0:00

Costco sells at a premium to

0:03

the profits that they're making is because

0:06

people know that. Even

0:09

in a recession, people are going to go buy

0:12

in Costco because they want to save money. Whereas

0:15

you can't say that to a business like Etsy.

0:20

When, when people are losing jobs,

0:23

they're not going to go buy handcrafted

0:26

items that are being shipped to their

0:28

homes. Costco

0:31

would probably see 5%

0:33

loss in revenues. If we get

0:35

a scenario of 2008, again,

0:38

it's, you'll probably see 50% loss in revenues,

0:41

right. It's not to say that it's a

0:43

bad business, but Costco

0:46

is a better business. I think

0:48

the same applies to the

0:51

cloud industry. Dribble

1:03

investments, thank you for joining us. I think,

1:05

you know, we've been wanting to do this episode for a little while.

1:08

I have somebody that. S you know, so-and-so expert

1:10

on AWS, and I think you're the best person.

1:12

So we have to begin with, if you could just quickly

1:14

describe what AWS is

1:17

and what makes it such a compelling business,

1:20

right. I get asked this questions all the

1:22

time by people who are not in the tech sector I

1:24

think Couple of weeks ago. One of my neighbor's

1:26

mother asked me what is the difference between Amazon

1:28

and Amazon ups? So it says, I thought everything

1:30

is the same. Right. But the simple

1:33

explanation is I think it goes back to

1:35

the history. Amazon started as.

1:37

Right dialer and

1:40

asked they started selling books

1:43

and they expanded their inventory

1:45

to CDs, music, other

1:48

items and the number of customers increased

1:50

the amount of data they housed within

1:52

their business. Exponential increase, right?

1:55

The customers increasing the products increased. Lot

1:57

of traffic means a lot of compute

2:00

and they. They

2:03

had to invent a lot

2:05

of technologies to scale to

2:07

Amazon, as a people with an Amazon call

2:10

it Amazon scale. And once

2:12

they achieve

2:14

the scale, someone came

2:17

to Bezos and be like, Hey, why

2:19

we have achieved this scale? We can either keep

2:21

it as a secret sauce, or we can actually

2:24

make this technology available for others, for other

2:26

people to utilize it. And

2:28

then we can. Make a business out of

2:30

it and base of like, that's a beautiful idea. And

2:33

I think in 2009 they found AWS

2:36

2008 where basically

2:39

they launched easy two, which is

2:41

the compute service that

2:43

AWS provides. And basically

2:46

at that point was basically a commodity type of

2:48

business. Right. Any, any.

2:52

Moment Bob shop to any

2:55

major retailer can post

2:57

their website on AWS silvers.

3:01

And they don't have to worry about

3:04

building their own data centers that that's how it'll

3:06

get started. And right now we just not

3:08

that anymore. Right now. It'll be much

3:11

more, it's not just a commodity company. You meet

3:13

in your computer servers kind of a deal. It is

3:16

a, it is a soft, it is an

3:18

enterprise that

3:21

has a distribution muscles too,

3:23

all over internet. That's how I would describe

3:25

it. I just wanted to ask a question

3:27

about that. So I built a, I built a few

3:29

things using AWS and it was incredible

3:32

to me how quickly it was, how easy

3:34

it was for me to come up with this idea,

3:37

write it in node, JavaScript,

3:40

and then launch it. I can't even

3:42

fathom of what the world looked like before that.

3:44

Do you have any insights? Right.

3:46

I wasn't really like I think back in 2010

3:49

or so when I started building

3:51

my own obligation, that's exactly my

3:53

experience. Right? So you

3:55

write code doctorals that hosts

3:58

of up silver, and then you write business

4:00

logic on top of it, and then you

4:03

actually have to And

4:05

every single competent of the whole stack,

4:07

right? You have to spin up, you have to go

4:09

find a separate entity

4:11

that hosts your DNS. You have to go

4:14

find a separate entity that holds your

4:16

URL assets, the CDN

4:18

cache, everyone, everything you

4:21

have to know of being a full stack developer

4:23

was such a pain.

4:25

Before it will be a C like, even if, even right

4:27

now, if you're a full-stack developer and you're not using

4:29

any of these integrated solution, it's not

4:31

easy at all. There's so many things that you

4:34

have to have in your mind. I think

4:36

one of the core monsters of Amazon is

4:38

making E-Trade. It's straight

4:40

away, the smallest of inconveniences

4:43

that the customer house, that's kind of how Amazon's

4:45

core mantra. Right. And

4:47

I think it really started chipping

4:49

in and automating the

4:51

smallest things that the developers

4:53

do. And then with

4:56

12 years of engineering, it has come to a point

4:58

where if you want to. Create

5:01

a software solution, not just to upside like a

5:03

software solution, you can pretty

5:05

much do it with a

5:08

two pizza team. Right? So I think the two pizza

5:10

rule that Bezos had kind of aligns

5:13

with AWS. That's why the

5:15

two pizza team actually works. If you think of it, not

5:17

many people talk about this. Anyone can say that,

5:20

oh, we are, we are go with lean

5:22

mechanisms and we have to be can

5:25

be more than. Nine

5:28

or six people. Right. But it

5:30

is not that easy if you

5:33

don't have

5:35

all of your base infrastructure obstructed

5:38

away by, you

5:40

know, your own DevOps being AWS,

5:42

it's not easy. Like I've worked in companies

5:45

where teams like about

5:48

25 to 30 people. Work

5:51

on a single segment of

5:53

the whole software stack. And

5:56

then this is one I'm

5:58

talking about one product, which is being worked

6:00

on by about

6:03

10 sub teams.

