Lordstown's Bankruptcy and AI Regulation

From Mahard where Innovation, Money and Power Collie in Silicon Valley NBN.

This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.

And Ed Ludlow here in San Francisco. Caroline Hyde is off today. This is Bloomberg Technology coming up. Lordstown files for bankruptcy, shares plunge as the evmakers deal with fox Con unravels. We'll bring you the details on that developing story. Plus, we'll talk AI and regulation with an MIT researcher who recently sat down with President Biden on his trip to San Francisco. Will get her takeaways on how the government

Well, we've known this fight was coming for a while and now it's here. We have Lordstown Motors basically saying that from a minute that they started inking these contracts and Fox Hunt to build the vehicles that Lordstown has

Know, The next question is is this the end for Lord's Town. You know, they've kind of relied on fox Con to build their endurance on their behalf. Do they have other options to move forward?

They've been saying for months that they need another outside partner, which I always looked at as a pretty big claim, considering that Foxcom was supposed to contract manufacturer these vehicles for them, and for Lordstown to come out a couple months ago and say, hey, we actually still need more help from somebody else, another OEM that it was a pretty big sign that Foxcom was probably not up to snuff. So Bardstown still thinks that it can find a way through.

Today as well.

But we'll see.

I mean, I think the question is have they actually developed anything over the last three four years of value that would either attract a buyer or attract a partner that they've like they've been looking for over the last couple of months. Obviously they haven't found anybody.

So it's a great point. I mean I started this year at CES in Las Vegas. As you know, I borrowed one of the Endurance pickups. I drove the CEO around for about an hour. There was a truck at least, you know, an early prototype. What's the widest story here. You know, we've always kind of viewed Lord's Town as one of the pile of eb startups that we're kind of not really sure about, like the viability of their business and their technology.

I mean, the history of the company and the story that they were trying to tell was always just very tangled. I mean you think back to twenty nineteen and the fact that they bought the company from General Motors, or the factory from General Motors that they were supposed to be operating in. It was announced by President Trump in a tweet, and he sort of got it wrong. Without the gate. He said that Workhorse, which is another startup that was going to be buying the factory, and this

All right, Bloomberg Sean o'caine on the ev beat. One of the top stories on Bloomberg technology this Tuesday. Thank you. The other top story and kind of activity we're seeing is in the crypto space. US based payments and crypto firm Circle closely watching regulatory developments in Hong Kong after the territories new crypto rules went into effect. We sat down with its chairman and CEO to discuss.

All around the world, every major market, stable coin laws are coming into place, and I think what that signifies is that this kind of digital currency, these fiat linked digital currencies, are about to become a part of the mainstream global financial system.

Elsewhere, we're seeing activity in bitcoin and bitcoin cash. And guess who's here Bloomberg Shnali Bassk with the crypto beat. Let's start with Bitcoin gap cash, right, it's basically doubled in value over a seven day period. It's the kind of spin off. Why what's happening?

There are a few things. One, remember bitcoin cash is in fixed supply and it is now being traded on the new exchange that was started by the backing of Citadel Securities and also a fidelity in large players on Wall Street, And so you do seem some activity here and they are trading only really four assets here, it's bitcoin, either lightcoin, and bitcoin cash.

So oere Bitcoin in.

The last seven days ed has risen less than thirteen percent. Bitcoin cash has risen almost one hundred and thirteen percent, so a very meaningful rise there. But remember it is not traded as widely as Bitcoin is in particular, so you would see a bigger jump there.

Then you would see a bitcoin.

For example, that is a largest cryptocurrency and is trading at more than thirty thousand dollars. And remember that thirty thousand level. We have been there for about a week or so now pretty much since we have seen that kind of black Rock filing for a spot ETF giving a lot more institutional support to some of these crypto assets.

Well, speaking of the headline, which caught my eye and moved the needle in terms of the energy we saw in bitcoin in Tuesday's US morning session was the block reporting that Fidelity is preparing to submit a spot big Bitcoin ETF filing. What do we know about that?

