that companies come to China because of low labor cost. I’m not sure what part of China they go to. But the truth is China stopped being the low labor cost country many years ago.

That is not the reason to come to China from a supply point of view. The reason is because of the skill and the quantity of skill in one location. And the type of skill.

The products we do require really advanced tooling and the precision that you have to have in tooling and working with the materials that we do are state-of-the-art. The tooling skill is very deep [in China].

In the US, you could have a meeting of tooling engineers and I’m not sure we could fill this room. In China, you could fill multiple football fields [with tooling engineers].

The vocational expertise is very very deep here. I give [China’s] education system credit for continuing to push on that even when [other countries] were deemphasizing vocational.

In McGee’s estimation, it was fully logical for Apple to bet on China…up until 2013. Within a week of President Xi taking power, there was an aggressive anti-Apple campaign. The Chinese government and media went on a “blitz” saying that Apple was taking advantage of the country and taking all the margin from the manufacturers.

In hindsight, Apple’s leadership should have realized how beholden they were to the Chinese government. Instead of building resiliency in its business Cook and Apple double-down on the country with those Marshall Plan scale investments, creating a true geopolitical adversary for America.

McGee expanded on this idea for an NYT opinion piece last week titled “Tim Cook Was Great for Apple Investors. He Was Not as Great for America.”

One counterpoint to this take is from Steven Sinofsky, an investor at a16z who previously ran the Windows division at Microsoft (and briefly lived in China).

Commenting on McGee’s book, Sinofsky said that Apple could not have gone to any other country by the second or third iPhone…and the dependence on China was really baked in by the late-1990s:

…to say Apple — either because of its scale or visibility — is somehow a culprit in whatever is going on, ignores the trillions of dollars that flow to China from the rest of the world every year.

It downplays the foundations of the tech industry that were in China/Taiwan already when Tim shifted Apple to China from the US, not to mention the “low tech” manufacturing that was outsourced to China already. […]

My sense and experience don’t really support so much “evil” on either side. I think both sides were doing what they believed genuinely right and still didn’t have a clear multistep plan. The book mentions the change is cars including the early success of VW, then Tesla, and rise of BYD. Many industries were like that. Many others were not.

Chinese consumer electronics for example have not really achieved global status (though some due to trade barriers) for example TCL TV or Haier home appliances or software in general. This is one of the most important business and geopolitical issues of our time. Reading this book should not make you angry or partisan but should point out just how insanely complex what Apple did was and how wrong all the US experts were about China (I would out myself in there with regards to software).

There is a world in which Apple could have taken those bonkers profits and — instead of spending $700B on buybacks in the past decade — started building out a back-up supply chain.

But the investing community has needs (and those needs in the 2010s were a lot less concerned about geopolitics).

Apple’s buyback plan was planted by Warren Buffett — who probably won more on Apple than anyone else — and the company’s shareholder-friendly approach is one reason its multiple expanded so much under Cook. In the past 15 years, Apple’s market cap went up 10x while its net profit was up 4x.

More on Apple’s buyback plan, per Cook:

“I’d been in the CEO spot maybe a year or so, we had a growing amount of cash, we had crossed the $100B mark, if my memory is correct. When I don’t have experience with something, I make a list of the people that I think that are the smartest people that I can contact to get advice.

Warren was on the top of the list. As you can imagine, I hadn’t met Warren before. I get his number, I call out in Omaha, and I wasn’t sure that he’d take the call. Call out of the blue, he doesn’t know me from Adam. But he took the call, and I had a great conversation with him, and that was the first time that I met Warren.

He was very clear to me, he said ‘let me just cut through it, if you believe that your stock is undervalued, you should buy your stock. I thought that was just the simplest way to look at it.”

It wasn’t a total cold call. Steve Jobs had previously spoken to Buffett about buybacks but never went forward with the plan.

Under Cook, Apple started repurchasing shares in 2012 and billionaire investor Carl Icahn agitated for even more buybacks. Apple did that $700B in buybacks and extinguished the shares (reduced share count by over 40%).

Apple was still spending $20B+ a year on R&D too. They just had so much cash flowing through the business and have never done large M&A deals (their biggest acquisition to date is still Beats at $3B).

That cash had to go somewhere.

The buyback program was massively beneficial for Berkshire as Buffett wrote in his 2020 annual report:

“Berkshire’s investment in Apple vividly illustrates the power of repurchases. Berkshire now owns 5.4% of Apple. That increase [from a previous lower stake] was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding. But that’s far from all of the good news. Because we also repurchased Berkshire shares during the 2 1⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018.”

Berkshire initially made a $32B investment in 2016 and the position peaked at $160B+ in 2024 before Buffett started trimming it. It recorded a profit of $100B+ on the trade and still owns $60B (still Berkshire’s largest position).

Knowing what we know now, should Apple have started diversifying its supply chain in 2013. Yes.

Let’s be honest, though: is there a single high-level tech executive in the world at that time that had the geopolitical foresight and could have legitimately told Apple shareholders it was taking $10-20B in cash a year to rebuild a supply chain in lieu of the one it had just spent $100B+ building?

Hindsight is 20-20 yada yada.

That is why Apple is now the most exposed company in the world to the US-China trade war other than TSMC.

I don’t want to be a total hypocrite. Me and hundreds of millions of other people happily bought $1000 iPhones that would have cost $5000 otherwise. Without the Chinese manufacturing machine, we could put a 5x-10x multiplier on every other high-end consumer electronic we love. Also cars. Or solar panels. Or heavy machinery. Or robotics. Or 1000s of random manufacturing parts we have no idea about. A lot of industries (and people) benefitted from Apple’s investment into China.

In recent years, Apple has moved more manufacturing outside of China, including to India and Vietnam. In fact, Apple is aiming for 25% of its iPhones to be made in India within a few years. But the reality is that Apple is mostly “assembling” its products in those countries. Most of the manufacturing of key components and related supply chains are very much still in China.

India clearly has the manpower potential but infrastructure is lagging and its government is not nearly as centralized as the CCP (which make it much easier to run a national industrial policy). Further, the risk Apple faces is that if it moves too much manufacturing away from China too fast, the Chinese government could seriously hamper its existing manufacturing business.

And lets not forget about the Chinese retail operations. The iPhone is much less stick in the country because the most important operating system isn’t iOS…it is WeChat and other Chinese apps. But when Apple hits the right fashion/status symbol the numbers are massive. Apple sales hit a record $26B last quarter in China (18% of total sales) driven by the Cosmic Orange version of iPhone 17 Pro Max.

