Welcome everyone to Kathy Wood Interviews Elon Musk Hopefully we've got other members of the Ark Invest team on the interview as well. It's going to be a Twitter Spaces interview. Uh, it is scheduled to begin in about 5 minutes or so. Uh, so we'll go ahead and do a little bit of preview while we wait for it to begin.

We are on standby Fort and of course we'll be listening closely. We'll be taking notes, we'll try to contribute where we can uh, while making sure we can listen to all of the goodies that we hear from this. uh, we'll uh, probably just be uh, taking notes during it as well. And my goal is to uh, throw some of those updates up on uh, Ec.com as usual.

So uh, let's see what we've got. First things: These are just going to be some expectations that I have things that I'd like to pay attention to uh, or things that I'd be hopefully, uh, looking for in in a discussion between Kathy and Elon Uh, the first thing that I personally am very curious about is I'd like to know have we shifted gears on Giga Mexico Giga Mexico During the last, earnings call was referred to by Elon Vquez, Something that would be Capital intensive duh but maybe not the best time because of macro uncertainty. Now, however, we've had a really clear inflection point in inflation. uh, and this could be a big moment for Tesla Kathy Wood Also bought Tesla stock for the first time in a while selling coinbase just yesterday, which hats off to Kathy.

She kind of played it perfectly. Coinbase ran like crazy. Trims from Coinbase goes back into Tesla after selling while Tesla's kind of been teering in lower levels. Fascinating move there.

Uh, this is going to be very exciting but so uh, first of all. also thank you. Uh Martin Adams Look at this 36 Monon member 3 years Martin has been a member and he says when are we going to see a meet Kevin confronts Elon Musk live Hey one day we'll knock on wood for that day one day. Uh, but for now we're uh, we're just a few minutes away here from getting started.

Very excited to see the beginning of this. uh oh Brett Just replied Brett just replied that he is going to be on the call as well. uh I replied to him and said will you be on the call he will be I've interviewed Brett a couple of times he's brilliant and I that's not to you know say that Kathy isn't It's just like he's got amazing perspective as well. It's it's amazing and they have different perspectives so they're such compliments to each other.

So very very excited for this. Uh, this will be really cool. uh Elon Musk uh down here. look at this.

We had an Elon Musk response to one of our eack articles which is really exciting. So we love seeing Elon's engagement on Twitter But anyway, again, number one. The number one thing I'm paying attention to is I want to hear about Giga Mexico If inflation's back to 2% now like we saw in the uh Q3 final read of GDP then I would like to see uh, some excitement about Giga Meico. So Kevin's expectations, we're going to call it okay.

number One Giga Mexico and inflation talk. this could be a big Catalyst for Tesla because if Elon's optimistic on this call compared to the rightfully so pessimism that we had last time which again, pessimistic because interest rates were at all-time highs, all right, that's that's a big deal when you get interest rates literally knocking on the door of on the 10-year Treasury 5% we like 4.99 Of course you're going to get some pessimism in Autos that was October October is part of Q4 Uh in Tesla will have faced the highest interest rates in its Tire it's it. in its entire history. As a company in Q4 ever, it has never seen higher interest rates than it has seen this quarter.

So I'd like to see how uh maybe some demand talk how has in how have falling treasury yields and therefore rates affected Tesla's Demand right? uh demand? uh as a result of uh rate declin from 5% right where where Did We End the day today and we're just here waiting for this oh it looks like uh Kathy just uh went live. It looks like they're just booting up the stream we're loading in. Here we go. Okay nobody's talking just yet, but we are in it.

and uh, we welcome everyone. Uh, I'm Brett Winon I am the chief futurist at AR Invest here I have with me uh Kathy Wood and I believe Elon Musk has joined. Uh I'm going to quickly read a disclosure uh, the information provided in today's conversations for informational purposes only. it does not constitute an offer, solicitation, or recommendation regarding any investment, product, or service any reference to a particular company or digital asset be it Bitcoin or whatever is not an endorsement by Arc nor a recommendation by Arc to buy, sell, or hold any security Arc and his clients as well as related persons may but do not necessarily have Financial interests and any of the things we may discuss.

uh, historical results may be discussed or not. indications of future results. Uh, and we can't discuss private. Good way to start.

Get the disclosure out of the way on Spaces Actually I actually appreciate that. Get it out of the way up front. Not a bad idea at all. Certain statements made today.

Maybe forward-looking statements? Uh, this could be about robots or, um, kind of the future of X could be anything. And we reserve the right to change our mind about those forward looking statements. And they involve all kinds of known and unknown risks and uncertainties. Actual results could differ materially.

Uh. in addition. Uh, some information referred to here. Uh, uh, maybe uh.

third party information? Uh, we can't. Um, you know, vouch for the accuracy or completeness of that third-party information. hi Kathy how are you hi Brett uh we're trying to get Charlie Roberts in here as well. So yes, uh yeah Brett is our chief futurist and uh Charlie Roberts who just joined us is our chief investment strategist and uh, he and uh Elon uh know one another hoping um, we can get them in here.

maybe Brett you can you can Elon is should be on hi Elon how are you Elon uh hey guys I'm here all right. So so happy, uh that you could join us and that you agreed to do this? uh Elon um, it's t this is taking me back to early 2019. Uh, we were uh at Fremont uh, doing a podcast with you when oh yeah, remember when Tesla was in production? hell with the model 3 and uh, I think you were sleeping under your desk at that time? uh and uh, and you gave us a lot of time to to really help us understand the story and what was going to happen and uh, the rest is history. So um, uh, just wanted to to recount that.

um, you know Elon you're so often, um, you know the media is, uh, focused on controversy and uh, you know that's how they get their clicks and and hits and all of that stuff. but yeah, yeah, I think they sort of actually don't really have much of a choice. Um, in that any media that isn't focused on controvers and is not, uh, maximizing the clicks is going to get out computed by media that does maximize the clicks. So you know you also can't entirely blame them.

Um, in that, uh, they're trying to survive in what is clearly a declining. uh, you know. Legacy Media Market and um, yeah, you know, shrinking? P It's a shrinking pie and shrinking pie. You know, desperate Times leads desperate, desperate.