6:05

And each team has 20 people and each

6:08

team takes care of being digital component. And

6:12

you can't, those

6:14

types of those types of organizations are

6:17

slowly moving out too. AWS and

6:19

Azure, and it enables

6:21

them to just go with the, see the unit

6:24

of just 12 people

6:26

or 10 people, and they can build the whole

6:28

solution. And because you have the

6:31

DevOps by you. Okay.

6:34

No, you can ask her anything and he is there

6:36

to give you the solutions

6:38

as generic as possible. So it

6:41

has, I've started away a lot of complexities. That's

6:43

how I do it. This as one of my friends told

6:45

me, AWS is my personal

6:48

DevOps. Right. That's

6:50

how most people, yeah. So

6:52

I think, yeah, that's, that's when I first learned about that,

6:54

I think that's what sort of struck me. You have the explicit

6:56

cost of having to just hire a lot of people

6:59

to work on the, you know, each component

7:01

or you can go to AWS. That's like the explicit cost.

7:03

Obviously the implicit cost is all the things

7:06

that were not being built before, just because people could not

7:08

afford to build them. And so I think that is maybe the

7:10

greatest thing that AWS has sort

7:12

of given to the world. You

7:14

know, if you, if you have to discuss, and I think, I think

7:16

I'm glad you brought it up that it was sort of brought around in 2008,

7:19

as you look at the

7:21

AWS competitors. And I'm sure

7:24

there were a lot of differentiate differentiating factors that

7:26

AWS had back then, but what are the core

7:28

differentiating factors that AWS has now when

7:30

compared to Google or Microsoft,

7:32

et cetera? The

7:35

core differentiating factor is their products.

7:38

If you ask me just because

7:40

they are the first entrant they

7:43

have almost

7:48

anecdotally speaking five,

7:52

four to five different

7:55

products that achieve the same thing,

7:57

but different offs. Right.

8:00

Let's say, let's talk about compute here with

8:02

AWS. If you want to

8:04

run an application, being

8:07

computer go, I'm calling it compute.

8:09

You can either do it. And by

8:12

buying an easy two instance and hosting

8:14

application, there are,

8:17

you can spin up a

8:19

Lambda and Landa

8:21

can quickly go do its thing

8:23

and close it. Or you

8:25

can do it. And and Beanstalk

8:28

obstruction, which takes

8:30

care of your

8:32

easy to and pro obstructed

8:34

with somethings for you. Or you can use

8:36

a faggot service, like a plaster was

8:38

transit application in a contract way.

8:41

Right. I'm just, there are

8:44

at least three more in there. That

8:46

does the same thing, but each

8:48

one has a different trade-off and

8:51

this, this kind of, this

8:54

kind of empowers the customer

8:56

to say that to

8:59

basically choose have more robust

9:01

choices. Right? So any

9:03

decision, like any CIO and CTO,

9:05

when they make a decision, whether they want to go with AWS,

9:08

Azure or GCP almost

9:10

always, no one regulates choosing

9:12

AWS because the old adage

9:15

of last year, right. No one got fired because they chose

9:17

Oracle or IBM. Right. It's

9:20

the same thing, right? Just because of the fact that

9:22

they've been here for a long time and they've been actually

9:25

trading away or at these features

9:27

on and on and on again, they are have

9:29

a very robust set up products that they have.

9:32

I think that's the number one. Competitive advantage.

9:34

If you ask me the second is the community that I've

9:36

built around, that I could go stack

9:38

overflow. If you look up the tags

9:41

for AWS, Azure and GCP

9:43

you would find about actually that

9:45

you would find about 9,000 pages

9:48

worth of posts for AWS for

9:53

Azure and 2000 pages

9:55

per GC. And that's probably a good

9:57

proxy for the amount

9:59

of community and engagement you have. Right?

10:02

So in this commute, it

10:04

actually, it, it might not sound like

10:06

a lot for people who are not in the

10:08

industry, but it is a

10:10

big deal for for a software

10:13

engineer when he's trying to Try

10:15

out a prototype and he

10:17

knows that he can go ask a vague

10:19

questions or refer the questions that are already been

10:21

answered. And that's a huge deal. This

10:26

even just making

10:29

the decision, whether someone wants to use an AWS

10:31

technology with us, let's say some

10:33

of the solutions people tend to, okay,

10:36

let's do this because it has higher stuff. Right.

10:38

So that's number two. I would, I would call it

10:41

and the other competence

10:45

are easily replicable and

10:47

already replicated. For instance, if it takes support,

10:50

it used to be able to support was

10:52

kind of best in class.

10:55

They have dedicated teams that have,

10:57

that are rightly incentives. To

10:59

minimize the number of tickets that come to them,

11:01

that they're actually incentivized to reduce

11:04

costs for the customers like

11:06

AWS customers actually tell you,

11:08

you should do this, but it support. Sorry,

11:11

would actually tell you, you should do this

11:14

to reduce cost. You will not

11:16

hear that anywhere. Right.

11:18

Like any listeners will be like, oh, do

11:20

you want to use this extra feature? Right.

11:22

But sales people do that, but

11:25

it really supports incentives actually

11:27

said to reduce costs for you, solution

11:29

architects. It used to be that it'll

11:32

be as hard, one of the best supportings, but I think it was

11:34

a GCP or uptake game. I don't think

11:36

it's a competitor, a competitor advantage

11:38

anymore. I just want to add that. I

11:41

think. Azure

11:43

and GCP are going to be as

11:46

good of a businesses as AWS.