Even if Apple somehow resolves the China question, the more existential one may be what happens with AI.

Sent from Trung’s iPhone

The AI Question

Cook launched Apple Maps in 2012 and it was a total dud.

He apologized and Apple spent the next decade building a legit Google Maps competitor:

• iPhone started with Google Maps

• the Big Tech frenmies broke up after Google withheld voice-guided navigation (competitive advantage for Android)

• in 2012, started using TomTom data but sucked so bad Tim Cook apologized

• now spent billions mapping >4 million miles of proprietary street level maps data with specialized vans and people wearing goofy Apple backpack cameras walking around town

Apple Maps will start running ads— Google probably makes $15B-20B on advertising in Maps — which would dampen the product but still a W.

That means the most embarrassing Cook launch has to be Apple Intelligence. They legit announced vapourware at the developer conference and had to pull an ad showing non-existent products. The ads that survived treated the customers like dumbasses.

The most memorable part of Apple Intelligence was the demented Genmoji campaign:

Last year, Apple’s SVP of Services Eddy Cue took the stand in a Google antitrust case and said that AI is moving so fast that “you may not need an iPhone in 10 years from now as crazy as that sounds…AI is a new technology shift, and it’s creating new opportunities for new entrants.”

Apple has been fumbling AI and it might be existential if there is a new form factor (eg. Jony Ive partnering with OpenAI on hardware).

Against this backdrop, Big Tech has gone HAM on AI-related Capex spending for chips and foundation models. An estimated $700B in 2026 across the Mag 7…except for Apple:

…and that explains this table:

So, what exactly is the Apple AI bet? And how will that look after 2030?

A few months after the launch of ChatGPT, I read this interesting exchange on Hacker News in 2023, which looks pretty prophetic 3 years later:

Apple has a ridiculous, almost unfathomably deep moat for training and running personalized, customised LLMs and other AI models on the ‘edge’ with these Apple Silicon chips in all their devices.

Apple expects the LLM models to commoditize while it owns all the customers through various hardware devices.

While Apple Intelligence was a disaster, the recent craze over people buying Mac Minis and installing personal AI agents is a concrete expression of Apple’s strategy.

Meanwhile, Apple has agreed to pay $1B to Google for its Gemini model to power Apple’s revamped Siri…so, hopefully, that gets fixed.

Let me give you two takes on Apple’s approach.

First, here is a bearish one from Polimath:

Apple had the most compelling pre-AI experience in Siri [acquired in 2010]. They had everything! They had mountains of user data, audio and transcription training data, the biggest and most sophisticated user data network in the world *by far*.

And they blew it. They should be so far ahead of the competition on AI that it makes their competitors fall into despair. Instead, they are a non-player in the biggest tech revolution since mobile, maybe even since the internet.

They could have leveraged their data advantage to create astonishingly powerful models. They make their own silicon, they could have beat Nvidia to the punch on hardware if Cook had any foresight.

Instead they still just make high-end devices and now also they make TV shows and won an Oscar for a movie no one saw. I’m sorry, but that’s underwhelming.

Here is a bullish take via Bubble Boi:

[People] will..be like oh but [Apple is] falling behind in the AI race. The problem with that line of thinking is that people think “AI strategy” means setting $100B on fire to rent H100s and become a low-margin neocloud. They want Apple to just blow all of their money instead of building a real differentiated product. Apple probably looked at the inference market early on and correctly decided not to play a game where the winner gets 20% gross margins and a terrible balance sheet and let everybody else fight it out. Nvidia did the same thing. Neoclouds look more like industrials why the fuck would you destroy your 75% margins for that?

The actual Apple AI strategy is a lot smarter than haters give credit to. They own the silicon, own the OS, and can run inference on the device better than anyone.

M5 ships with neural accelerators in every GPU core, 153 GB/s unified memory bandwidth and if you believe flash has room to run… much more. Your data never leaves the phone, your AI never goes down because AWS had a bad day, and you don’t get billed by the token. No competitor has the silicon plus OS plus distribution to replicate that and I truly believe on device inference for trillion parameter models is coming in next 5 years.

And this is why the John Ternus decision matters.

John Ternus & The Future of Apple

Ternus is 50 years old and will have spent 1/2 his life at Apple when he becomes CEO in September.

He has a Mechanical Engineering degree from Penn and built a head-controlled feeding arm for quadriplegics as a graduation project. His first job was in VR and he joined Apple in 2001, the year Jobs released the iPod, and has played a part in every major Apple hardware product since: iPhone, iPad, AirPods, MacBook Air, Mac and Vision Pro.

All that is cool but, holy smokes, we need to talk about the pun potential with his last name here:

• If he makes another run at a car: “Apple’s U-Tern”

• When the iPhone Fold drops: “The iPhone Terns A Page”

• If L’il Jon performs at Apple’s 51st Anniversary: “Tern Down For What”

Also cool was the commencement speech Ternus gave at Penn’s Engineering school in 2024. He did a version of Steve Job’s famous “paint both sides of the fence even if no one looks because you will know you did it” attention-to-detail story:

Here’s my first [advice]: the care that you put into your work really matters. My first project at Apple was the Cinema Display. It was a large desktop monitor. It had a beautiful clear plastic enclosure that was held together with some screws coming in from the back. These screws were made of stainless steel, and the head of every screw was machined to have a pattern of concentric grooves that shimmered like a CD when light moved across it. I should probably say, if some of you have never seen a CD before, you can ask your parents afterward.

At some point in my first year, I found myself at a supplier facility. I was far away from home, it was well past midnight. I was using a magnifying glass to count the number of grooves on the head of this screw, which, remember, lives on the back of the display. And I was arguing with the supplier because these parts had 35 grooves, they were supposed to have 25.

I distinctly remember stepping back for a minute and thinking to myself, “What the hell am I doing? Is this normal?” And I thought about it, and I realized it might not be normal, but it’s right. It’s right because I’d already spent months working on that product, and if you’re going to spend that much time on something, you should put in your very best effort. Maybe a customer notices, maybe they don’t, but either way, whenever I saw one of those displays on someone’s desk, it mattered to me to know that my teammates and I had considered everything about it and done the very best job we could.

Steve Jobs and Jony Ive were product guys.

Tim Cook wasn’t a product guy — Ive left in 2019 and was apparently “dispirited” the Cook didn’t take more interest in products — but he scaled the shit out of them.

Ternus gets to take Cook’s “scale the shit out products” machine and make new products because Ternus is very much a product guy.