Desperate Measures And that's you know. it's somewhat frankly, predictable. Yes, yes. Well, um, that's not what we're about.

As you know, at ARK we're We're all about the future, trying to figure out the way the world's going to work. and um, well, I' I'd love to give you an opportunity right now to you know, address what you think mainstream media does not understand because there's such a big story here. There are so many big stories that you know offer all kinds of Hope and you know, really, transformation. Um, in the future and and you're leading the charge.

So what? What don't they get do you think and what would you like to? What would you like them to understand? Well, I I Think that's quite a long list of things that are don't understand or where they. They simply don't wish to focus on. Um, because it it it doesn't quite lead to clicks and traffic whatnot. So um I yes, I guess I I Could I could you know go over at a high level What? SpaceX and Tesla are accomplishing or have accomplished this year? Um, you know? Well you just said that like media is a dwindling pie and you own a big kind of like media platform franchise.

How do you think about the future of X within? Well he said Legacy Media and how it should evolve? Well I mean X is actually growing in traffic. So um I mean again, one doesn't know quite what to believe. but uh, the you know when you look at the the traffic numbers, the traditional media is down. but but X's is up.

So um, you know I think that's you know cause for optimism. but of course the traditional media would never actually write a story about that. I'm not going to write a story that says hey, we're losing and X is winning is is a very unlikely headline. Um, in fact, you see the opposite headline which are quite misleading.

that uh, Xfk Twitter is is dying or dead or whatever. I mean how many times have we seen that headline? it's it's getting a little tedious. I mean you just press, you know. repost the same thing every month is what it seems like.

So um, you know I that's you know. So I think I feel quite optimistic about the the sort of xplatform and where it's going and adding a ton of functionality that uh I think people will find useful. Um, there's been immense progress in just the course of a year. We've accomplished more uh, advancements in a year than I think in Twitter done in the prior at least five years.

So um yeah, one of the we've been talking a lot. Uh about X Um, we know it, We own it in our Venture fund and uh, we've been talking about. um, you know the the democratization that you are enabling. Um, in many ways we we just going back to Tesla You'll remember that um, you know when when Tesla when you were thinking about taking it at private I implored you? you know, No, You know the the you know we've been supporting we the the retail investor and and others have been supporting Tesla Don't take it private, you'll you'll take it.

You know away this incredible growth opportunity and so thank you for that. That was a democratization move. but Twitter yeah and I should say that that you know your L was influential. You know it played as a significant role in the decision ultimately not to take the company private.

I We we could have taken the company private. Uh, the the downside was that uh, it would have been quite a big distraction. Um so and and of course would would have made it difficult for many investors to remain invested. Um, and I mean the combination factors of complexity having to leave behind so many investors.

Um, really that was the those were the two factors that uh, you know why we decided not to take company private? We absolutely could have. Yeah I want to be just Absolut Super clear. No, no I know that and we did have funding secured. So so far this has been eight minutes of a recap here.

Yes, um, you know it's it's it's worth bearing in mind that um, you know I was sued in San Francisco Court uh which which was jurry shopped by uh, a class action plain of Law Firm It's always. it's important to bear in mind in these class action law lawsuits. the the media will actually write as though it is actually an AG grieved shareholder. but in fact it is not.

The the true plaintiff is the class action law firm and the plaintiff is is simply the a puppet. Yes, um yeah. so but the media never never mentions this for some reason. Not at all.

And and one of the reasons uh, you took Twitter private was you know to to to Really enable free speech and again, whole democratization? Uh, this democratization, uh concept? Uh, you know we're We're all about that as well. We give our research away. We want people to understand how how much the world's changing, how technologically enabled Innovation is going to transform could transform everyone's lives. Uh, for the better if they get on the right side of change.

Uh, so so yeah, yeah, thank you. Well, absolutely So the um, there's like kind of like maybe an argument that sounds or kind of esoteric, but um, it it's the way I I Actually think about it that um, you can think of the xplatform, um, or social media in general as kind of a a collective Consciousness or group mind and you you want to, uh, have as much signal and as little noise as possible. Um, obviously we've got a lot of work to do on that front, but you you want um, you information to be coming at you from people who are experts in the field uh, or who are in the case of, let's say, a war zone, literally in the field um, and uh as opposed to Fed through uh journalists who are not experts in the field uh, and who, uh, most of the time 90 probably 99% of the time are literally not in the SC at the scene. there's only a few reporters, sometimes only one reporter at the scene.

Um, so now in in the past, uh, that it was the only way to have things work. That's why you know. So the Legacy structure in the past was you had to uh, have information filtered to Media organizations and then to Um and then and then they would decide what to publish and they' publish it and then people would read a really a a small subset of what was actually going on in the world. Um, and and obviously a subset that was chosen by Um.

a handful of editors curated. yeah, curated. So it's sort of, if the editors weren't that interested in the subject, you simply didn't hear about it. So uh, now that's in the past, especially a in a non interet world.

That's kind of how things there wasn't really another way to do it. Um, you didn't really have a mechanism for connecting all of the humans, but now with the internet. Uh, and at a fast moving social media? What social media is terrible word, but fast moving sort of platform. like like the Xplatform? Um, the you can actually get, uh, have all of the you can.

You can get all the all the people out there that on the platform reporting information, distilling it down. Um, have people who are the who are world-class experts in their field. uh tell you exactly what's going on. I Mean if you see for example, the Uh AI discussions on X are by far the best.

Absolutely, absolutely, you know. Elon We Um, I one Um, I Conceived of this open-source research ecosystem that we've evolved in 2012 I Never dreamed that Twitter at the time it was was for tween and teens and celebrities and there's still some of those on. But I Never dreamed that it would become our primary platform for giving away our research and having dialogue with the people in the field out there who are innovating. You know we're getting information that no one else in the financial world doing it the traditional way is getting just because we are engaging with these um, you know, with the innovators.