Something that's interesting if you take a look at the movement here. You saw a pretty significant rise in Bitcoin after the black Rock ETF filing, which coin basically the custodian of the bitcoin assets as well. But now the block reporting Fidelity gives you another big investing giant behind the weight of crypto and this idea here that there could be support even from US regulators to get this

Into the system.

Bloomberg Shnali Basek on the crypto beat here on Bloomberg Technology, Thank you so much. Now coming up, the Biden administration is taking steps to better understand and regulate artificial intelligence. We're going to talk to AI researcher doctor joy Bola Weeni about the panel and get her view on the risks and rewards of using AI. Just really interesting reaction to her conversation with President Briden. As we had to break.

I do think that NASDAK is getting a little bit overbought. If you look at the CFTC data, we're hitting new highs on NASDAK mini positioning that Beings said, I don't think you have to sort of throw all the growth stocks out at this point. A sector like communication services where a lot of the Internet names are those earnings revisions are starting to weaken. They're actually staying stronger in tech property.

Oars official intelligence startups stability AI has lost at least two top executives in recent weeks. That includes its head of research and chief operating officer. The departure has come the same month that an article Informs criticize the startups. Stability joined us to discuss more is the person that broke that story, Bloomberg's Rachel met Rachel.

What do we know?

Well, we know that David ha who is stability AI's head of research, left recently, and we also know that Reren Itto, who had been the company's chief operating officer, also left.

Stability told me that David had left. Sources had told me.

That David had left on his own, as he had resigned. Stability CEO Emad Mustak told me that Wren actually had been, in his words, leg.

Interesting. You very recently spoke with an ad at the Bloomberg Technology Summit. I give our audience a sense of what's going on with this company. They're kind of seen as a leader in the field. But you know, despite the name stability AI, there are some issues that investors as well are concerned about. Yeah, that's true.

The name has inspired unfortunately a few jokes on Twitter in the last twenty four hours. Is it stable or it's not so stable as some people are saying. I mean, the fact is that some people have had really short tenures at the company, and you could see how that might concern people on the outside. I'm aren't sure what's happening. On the other hand, it is true that I'm often with a fast growing, early stage company, which this is.

To happen going forward?

All right, Bloomberg's Rachel Met the latest reporting there from Bloomberg Technology and what's happening in the AI space. Let's stick with AI and talk about regulation. Doctor Joy boll And Weeny is the founder of the Algorithmic Justice League and an AI researcher at MIT. Just last week, she sat with President Biden to discuss artificial intelligence and joins US now from New York. We'll get to that conversation with President Biden in a moment. You listen there to

Yes, I am extremely troubled with how quickly we are releasing generative AI systems without the transparency to know where the data is coming from. And also we continue to see data being taking without consent, without compensation, and you're going to continue to see increasing lawsuits against companies that are built on what some would say is stolen data. You had Meta Facebook settle six hundred and fifty million dollars when it came to violating the bip UP Biometric

Doctor Joy, What were the specifics of your discussion with President Biden? Yes, artificial intelligence, but what did he want to know?

So?

I was very encouraged by how engaged President Biden was at the roundtable, and we started off discussing the possibilities of AI for healthcare for education, but quickly focused on real world harms of AI, and so I focused on racial bias, gender bias, and known false matches that have led to false arrests, such as the case of Robert Williams, who was arrested in front of his two young daughters and his wife due to faulty AI system. So that

Dr Joy It's interesting the comparison between the European Union and what we see in the United States. Did President Biden give you any sort of indicational pledge that the US will kind of be more active in regulating or at least acting on a framework in terms of god rails for artificial intelligence technology.

Well, something that I was encouraged to see last year from the Biden Harris administration was the release of a blueprint from an AI Bill of Rights. And I think that's exactly the way the US should approach regulating AI right, which is a rights based framework, and so here you would have protection. You would have specific protections against algorithmic discrimination. There would be notice and explanation, there would be privacy when it comes today, and consent, and these systems would

At MIT, tell me about your research. What are you focused on. So my research.