Just like Jobs didn’t pick a Jobs. Cook isn’t picking a Cook. Although, they both seem to be on the low-key and even-keeled side of the temperament spectrum.

When Ternus rumors hit the newswire last year, long-time Apple observer John Gruber wrote this:

I absolutely love the idea of Cook’s successor being a product person like Ternus, and Ternus is young enough — 50, the same age Cook was in 2011 when he took the reins from Steve Jobs — to hold the job for a long stretch. Ternus took over iPhone hardware engineering in 2020, and was promoted to senior vice president of hardware engineering in January 2021, when Dan Riccio stepped aside. Apple’s hardware, across all product lines and including silicon, has been exemplary under Ternus’s leadership. And Ternus clearly loves and understands the Mac.

The most relevant part of Ternus’ career as related to AI is that he led the effort to port Apple’s products from Intel to Apple Silicon, as noted by another long-time Apple analyst Ming-Chi Kuo:

1. John Ternus’ most important move in recent years was leading the Mac transition from x86 (Intel) to ARM (Apple’s own Apple Silicon). Pulling off a full-stack shift across hardware, software, and the developer ecosystem in one go, and turning that into a commercial success, required a very high level of execution and tight cross-functional coordination. Without this, there wouldn’t be the success of today’s MacBook Neo and the advantage Apple now holds as it gears up for AI devices.
   

2. The iPhone has been the core driver of Apple’s hardware business for nearly two decades, yet the new CEO does not come out of the iPhone side of the business. That suggests the board is applying a broader set of criteria, not just picking the leader with the most visible wins.
   

3. Moving the Mac to Apple Silicon was a system-and-platform-level transition, essentially a brain transplant. Within Apple, no one has more experience managing a shift at this scale than John Ternus. That is exactly what Apple needs as it moves into the next phase of on-device AI.

Apple made two other notable announcements last week along with the Ternus news.

First, the driving force behind Apple Silicon — Johny Srouji, who joined Apple in 2008 from IBM — is now Apple’s Chief Hardware Officer.

Second, Tim Cook will become Apple’s executive chair and remain very involved in Apple, especially when it comes to “engaging with policymakers around the world”.

And “engaging with policymakers around the world” really means “dealing with President Trump and President Xi”.

Cook had to become a politician. Apple has 2.5B users, makes $410B in annual sales and its supply chain span the globe employing tens of millions of people.

He’s on par with leaders from large countries in terms of responsibilities.

“Tim may not be able to design a product like Steve but Tim understands the world to a degree that very, very few CEOs I’ve met over the past 60 years could match,” Warren Buffett told Bloomberg in 2021.

In this role, he’s had to apologize to Chinese consumers after intense pressure from the CCP around a flimsy warranty issue in 2013. Domestically, that means becoming a political heat shield for Apple and all that entails:

• smiling when you get called Tim Apple (a top 10 tech moment in past decade)

• bringing a 24-karat gift to the Oval Office

• having the President fete your career by saying you kissed his ass

Apple recently waved its mandatory 75-year old age limit for the exec chair. Cook could be around for a while making sure Ternus has a smooth transition, especially by dealing with the heatiest heat that will heat in upcoming years.

Cook will do it because he LOVES Apple.

During his 2014 conversation with Charlie Rose, Cook reflected on the moment that Jobs asked him to become CEO. He had filled that role on an interim basis in 2009 but Jobs’ health took a quick turn for the worse in early August 2011:

[Jobs] told me, “I’ve been thinking a lot. Apple’s never had a professional transition at CEO and I’m determined that we will have one now. I want you to be the CEO.”

On that day, I thought he would be chairman for a long time and that I’d be CEO for a long time and that we would continue to work together.

He chose me because I wasn’t like him. I’m not a carbon copy of him. He obviously thought deeply about who he wanted to lead Apple.

So, I have always felt the responsibility of that and I’ve wanted desperately to continue his legacy at Apple. I deeply love [Apple] and I wanted to pour every ounce that I had of myself into the company.

Then, Cook talked about how he thought about building the Apple leadership team:

If you’re a CEO, the most important thing is to pick people around you that aren’t like you and that complement you.

Because you want to build a puzzle. You don’t want to stack Chiclets up and have everyone be the same…so, the people that surrounded me are not like me. They have skills that I don’t have. I may have some that they don’t have. […]

As a team collectively, we are able to do some incredible things and it’s because we collaborate and I see one of the key things in my life is to make sure that we collaborate at an incredible level.

It’s because we run the company functionally. We’re not like the typical big company that has a number of divisions. Everybody is a functional expert and, then, we work collectively to get things done. We work together as a team because the work really happens horizontally. Not vertically. Products are horizontal and it takes hardware plus software plus services to make a killer product.

For years, many thought Cook would elevate his long-time COO Jeff Williams, who has a tight relationship with their major manufacturing partners at Foxconn and TSMC (Cook was Jobs’ COO). Williams retired late last year. Others floated software head Craig Federighi but he gets some of the AI blame (also, would he even want to deal with hardware complexity?).

So, Ternus it is.

Profiles in the days after his CEO announcement noted that Ternus was:

• “a super nice guy”

• “a great collaborator”

• “a levelheaded voice” who “inspires fierce loyalty”

Apple’s whisperer at Bloomberg (Mark Gurman) says, “Apple picked Ternus because of his age and belief that he could reinvent Apple’s product lineup and compete against AI-savvy competitors. Longtime colleagues describe Ternus as someone willing to make clear calls, in contrast to Cook’s more deliberative, consensus-based approach.”

Gurman notes that the Ternus pick was very much Cook’s to make (with the assistance of one of Apple’s longest service execs Eddy Cue — SVP of Services — who has been with Apple since 1989 and worked very closely with Steve Jobs).

The reporting out of Apple — which may be strategic leaks — has given Ternus credit for the MacBook Neo success while dropping nuggets that he was against the Vision Pro. In the next few years, we’ll get to judge him on the iPhone Fold, a Homepod and a suite of more AI-powered wearables (eg. smartglasses as well as camera-enabled AirPods, Watches and a new pendant product).

Ternus has the tools and was given a decent hand to win in AI.

Can he?

The most interesting take I saw on the news was from Horace Dediu, who mocked up a press release from the year 2040 that “looks back” on Ternus’ 15-year run as Apple CEO:

• John grew Apple devices to 4.5 billion from 2.5 billion when he took over in 2026. Many have pointed out that he has been building on Tim Cook’s success and that John has only added 2 billion devices in 15 years, averaging 110 million per year. The reality is that most of those have been switchers from Android rather than first-time users. Because of this, Android’s 5 billion active devices means Android users still outnumber Apple users. Apple’s users do have attach rates of over 2.5 devices per user including passive AI wearables but the competition is not standing still. The new CEO will face the challenge of trying to wrest majority market share in a saturated 12 billion active device market.

