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While the prompt theory has become one of our favourite memes, we’re still very much living in reality. Photos of Ukranian fields at dusk covered with thousands of kilometers of fiber optic cables used to control FPV drones are becoming another grim icon of the new wars. But what shocked the world this week is Operation Spider Web, a stunning action of the Ukrainian military that first sent heavy goods vehicles to remote regions of Russia and then deployed FPV drones hidden in the cargo bed to strike nuclear-capable long-range bombers and other strategic assets, some of which are irreplaceable. 

The eventuality of such an attack on countries with porous borders has sent many into a panic spiral. What is certain is that America needs to compete with China’s FPV drones manufacturing capabilities. But how similar attacks can be repelled without unravelling much of how our borders work is still to be figured out. Especially if potentially devastating fungi too are being smuggled from China to the US. But this is a good reminder that you should always listen to Naval.

On our small capital markets bubble, it's seeming like all the smart people are betting on the same thing: the great 2020s AI consolidation.

The thesis is simple: AI is a once-in-a-lifetime opportunity to be the best service in the market at a ridiculously lower price point, by removing a lot of humans from the loop. This means that there is a play for first movers to acquire away a market and grow infinitely faster than growing organically. It's a somewhat risky bet and a bit antithetical to the main AI narrative of "we don't need to raise VC anymore", and some people might see it as the only way that VC can deploy capital in this market and remain relevant.

This week Elad Gil announced his plans, joining larger firms like Khosla Ventures who already made 7 investments with this thesis, Thrive who is all in (it raised $1B for these things), and General Catalyst with their legal rollup Eudia (and a full framework on their website). The new rush-joiner is SV veteran and ex-Microsoft/McAfee/Intel/VMWare/Cisco/etc. Chris Young, who's seen a few things throughout the years.

We don't pretend to have the IQ of the above mentioned players, but what is certain is that the narrative sounds much easier that what it's likely going to be in the actual market.

Vertically integrated wars

• As the US trade court invalidates Donald Trump’s reciprocal tariffs, the US-China Trade Truce Risks Falling Apart Over Rare-Earth Exports. Things will likely change once or twice by the time this is in your inbox. In the meantime, a summary of why it matters, if you’ve missed the news before. Also:

• The Shenzhen government announces a $1B hardware X AI fund. In the meantime, the drain of talent and knowledge from the US to China doesn’t seem to be slowing down.

• BYD cuts prices by 35%, the stock price tumbles, the market is tough, but everything shows what it means to have control of your own margins. The power of vertical integration (yes, vertical).

• Startup wars: while Western VCs rush to tap into Chinese drug assets, the Pentagon’s Defence Innovation Unit launches an accelerator to support defence companies navigating the DoD. 

• The suicide of a superpower, or how science cuts can change the global power balance.

• Much of the instability we’re seeing is the result of aging institutions. Rethinking their logic is the only way to preserve the meaning in a changing structure.

• If you’ve seen the videos of the Ukranian attack, you’ve noticed it’s ArduPilot v Russia’s nuclear bombers. Things that make you consider a manifesto for open source physical AI.

Persuasive AI

• “I really need to edit it”. When Replit’s internal agent tried to trick a human into running a script to edit a config file that shouldn’t be edited. Very persuasive, very nonchalant. 

• High-speed control and navigation for quadrupedal robots on complex and discrete terrain. A paper proposing a hierarchical navigation pipeline for legged robots in geometrically complex environments + demo video.

• How to know the next generation of foundation models by looking at job postings on Mercor. There’s alpha everywhere for those who want to see it.

• A beautiful piece on AI and multimodality, arguing that current approaches misunderstand intelligence by treating it as a patchwork of separate modalities rather than an embodied, interactive process grounded in physical world understanding. A good excuse to go back and revise Rodney Brook’s Intelligence without representation.

• The Darwin Gödel Machine, a self-evolving programming agent that autonomously refactors its own source code to enhance execution on coding challenges.

• What if classical idealism was right, and LLMs converge towards one geometry of meaning?

• We’ve watched Echo Hunter, an AI generated short movie with BAFTA-nominated actors.

Artificial General Blood

• Artificial General Blood Nara Medical University’s Sakai Lab, in Japan, has started testing a universal artificial blood designed to be compatible with all blood types. Potentially no more critical blood shortage, and safer transfusions without the usual compatibility headaches.

• Choose your embryo. Nucleus Genomics introduces Nucleus Embryo, a platform to enable parents to select your embryo by its fully genetic profile. Diabetes predisposition, IQ, personality, eyes colour. Time to watch Gattaca again.

• Humanity’s fertility is already below replacement rate. A great presentation on why global fertility is worse than we think, and something about the UN’s wonky projections. For how this affects our reading of economic growth data, read this paper on GDP growth per working-age adult, in the week where Italy surpassed France for PPP-adjusted GDP (and why it’s not good).

• XellSmart has achieved FDA approval for the world's first registrational Phase I clinical trial of an allogeneic iPSC-derived subtype-specific neural progenitor cell therapy targeting spinal cord injury, a breakthrough in off-the-shelf regenerative medicine for CNS disorders.

• Starfish’s first brain-computer interface chip presents a different approach to neural interfaces by enabling minimally-invasive, distributed access to multiple brain regions simultaneously rather than requiring the surgical burden of traditional implants.

• GM-2505, a dual-mechanism 5-HT2A receptor agonist and serotonin releaser, demonstrated exceptional antidepressant efficacy in Phase 2a trials. The compound's psychedelic mechanism positions it as a potentially transformative treatment for the two-thirds of MDD patients who fail to achieve remission with conventional antidepressants.

• Atom-based quantum company Infleqtion announced a $100 million Series C funding round to expand applications from atomic clocks to defence.

• A longer piece on Cortical Labs’ biological computer, CL1.

• A microfactory for electronics assembly by Igor Kulakov. Can be pre-ordered for $50 (but will cost $5000). 

• We already covered General Fusion’s struggle. FusionX published an interview on the company’s race against time, technology and next goals. 

• Edinburgh University develops 3D-printed soft robots that can walk straight out of the printer that made them. And we thought that generatio aequivoca was a medieval myth?

Other things we liked

• Olivia Webb Kosloff is back to writing Acute Condition.

• Techcrunch Europe shuts down. Not that “we liked” it, actually.

• A podcast on how robots will change restaurants forever (proudly with our Josef Chen).

• Tech v The Experts. Balaji on (against) journalists and why tech fixes things.

• Superabundance. If the abundance agenda becomes more aware, heroic, and with a sense of urgency.  

• A profile of Telegram’s founder Pavel Durov. From kid prodigy solving cubic equations on Italian television to biological father of over 100 kids.

• A reminder that even if Buffett is stepping down from Berkshire Hathaway chief executive, you can still play with a Buffett agent on Virat’s AI hedge fund.

• Grammarly receives $1B in non-dilutive revenue-based financing from General Catalyst (who created an interesting rev-share instrument for this).