11:48

I just know it'll be very deeply because

11:51

I worked with hands-on. I

11:53

I just want to second what you said about community. So

11:55

like for the various hacker hackathon type projects

11:57

that I've built that involve AWS tutorials

12:00

and stack reflow answers are my number one determinant.

12:03

I do not want to spend a month. Of, of lead time

12:05

to build something I want to spend like three days.

12:07

And in those three days, I want to build a proof of concept,

12:10

at least. So that is by far

12:12

my biggest determinant for choosing what technology

12:14

I use. And AWS is just a, no

12:16

brainer from that front. So how

12:19

can Azure and Google

12:22

cloud possibly compete if AWS

12:24

has such a headstart, both in terms

12:26

of what their offerings are, but more importantly,

12:28

what their community. I

12:31

think they are already started chipping away.

12:33

They just, they just need to start follow

12:35

the playbook. Microsoft is so good at

12:37

replicating others products. I

12:40

mean, it's not a surprise, like if

12:42

Microsoft school business and it's basically replayed

12:44

replicating other people's innovation and they're very

12:46

good at it. And they've done that beautifully,

12:48

right. As there has been an

12:50

existence for 10 years. And

12:53

it's, it's not, no one has the dates to

12:55

move to cloud anymore because. Microsoft Microsoft's

12:57

person. So Microsoft actually made

13:00

it, made

13:02

a Mindshare from customer's perspective

13:04

that in moving to cloud is not a bad

13:06

thing. Like we can deliberate go because

13:09

Microsoft is there, right. Microsoft has

13:11

that kind of Mindshare. And

13:13

I think it has almost like 10 years from

13:15

now. I wouldn't be surprised if AWS

13:17

and Azure are how equal market.

13:20

And GCP right behind

13:22

that I would not be surprised at all. And

13:24

they just have to need to follow the

13:26

playbook that it will use how it's set up.

13:29

And I think both of them would, would

13:32

be just fine and B

13:35

any other and new entrance that they are

13:38

thinking to come into the school space that is

13:40

not going to happen in my mind. That's it,

13:42

the, the intubated scope. In

13:45

my opinion, there are a couple

13:47

of people that I am for the sport, right. For

13:49

OCI, Oracle OCI is

13:51

I am for that spot. Like Oracle is probably

13:54

has the cash flows to actually make it happen.

13:57

But I doubt it because

13:59

just because of the fact that or to have lost

14:01

its luster people kind

14:03

of view it as old school. And

14:06

I know that's, that's still to be decided,

14:08

but. The intermediate into heart hyper

14:10

scaling witnesses closed outside of China,

14:13

these three are going to be the only

14:15

layers. I, I did a

14:17

calculation sometime I go, but

14:20

I don't have that almost with me right now.

14:22

The, the CapEx, the

14:24

capital expenditures that Amazon

14:27

Azure and GCP have spent

14:30

thus far. Would

14:32

sink a country like Argentina,

14:35

but that's right.

14:38

That's the amount of

14:41

money they have to put into

14:43

this do bring to the scale

14:46

and only

14:49

cash gushing businesses

14:51

can afford to do that. No new

14:54

player. Can you and I cannot

14:56

go sit in a garage today and say,

14:58

that'd be going. Compete with

15:00

AWS and

15:02

no VC can support that kind of money.

15:04

Either only

15:07

businesses that are actually gushing

15:09

cash out on it. They're like, we

15:11

don't know what to do with this. And

15:14

we are going to buy with this cash towards this.

15:16

And that sort of happened with Amazon. Like with

15:18

Amazon, that's not the case. Amazon was, was

15:22

actually unprofitable for so

15:25

long. Because of the money though, that they have

15:27

to spend on AWS,

15:29

if not, I think retail personally,

15:31

I think retail would have started showing free

15:33

cash flows. In 2009, not

15:35

saying that's a good thing, but I

15:38

think all the cash that was coming from retail

15:40

was just straight up going to Catholics for AWS.

15:42

Right. And also came up, explore Amazon retail,

15:45

but for Google the S. The

15:48

amount of free cash flow that the generating

15:50

from Soche, it's just straight

15:52

up going to Cemex of AWS,

15:55

right? the

15:57

GCP and same with Microsoft,

15:59

but they've spent so much for the past 10

16:01

years and only

16:04

Azure and AWS

16:06

are making profits right now. Google is not making profits.

16:08

I think it will take another couple of years. So.

16:11

Spending that much money without taking

16:13

profits for 10 years. Not many

16:15

countries can do it. Let alone country companies.

16:18

So I think these are the only players in my

16:20

mind that going to be in this space. So

16:22

our Google. So what is, Google's

16:25

play Google and Microsoft play to gain

16:27

market share. Are they trying to migrate AWS

16:29

customers or are they going after the market

16:31

who hasn't even gone to the cloud? Yeah,

16:34

th this is white space. They are just going

16:36

with whites, less exploration. So with that,

16:38

it'll be a, no one is competing with each other right

16:41

now. They're just, no, I mean,

16:43

they are competing at some level, but. Looking

16:46

at schmoozing CEOs and CTOs,

16:48

and they're showing how much that they can save

16:50

and how much they can improve their productivity.