• With over 2 billion customers, Apple is capturing over 40% of all AI revenues. Critics point out that the company has not grown beyond its core: high net worth and high income households. Much of that foundation was laid by his predecessor and arguably all that John has done is maintain a base that grew organically as global income has risen. Over a billion middle/high income individuals have joined the world economy as Apple users but that is hardly attributable to Ternus. His engineering acumen did not give him the insight into marketing to low income countries where most of the users are shunning Apple products.

If some version of this future plays out, Cook made the right choice and those accomplishments sure would be impressive updates on John Apple Ternus’ LinkedIn profile.

Them Apple CEO Memes

Finally, my personal favourite Tim Cook post ever. It’s from 2022 and a reminder for me about “context collapse”, the concept that a user will post something on social intended for their audience (in my case: tech/business folk) but the post will travel into other communities and lead to original poster getting absolutely cooked because it’s out of context (the pièce de résistance were various publications picking it up with the headline: “Writer roasted for saying Tim Cook proves you can’t get rich as an employee”).

Links & Memes

Some links for your weekend consumption:

• Fencing at LA 2028 Olympics will be lit…because the audience will be able to watch AI-powered visualizations of the sword movements.

• Meta is taking training to the next level…first, is is offering a free program to train fiber technicians to help build data centres. Then, it went full dystopian and will now track mouse movements for all Meta employees to train the AI models (there is no opt out). Beginning to think Meta is behind that “Data Centre” game on Steam where you buy racks, set up servers and install cables.

• The cast of Friends…but totally juiced up and looks-maxxing isn’t the worst idea ever.

• Two insane Polymarket prediction market trades…someone rigged a bet and made $30k+ on the temperature in Paris by applying a hair dryer to the thermostat that resolved the bet and the memes have been incredible. Elsewhere, a person involved in the US military’s Venezuela was arrested for using confidential information to make $400k+ betting that Maduro would be removed from office (and the President’s response to the news was…watch it).

• SpaceX has a $60B option to buy AI coding startup Cursor…and Kevin Kwok has a good breakdown on why the deal makes a lot of sense.

• Sony AI built a ping pong playing robot (ACE)…and it became “the first robot to attain expert-level performance in a competitive physical sport” and beat top-tier human players, per Reuters.

• Someone built an Anti-Grammarly…the app makes mistakes in your email to make it look more human and less AI slop. Reminds me of the saying, the opposite of a good idea is also a good idea.

• Why Rome never industrialized…good 11-minute video explainer!

…and them wild posts:

Today, we will talk about Live Nation: a federal jury determined the $36B live events giant operates an illegal monopoly and may force the company to spin off Ticketmaster.

Also this week:

• Bieber Takes Over Coachella

• Should Jensen sell Nvidia chips to China?

• …and them wild posts (including Allbirds)

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A few weeks ago, we talked about Disney and how the company’s reliance on its theme parks & cruises division is warping the entire business. The division has grown from 18% to 57% of Disney’s operating profits over the past decade (while still only 1/3rd of total revenue).

Disney has to milk park attendees with egregious prices, because it needs the cash to navigate the transition from cable TV to streaming (hence, the 100x marked-up Mickey Mouse ears and the $250 lightsaber that I was very very close to buying).

Now, let’s talk about Live Nation and its subsidiary Ticketmaster. This week, a US federal jury found that Live Nation illegally maintained monopoly power in the market for large amphitheatres while Ticketmaster did the same for ticketing at major concert venues.

To understand how these monopolies work, let’s start with this visualization of Live Nation’s revenue and operating profit via Sherwood News.

For more context, Live Nation is the world’s largest promoter and producer of live events (booking, marketing, logistics etc). It owns or has a stake in ~400 major concert venues across the world.

Since acquiring Ticketmaster in 2010, Live Nation’s stock is up 17x to a market cap of $36B (naturally, I missed out on every single part of this run-up).

In 2025, the company put on 55,000 events. It manages 400 artists including Madonna, Lady Gaga, Miley Cyrus, Post Malone and Weezy F Baby (owning 65% of the concert promotion market) and sold 646 million tickets (Ticketmaster controls 86% of the ticketing market for major venues and sold 10x more tickets than the 2nd place AEG).

Of those ticket sales, 53% (or 346 million) included fees.

Live Nation’s revenue hit a record $25.2B last year (compared to $7.3B in 2015) and its three main income streams are concerts, ticketing and sponsorship & ads.

Across these divisions, the difference between revenue and profit is even more extreme than Disney.

In 2025, the concert division did 83% of Live Nation’s revenue ($20.9B) but — with a tiny margin of 3% — it only contributed 26% ($687m) to the company's $2.6B in adjusted operating profit.

Live Nation’s other two divisions operate with much higher margins:

• Ticketing (37% margin): 12% of sales ($3B of $25.2B) and 42% of adjusted operating profits ($1.1B or $2.6B).

• Sponsorship & ads (64% margin): 5% of sales ($1.3B of $25.2B) and 32% of adjusted operating profits ($845m of $2.6B);

If Disney is squeezing parks & cruises to the detriment of park attendees — granted, without any antitrust heat — which Live Nation division do you think is squeezing customers?

Is concerts? Is it ticketing? Or sponsorships & ads?

We all know.

But if you’re still on the fence, here is one of the most on-point tweets in the history of Twitter:

Ok, it is a bit more complicated than “Might as well fee”.

But Ticketmaster’s fee situation is definitely the most salient and consumer-facing part of the key antitrust charges…and ticketing has been key pillar for past decade:

Here is more from Music Business Worldwide:

Across three core claims [against Live Nation], the jury found that:

• Ticketmaster willfully acquired or maintained monopoly power in the market for primary ticketing services to major concert venues through exclusionary conduct.

• Ticketmaster did the same in the market for primary concert ticketing services to major concert venues.

• Live Nation willfully acquired or maintained monopoly power in the market for large amphitheaters through exclusionary conduct.

In each case, the jury also found that the anticompetitive conduct caused harm, and that Live Nation controlled, dictated or encouraged Ticketmaster’s behavior.

The jury additionally found that Live Nation unlawfully tied artist promotion services to the use of its large amphitheaters (meaning artists were required to use Live Nation’s promotion services in order to play its amphitheaters).