Uh, so it's it's a marvelous platform and uh I think it's the Knowledge workers platform. Yeah, hi Elen, this is Jol Hey, how's it going It be it' Be great to learn more about how you're thinking actually about the road map to expand X from where you see it today to where you see it becoming and risks, challenges and also opportunities of that including Ai and how you see that that transition well along lines of what I was saying earlier. the um, it's It's really kind of create a a group mind. or Collective Consciousness where um, every person um is essentially uh, part of that group group.

minor Collective consciousness and is is kind of uh, reporting information to the system, consuming information, giving their opinion on it. Um, and you could just think of it like a giant brain. basically. um, and you know, I post it.

I Think a few years ago that a neuron doesn't feel like it's it, doesn't know it's a neuron. So right. Uh, you know individuals on the system. Obviously you feel like an individual, but but actually you are actually part of a collective sort of group mind.

Um, and and then you know, See say well what makes it a better or worse? Um, you know. Collective Consciousness It's it's well. obviously speed is very important. How fast is information being transmitted? How is is that? Information is the most interesting information? Uh, being propagated to the to the right other people as quickly as possible.

Um, you know how much noise is in the system? Noise would be information that is either. Not not interesting. Uh, obviously spam scams? um actual misinformation. Um well you know that that that that term is overused.

Um, but just say like just say information that that that that is deviates from the truth. Uh, meaningfully. Um, because there's always this question of what is the truth. Um, you know.

and uh, it's like there's an old sort of uh, police saying uh, you know for any given crime there are at least three stories. the victim, the per perpetrator, and the truth. right? You know? Or you know. Uh, the Um was that Kurasawa movie Rashan where they the same event happens and and you see it's perceived completely differently by four different people.

Mhm. Um I Really hope they have some prepared questions by the way because it's very very slow. So far the least aspire to have the least amount of error. Um, so so that's that's really.

Uh, that's the main thing is is like how do we uh, get as many people as possible participating in providing information that's accurate? uh um, correcting information that is not accurate? Um, and just if you think of it sort of like from an INF Theory standpoint, this is like I think the right way to think about it. think about from an information Theory standpoint you you want to have what would make for the most effective um. group mind or Collective Consciousness um and it's it's like either neurons all communicating as quickly as possible with the lowest signals of noise. um and um, yeah and oh go.

Sor Do you think you need to enable users to put like skin in the game behind their messages and in a more frictionless way as in if I'm like within Capital markets I can bet I can put Capital to work right and I stand to lose it if I'm wrong. Uh, and the information space in X is. It's kind of like a survival of the fittest, but kind of like the marginal energy needed to put in for an individual tweet I can't really change that or an individual post Um, is that like a direction to go? Um, you mean like when you post something, assign sort of a some some amount of your credit effectively. your um yeah, I mean within prediction Prediction markets work because people are able to bet on One Thing versus another.

Like conceptually if I'm right about something if the truth if I if I get some kind of like you know more than just reputational acral but capital acral for being correct about something on X is that a way to kind of increase essentially effective Um signal to noise with than the network? Um, do you have a suggestion for how that might be implemented I Was just thinking they should have come prepared with an example. the fact that I can advertise on X like I can promote a tweet you know is in some ways in in instantiation of that. but there's no mechanism by which I effectively lose for being wrong. Or maybe within the distribution algorithm there is um, right's basically saying you could share disinformation all day long.

but you don't actually have to be right or credible because everybody forgets about your question the next day. So what he should do is provide an example. I'll think of one actually rewards me in some way, either financially or otherwise for contributing positively. Well, I mean we, we are um, paying creators for you know, for people who, who, who are posting on the system and where that yeah, for getting the most views, not for being right interesting, um and gets a lot of views.

So that's uh, that's one way in which people are acing value. um you if if you post something that's boring or uninteresting, then just or wrong whatever you perhaps will get less um views and thus uh, earn less. Um, you know there's um, there is this like very challenging problem of of bots and trolls. Um which is I think I mean just tackling that and I think we've made great strides, but just a long way to go.

Uh, that is the biggest source of noise. Um is because the F fundamental problem you have right now is that uh, it's It's quite easy to pass the are you a human tests? You know, even if I mean basically o Open Source AI at this point, can uh pass? Are you a human test B I Think better than most humans? Um so uh, and that's only going to become more widely available so you know you have to I think bias the the network to uh, have basically raise the cost of manipulation and raise the cost of bots and trolls. Um, you cannot completely get rid of them. This is not possible, but you can make it um, much harder and much more expensive.

Like I mean like having say, a drug enforcement agency like the or any kind of if making drugs legal. um does it doesn't make the drugs disappear, it just makes them more expensive. So uh, you know sometimes there's this false dichotomy of like, well, it's all or nothing. No, you just, you have to do things that that dramatically um, increase the cost of noise in the system.

Uh, so that somebody can't spool up 100,000 or a million bots in a day? Um, and and then um, manipulate the system. So this is why the you know we've moved to sort of, uh, a subscription. Um, you know where there's at least a small monthly payment? um even even a small amount. like if like $3 a month is or some some small amount is it's still several orders of magnitude? Uh, it.

It raises the cost of bots by several orders of magnitude. Maybe by a th000 or 10,000 Um so. uh. and and then it's not just the cost, it's not just the the dollar amount, but that then you effectively piggy back on the payment system.

the payment authentication. So it's just it's just hard to find. um, more, uh, credit cards? to uh, misuse that like there's an actual cost in the black market for credit cards that work so so just just biasing things to where the Uh subscribers effectively or premium users uh, content is is elevated above that of um bought Amplified content it is I think a very big deal. um sorry and my my my prediction actually is that uh, any given social network um that does not uh move in this direction will be swarmed with with Bots and and and will simply be overwhelmed.

You know I have an experience with that Uh we all of a sudden uh I guess Bots were taking over and this was not on Uh Twitter but on or an X but on Instagram and Facebook I mean it was just all over the place. So we've already experienced a Taex like that. Um, can we uh, stay on the X plat platform as a topic? Uh, um Elon But maybe, um, take us a a little bit more into the future about this? uh, super app opportunity? Will you become a financial platform? um, identification? uh is and we're already seeing uh, you're still tipping I think uh, um on on X But uh, uh, are you going to uh, are you going to turn into a financial platform? Which is where you started your uh, entrepreneurial Journey many years ago, Is Is this still? uh, Is this still on the drawing board? Uh, yeah, absolutely we're We're just waiting for the final approvals to come through. For the Money Transmitter licenses.