Looks into bias in various types of AI systems, So probably most known for the gender Shades paper, which showed racial bias and gender bias in commercially sold projects products from IBM, Microsoft. Later on we also did Amazon as well. Right now, with the Algorithmic Justice League, we're focused on real world harms. How are people experiencing AI systems being used for access to government services? So, for example, we know that the IRS put on board id ME as

Correct, doctor Joy. The core of your research and your role is looking at the societal risks of AI. But how do you yourself use artificial intelligence tools? Would you say that you are pro AI is as a tool to advance mankind?

I am optimistic about using ethnical AI systems, and what I try to do is say are the AI systems that I would like to see use built on an ethical pipeline, and if not, are there ways we can shift that. I'm very excited. For example, with what we're

Doctor Joy BOLLAMWENI reflect on that meeting with President Biden here in San Francisco last week. Thank you so much for your time that in New York. All right, time for talking tech. First up, India's buy dju is talking with prospective new shareholders for a one billion dollar fundraising round, seeking delay investors who want to clip its founder's control. The education tech firm is offering sweeteners to win over newbackers,

Yeah?

I think that it's a good question. So I think that generative AI does a lot of.

Things for startups.

Like you know, I'm a serial entrepreneur doing these things building products. I think that it does has enabled us to do things that we otherwise weren't able to do

We will get into Quiver in just a moment and talk about the specific use case that you're trying to crack. But when you left Bridgewater, did you consider developing an AI product or platform that could be used in the world of financial markets and financial institutions.

Yes, actually so when I left, I also started working on trading algorithms of my own, mostly based in causal inference.

And the biggest use case.

For generative AI or really LLLM models is actually the synthesis of the amount of data that you have to crunch in order to try to understand the market right and being able to do that again, like I said, being able to do that at scale is a thing that has really only become available and possible and say the last few years.

So Quiver, let's get into it. The primary artificial intelligence use case is to protect the badging process. Well, what is the badging process?

That's right, so Quivers, we're trying to do something a little different with digital identity. I think that people tend to think about digital identity as like a KYC know your customer, you know, what's social security number, what's your driver's license, where do you live? This kind of stuff, And instead, what we wanted to do is focus on the more human aspects of our identity and create a platform where people can aggregate all of these different facets

Get that validated?

And so we have this social protocol that allows people to create video and sumbod evidence that gets voted on by the community and you get validated for that way too. So for example, if you're a dog lover, like there's probably not you know, that's a silly thing, but it's a big aspect of our humanity, right, So when you put that next to say your accolades, and you know you worked at Bridgewater, but you're also a dog lover, it makes you more human.

And I think a big part that.

Is missing in the Internet is that aspect of our humanity. And so that's what we're trying to do. And then of course our AI use case there is this is obviously very delicate, right, we need we need a lot of trust in this space. And so again going back to like things like agent models in AI, it allows us to do to protect that authenticity and that validation process at scale in a way that was completely impossible even six months ago.

Jersey, if I'm almost certain that a big portion of the Bunomberg technology audience dog glovers, It's okay, it's not silly. It's built on graph AI algorithms explain the underlying technology to me, what is the point of difference there on a graph AI algorithm.

Yeah, So what we have is a sort of graph that connects all of the users and their interests and their likes, and then what we can do in that is do community detection.

We can look at fraud detection.

We can look at if there are bad actors in the community, if there's a group of people that are sort of taking over some sort of some some you know niche of the of.

The of the badge like library, if you will.

If there's things like prejudice, if there's things like you know, people trying to you know, discriminate in systematic ways. The graph allows us to suss that out and see and detect these bad actors.

Joseph Miller of Quiver formerly Bridgewater, thank you so much for your time.

Thank you very much.