On damages, the jury found that consumers were overcharged by $1.72 per ticket for primary concert tickets at major concert venues across 22 states and the District of Columbia [this $1.72 overcharge applied to ~20% of all Live Nation tickets sold].

According to the states’ case, Live Nation is using its monopoly position to basically Tony Soprano everyone in the ecosystem:

• To the artists: “Oh, nice tour you have there, would be a shame if we didn’t promote it because you used a 3rd-party venue.”

• To 3rd-party venues: “Oh, nice stadium you have there, would be a shame if it stays empty because we won’t let our artists play there unless you use our ticketing platform.”

• To fans: “Oh, nice college fund you have there for your kid, enjoy this Another Dollar Won’t Hurt Fee because what other ticketing platform will you use to book your favourite artist who we happen to rep?”

To be sure, these concerns have existed for decades.

As Matt Stoller highlights, Ticketmaster’s webpage basically brags about absorbing a competing platform in 1991 right on the timeline page of its website: “Ticketmaster acquires its major competitor Ticketron”.

They were rolling up other ticketing platforms to gain market power.

In 1994, Pearl Jam went to war against Ticketmaster. Stone Gossard and Jeff Ament — along with the managers for Aerosmith and REM — testified in congress against the ticketing giant. The artists said that Ticketmaster was using its influence over venues, promotion and tickets to charge fans “exorbitant fees”.

Pearl Jam ended up cancelling its tour that year due to this beef.

While Ticketmaster was cleared of being a monopolist in various class-action lawsuits, its reputation hasn’t exactly…well, please see the above tweet.

When Live Nation acquired Ticketmaster in 2010, the Department of Justice (DOJ) forced the newly formed company to pinky swear sign a 10-year consent decree agreeing not to force concert venues to use Ticketmaster. In 2019, that consent decree was given more meat because venues were complaining that Live Nation was retaliating against them for using other ticketing platforms.

Then, came the “website crash heard around the world”. On November 15, 2022, a super-duper-superstar artist who rhymes with Baylor Sift launched the Eras tour. A record 2.4 million people bought tickets on Ticketmaster that day but millions of other fans were left in the lurch and the website went down.

A bunch of Swifties then got rugged on secondary markets by scalpers and the outcry led to lawsuits and another congressional hearing. Within two years, the DOJ and dozens of states had filed antitrust lawsuits against Live Nation.

Live Nation settled its lawsuit with the DOJ just last month. However, the states case kept going and that is how we got this week’s legal outcome.

That earlier settlement provides a roadmap for how a judge may seek antitrust remedies against Live Nation.

But, first, I want to play some devil’s advocate.

I’m personally biased against all ticketing platforms (Ticketmaster, StubHub, SeatGeek) for two reasons. First, we’re obviously getting donged on the fees. Second, anytime I have to buy a ticket on the secondary market, it is a reminder that I don’t have the hustle to actually snag a ticket right when it goes on sale (I’m learning this lesson the VERY VERY hard way with FIFA 2026 tickets right now).

So, I had to force myself to understand Live Nation and Ticketmaster’s rationale for their tie-up (a "steelman" if you will):

• Organizing and promoting live concert events is very expensive and has paper-thin margins. Dude, I can barely organize a coffee meeting. I can’t imagine the lift that goes into throwing a concert for The Weeknd. A fully-integrated business — with control of ticketing that ties promotion and ticket inventory — creates a better fan experience and is the most viable way to make the whole model work for everyone long term.

• A scaled player can invest more in infrastructure, fraud prevention, resale controls and digital ticketing (I will admit that the Ticketmaster App is pretty slick and it feels like magic when a concert ticket shows up in Apple Wallet).

• Live Nation doesn’t actually set most of the ticket price. Artists dictate the face value and venues tack on most of the Fee-Fees (80% of Live Nation events are in 3rd-party venues).

The last point probably has the most credence.

Yes, ticket prices have definitely gone up. According to Bloomberg, the average face value price for a top-100 artist has risen from $53 in 1996 to $142 today (all adjusted for inflation).

There are a few key factors to consider about this price increase.

In the 1990s, concerts were marketing for the physical albums. CD sales — aka the bundling of 2 or 3 great songs with a bunch of filler no one wants — was an incredible business model for artists. Physical albums were the cash cow.

Now, live touring makes up the majority of income (70%+) for the top-tier artists and streaming services are the marketing tool to get people to come to the shows. Artists are very incentivized to pump them ticket prices and the demand for live events has been wild post-COVID.

Those pesky secondary markets also (shocker) inflate ticket prices….especially from fees. For primary tickets, fees are ~27% of the face value. On secondary markets, one study found fees hitting 56% of a ticket’s face value.

The clear appetite of buyers on the secondary market has led to platforms implementing dynamic pricing, which further boosts primary ticket prices (but at least this money is going to artists and promoters, opposed to scalpers).

This is a long way of saying that Live Nation isn’t the only one milking fans. The company is a pain sponge for the rest of the industry (similar to how Roger Goodell gets paid $70m a year to eat shit for the NFL owners).

But but but but, let’s be honest. They is milking us with them fees. Of course they are. Look at the business model. Just like Disney with Disneyland. Live Nation has to turn the fee dial if it wants to profit-maxxxx.

There were some pretty damning evidence from the state’s antitrust trial, per NYT:

Live Nation employees joked about trying to “gouge” people for parking and V.I.P. upgrades at concerts, calling fans “so stupid” for paying the inflated charges and boasting that they were “robbing them blind baby.”

To quote one of the greatest fictional characters in the history of the TV medium: “Is you taking notes on a criminal f-cking conspiracy?"

The company’s explainer via Bloomberg:

Live Nation’s ticketing director Ben Baker testified that Ticketmaster’s fees depend on the face value of the ticket. As of September 2023, the company’s standard rate card called for charging $3.25 on tickets with a face value of as much as $5.99. From there, the fees increase based on face value with the highest price range — above $116 — garnering a 20% fee that caps at $70.

Will Live Nation be broken up?

The stock was up +3% in the day after the verdict. Markets don’t seem to think the judge will force Live Nation to divest Ticketmaster. It would be gnarly. Recall, the concert division made $687m on a $20.9B revenue for a paltry margin of 3%.

WHAT IS THIS? AN OPERATING MARGIN FOR ANTS?

