China, China, China. Breaking Down China’s Tech Surge | BG2 w/ Bill Gurley and Brad Gerstner

**Bill Gurley** (0:00)
Over lunch, this individual told me, you know, every founder and every VC in China studies the West at a nauseating level. So they listen to all the podcasts, they read everything they possibly can, they study any speech, they look at the financials. And he said, the West doesn't do that of China. And you know, maybe we should be, maybe we should be studying the best and the brightest over here.

**Brad Gerstner** (0:42)
Hey, Bill, great to see you. Good to see you, Brad. Summer has just blown past. It's almost football season.

**Bill Gurley** (0:49)
Yes.

**Brad Gerstner** (0:50)
How are the Longhorns looking this year?

**Bill Gurley** (0:51)
They're ranked pretty high.

**Brad Gerstner** (0:54)
What's that mean? Come on, give me the scoop. I know you're all over this.

**Bill Gurley** (0:57)
People that know, know, but they have the dangerous starting position of being ranked number one in the country.

**Brad Gerstner** (1:04)
Oh, wow, wow. Any big games coming up?

**Bill Gurley** (1:07)
They play the number two team in the country this Saturday.

**Brad Gerstner** (1:11)
So we're going to find out, we're going to find out, we're going to find out.

**Bill Gurley** (1:14)
It gets real fast.

**Brad Gerstner** (1:15)
Back to Buckeye country. Yeah, exactly. It's been really incredible.
I just got back to Silicon Valley after being away for a few weeks. The OpenAI deal, the Anthropic deal, I was just looking at these. I think these are bigger private IPOs than any public IPO done in the last five years in the tech market. You had Sam say the other day, Sam Altman say, two things can be simultaneously true. One, that this is the biggest thing to ever happen in technology. But number two, that in the short run, things become overheated and people can get a little bit ahead of themselves. Where are you on that?

**Bill Gurley** (1:55)
Look, there's just no denying that the amount of capital that is going into these companies earlier in their life and the scale of hiring and their willingness to take on risk, which I think you can use cash burn as just a proxy for risk because you get further away from knowing unit economics. And you're more threatening. You know, I think those numbers are unprecedented. Like even against, you know, the uber door dash wars and all this, they're bigger than that. And so I think it's part of, we've talked about it. I think it's part of a systematic trend where investors are aware of network effects. They've watched companies that get the initial conditions right, go on to really big outcomes, and they're willing to bet ahead of the curve. And as the more confident they get over more time, the more they're willing to make that bet ahead of time.
And so, you know, it is what it is. We're seeing, you know, massive numbers.

**Brad Gerstner** (2:57)
Well, I'd say it's a combination of two things. Extraordinary scaling. We've never seen two companies, in the case of OpenAI, scale users and scale revenue as fast as they are. But definitely, you're absolutely right. The private markets are there to meet them. And we're seeing the depth and the breadth of capital and investment in the private markets, I think, unlike anything we've ever seen. But, you know, we're going to save that for-

**Bill Gurley** (3:20)
Yeah, save it for the end. Let's save it.

**Brad Gerstner** (3:23)
Let's save that for another day. We're going to do something a little different today. You know, one topic that I think we've hit on time and time again, but we're going to really just try to dedicate the show to it today. And that's China. You know, you just got back from China. It's one of the hottest, in many ways, most consequential and also most controversial debates, I think, in Silicon Valley and in Washington. You know, on the one hand, you have, I think, national security, economic hawks, you know, who are in this camp that we should decouple. It's a little bit more Cold War 2.0, a great power struggle. This is the Mearsheimer perspective. You know, maybe in the middle, you have, you know, tech pragmatists, I guess I might call them, you know, like Jensen Huang or Tim Cook. I'd probably put myself in this camp who thinks we have to compete. We have to re-onshore industry. You probably should have some tariffs in order to achieve that, but you definitely can't decouple or ignore or antagonize. And then maybe on the other end, you have kind of the globalists. I don't know, Jeff Sachs, Jeffery Sachs is probably in this camp. It's free trade, open science collaboration. And this is a tremendous consequence to issues around tariffs and trade, issues around military, issues around AI. And there's this new book out by Dan Wang that I want to talk about where he really takes on the differences between the two countries. But why don't we start with this trip that you recently took?