16:53

And they're just going after the old school

16:56

basically the non-tech part

16:58

of SMP 500. If you think about it, it's

17:03

not in a cloud right now

17:05

and they're just going out to the market, right. When

17:08

I say, like, imagine

17:10

American airlines, Southwest airlines,

17:12

Nordstrom, ExxonMobil

17:15

container store, you know

17:17

all these people. They're just going out to the whites because

17:19

I think the statistic is not even accurate

17:21

at this point. I think the statistics somewhere around

17:24

20% market penetration. Yeah. People

17:26

can't even judge because no

17:29

one knows how, how

17:31

big that spaces, but

17:33

I'm I'm estimating about,

17:35

you know, sound of a percent penetration rate

17:37

in another 10 years. And

17:39

most people would come to the realization that

17:42

having their

17:44

obligations on in cloud is much

17:46

more Beneficial for them than

17:49

doing their own their own private clouds. There are multiple

17:51

reasons for it. I can tell you, I can tell you a simple

17:53

example, like from the

17:56

customer benefit, right? It's

17:59

from customer standpoint, it's very straightforward

18:02

in their head. I

18:05

don't want to name names, but

18:07

there's a healthcare company. And it's

18:09

mandatory as a healthcare hospitals,

18:12

software solutions company that I worked for before.

18:15

And this company has been onboarding.

18:18

Customers, you know, left and right,

18:20

right. Like when I say customers, hospitals, hospital

18:22

solutions that relate to technical technological

18:25

hospitalizations, and it's

18:27

an old school company and they

18:29

have the old data centers obviously. And

18:32

the bottleneck is whenever

18:35

they have to add a new customer,

18:38

they need to build a new data

18:40

center to house the

18:42

extra day. Right. Like either

18:45

they have to add new CPU's because

18:47

the clusters we're not scaling like every

18:49

like, like administerial

18:51

level, the, the

18:53

jobs were failing because the

18:55

clusters couldn't sustain

18:58

that much amount of data. So they need to add

19:00

extra notes, but they don't have space

19:03

in the same data center to access the extra nodes.

19:05

So they have to do extensive. Their data centers

19:07

or build new data centers to add new customers.

19:10

So imagine the amount of bottleneck that

19:12

it provides for operations. Like if you can,

19:14

they could only, they have the capacity

19:16

to onboard 20 customers a year,

19:18

but they can only do 10, but

19:23

once they move to a

19:25

cloud provider like AWS or Azure,

19:28

they don't, they're not, they don't have this bottleneck

19:30

anymore, even though they end up spending the

19:33

same amount over the long run. Right.

19:35

If you are monitoring the initial spending

19:38

and you do a net present value and whatnot

19:40

probably will come to about the same

19:42

money, but they're, but

19:44

where they win is the productivity gain. They

19:46

don't have to wait two

19:49

years to onboard 20

19:51

customers. They just have to do, they

19:53

can do it as fast as they can. And

19:56

in, in technological space,

19:58

that's a huge advantage, right? No one is going.

20:01

Profitability straight up, everyone is going for market

20:04

share. And because in technology

20:06

in it, that is the most important

20:09

part. Like it's, it, it lends itself to

20:11

be a winner-take-all kind

20:14

of space and it's a huge

20:16

benefit for customers, but that alone

20:19

is a no brainer for customers and customers are

20:21

going to, in my opinion, any

20:24

new software solution that existing

20:26

Non-tech S and P 500 companies are going to

20:28

bold. I think they are going to wisely choose

20:30

to just put it in cloud. I think most

20:33

of them already decided to go that way, if

20:36

you, if you could sort of ground this conversation

20:38

and numbers, cause I think you said we have

20:40

currently 20% market penetration

20:42

between all the cloud providers. Eventually,

20:45

maybe in five to 10 years, we have 75%

20:48

market penetration. What does that mean in terms

20:50

of dollar. Sure.

20:52

I'll go those numbers. So

20:55

we can do this calculation

20:57

either way. We can either go

20:59

from the

21:01

global GDP and backtrack. To

21:05

what would be on the cloud

21:07

town, or we can look at the current

21:09

businesses and I'll play kegger on

21:11

top of it and see where they are. We can do both. Let's

21:13

go from the global GDP route, right. Right

21:16

now in 2021

21:18

2020. The global GDP is

21:20

113 trillion and we apply

21:23

a 6% projected kegger to

21:25

disclosure, GDP assuming 2%

21:27

inflation, three per person productivity

21:29

gains. You will end up with $180

21:33

trillion worth of global

21:35

GDP. That's every S and

21:37

on the side and $80 trillion.

21:41

If you assume that. Any

21:43

big, any industry? APR

21:46

seem that 5% of the industry's

21:48

spend are going to come from it

21:51

maintenance and that very well is the case.

21:53

Like if you go look at statistics even

21:55

agriculture industrials are spending

21:57

5% of their

21:59

spend on it at this point.

22:02

And it's only going to grow on automation, right?

22:04

Like you can think of even the smallest things like

22:06

irrigation, automating the irrigation part. That's

22:08

an, it. Right. If

22:11

any, any sort of automation is going to compromise

22:13

the span. If you have him 5%

22:15

of that, that's going to be $9 trillion. Right?

22:18

So 20, $39 trillion of

22:21

global GDP is going to be on, it

22:23

spent to be precise

22:26

and of the $9 trillion.

22:29

So now we are talking about automation

22:31

and software and it companies and hardware companies,

22:33

right? This is the, this is the industry space

22:35

that we are right now. General heuristic, if

22:38

you take usually take any companies

22:40

the gender, like if you look at the expenses about

22:42

80% will be their employee

22:44

base. 20% probably is

22:47

their backend infrastructure.

22:49

That's a, it's a Pennsylvania

22:51

heuristic that I would like to date. It probably

22:53

is more if you asked him 20%

22:57

oh 9 trillion, that is

23:00

$1.8 trillion. And

23:02

then $1.8 trillion

23:05

is the, is the money

23:07

the world is spending on it infrastructure.

23:11

And now this time. Is

23:15

includes private clouds and

23:17

public clouds, hyperscalers, and, you

23:19

know people who decide to have their own clouds.