It's time for VC Spotlight, and today we're going to talk about why Combinator YC hosts two three month programs a year to help a select group of startups and founders in an accelerated program. One program runs from January through March and the other from June through August. The summer twenty twenty three batch has officially started, and for the first time since the pandemic YC is hosting the

Absolutely so.

As you know, hy Combinator funds people at the earliest possible stage, sometimes when it's literally just an idea and a couple co founders, and so really in order to go from zero to one, to create something that has never existed before. There's nothing like having the energy of people in person, not just right next to each other, writing the code and shipping it to users. You know that you could do from any living room or any bedroom in the world. There's something special about hundreds of

Really we're the same Bay area, but really the message from you is San Francisco.

Yeah, I think San Francisco in particular, what the AI boom is really about Cerebral Valley, which we call Hayes Valley, right down the street. There's something very special happening here where literally the foundational models, the open source, the smartest people in the world are sitting in those cafes. You're having discussions not just about starting their companies, but also what is the cutting edge of what these AI models can do.

Let's go through the mechanics of it. You know, the initial investment pledge is five hundred thousand US dollars to each of the startups and then a three month program, you know, going through the operational side of things. But what happens in that time.

Absolutely, I think the most important thing that's crazy to me is the people who start these companies. They are the most eminent of all of the people who could be starting companies at that moment. So we had more than twenty four thousand applications for about two hundred and forty spots.

Twenty four thousand was a record, that's right.

So our acceptance rate was just under one percent, which it's never been as selective as today.

But that means that those.

People in that room, they actually go on to become the most eminent people in startup them.

Sorry to interrupt, but what does that day to represent If you had the most applications on record and you're accepting the fewest on record, what does that tell you about the big picture of this economy?

Well, I think at the end of the day, we're trying to set these founders up for success, and so you know, if there is ongoing high interest rates, one of the things that we're really trying to focus on is how do we make sure the founders we do fund are the people who are most likely to go on and succeed. And so in a time of cheap capital,

Today we can discuss the Top Companies list. I think I want to go back to the mechanics, because what surprises so many people, whether you cool why combinator, an accelerator, or an incubator, it's just a three month program. How can you get anything done in that time?

Well, I think the cool thing that I get to do is I get to work with twelve of some of my closest friends who are known as group partners. And the big thing that's different now is actually as CEO, I am actually also a group partner, So we actually have thirteen people working with the companies.

And so these are some.

Of the people who literally work with these top revenue and top valuation companies from the zero to one stage, literally a few people just starting out. For me, I got the privilege of working with Apor Vimetta from Instacart, or Brian Armstrong from Coinbase, or Kyle Vote from Cruz Automation. These are all companies that have gone on to sort of change both their industry but also tech broadly. But I can't tell you how crazy it is to meet people when it's literally a YC application on the web.

Of the twenty four thousand that applied and then the two hundred and forty that were accepted, I guess the question goes to, like, what do they have in common? Or paradoxically, are any of them not AI companies?

Oh yeah, so actually only thirty five percent of the companies in this batch are specifically AI focused. I'd say maybe half of them have some AI component. YC has always been generalists, you know. That's how YC was able to fund coinbase, really even years before anyone he'd even heard of bitcoin. And I think the key message here is that the best people in the world to sort of create these startups are actually the technologists, the builders, who are just a few people writing lines of code.

It's a very fringe thing, and what YC does is take people who otherwise would.

Be on the fringe, but they're some of the most technically and engineering wise brilliant people in the world, and you know, we sort of teach them how the pieces move. You know, we teach them chess the part of, you know, building a business that frankly is the easier part to being highly technical and being on the cutting edge of what's happening in technology.

Gary, how do you ensure you've got the funds to deploy every year for two programs? Is there's still LP interest in backing you? Absolutely?

I Mean one of the amazing things about YC is if you look at every single top venture capital firm in the world, pretty much all of them have a YC company that is either on their homepage or often multiple of them that have become fund returners for those VC funds.

So to me, states becoming LPs in themselves. I mean, where are you getting the funds from?

Oh?