The current vibe feels similar to Google losing antitrust cases in the past two years, with courts deeming that it illegally operates search and ad network monopolies. However, Google avoided a break-up (which would have included a spin-off of Chrome). The search giant was forced to make changes to distribution deals and data sharing but most considered it a “slap on the wrist”. The judge said he didn’t want to disrupt a rapidly changing market (aka AI and the rise of OpenAI/Anthropic is threatening Google).

Breaking up Live Nation wouldn’t be nearly as disruptive, though. And the company has clearly abused its position…so who knows?

Live Nations has already signalled that it will appeal the decision.

Either way, the settlement with the DOJ last month is probably the template: it paid a $280m fine, will divest from 13 venues, offered ticketing platform interoperability and agreed to a 15% cap on service fees at Live Nation-owned venues.

If there isn’t a break up, we’ll probably see more divestitures and get a lower cap on service fees (and an application of that cap across every venue on the Ticketmaster platform, not just Live Nation-owned ones).

The ticketing division would remain Live Nation’s profit engine...but with fewer Cuz We Can Fees.

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Bieber Takes Over Coachella

Speaking of live music events, the Super Bowl for Molly Coachella music festival hosts is wrapping up its second weekend. The event is actually put on by Live Nation’s main competitor AEG.

The buzz from last weekend was headliner Justin Bieber doing a stripped down set on Saturday. People thought it was lazy and unbecoming of his $10m payday across two performances. Particularly, after Sabrina Carpenter put on a Broadway-caliber set on Friday.

Disclaimer: My wife calls me Top 40 Phan and I am a huge Bie-lieber. Been a fan for nearly two decades. Gun to my head, his best tracks are “Despacito (Remix)”, “Beauty and the Beat”, “What Do You Mean”, “Never Say Never”, “Somebody To Love (ft. Usher)”, and “Baby".

“Mistletoe” is also my favourites Christmas song ever (like I said, I’m an OG supporter…and Top 40 Phan).

I wanted to stay up for the YouTube livestream but, hahahhaha, c’mon man. It started at 11:35pm. My kid has sports on Sunday morning.

Anyway, I woke up Sunday and Bieber had taken over the entire timeline. People were absolutely cooking him for spending a portion of the performance sitting at a table with a laptop while scrolling through memes and a bunch of his old YouTube music videos.

I added my $0.02 that no one asked for.

After bathing in some dopamine from this post, I watched the set and was very very wrong.

The YouTube stuff was perfect: So much of Bieber’s career is tied to the platform. In 2008, Scooter Braun famously discovered Bieber in a YouTube video singing to Chris Brown’s “With You”. In 2014, “Baby” became the second YouTube video — after “Gangnam Style” — to cross 1B views. At Coachella, he watched both songs and duets with the videos among others.

Oh, and YouTube is Coachella’s official global livestream partner. Shocker, Bieber rehearsed the entire moment, which many people thought was super authentic and organic.

In reality, Bieber was a massive get for Coachella.

The largest music festivals (Coachella, Glastonbury, Lollapalooza) and the broader industry have been in a weird spot. It’s estimated that 90 such festivals were called off in 2024 and another 50 in 2025. A lot of these event organizers probably overestimated the post-COVID comeback of “live events”.

For the world’s biggest artists (Taylor Swift, Rihanna, Beyonce, Coldplay), Coachella doesn’t actually make a ton of sense anymore. These acts can pull $10m+ per night on their own tours.

Trapital’s Dan Runcie wrote about the Coachella business in 2023 and explained how the festival pays artists:

Headlining the show is great for many superstar artists, but at the highest heights there’s a tradeoff. In recent years, the headliners get $4 million per weekend (but I heard from a source that Bad Bunny got $5 million). The artist on the second row got $750,000 per weekend. That’s a great payday, even for an artist selling out arenas. But for an artist like Taylor Swift, who can likely gross $10 million per night on her own stadium tour, then she may be leaving money on the table. This is where the Coachella documentary deals play a factor. Beyonce was rumored to be paid $20 million for the Homecoming documentary on her 2018 show, which made the experience worthwhile for her (and the Beyhive).

For other artists, Coachella is a brand-building signal to keep getting looks. Cardi B performed in 2018 and was paid just $70,000 per weekend. She spent more on her production, but she saw it as an investment. Cardi now gets paid $1 million for private shows regularly. She used a Coachella performance the same way a speaker uses a TEDx Talk. Sure, they weren’t paid. But that high-quality video lives on YouTube forever and will be the proof point to land more lucrative speaking and career opportunities.

Bieber has had a rocky few years but the comeback vibe has been strong in 2026.

He did a viral Grammys performance in February and now Coachella. If this catapults him back into top-top-tier, then it worked out for everyone.

I might stay up to watch Bieber’s second Saturday live because he could do the most glorious thing ever: just sit on the stool and play last Saturday’s entire 90-minute performance on YouTube. Do it Beibs! I belieb in you.

Links & Memes

Should Jensen sell Nvidia chips to China? Jensen Huang went on the Dwarkesh podcast and it got spicy. Dwarkesh asked very good questions and kept pressing on key topics.

At about the 1-hour mark of the podcast, Dwarkesh asks Jensen whether Nvidia should sell chips to China. The US government has had export controls in the past few years and Nvidia went from 90%+ market share of AI compute in China to less than 50%. Meanwhile, Chinese networking giant Huawei has made serious headway.

The exchange led to what many on X called the most Rorschach Test in recent memory. Split between those that agreed with Jensen and those that agreed with Dwarkesh.

Dwarkesh made the argument for why America — especially after the recent release of Anthropic’s Claude Mythos model with significant cybersecurity capabilities — should not allow China to have access to Nvidia’s best chips. He was coming from the camp that AGI/ASI may happen next few years and it’s crucial America does everything to win that race.

Jensen is a lot less “AGI-pilled” and frames the situation in much more business and market share terms. You could tell that Jensen was speaking to a number of constituents (shareholders, the public, US government, Chinese government) with his answers. Many felt he never addressed Dwarkesh’s key assertion that giving China access to top-tier chips would be a national security threat.

The point that Jensen has made for years is that if China doesn’t get access to Nvidia’s chips, an entire domestic ecosystem will develop and that ecosystem will ship to the rest of the world. As in, the majority of people will use the “Chinese Tech Stack” instead of the “American Tech Stack”. That is both a commerce and geopolitical concern.

Jensen’s argument made ALOT of sense before the export ban started. Let’s get China hooked on Nvidia chips and the American Tech Stack. But since the export ban started in October 2022, the CCP has 100% committed to creating a fully indigenous semiconductor industry whether or not the country ever imports any more Nvidia chips.