23:22

And you assume by 20, 30 scientific

23:24

person or the people on public clouds and 20, if

23:26

I choose to still choose to have

23:29

their own clouds but that penetration, you are looking

23:31

at 1.3, two. And if you assume

23:33

let's say that I'm wrong and there is one

23:36

more new enter the space and

23:38

the top five players only taking up

23:40

some 20% of the one, 1.3

23:42

trillion that I'm talking about. That's

23:44

$1 trillion. So the top

23:47

five players, including the two from China

23:49

are how in cumulation

23:52

are making $1 trillion in revenue.

23:55

Right? And if you look at the first

23:57

day, Right now it's

23:59

about 50% AWS right now

24:02

in 2021, 40%, AWS, 30%

24:05

as you're about 10,

24:08

10, 5, 3%

24:11

the remaining. Right. But obviously the

24:13

smaller players are going much faster

24:15

than AWS and Azure. And

24:19

if you are seeing. It reduces loses

24:21

market share and they are 30%

24:23

by 2030, that would bring

24:25

the revenues to $300 billion.

24:28

By 2030 and

24:31

$300 billion. If you

24:33

put a free cashflow margin on top of that,

24:36

that will be $60 billion. To give

24:38

some context, all

24:40

of Amazon makes $30

24:43

billion in free cash flow in 2020.

24:46

So it was a loan

24:48

would make twice that amount of free

24:50

cash flow by 2030. If my assumptions

24:52

are right. Yeah. If

24:54

you go back. So, so this is a

24:57

reverse engineering plan the global tab,

24:59

right? But if you see

25:01

how feasible it is from the current revenue

25:03

numbers on, on an annualized basis,

25:06

it'll be places making $55

25:08

billion in revenue in

25:11

the past 12 months. And

25:14

so 55 billion to 300

25:16

billion revenues. So

25:18

that comes to somewhere about. 21

25:22

person, or if

25:24

I'm not mistaken someone can correct me. But

25:27

it's one day, one person kegger as

25:29

right now is growing at about

25:32

to T one

25:35

person. I think last quarter

25:37

was 35%, but

25:39

they're growing at about 30 bucks of giggle right now.

25:41

So even if you assume the first four years

25:43

are going to be, you know, From

25:46

somewhere around 30% to failing

25:48

to 15%, they'll

25:51

easily make 21% and

25:53

that would get there. And I think

25:55

they will get there. Same with. As their material,

25:58

if you have saved 30%, I mean, if

26:00

you have simply let's assume that as it is 25%

26:02

they would be going a little more faster,

26:05

but I think they'll get there in my opinion.

26:08

Do you think though that the clouds of 2035

26:11

will resemble the clot that we have today? Or

26:13

could there be something which completely changed

26:15

the orders of magnitude? There's

26:17

something that I think everyone

26:19

needs to keep an eye on by 2030.

26:23

I don't think anyone them,

26:26

anything fundamentally would change

26:28

given the incentives of people who are

26:30

involved? No one wants

26:32

the underlying infrastructures infrastructure

26:35

to change. If they are already spent so much money,

26:37

right? Every single player wants the

26:40

same infrastructure. They, people change

26:42

adopting just one lead. They see clear incentives.

26:45

With the newer chain, right? That's why people

26:47

who are have their obligations in

26:49

their private data centers are moving to AWS because

26:51

they're seeing a clear incentive to

26:54

move right now. There's

26:56

nothing in the horizon, in my opinion. That

26:58

can be an upstart, but. There will

27:00

be something for sure in

27:02

the next 15 years or so. I

27:04

don't know what that's going to be. Anyone who is

27:07

enlisting technology has to keep an eye on these

27:09

things for sure. One advantage

27:11

that you have is that

27:13

new thing might very well be coming from

27:15

these three players I

27:17

was just saying that on your note about hyper scaling

27:20

and Amazon growing at 30%, I'm sure as

27:22

you're, they're all growing at a similar rate, what

27:24

is the biggest constraint to their growth?

27:26

I was just reading an article recently that Amazon

27:29

is having trouble finding the requisite

27:31

talent to maintain this growth. Do you

27:33

think that is the biggest constraint or do you think there's some

27:35

other big constraint? I think Tyler. Is

27:40

certainly a problem. The, the first

27:42

five years of growth, I think they were able to achieve with

27:45

much less head count.

27:47

But right now the industry they're employing

27:50

more than 150,000

27:54

people. The top three players alone, more than

27:56

150,000 engineers are not

27:59

engineers, kind of 2000 people, right? It does

28:01

include sales. This includes several

28:03

people who are in the data centers. I think

28:05

they are figured out a way to

28:09

attract new talent. I

28:11

think the trouble. Is

28:14

going to be keeping the quality

28:16

as they grow into the

28:18

scale. One of the biggest risks,

28:20

in my opinion for hyperscalers is

28:23

losing trust. The biggest stress that's

28:25

what happened to take Oracle,

28:27

right? Customer started losing trust in

28:29

Oracle. Once they realized that Oracle is

28:31

not scaling, it's not performing

28:34

to the level that they thought that Oracle

28:36

products do. Almost Oracle became

28:38

synonymous with, you know, sluggishness, slow.

28:41

You are. Right. So, but,

28:45

so that's one of the biggest things. So they have to keep

28:47

on innovating and

28:49

pushing the boundaries to sustain this growth

28:51

or else something else is going to be

28:53

an upstart. That's number one. And

28:56

security is second biggest risk.

28:59

If customer starts seeing

29:01

hearing news from everywhere that,

29:04

oh, there's a data breach here. And apparently

29:07

it's from Azure or GCP. They

29:09

start having this mind share of unreliability

29:12

and it will be very hard

29:14

to sell to new customers. That's going

29:16

to be the second biggest hurdle.