It's just taking longer than expected to get the Money Transmitter licenses. Uh, yes. I did See you have 15 or so now or is it more? Um I Think we actually have a majority of the states oh, have been. Um, but it's it's irrelevant until California And and New York Brew is I see I See and and uh, are there any showstoppers? Or it's just bureaucracy? It's just I Mean, really? just I Guess bureaucracy? Um, you know.

Um, the thing. Things were obviously quite chaotic, especially for the first few months. So you know this: It's not entirely the fault we We were a bit late in submitting our uh, you know, um money trans licenses um and uh I essentially thought I thought we had done it, but we had not done it. um until around the middle of this year.

So I I think we'll probably get our approvals uh, early next year and so I would expect payments to roll out I I would be surprised if we ar if it takes us long than the middle of next year to roll out payments. um so I'm I'm not aware of any any Show Stoppers it's just kind of working through the system. um yeah, um uh if you don't mind, uh Elon I'd like to actually make an announcement uh on X uh since um, you know we we learned in the markets that uh, once, uh once you say something on exit it it actually becomes public information from the Sec's point of view. we've seen that tested a few times and so uh I just wanted to announce that um, we're pretty EXC decided that uh for the first time beginning in uh January our Venture fund will be available on Sofi right now if you want to buy our Venture fund.

um tit, the Titan app is the way to go. That's an Andreen Whit funded company and they've been great. Uh, but uh, we are expanding and you know we'd love again in this uh movement towards democratization of VC If any other platforms want to uh, participate in in this movement, uh, you know we're we're not exclusive. So um, and and we're very excited about the possibilities.

So thank you for letting me do that and it's It's also a big part of bringing the broader Um base of huge number of non- accredited investors who' love to enter companies like yourand of course and we are already with the AR, Venture, Fund in SpaceX and X and we'd love to you do others and really allowing you know obvious your companies are extremely well funded. but for many companies they don't have access to Capital necessarily at the scale you've built without going public. So we think that's a really exciting potential for companies to stay private for longer. And really, that sounds great.

Yeah, yeah, that sounds really, really cool. Um I mean the burden of being a public company really has increased over time. Um, such that it has somewhat dissuaded a lot of companies from being public. Um, and I I Really? Frankly, um, would would recommend companies don't go public.

Uh, unless they absolutely have to. Um, so yeah. I Do you think do you think that going back to like the Model 3 ramp when you had customers and shareholders going out and facilitating delivery of vehicles? Do you think that could have happened without people having like skin in the game in the same way? Yeah, absolutely most most of the people who helped were not shareholders. That's interesting.

I mean not that many shers um I don't know, you know Elon So many people have come up to me and all of us over the years because we were out there. you know, pounding the table uh for Tesla against you know, against the traditional Financial world and they they read our research uh on Tesla and um and bought into it and so many people have come up and said thank you for doing that research, alerting us to the opportunities what's happened to the public markets. uh Elon is I think uh is I think they're kind of broken I agree with you I think part part of it is regulatory, but part of it is the way the traditional Financial World works and I saw I've seen this time and again is if a company is not in a broad-based benchmark, then then Financial Analysts and uh, portfolio managers very often say okay, not relevant, not relevant to me, not in an index. I'm not competing against it.

That's how broken it is. Instead of focusing on the future and you know which companies are going to be transformative and are going to scale brilliantly, they're very nicely situated in the past, you know, and stocks that are where they are in benchmarks because of past performance. That's the other thing that's happened here. Uh, sure, but it's important we change that Elon and and Tesla has been a change maker in that regard.

Sure, you didn't get into an index because of the way they construct them until Tesla was $500 billion dollar. So a lot of it was pretty crazy. You know how many more? how many companies are bigger than that? You know it's just crazy, but you did you, You made it and you opened people's eyes. And we're trying to change this shift away from passive.

uh, back to active so that there is an efficient allocation of capital. Yeah, you're You're touching on a very important point, Which is that I Think the the percentage of the market that is passive is simply is too great at this point. Um, so at the end of the day somebody actually has to make an active decision. Um, the passive investors are riding on the decisions of the active investors.

Um, and so the passive passive. You know, Investments Like index funds whatnot are they're like a an they're just they're an amplifier. It's like have you know, um, like an electric guitar amp or something. So but but you you don't want that amplifier gain to be too high? Um, or you you you get essentially massive movements of the stock.

Uh, based on the decisions of maybe 40 five. Uh, active, major, uh. stock? Pickers Well, you know, actually it's it's It's a a little more complicated so if you, if you, yeah, if you, if you look if you're in a riskof market a bare market like we were in 22. What actually happens is these managers are very fearful and they just get closer and closer to their benchmarks.

And they sell the stocks that the kind of stocks that we're invested in because we're completely active, we don't we're we're Benchmark agnostic. We ju, we just don't even look at them. We're all about the future. So that's in a riskof market.

It punishes stocks that are not in indexes um, more than otherwise would be the case. And then to your point, it rewards stocks that, uh, you know in a risk on period uh that, uh that that are growing very quickly like yours. And as you say, yes, there's a Pyon effect if they get into a benchmark now everybody has to consider them. So it's really it's It's a really distorted way of, um, that the public Equity markets have evolved.

Yeah, I mean essentially getting into any kind of index will passive fund will I think uh, increase the volatility significantly. Um, because uh, you know just now it's Amplified that stock is not Amplified By the by the passives um so you know and I think Bogle was was it was a good idea to to create U you know, Vanguard and and and passives but it's gone. It's just gone too far. It has, um so you just don't want to have the amp.

The amp sort of the amp. The amp has turned up too high as way to think of it. Um, yeah. so there should be more more active, uh, and less less passive.

Totally agree. And absolutely. And the other thing that's happening I Didn't know we were going to go here Elon But the other thing that really is gripping the markets is you know, 75% plus uh, uh of trading every day. Um is algorithmic and and we see they very simple algorithms.

Uh, you know in a bare Market Okay, do they have cash? Uh, are they burning cash? Uh. and and those two variables will will dominate Uh, the the stock action. So yeah, we've watched this over the last three years. It's a very simplistic way of managing money and um, and I I really do think it has.

