Ep 136: Commodity Products, Subject To Competition. Canva Layoff - Enough? Rate Of Change Predictions. Sharts.

Don, Aaron and Jack unpack a big week in venture, AI and building companies.

• Commodity products, subject to competition: John Hempton on the Joe Walker podcast, and the line the lads have been trotting out for years. A high capital cost with a low marginal cost competes margins to zero, solar panels changed the world and destroyed capital at the panel level, and the one real case for a frontier moat is that the capital needed to leapfrog is itself the barrier. Don is not seeing those dynamics hold as the open weights keep closing the gap.
• The second derivative: an ex Bank of America analyst argues this is not the 2000 tech boom but a debt driven real estate boom where the real estate produces tokens. Take or pay compute contracts start billing on delivery rather than signing, and the 24 to 36 month build mirrors the teaser period on a subprime ARM. $2.3 trillion of obligations sit booked and not yet billing across the four largest US cloud providers, Oracle's RPO grew 363% in a year, and OpenAI signed $1.4 trillion of commitments on about $40 billion of run rate revenue. The 45 minute audio version of the full article runs at the end of this episode, which is why it is 90 minutes long.
• Rate of change predictions: you can be growing and decelerating at the same time, almost nobody tracks the second derivative, and being mid sale process while decelerating is a terrible place to be. Don runs every portfolio update through it, and says so even when it makes him the negative one in the room.
• OpenAI went out for $30 billion at $1.4 trillion and came back with $11 billion at $1.2 trillion. Decelerating raises against accelerating compute commitments is the bellwether to watch.
• Canva layoff, enough? 22% of the workforce goes, with a $10,000 no dilution offer for anyone leaving to found something. Jack's read: the handling was good but it is still peacetime when it needs to be wartime, growth has nearly flatlined, and the lads are backing Canva rather than piling on. Heidi cuts heavily too, and two of its three original co founders leave in the same week.
• Jason Lemkin on layoffs: a layoff is a failure of management, and almost every one of them is too small. Cut once and cut hard, because the alternative kills culture and productivity and the best people leave anyway.
• The agent is the buyer now: Jackie Villings' agent read her bills, found a power rate $1,000 a year cheaper and switched inside the hour, Jack ran his and saved $700, and Simon Beard's agent found pharmaceutical grade creatine at a tenth the price. Corporates whose margin depends on friction and brand have a problem coming.
• Counter positioning in Hamilton Helmer's terms: portfolio customers who used to be slow and laggardly are now building their own tools with AI coding, so incumbents are suddenly competing with the companies that sell to them. Plus Annie Lao on not knowing what a safe career looks like any more, and what happens to juniors when you automate the work people used to learn on.
• Sharts: the midterms map going blue almost everywhere, Australia 1.2% above its inflation target and second only to Brazil, house prices down between 4.7% and 10% from their peaks, the S&P higher six and twelve months after every midterm since 1950, the capital share of income at record highs while labour sits at record lows, and demand for AI fluency running at three times curiosity.

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