29:18

But if they are able to

29:21

maintain these two basically when I say

29:23

these two, I mean reinventing themselves,

29:25

number one basically the day one culture that basis

29:28

talks about and the second one being wonder

29:30

bus and attention to security. I think

29:32

that'll be fine. Sure. You know, I,

29:35

the other thing about AWS that I wanted to touch on,

29:37

I know previously you've mentioned, so the recession

29:39

proofness of the business, can you

29:41

speak a little bit about that? Sure.

29:44

Any investments that

29:46

as an investor you make one

29:49

of the first things that to look at as downside

29:51

production, correct. One of the reasons

29:53

that Costco sells at

29:56

a premium to the

29:58

profits that they're making is because

30:01

people know that. Even

30:04

in a recession, people are going to go buy

30:07

in Costco because they want to save money. Whereas

30:10

you can't say that to a business like Etsy.

30:15

When, when people are losing jobs,

30:17

they're not going to go buy handcrafted

30:20

items that are being shipped to their

30:22

homes. Costco

30:26

would probably see 5%

30:28

loss in revenues. If we get

30:30

a scenario of 2008, again,

30:33

it's, you'll probably see 50% loss in revenues,

30:36

right. It's not to say that it's a

30:38

bad business, but Costco

30:40

is a better business. I think

30:43

the same applies to the

30:46

cloud industry. Yeah. If

30:49

companies are struggling to make revenues.

30:51

The first thing as

30:54

a CFO would look at the airline

30:56

items and say that, Hey, we are to

30:58

go lean. We should probably let

31:00

go of some people, or we

31:02

should let stop spending

31:04

on new ads.

31:06

We should stop spending on expansion.

31:09

Those are the places that they will cut their

31:11

money. The last

31:13

place that they would cut their money on

31:15

is to strip their website away. They

31:19

need their website up and running.

31:21

No matter what the businesses say,

31:24

you are a restaurant Thai

31:26

restaurant that that

31:30

is going through Solutionary period. You

31:33

will, you know, the go people

31:35

first, you will do anything. But the last

31:37

thing that you will do is Stopping for your

31:40

website whoever is hosting your upside, right?

31:44

And ultimately all of

31:46

this trickles down to being managed by hyperscalers

31:49

and ultimately it goes to themselves. They

31:51

are almost like utility.

31:54

In some sense you will not cut your water.

31:56

Supply. Water will be the last water

31:58

bill will be the last place that you would stop paying. Right?

32:01

So it's almost like a utility

32:03

in the, in some sense. And I think. Hyperscalers

32:06

would cruise through a neuroception every

32:08

period. And also

32:10

one other thing to note is

32:13

they know that they are in this power position

32:15

and they don't abuse it. They

32:18

usually give leeways to

32:20

the customer because they know

32:22

that the customers need their help.

32:24

They usually just like in old landlord

32:27

gives moratorium doing coordinate. COVID-19

32:30

hyperscalers say that. It's

32:32

okay. You don't have to pay us

32:34

for you know, so on silly if you're struggling,

32:37

but then, you know, you have to pay us when things are

32:39

getting better and they would, they all,

32:42

they always provide because scenarios

32:44

like that, because at

32:46

the end of the day, the customer's success

32:49

is hyperscaler success.

32:52

They want every single one of their customers

32:54

to succeed. Phenomenal. Right.

32:57

Do you, do you think Amazon does that? I know

32:59

you mentioned this earlier, which is they really want to

33:01

save the customer money. And even in the case of

33:03

a recession period, they don't take advantage of them. Do you

33:05

think that is because of anti-trust

33:07

fears, they're worried they're going to get broken up and so

33:09

they don't want to do you know, they don't do price gouging

33:12

of anything. No, I genuinely think

33:14

that's because it's in the best interest

33:16

of them. They don't, you

33:19

don't want your best customers dying. Right.

33:22

Ask tobacco industry right.

33:24

You want your best customers living and

33:28

they, I think they would, they should, if

33:31

any operational entity

33:33

would choose to do this because

33:35

it's only in their interest. Oh,

33:39

one thing that you've mentioned a few times

33:41

was the potential upstarts.

33:44

So. I wanted to get your

33:46

opinion on something like, say Heroku, which

33:48

just to give context, it's

33:50

kind of offers some similar things to

33:52

Amazon, but it's a much lower

33:55

learning curve, but it's also much, much

33:57

less powerful. So where do you think

34:00

things like Heroku fit into this whole

34:02

ecosystem? Hiroko

34:07

probably has been an existence

34:10

as long as it'll be. Correct

34:12

me if I'm wrong, right? Probably about

34:14

10 years now. I think they have chosen

34:16

their niche and

34:19

I think they are decided to play

34:21

that niche. I don't, I don't think they want

34:24

to play the hyper scaling

34:26

space. I think they want to stick to

34:28

these are the know

34:30

bare metal solutions that we are providing. And

34:34

we are leader in the space. And if you want

34:36

to host your Kassandra

34:40

instance and manage it with

34:42

your own DevOps team, come and use our

34:44

solution to host it. You don't have to

34:47

go build your data centers, but you can

34:49

have your own DevOps team to maintain your solution. Right.

34:53

And that's a niche. That's a niche

34:56

that there are some people who prefer

34:58

doing that. The communities that have

35:01

a specific use case to maintenance their own applications.

35:03

And they are very happy with using private,

35:06

private clouds or managed.