It has led to the most massive misallocation of capital in history. A lot more private companies should be public, but we understand why they don't go public because of the kind of behavior you're subjected to. And now you know all about it, right? Yeah, I Mean the the regulatory board of being public is way too high. Um, and then the the legal burden of being public is also way too high.

So if if you're public, you're just going to be sued non-stop by these class action law firms with their fake plaintiffs. Um, as is the case with Tesla, We're just, you know, constantly being sued by uh, you know as I said, what the media will portray as a member of the class, but in fact, we're just being sued by class action law firms with with puppets like that drives me crazy. It happens, It's you. You know it's it's it's he's right about that.

That's very common. Um, but the the The problem that we're talking about here is non accredited investors have not been invited to the Venture Capital party because they don't make enough money. or they or they're not wealthy enough, which we think is quite a regressive tax. Um, so yes it is.

Absolutely I I Fully agree. That's why we're democratizing Venture Capital by not taking a carry ourselves so that we can, well, not taking a carry. but it's a 2.75% management fee to anyone. Anyone that sounds great? Well, I think more people should take your up on that.

Yeah, um, the there is I mean most most of the Um Mo the vast majority of companies are obviously private. They're not public. Yes, and uh, and you're right that that it is somewhat of a regressive tax that makes it difficult for the the average uh citizen to participate in the upside of those companies because once you go I think above 2 200 shareholders non-employee shareholders then you are forced to go public. Um, so the the reason that SpaceX cannot simply offer stock to anyone who wants to own it is because of that 2500 um direct shareholder limit right? So and do you think, do you think that within SpaceX or just thinking about Tesla versus SpaceX Do you think you've been a enabled to take more appropriate risks within SpaceX than you have within Tesla because of the public versus private? Absolutely.

I Mean at at SpaceX we never think about, um, what the quarter? We never think about it. And we don't think we don't think about the stock price. So uh, you know there's um, there's a lot of pressure, like immense pressure on a public company to not have a bad quarter. So this can actually result in a less efficient operation.

Where you you're you're going to Great Lengths at the end of a quarter to not disappoint people. Um, and um, you know, that's just. that's just how how it goes. Um, so uh, and and then you know you've also got a sort of a long-term challenge with public markets where a lot of the analysts following companies uh, have a Time Horizon that is maybe only a year or two.

Um, it's you know, rarely more than a few years. Um, so and so they literally don't care because then their incentive structure is short-term. They do not care about what your long-term outcome will be because their career is dependent on how you do in the short term. Elon You have been great at I Think standing up to short-term oriented shareholders.

That's one of the scores in our scoring system as as we're evaluating companies. Is this a Visionary management and will they stand up to short-term shareholders who want their profits now, their dividends, their share repurchases. Will they invest aggressively enough in the future? and I think you've done a great job? Uh well thank you um and credit to the Tesla team as well. Um so but that that said, we at Tesla we do um go to Great Lengths to ensure that our quarter is is good as um that that we don't disappoint because it's it's not so much about the it's just that we feel like we have a sort of you know moral obligation to you know I don't know that to to not have a bad quarter um and and disappoint people.

So we you know the the number of New Year's EES that I've spent in delivery centers is like I don't know six I don't know seven I don't know I' bless count how many times I was in I was delivering cars until like basic Bally M out on Year's Eve personally. so um, you know, um yeah, has has it done any? Let me just ask the question the other way. at SpaceX you you feel like you have more degrees of freedom being public. Has it done anything positive for you for Tesla he could buy Twitter um raise money.

It did allow to clean up our capital structure which was overly complex as a private company and have a single class of of common, which so we we really getting. Things were getting quite unwieldy with the the private company capital structure. Uh, there was obviously the capital availability in the public markets, which, um, is a lot more than in private markets and a car company is capital intensive. So I guess access to large amounts of capital and cleaning up what had become an extremely complex uh, you know, private company share structure? Uh, were two.

You know, major things? Um, certainly. It was also good to, um, give access to the company stock to uh, small shareholders. Um, you know, so those are those are good things. but you know I think it's also been a tremendous distraction as well.

On the downside, Uh, so um, and uh, you know there's just a lot of lot of overheads, just there's more time that's required to manage a public company than a private company. So in the past you've talked about potentially um, I guess listing Starlink or doing something on the SpaceX within the public Capital markets. But do you think that that's actually not something that you need to do or anticipate doing across all of your companies outside of? Tesla At this point I Don't think it's worth going public until you have maybe an extremely stable, uh, and predictable Revenue Stream So If your cash flows are extremely stable and predictable, Um, at that point, going public is less of an issue because you you're just not going to have these big gations. Um, so you know, isn't Isn't that ironic? Like the point of the equity markets is is to provide like Perpetual capital for Capital intensive businesses, right? And what you're describing is a business that actually doesn't really need Equity Capital Necessarily, you could you could debt fund it to some degree.

if you have very stable cash flows, right? I mean it. I I can Equity or debt fund just about anything. Um, at this point you know the you know it's worth noting that in all my all the companies across all the years, I've never lost money money for an investor even once. Um, and this is now over a 100 financing rounds now.

of course I cannot stop people from selling when they should not sell. Um, but I have never driven them to a bad outcome. Um, so that's a pretty good batting average. Um, and and obviously, when you've treated Capital well, then Capital if it treats you well in T and so you know, uh, it's it's basically very easy for me to raise almost any amount of capital frankly.

Um, so uh. now of course I need to make sure that track Rec stays intact um and not get complacent, uh, or entitled. But uh, you know, obviously I do not have a need to to raise Capital Um, and uh, in fact, a lot of in most cases I I don't really need even for say like company or neur link I I mean I could just fund it myself entirely. Um but uh I think it is good to have other investors um why why why even bother with with outside shareholders at all? It' be simpler to you could take whatever risk you want without having to answer to anybody.

um well I do take a lot of risks uh e way. uh I don't know I think it's um I think it's good to have I don't know I think it's good good to have other investors um I mean I I think that you know each investor you you add is an ally. Um so it's good to have more allies. um I think it also you know establishes that I'm not uh, delusional in the valuation of the companies.