From here, my thinking was: “If China is going to to speedrun a semiconductor industry no matter what, a geopolitical rival shouldn’t help it…so, yeah, America should ban all Nvidia chip exports”.

Also, since the manufacturing of chips is a bottleneck…that meant any chips shipped to China was less for America and Western allies.

After listening to the podcast twice and reading all the commentary — it went mega viral (including a wild moment when Jensen kinda lost it and dropped this line, “I didn’t wake up a loser”) — I have changed my mind.

Nvidia should definitely NOT send the best chips to China. However, there is a point on the spectrum between “send 0% of chips” and “send 100% of chips” that Jensen is trying to hit. Obviously, it’s self-interested. He cares about Nvidia’s global market share. If Huawei builds a complete parallel AI system, that will be bad for Nvidia in the long run.

In response to the podcast, investor Gavin Baker made the best case for allowing some chips to flow to China.

Basically, inference (asking the AI model to do stuff) has overtaken training (building the AI model) for chip usage. Since inference dominates now, the key consideration is how to deliver tokens efficiently and the best way to do that is building a unified system across what Jensen calls a “5-Layer Cake” (energy, chips, infrastructure, models, applications).

AI chips are more fungible for the first step of training the AI model but less so on inference.

Yes, China will keep building its own semiconductor industry. But since Nvidia’s full offering — even on older chips and racks — is better than China’s domestic options, there is still some sweet spot to keep Chinese AI’s industry temporarily hooked on Nvidia and building for the “American Stack”.

It won’t be as easy for China to just plug their AI models trained on Nvidia chips into next-gen Chinese chips when they eventually come online.

Per Baker:

“TLDR: as labs shift their focus from training to inference, the costs of portability and the upside of co-design to maximize tokens per watt per dollar both rise. Portability is likely to begin decreasing as a result. […]

The networking primitives for this Huawei system are very different than those for Nvidia’s systems and a model that runs well on Nvidia will not run well on that system and vice versa. This means that if a Chinese ecosystem gets momentum, Chinese models might stop running well on American hardware. And when Chinese models run best on American hardware, America is in a better position as this gives America a degree of leverage and control over Chinese AI that it risks losing to an all-Chinese alternative ecosystem.

This architectural fork makes porting and distillation less effective and strengthens the pro-American national security case for selling China deprecated GPUs imo.”

Another key point is that China’s AI labs are focused on open-source AI models. If these open-source models become the standard in the Global South (similar to Android as compared to iOS), that means the majority of the world’s population could be running on a Huawei-designed system. A number of governments have already banned Huawei telecom infrastructure due to surveillance concerns...and that could play out again.

I don’t know what % of Nvidia’s older chips should go to China. But it’s more than 0%.

Anyway, this is all above my pay grade, so I’ll leave you with this incredible AI-generated video of Jensen summarizing the interview.

***

Some other links for your weekend consumption:

• A breakdown of the best Artemis II photos…by Hank Green.

• Andy Jassy’s Amazon annual letter…has some very interesting stats. AWS is at a $142B annual run rate. AWS AI revenue is at a $15B run rate after 3 years (this is 260x larger than AWS run rate of $58m after 3 years). Amazon’s chip busines is “on fire”, at a $20B run rate (it would be a $50B business if Amazon sold Graviton, Trainium, Nitro sold chips directly instead of monetizing through the cloud). Then, here are two macro stats that make the Amazon long-term bull case: 1) 80% of retail is still in physical stores; and 2) 85% of IT spend is still on-prem.

• Maybe the most actionable LinkedIn post I’ver ever seen…and it explains how to talk to conspiracy theorists.

…and them wild posts:

Finally, here is your weekly “have we reached peak AI bubble yet” piece of news.

Allbirds — the sustainable wool shoe brand that paired perfectly with every Patagonia vest in Silicon Valley over the past decade — is trying to pull off one of the most absurd business pivots in history.

During peak liquidity / stupidity of 2021, Allbirds went public and hit a peak valuation of $4B. It fell 99% before declaring bankruptcy. Then the pivot: on Wednesday, the company said it was rebranding as NewBird AI and is expected to raise $50m to “acquire high-performance, low-latency AI compute hardware and provide access under long-term lease arrangements, meeting customer demand that spot markets and hyperscalers are unable to reliably service”.

We are all dumber for having read that press release.

Bloomberg’s Matt Levine points out that the pivot isn’t from shoes-to-AI. It is shoes-to-meme stock. Whoever is making the $50m investment — which still needs to be approved by shareholders — is getting some juicy upside:

The other level is that Allbirds is pivoting its stock to being an AI meme stock. That definitely worked out! The stock closed yesterday at $2.49 per share, for a market capitalization of about $22 million. Allbirds previously agreed to sell its sneaker business for $39 million and pay out the net proceeds to shareholders as a dividend; the $22 million market capitalization represented, roughly, the expected value of the dividend. At noon today, the stock was at $18.82, up 655% from yesterday’s close, for a market cap of about $164 million. That represents, uh, I guess it represents the expected value of the future AI-native cloud solutions business? Let’s go with that. […]

The proxy does not disclose who the “institutional investor” is but, you know: great trade! The investor is essentially buying $50 million worth of stock at the old, defunct-sneaker-company price, and selling it at the new, AI-neocloud-company price.

Maybe! Presumably the investor can’t sell the stock yet: The convertible financing hasn’t closed, the company needs shareholder approval to allow conversions into stock, and probably selling twice the market cap of the company into the market would take time. (Though more than 200 million shares had traded by noon today, up from about 63,000 yesterday.) The investor has a lot of downside protection, but fundamentally it is betting that the new, AI-neocloud-company price will hold up for a while.

As of this writing, Allbirds is worth $94m. None of this is investment advice.

Today, we will talk about how Shohei Ohtani’s $125m bag from sponsorhips.

Also this week:

• Anthropic’s Cybersecurity Bomb

• Andy Weir’s Writing Journey

• IBM’s AI is Powering The Masters App

• …and them wild posts (including Artemis II)

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Shohei Ohtani $125m Sponsorship Bag

Your boy was in Tokyo for a week in March.

Just wanted to share two thoughts on the trip.

First, if you are ever in Toke-A-Dokes, try to visit the Hakone Open-Air Museum. It’s a 1.5-2 hours from Tokyo via car or train. One of the best museums I’ve ever been to. Incredible sculptures that are...err...outdoors. And a massive Picasso Pavilion. Pablo’s daughter Maya stewarded a bunch of his artwork including ceramic sculptures. In the 1980s, Japan was getting uber rich and wanted some of that old Europe swag so they struck a deal with Maya. Super interesting visit.