35:12

Commodity commodity type

35:14

public clouds like Heroku. I

35:16

think everyone is trying to find the

35:18

niche and be the biggest player there. I don't think

35:21

if Heroku had to compete, they would have

35:23

already competed in the space. I don't think they have,

35:25

they might. Since

35:28

it's a white space, no one is

35:30

competing with each other, but once

35:32

the industry gets a dementia rarity, I think will

35:34

be a lot interesting to see how

35:37

each player is deciding to

35:39

partner with each other. So

35:41

you mentioned like by 2035, we see

35:44

these big five players. Do you think it's possible

35:46

that another thing which could happen is we have the big

35:48

five and then we have a huge chunk of market share that's

35:50

taken by just like these small niche islands.

35:54

Right. I think so. I think private cloud,

35:57

private cloud is going to have a lot more

35:59

players just because of the fact that it's

36:01

a commodity industry, right. Like HPE

36:04

is going to however, it's share

36:07

Dallas going to have its share. I'll be embarrassed

36:09

going to have its share. Toshiba

36:12

build servers for enterprises with average

36:14

year. I think there's, there are, there are

36:16

lot more players at that private cloud

36:18

niche, and even Amazon has outpost,

36:21

AWS outpost that it

36:23

launched a year and a half, couple

36:25

of years ago basically rolls

36:27

their silvers in, into

36:30

your data centers. Then trans

36:32

erased application on top of it. So

36:34

I think it's an all quite in that space. It's

36:37

not in public cloud, in my opinion,

36:40

I think in one of your threads, I

36:42

think you put it really nicely, which is Amazon

36:44

has sort of has this distribution power, that trumps

36:47

product. And so if somebody is already

36:49

in the AWS ecosystem, they're more likely

36:51

to use a Redshift compared to snowflake,

36:54

even though Redshift isn't really as great

36:56

of a product as snowflake. And that ends up

36:58

being like a moat. So can you speak a little bit about that? Sure.

37:01

Yeah, the one allergy that I keep referring back

37:03

to is there is a reason Chrome

37:06

is the most used browser and Android

37:08

and safari is the most used browser

37:11

and iOS that does primarily

37:13

because distribution, but

37:15

it's not that close. Other

37:18

than Safaria Safaria is better than Crow. They're

37:20

good. But most people prefer

37:23

to use whatever that's coming default

37:25

them. It's not applicable

37:27

only to general public, but

37:29

to software engineer still. I'm a software engineer

37:32

and I'm building solutions and mobile solutions

37:34

using tools. Part of AWS and

37:37

new project comes into maintainable. And

37:40

let's say that it involves graphical

37:42

database. I need, you know, a database

37:45

that provides graphical relationships.

37:48

The first thing I'm going to be doing, this is

37:50

literally going to be my workflow. I

37:53

would go to Google. I would, I would search

37:55

alias graph database.

37:58

I'm not going to search best

38:01

graph database. There is a difference,

38:04

right? I'm going to search in this graph

38:06

database and I'm going to go click on the documentation

38:09

and read it. Probably I'll

38:11

do a sanity check. Neptune

38:15

databases, Neptune DB probably I'll

38:17

do a graph on a checkoff Neptune

38:19

versus whatever

38:21

that's out there. And probably read

38:23

one post that says that Neptune

38:26

is good enough. And I was like, that's good enough. And

38:30

there's a trust that's built in these ecosystem

38:32

and software engineers are like

38:34

like you said they want to get the job

38:36

done as fast as possible. But

38:39

good enough quality. The key is

38:41

good enough. Good enough. You're right. So,

38:43

and then people didn't do iterate

38:45

and improve their product. So the incentive.

38:50

I wouldn't say incentive, but the

38:53

human nature is to stick

38:55

with the dealer that they know. And

38:58

and because of that, most people are going to choose

39:00

whatever that's, that's included as part

39:02

of their toolkit. And

39:06

this is not to say that snowflakes

39:08

is a bad business snowflake. He

39:12

asked any person who use snowflake, they're

39:14

going to give you glowing reviews for

39:17

that. They're going to say it achieved a slow.

39:19

They're going to say it doesn't scale. Well snowflake

39:22

decouples compute and data

39:25

storage scales, beautiful pleats,

39:27

much faster. It provides a lot more

39:29

integration, much better than any other

39:31

solutions out there. It's all true. It's

39:33

probably it's the best thing ever.

39:36

Slicer. But the

39:38

native integration and

39:40

the distribution that

39:43

the NATO the tools

39:45

that come directly

39:48

through AWS are going to always

39:50

win in my opinion. And

39:53

it's one of the boon, or

39:55

I would say pain or software industry. It's

39:59

so easy to copy features, right?

40:03

It's there is no Payton pattern that

40:05

that is protecting snowflakes. Anything

40:07

else Snowflake's architecture? So

40:11

I, I, I bet that

40:13

Redshift team is already working on they already

40:15

released retrospect from that are decoupled

40:19

computer. Data storage.

40:21

And they probably would be

40:24

logging a year behind snowflake,

40:27

maybe forever, but they would keep on improving

40:29

and for the most dollar post it's good enough. Right.

40:32

And also the integration parts

40:35

integration is the key to all of it. Imagine

40:39

you are in WhatsApp in your phone

40:42

and you want to share

40:46

a link that you would right. In

40:48

Chrome to someone through WhatsApp. Imagine

40:51

not having the share

40:55

and send button

40:57

from Chrome that is integration,

41:00

direct integration, right? That

41:03

is a pain like a customer pain. And

41:05

those things happen all the time in

41:08

AWS. If the

41:10

third party tool. That is

41:12

being sold in market marketplace.