And really speaking, all the same kind of limited partners that you would expect in venture capital.

And that makes sense because YC to me is actually.

The fountain of prosperity for this type of activity in the world.

Two pieces of news. So we've got through the class of summer twenty twenty three. You're also publishing this list of the top net revenue generating companies you backed in twenty twenty two, private or otherwise. Why, I mean, those are two different scales, ends of the scale.

Ye.

The reality is, and this is no news to anyone. Twenty twenty one was such an extreme sort of time and one of the things that we became very concerned about because we actually want to be a bellweather of trying to teach the next generation what they should focus on. There was this over reliance on thinking about what's my

Be thinking about? And right now you know, now more than ever, it's about gross margin.

It's actually about net revenue sort of one of the things I'm calling it is literally edible revenue. And one of the wild things now just can you pay people? Can you pay salaries? Can you actually run your operations on this revenue? And what's funny is looking at the different financial and accounting sort of shenanigans that people pull

But why is that.

Shouldn't we just use one metric that actually will allow founders to make the right decision, which is to build great sustainable companies and know that they can grow over the long term.

We should talk about San Francisco and where to build for the long term. I mean, your position on this city is well known, but as of today, where is your head at?

Yeah?

Absolutely, you know.

The great thing about San Francisco to me is that it gave me everything I have. I learned a code in the city, taking bart into Petrero Hill in Web one point zero, I learned how to make database backed websites. And what I realize is San Francisco and the Bay Area is the place that is a magnet for all

But we have problems as well, and you've been very vocal acknowledging them absolutely. And I guess where my question goes is how much more deeply you would be involved in political cycles, putting money into initiatives and candidates, yourself being involved in politics.

Well, some of my friends started an organization called growsf which is one of the most important things. How do we take really some of the smartest people who have created this wealth, and how do we have an impact that's positive on our local economy. We want that wealth

Our spiritual future.

You know, what we believe is Starfly The Academy was in San Francisco for a reason, and we can actually build San Francisco into San Francoccio if we actually have the right policies and the right politicians in place. And in November of twenty twenty four, I think.

If you follow grows up. You'll see our plan to make that happen.

This is the first opportunity I've had speech to you since the collapse of Silicon Valley Bank, and the commonality with y Combinator is that SVB was often the first institution to write a check. Bloomberg reported last week that the FDIC had mistakenly released this document to our news organization that revealed the backstop on all depositors with balances exceeding two hundred and fifty thousand was also inclusive of

Absolutely, you know, I.

Think the hard part about SVB is that it really did hit the little guy. You know what I realized for us, you know, YCS fun over four thousand companies, and of course the top one hundred, top two hundred are some of the biggest names that you could think of. But what the backstop was really about was saving the tens of thousands of small and medium sized businesses that literally would not be able to make payroll. And I think this fact coming out doesn't change any of that.

In that moment.

And I think the FED and the FDIC and the people in charge they did the right thing.

Gary. When I think of you, I think have also about initialized and you returned to YC in January. You were the key man alongside Alexisanian and you've kind of come back to y see quickly. How did that conversation go with LPs of analized? And is it now just all alexis initialized?

Oh so alexis left to start his own fund called seven Semi six a number of years ago.

The new managing partners are Brett Gibson and Jen Wolf. They've done an incredible job.

I mean, the number one thing I love is that in venture, the best and highest to me is not to elevate a single person, but to really create an institution that lasts well beyond anyone who sort of started the business. And you know, I looked at Paul Graham and Jessica Livingston who created YC for us. They're still there, but they made space for what is now an institution, and I am merely the steward of that institution going forward.

Why you comminated to see you, Gary Town was so grateful for your time here in San Francisco. This is going viral. Taylor Swift's Eras Tool is on track to become the biggest in concert history. It could potentially gross over a billion dollars that milestone or break the record for global concert tours currently held by Elton John followed by Ed Sheeran. Swift will play one hundred and six contexts by next summer, including fifty four shows over seats.