Um so if if others are prepared to invest at a particular value then um then then I'm not the sole decider of what the value of the company is. Others are are deciding what the value of the companies are. You know it's sort of an outside assessment of the value of the company. Um, and and there you know there is also a need to um, uh, you know, provide liquidity.

so uh, to to to to people at the company. So I believe in in um, providing stock to the people at the company, the employees and creators of the company. It's important to provide them stock to have the incentive be aligned with the company. uh, outcome and uh and then you know you they at various points want to gain liquidity so that you you want to then establish an outside valuation.

um and you know so there not. It's not just me deciding it and and enable liquidity. For those who've been awarded uh, stock and options at the companies, and and it's generally been my approach to award everyone at the company's stock. Um, you know a Tesla we've awarded uh, we awarded everyone a stock.

um you no matter how Junior they were. um so that actually obviously made a lot of people. uh, millionaires. I I think Tesla may have created more employee millionaires than any company in history.

Yeah, um so I would say like if there's a company that's done that's created more employee millionaires than Tesla You know it's maybe there's maybe it's there's one or two others. but but really the sh know Tesla are around 140,000 people um and uh you know so there I think I think we might be number one I think I think you are So um I'm conscious of time here and and thank you so much uh Elon um we Frank Downing Our director of research on on Next Generation internet um asked grock what questions do people want Cathy wood to ask Elon Musk to okay faces and and we would be remiss if we didn't uh if we didn't Uh, summarize this first and then uh, let you take it where where you'd like And it basically said it seems this is Gro talking Seems that people are eager to hear about the latest developments in AI I mean in Tesla's AI Technologies We definitely are such as FSD uh 12 and the Next Generation platform for Robotaxi. They're also interested in learning more about the company's plans for the Optimus project. Additionally, there is a lot of curiosity surrounding Elon Musk's thought on the AI space as well as his take on the future of Bitcoin I Guess that was a little repetitive AI there, but these these topics are sure to spark some engaging discussions.

That's that's Gro for you. Okay, well that's pretty good. Yeah good. So um Ai and and well and I do I do have more time than uh, you know if you you would like to go along longer than 15 minutes, we can go longer than 15 minutes.

um I mean trying to distill my thoughts here on AI because I I could really talk four hours on AI You know we we both uh Charlie and Brett are are steeped in it. so is is Frank Um, and of course Tasha She's done our work on autonomous but one of the one of the things we've been very curious about is open source versus closed Ai and I I Don't know if you've SE I don't know if you've seen the chart that uh Frank uh and Joseph did uh on our team but they they uh, drew a line um uh, they basically uh calculated performance improvements in both the closed uh, closed or private AI uh companies and models, large language models and then the open ones and it and it open is behind closed. But the Steep the the performance is um improving at a steeper rate than closed. Do you have any thoughts about that and about open versus closed? Generally when it comes to AI Sure.

Well, I mean I think a lot of people know that you know I was instrumental in the creation of Open Ai and the in fact I came up with the name the opening open AI means open source. Yes, and it's thought it as an open source nonprofit. Um, and the reason I wanted to create it was was to create establish a counterweight to Google Deep Mind U because it was a unipolar world at that point it would you know Google Deep Mind had probably two-thirds or more of the Um top AI talent and of course, um, fast Computing and Financial Resources Um and um at the time I was close friends with Larry Page and it did not seem to me that he was taking AI safety seriously. Um, so I felt there needed to be some uh, like some some counterweight, some competitor to um uh, sort of the Google deep mind uh situation.

So um and frankly in instrumental in in creating the company was recruiting ILO Su Skyver um which was a a back and forth uh thing where actually ilot changed his mind a few times and and ultimately decided to come to openingi um and uh so I won that recruiting battle um and and that is actually what caused Larry Paige to stop being friends with me. Frankly, so um, ni but now ironically because fate loves irony. Uh, Opening Eye is super closed source and um and for Maximum profit it it should be renamed Close For Maximum Profit AI Um won't be more accurate. So because that's that's you know it's literally the polar opposite of what of it was started.

um I guess I I generally have a bias in favor of Open Source um and you can see that. Certainly with the Xplatform where we've open source the algorithm uh, and for for example, for Community notes, we open source. uh, not just the algorithm, but all the data as well. So you can see exactly how a note was created.

It can be uded by Third parties. There's no, there's no mystery, nothing hidden at all. Um, think that's one of that. Seems to be one of the confusing things about open source as pertains to large language models is it's it's not as simple.

and I think this has been lost in some of the debate as just Open sourcing the code. It's open sources the Shades of Gray here. Of course, with parameter weights, data, there's there's all of that spectrum. and I think that's been maybe lost from some of the debate.

so it's great to hear. Yeah, there's there's actually, uh, very little code. Um, very little actual traditional lines of software. Certainly, at the at the inference level there, there's very little.

It's a remarkably tiny number of lines of code. Um, so it's to these giant you know weights files and you know what your hyperparameter you know numbers are and um, it's basically a giant comma separated value file. Um, so I Always find amusing to contemplate that Papsa Digital God will be a CSV file. You know, like, and uh, And then you make a new CSV file that has maybe more weights and the weights are better.

Um, and then you pretty much delete the old one. So just the AI is evolving and deleting its prior self constantly. Um, so so we're going to worship a giant Excel file essentially perf. Uh, kind of I Mean you need a very big yeah, it's a lot of cells, but um, it's really just a bunch of numbers.

And and then those numbers are. They're getting smaller in magnitude too. You know, going from Fp16 to FP fp32 to Fp16 to In6 to In8. And and now it looks like things are training towards uh, mostly in Fall Um, so they're not particularly large numbers.

Um yeah and so yeah. I'm not sure if I'm answering I'm probably answering the question uh, but I mean I think it's true that closed source is not that far in like from a Time standpoint, not that far ahead of of Open Source Um, But let's say and if you assume open source is, you have six months because of the immense rate of improvement of AI that six months is a is actually a massive amount of time. um I mean or at least the delta in a an exponentially in improving situation. Um, 6 months will I think feel like an eternity.