41:15

Most of those, they don't have one-click integration

41:17

with native AWS tools. Right.

41:20

Snowflake probably doesn't have one,

41:23

it probably does, but you know any like

41:25

a normal, a normal third party

41:28

solution, wouldn't have one click integration

41:30

with the kindnesses to

41:32

put data into it. But Richard

41:35

does. You

41:37

don't even like the whole no-code

41:39

movement. It's,

41:42

it's only possible because

41:44

of well defined

41:46

integrations. If

41:49

those integrations are not provided for

41:52

you by default, then there is

41:54

no no code. You have to code those

41:56

integrations yourself. So the

41:58

no code is basically. Strengthening

42:01

the business model that all these hyperscalers

42:03

are already having. So distribution trumps

42:05

quality, in my opinion. Great.

42:08

Great. You know, this has been amazing. I think I've

42:11

honestly went a lot about AWS. I it's one

42:13

of my sort of new favorite things to learn

42:15

about. So before we wrap up, I want

42:17

to touch a little bit on your background and

42:19

how you got into financial investing. I know

42:21

you come from an engineering background, you know, other

42:23

engineers that are listening out there who have

42:25

for their whole life really just coded or stuck

42:28

to hardware or whatnot. And now they're thinking,

42:30

well, what's, what's The technology itself.

42:32

And what's the business. How would you

42:34

sort of advise them to approach that

42:36

aspect of technology? I started

42:41

to learn about finance as

42:43

a hobby. I started researching

42:47

into what makes a business.

42:51

Durable hence more of my hands,

42:54

my Twitter handle and going

42:59

through these, going

43:02

through those research, the one thing again

43:05

and again, and all this was

43:09

a good business. Makes

43:11

all the. All

43:14

the stakeholders, not the shareholders, all

43:16

the stakeholders, happy

43:18

and content. Right. That's one of the key

43:21

things. And when I

43:23

learned this, the first thing that popped

43:26

in my head is wait, the industry that I

43:29

am working in, it does

43:31

that, right? Like if

43:33

you look at the customers are happy because

43:36

they get through, spend less.

43:40

Are much more productive. They, shareholders

43:42

are happy because this is one of those businesses

43:44

that are actually joining profits

43:46

left and right. And the

43:48

employees are happy because these DevOps

43:50

people the people who work in AWS,

43:53

they brought they, if not for that,

43:55

they probably would be ironing.

43:57

You know, all these repeats. Automations

43:59

that has to be done again and again in

44:01

a different company. Now they get

44:04

to use all that to create

44:06

solutions that actually empowers

44:08

the whole world. Right. It, it, it

44:10

kind of touches on

44:13

it, makes all the stakeholders happy. And

44:18

this is the framework that I

44:20

look any look at any business

44:22

like For people who offer them technological

44:25

background, they see a lot of new things

44:27

that are exciting, right? Like electric

44:29

cars, like you see Tesla is doing

44:33

phenomenal phenomenally with their

44:35

car manufacturing, with self-driving

44:38

and people are in love with the car, but

44:40

you have to ask yourself all these questions

44:43

too. How durable the company is,

44:45

how profitable the company is. And you have to

44:47

build these mental frameworks by basically,

44:50

you don't have to do anything new. Just listen

44:52

to you know, Warren buffet, Peter Lynch

44:55

Charlie monger Darcy and

44:57

all these people, and basically how these

44:59

mental frameworks in your head to judge

45:01

companies based on their qualities.

45:04

And once he judge companies

45:06

based on their qualities, you can pretty much come

45:08

to an understanding of, okay, would

45:11

this company, it boils down

45:13

to a couple of questions. Would this company

45:16

last 30 years,

45:19

what would it take this company to last 30

45:21

years? If

45:25

this company, if you say that this company

45:27

will last 30 years would there be other

45:29

companies coming in to take the profit share?

45:33

If that's the case, then

45:36

why would customers choose this company

45:38

or the other? Right. So it's a, once

45:41

you start asking the core question, you can dig

45:44

in again and again, and again, to

45:46

find why there's the durability

45:48

of this company, right. I think building

45:51

all these mental models in your

45:53

head is probably the number one starting

45:55

place. And then you can start

45:57

looking into the financial statements, just like

45:59

and look at their numbers and see how

46:02

much is their growth trajectory. How much

46:04

are they growing revenues, their profits,

46:07

and what market share they're having? What are the

46:09

economics. You can look at all those things at

46:12

the secondary level, but at departmental

46:14

level you should have a good understanding

46:16

of what. A

46:18

business, good business.

46:21

Sure. And I, you know, I I'll just add to that. I think

46:23

beyond, even beyond investing, it's good to

46:26

study these things as a person in tech,

46:28

just because you're probably leaving jobs every

46:30

few years. And as you determined. Sort

46:33

of what company you're heading into. It's

46:35

probably good to know, like the financial health

46:37

of this company and sort of the market they're in

46:39

and the sort of the bigger point of view,

46:41

the bigger picture of the, of the business

46:44

and the industry. So on that note dribble investments.

46:46

Great. Thank you so much for joining us. I will, we

46:48

will include sort of your Twitter handle and other

46:50

places that people can find your content in, in

46:52

the show notes. Otherwise, yeah. Thank you so much. This has

46:54

been really informational and education. Thanks

46:58

guys. I really appreciate you guys having me.

47:00

That's our episode for this week. Thank you so much for listening.

47:03

Make sure to subscribe to us and rate us on Apple

47:05

podcasts. We would really appreciate

47:07

the support. You can also follow me on

47:09

Twitter at F Z from Cupertino

47:12

and Busan. The ad next facade.

47:14

See you guys next week.