Second, Shohei Ohtani’s mug is literally everywhere. If you played “drink an Asahi every time you see Ohtani’s face”, you would be blackout within 2 blocks of walking in Tokyo.

My sister tried to take photos of every ad featuring the LA Dodgers super-duper-duper-star bu gave up. It was too many.

Stepping off an airplane. Bam. Billboards. Bam. Bus stops. Bam. Convenience store windows. Bam.

So, here is a round-up ads from r/Dodgers and r/baseball:

He’s sponsored by over 20 brands in Japan including:

• Seiko (watch)

• Ito En (green tea)

• Kirin (probiotics)

• Kose (skin cream)

• Japan Airlines (take a guess)

• Mitsubishi Financial Group (bank)

My absolute favourite is Family Mart because I’m obsessed with the Onigiri rice balls (I’ve been known to call “them triangle rice b*tches”) and these are very popular at the convenience store.

The amount of technological innovation that Japanese foodmakers put into the Onigiri packing is tremendous. You peel this. Pull that. Next thing you know, the seaweed is perfectly wrapped around the triangle-shaped protein-filled rice.

Legend has it that on the day of the Family Mart photo shoot, Ohtani skipped lunch so that he could smash all 19 of the different flavours on offer. I don’t even care if that’s an urban legend. Arguably more impressive than his 3-homer, 10-strikeout performance in Game 4 of the 2025 NLCS.

At this point, it probably shouldn’t be surprising when I tell you that Ohtani makes more in sponsorship than any other MLB player. His estimated $125m endorsement haul for 2026 (including memorabilia stuff) is like 10x more than the next top MLB stars such as Juan Soto and Aaron Judge.

Per Sportico, Ohtani is reaching truly rarified air:

Before Ohtani, endorsement earnings for MLB players peaked around $10 million for Derek Jeter and Ichiro Suzuki. Last year, Ohtani made $100 million from endorsements, a threshold previously reached by only three athletes in Tiger Woods, Roger Federer and Stephen Curry, who each did it one time. Woods’ 2009 endorsement earnings of $105 million was the prior record.

On an inflation-adjusted scale, Ohtani is still looking up at Woods’ $160 million, and Michael Jordan remains the endorsement king if you count retired athletes. MJ earned an estimated $300 million in 2024, thanks to royalties on Nike’s Brand Jordan business, which posted $7 billion in revenue during its latest fiscal year.

Woods and Federer do platinum brands like Rolex and Nike. Federer also did Mercedes, Moet & Chandon and Credit Suisse before getting a huge equity slug in On Running. Woods has also done NetJets, Tag Heuer and Tiger Woods Dubai Luxury Golf.

Ohtani seems like he’ll do anything.

But, apparently, this is a thing in Japan according to one Redditor in r/AskJapanese:

Japanese celebrities aren’t as conscious of “protecting their brand” like American/western celebrities. That’s why you will very often see super big-name celebrities doing super silly commercials on TV. It’s all about just getting your name and face out there as much as possible.

And he’s far from the first person to reach this point of ubiquity. Back in the 90s, KimuTaku was everywhere for a while. Imada Mio seems to be approaching that status as well.

An good American comp is Shaq: at one time or another, he has done Ring, Amex, Pepsi, Taco Bell, Nestle, Reebok, JCPenny, Radio Shack, Gold Bond, General Insurance, Toys ‘R Us etc.

Shaq gets side credit for cutting a pre-IPO check to Google (always be sourcing deals) and once having an insane franchisee portfolio (owned 100+ stores across Papa John’s, Big Chicken, Five Guys, Krispy Kreme, Auntie Anne’s).

Not super lux but still printed cash.

Ohtani has done some lux with Porsche and Hugo Boss, though.

Ok fine. I’m probably having a case of confirmation bias but, yeah, I don’t see MJ, Woods or Federer doing an equivalent of Onigiris.

Ohtani’s endorsements are the key that unlock the seemingly bizarre LA Dodgers contract he signed in 2023. The sticker price was $700m over 10 years, making it the largest ever at the time. But he deferred 97% of the money. His annual salary is only $2m or $20m over the life of the contract. The remaining $680m will be paid between 2033 to 2043.

Either way, all of the financial analyst dorks pulled out their spreadsheets and realized that the actual net present value of the contract was <$500m.

The Dodgers probably would have paid him any way he wanted. The back-to-back World Series winners have had the #1 or #2 largest payroll in the MLB in the past few years. With Ohtani (and then another $300m+ for star pitcher Yoshinobu Yamamoto) they bet that they’d also capture a large part of Japan as fans...and they were right.

But the endorsement guesstimates were too low. I remember seeing top analysts guess Ohtani would make $50-60m a year to supplement his $2m salary.

Dude might be doing that on rice-related sponsors alone soon. Unreal.

Anthropic’s Cybersecurity Bomb

Anthropic has been on a heater in 2026.

It just announced that its annual revenue run rate hit $30B in March, surpassing OpenAI’s latest reported run rate of ~$24B. To be sure, these are self-reported numbers and there are legit quibbles over the accounting. Anthropic includes all the revenue from cloud platforms that resell its product (it deducts the partner’s share in the sales and marketing line). OpenAI only includes its own share in the top line, thus undercounting.

Either way, Anthropic’s revenue ramp is — in technical terms — stupid rn:

• 2021: Founded

• 2022: $10 million

• 2023: $100 million

• 2024: $1 Billion

• 2025: $9 Billion run-rate

• January 2026: $13 Billion run-rate

• February 2026: $19 Billion run-rate

• March 2026: $30 Billion run-rate

Against this backdrop, the ~$400B AI lab announced that it had a new model called Claude Mythos. Rumors that the follow-up to Claude Opus costed $10B to train. This makes sense since it just demolished AI capability benchmarks.

That’s just the tip of the iceberg, baby.

Mythos is a beast in the cybersecurity realm (allegedly). In the past few weeks, it identified 1000s of zero-day capabilities in every operating system and browser including:

• OpenBSD: A 27-year old bug in an “an operating system known primarily for its security.”

• Linux kernel: It found and chained together up to “four vulnerabilities in order to construct a functional exploit” of the operating system that powers 90% of the world’s data centres.

In a wildly shared anecdote, Mythos was able to breakout of a sandbox environment, connect to the internet and notified an Anthropic researcher of its David Blaine magic trick while the person was eating a sandwich in the park (this is officially the 2nd greatest sandwich-in-the-park story since Sad Keanu).