Um so I think uh Clos will outperform open by a meaningful amount at any given point in time. and given, just say given the questions we were talking about before about truth and not truth, and do you think in 10 years time AI will have been a net Truth uh, improver or detractor from where we are today I Think it'll be well I speaking for at least for GR I Think it will be a significant uh, truth improver um that that is literally our goal is to be maximum truth seeking, maximally curious um minimizing the the the error between P between perceived reality and described reality and actual reality. um and always acknowledging the error not being too confident about it. Um, so I and I think there will be a competition for truth and you will go.

People will uh, tend towards the one that they think is most accurate. So and and if there's at least one AI that is uh, aiming for maximum accuracy I think it pushes all of the AIS to aim for maximum accuracy. Um just as with Um with the Xplatform, FKA Twitter Um as soon as as soon as you know, X pushes for maximum truth and accuracy. it it S Forces The hand of others, they the others now also have to do that right.

The truth, the truth arms race among the Csvs and is yeah is one of the one of our Theses I Think with Ar is that Tesla is one of the most undervalued AI companies There is because of the insane amount of data you've got on all you know to feed into autonomous I Don't know if there's any commentary on that because I Think you know. Obviously, with the rise of these Llm companies which by and large working off essentially available data that is not proprietary, the benefits coming to the company like Tesle that understand how to use the AI benefits but do have these enormous proprietary data pools seems like that's going to be the next. Frontier Yeah, Um I think that's accurate an accurate description. Um Tesla is one of the leading AI companies in the world and with respect to real world AI it is obviously by far in away the leader.

Um, so you know would quick node Nike just came out with some numbers that aren't that good I broke them all down on Ec.com Uh, deflationary expectations here? Uh, happening is somewhat of a convergence towards intelligence. Um, you know? um Tesla like really to to make fullt driving work you kind of need baby? AGI in the car? Um, because you need to understand reality and reality is messy and complicated. um and just as as a side effect, the car AI has to be able to read. for example, it has to be able to read read read arbitrary science as a little just a little side effect of understanding reality in in every language.

um so you know, uh think everything is coming down to you know different layers of Transformers and diffusion and how you put together the Transformers and the diffusion um does the that's why I sort of made that that somewhat. Niche AI joke. Uh, on the Xplatform, who do you think will be President in 2032? Transformers or diffusion? Do you think that? Do you think that switching to full stack? um AI for for Tesla's full self-driving reduces the kind of forecast error for you in terms of when the problem will be solved as in you famously have you know said it's a year away for a few years now? Uh, do you think that like actually line of sight wherever it ends up, you'll have a better like line of sight on on When you're going to cross a particular threshold of performance where it can go without human intervention. Yeah, I mean the car is already incredibly good at driving itself.

Um, so uh. now, especially if you say like, okay, drive in California What? Which is? Um, you know both generally easy driving. Uh, because you don't have heavy rain and snow and that kind of thing in most parts of California Um and tells that engineering is primarily in California So you're going to get it's going to overfit for solving California But if you're just driving, say around. Palo Alto the probability that you'll need need an intervention at this point is incredibly low.

Um, in fact, even if you're driving through San Francisco the probability of an intervention at this point is very low. So we're really, just, uh, going through a March of nines. Like how many nines of reliability do you need before? somebody does not need to monitor the system. You know it's so interesting.

Um GM basically shutting down Crews Um Tasha has done the work on uh, safety and um, it seems that Tesla with FSD Uh has an accidents once every 3.2 million miles. at Tesla Without FSD 600,000 miles the average vehicle on the road I think this is surface streets 190,000 and cruise was 40,000 So there really was a safety issue there. Do you worry that um, it has potentially set back Regulators Uh, you know from from considering uh, autonomous Transportation or is this data no Given that accidents uh on the streets have gone up in the last 10 years fairly dramatically actually because it text yeah, do you think yeah, do you think that Regulators are going to look at the data which I mean we've done the research Tasha has done the research on on this and is pretty compelling. Well you know our regulator in the US is the enforce enforcement division of Nitsa U for whom I actually have a lot of respect.

I Think those guys are they. they really, um, have I I mean they're they're quite I think actually in my experience thus far have been quite sensible. Um, you know that that That doesn't mean that they on silly things that happen from time to time, but uh, they've really been quite sensible because they they see the actual truth of the the accidents and they see the the fact that there are on the order of 40,000 people killed every year in um in motor vehicle accidents and um so so so they they actually do. They do care about uh, the the safety statistics and we've seen that in their letters they like Tesla you like there's always going to be some risk with cars.

um uh, they're well aware of the fact that that our cars are much safer than other vehicles. so you know we really I mean there have been a few things where you know, maybe we have had some disagreements, but you know, like like for example, coming to an absolute full stop at stop streets even when the you know it's very clear there are no Cars anywhere in sight. um that could possibly cause an impact. No no, no cars, no pedestrians.

Completely clear and and actually almost no. uh, humans stop at stop streets at stop signs. Almost. No humans actually come to a Full Stop They're typically they may think they came to a full stop, but typically they'll be going at least a few miles an hour.

Um so like you know they they they said well the Lord does say that you have to stop at a stop Street Well, even though no, almost no humans do so that actually created a bit of a challenge for us because uh, we had to select the rare cases were from the fleet where humans actually stuffed at Stu streets at stop signs. Um so and and then actually get our our QA team to stop at stop streets and then overfit the stopping stoping at stop signs. um in order to get the car to stop at stop signs because it was trying to be behave like a a sort of good normal human driver who does not stop at stop sign. so you know, um, we had a disagreement there on it, but we ultimately you know, have made the car stop as stop signs even though it's a little Annoying um so uh, but you know overwhelmingly you know.

So one of the things the media will try to create this that that I'm some sort of lawbreaking Maverick uh, who just does does what he wants and doesn't care about legal matters? Um, this is actually not true. Uh, of the literally millions of laws that I am subject to and my companies are subject to, there are a handful over the years that we've disagreed with almost, but the vast majority 99 I don't know 9% of of laws and regulations. Uh, we do abide on and we do agree with um, well, maybe maybe we don't agree with we certainly abide by um, you know there's once in a while there disagreement, but it's it's really, um, minor and but if you sum up the disagreements across the over the you know 20 years it, it can just sound like a lot. But but in fact, my companies are incredibly law biting.

so that's the that's the, that's the truth of it. Um, Anyway, I I think I think it'll be I think it'll be fine From regulatory standpoint when we can show that uh, there's even completely without supervision, there is a a massive statistical uh case for self-driving being actually safer than if someone had their hands on the wheel or or was even potentially having their hands on the wheel, then I I think The Regulators will accept that. You know it's been really interesting uh to as AI We we were watching the breakthroughs as everybody has course in Ai and and we had agreed with you our original. Our original research had autonomous uh, mobility in pretty much full force.

This was our original re resarch by now, but if we didn't have the breakthroughs in AI that that we've seen particularly Transformer architecture we it it's it wouldn't have been possible right? but we didn't know that is is that how you're viewing it now? Uh well. it's certainly true that Transformers um are transformational? Yes, so uh, you know pretty much everyone's using Transformers uh and it's really just how many Transformers what kind of Transformers are you using autoaggressive Transformers which are very memory bandwidth intensive? Um, you know there's but you you I think you really? I'm not sure you can really do AI without Transformers in a meaningful way. Um, diffusion is also very important. Um so I mean just really looks like AGI is some combination of Transformers and diffusion.

Um, that's interesting. Would does diffusion help Elon in the things that Transformers are NE not necessarily that good at yet, like planning and remembering rather than sort of a current state. Uh, I think Transformers are important for all aspect of AI Um yeah, I mean computers are very at remembering things. Your phone remembers the video that you took down to the last pixel.

um, whereas you know most humans cannot remember who they met last week, so memory is the easy. I Mean we've already outsourced memory to computers. Uh, in in that like you say, how how much of human knowledge is in digital form in versus in contained in human neurons? It's overwhelmingly ins silicon uh, rather than biological neurons, right? So I there there this? I mean I Think it's always you know it's good to to think of. Um, like try to consider one of the most fundamental ratios.

Um, this is like in physics you always think about try to looking at fundamental ratios. Um and some of the you know one of the fundamental ratios is the ratio of digital to biological compute. um, just you know, just just in raw raw compute. um and and how much and the ratio of digital memory to biological memory.

so you know at what point it let's like I think at this point I think we're probably over 99% of all memory is digital as opposed to biological. So you've got over I think over a 100 digital to biological ratio in memory at this point. Um, trending towards thousand, you know, and many ORD of magnitude beyond that. Um, then um, then you've got the digital biological compute ratio.

And and since the number of humans is more or less constant I'm worried about you know, humans declining quite significantly in the years to come because the birth rate is so low. Um, but you know, so so human human computers more or less it looks like a flatline versus time, whereas the digital compute is uh, exponential, right? Um, and um, you know at some point it's that that will also be above 100. meaning more than 99% of all compute will be digital instead of biological, right? And if we're not there already, we will be within a year or two. Although it is amazing how much data biology can store, right? I reckon I Believe it's It's estimated that a gram of dried DNA can store between four and 500 exobytes.

so maybe there's still still things to learn from biology. But yes, incredible. The pace of change? Yeah, I mean if you encode memories uh, in DNA like a ticker tape then the DNA um. memory potential is immense.

Um, but I'm not sure that's actually what's happening or if it is, it's I don't know I'm not sure why my memory is so terrible and but actually I mean your memory in terms of the raw details. like you have an amazing search function, right? I It's kind of like yeah, Well, for for any I mean I would argue kind of. In some ways, like the the Transformer architecture enables Um effective search of a a very, very broad amount of data. Um, and or that's a or or it's like data compression.

It seems like the um, yes, we have there's many more like databytes encoded or gigabytes encoded in disk. But but actually being able to effectively search that space is is pretty still primitive with compute at least. At Large Scale relative to human's ability to access information. No.

I mean there still some things that humans do better than computers. Um I Mean if if you look say like, say, like computers have not yet discovered any fundamental physics, but humans have discovered a lot of fundamental physics. Um, the computers have not yet invented a useful technology. Um, Humans have invented many.

Uh, useful useful Technologies Um, so you know. Um, yeah. Do you think that do you uh, ascribe to the notion that like you essentially training training AI systems on language is not enough and that you have to have some kind of embodied source of data like through an Optimus robot? Um to actually get kind of the the raw learning in that a AI system would need to understand fundamental physics. Yeah, so that's what I think is coming I think um I think what's coming is is uh AI understanding fundamental physics Um and and AI inventing new technologies It It definitely definitely feels like rather, even though some things now apparently pass the touring test, most importantly, passing the money Penny test as in can of an AI actually pay bills? Do expense reports to the extent James Bond did those and actually pay parking fines and things like that that would actually be a very good use of AI that I think would have a lot of users immediately and and maybe the the uh Billy Connelly test of can an AI actually be consistently funny.

Those feel like out Gr is pretty funny. That's fair. Um I think you know one of our goals for grock is to be the funniest AI So I mean if you ask Grock to provide a vulgar roast, it's really good. And speaking of Gro to not to not let down our future AI Overlords: The final question on the grock.

uh, summary that that that Kathy touched on was the future of Bitcoin Not sure if we want to touch on that or not or whether that's out out of out. yeah, that that and um and then just be before. uh I Don't know if we're wrapping up here, but uh I'd love to talk about uh Bitcoin and and your your view of crypto assets and then maybe back into um, kind of tying things up. uh with convergences among Technologies you mentioned that a little earlier.

uh Elon and the impact ultimately of all of this on economic growth longer term. You know, the surprises that might come from there. But first first. Bitcoin Okay, sure, what's the question regarding? Well, you know there's when we first, um when you put it, uh or Tesla put it on on its uh balance sheet there was I I remember uh.

Afterwards there was this backlash. uh in terms of its economic impact, uh, all of the energy usage and so forth. and then and then as part of the the seminar that we did that you participated in Elon we we basically we and block had come up with this um notion that wait, you put uh Bitcoin mining into a utility ecosystem. uh so that you know if uh, if there's a storage unit and you know the the intermittent energy, you know the storage unit's full sun is still shining, the Excess power goes over to Bitcoin and uh, and you can mint Bitcoin and overbuild solar and wind an