What's Actually Holding Humanoid Robots Back Isn't the AI | Andrew Kang, RoboStrategy

Intro

00:01The amazing thing about the Figure AI live stream was it showed that this is real. It's not a video where they took a hundred attempts at [music] doing a task and they showed the best one. This was a live stream that went on for 8 or 10 hours and it ended up going on for 8 days.

00:15What was funny was that the human actually won. It won by a little bit, but you know, at the end of the day, the intern that was doing the challenge, his hands were blistered. He was not having a lot of fun. It was exhausting. It's not something that he'd probably want to do again.

00:27I actually think it's closer to something like two [music] to three years where humanoid intelligence, robot intelligence gets good enough to do most of the tasks that we need on on a daily basis. [music] This is a technological revolution that is different because it turns physical labor into in a product that almost anybody can access.

00:42Hey guys, I'm Andrew. I'm the CEO of Robo Strategy. Robo Strategy is one of the first publicly listed venture funds on NASDAQ and we are the only publicly listed venture fund that is exclusively focused on investing in robotics and physical AI.

00:58We're invested in quite a few robotics companies, Frager AI, Uptronic, Dino Robotics. We also have Centerbots in the portfolio. They build industrial arms, cobots, and also companies like Path Robotics that focus on specific tasks like welding.

The Bet: All in on Figure AI and the full-stack future

01:16One of the largest investments that we had ever made into the company Figure AI, it wasn't a consensus investment because [music] everyone that we had asked, the other venture investors that were more familiar with investing in inferentiary technology, they didn't really believe that humanoid robotics was going to work [music] anytime soon or they perceived there was going to be a lot of risks.

01:34They saw that humanoids or uh companies building [music] the robotic space had never produced big venture scale outcomes as opposed to understanding the [music] context that things were changing and that technology for robotics was going to be accelerating and moving at a different pace than it [music] was before.

01:50And so that's why we really decided at that point to pivot, you know, our entire company into focusing on investing in robotics. It's funny because when I went and [music] invested in Figer for the first time, I had never actually been to their facility.

02:03I watched every single video I could of Brett of Figure um and you know all the work that they had done for previous companies as well. Just kind [music] of doing our research on the team, the founder, it was quite clear that this is [music] one of the few teams that were able to do it.

02:17They had the background in hardware engineering. They had the background in robot learning. They had the background in all these really niche fields like hand engineering or robot controls and [music] fleet management. Looking at all the competitors and all the other players in the space, it was pretty clear that they were one of the top teams to be able to to accomplish a task.

02:35We're not the type of investors to be very dogmatic. When we believe one thing, never change our minds. High conviction, strong beliefs loosely held. Um, but we're always trying to re-evaluate our beliefs of the world. And [music] if there's important information that comes up to lead us to believe we're wrong, then we're happy to change our minds.

02:55And it's important for us to always track the pace of development across [music] all robotics companies, not just the ones that we're invested in, so that we can understand how are the different companies stacking up against each other. How is the field developing across all the different characteristics that we look for robotics companies, right?

03:10How are different players scaling up their robot fleet? um how are they conducting robot learning research? You know, what are they doing on the hardware development side? And from all those kind of points of view, we still believe Figure is one of the top companies.

03:24Really, it's it's them in and Tesla Optimus at the top. We're really excited about the vertically integrated robotics companies. These are the companies that we're investing in the most. And these are companies that are not just building their own robot intelligence, but they're building the hardware.

03:39uh they're doing the deployments and they're also uh scaling up their own manufacturing capabilities. When we think about why these [music] companies exist in the first place is because when you're training the robots, it also makes sense to be able to, you know, have built the robot hardware yourself [music] so that they're co-optimized for each other.

03:58Maybe a robot that has better torque sensing within its joints uh is able to be better modeled in simulation [music] or you can build a model that incorporates that type of data that you're capturing. So there's a lot of advantages in [music] building these systems in parallel with each other um because it makes the training more efficient, research more efficient.

04:16At the end of the day, the robots are going to be more performant [music] as well. One of the key data pieces that are required for robot learning development is the actual robot data itself. Robots that are either doing a specific task running a model or robots that are controlled using teleaoperation to collect the data.

04:35One of the ways that you can think of this is if you were transformed into the body of somebody that was seven foot tall, you probably would have be a little bit awkward in interacting with the world around you as opposed to you continuing to interact with the world around you in your current body in your current physical form because that's the body that you're used to.

04:54And so having that embodiment specific data is going to create more effective models. and to be able to collect a lot of embodiment specific data, [music] you're also going to need need a lot of robots. That is one of the bottlenecks that the industry is currently working through right now is if you're trying to buy 100 robots or a thousand robots.

05:13That's going to be pretty tough. You [music] can't get that in a day. You need to make those orders ahead of time and it's going to take time to produce those robots. And so, if I have my own manufacturing facility, I can earmark all those robots just for the sole purpose of collecting data myself.

05:25And that's what companies like Figure [music] are doing, what companies like Tesla Optimist are doing, Electronic as well. So I'm not going to have a bottleneck because I don't have to worry about say a robot company supplier in China where I'm getting my [music] robots from just not having enough available because demand has skyrocketed.

05:44And that's what you've seen with GPUs or you know other components of the supply [music] chain is that things demand for a lot of these items are scaling up really really quickly and it's hard for these supply chain vendors to be able to produce them enough to fill that demand.

The Future: How far humanoids actually go

06:03I think the market for humanoid robotics is going to be in the tens of trillions. It's a crazy number. I think the way that you can get there is you can take two views. You can take the top down view, which is you just look at all of the market for physical labor in the world, and that's a $50 trillion market, but it's it's a little bit hard to conceptualize.

06:19And so the way that we thought about it was imagine one humanoid. It might be sold or it might be leased for $50,000. That's that's a pretty good price because a laborer in the US or physical work in the US, you have to pay maybe $50,000 a year when you're considering all of the benefits and and all- in costs or sometimes more than that.

06:38And then you take that $50,000 and you multiply it by h 100,000 just as a starting point. That number is already $5 billion. Company that's making $5 billion a year is is a pretty sizable company. But then right you just scale it but up by 10 [music] and you say what if I have a company that sells a million humanoids per year.

06:54It's $50 billion. We make billions of cell phones per year. We [music] make hundreds of millions of cars and PCs. And so I think we're probably going to make a lot more humanoids. And so you can really clearly see that there's a [music] there's a trajectory for this industry for humanoid robots to get to trillions of dollars of revenue.

07:11And that would imply tens of trillions of market cap. And that's almost an underestimate because when we start making labor more abundant uh more affordable then it expands the market as well. We can start sending robots to space. We can start sending robots to build more data centers.

07:28Right? That is kind of a key constraint for the data center buildout right now. It's not the things that go into making them. It's the the labor. It's the people that are actually putting things together, doing the plumbing, electricity. I actually think it's closer to something like 2 to 3 years where humanoid intelligence, robot intelligence gets good enough to do most of the tasks that we need on on a daily basis.

07:48So, I think you could almost characterize this new wave of robotics as almost the fourth industrial revolution. This wave of robotics and AI. We've created machines that [music] allow us to produce many different things and to make the everyday life easier.

08:01But this one is really different because this is the first time that we've been able to create machines in intelligence that can really do anything a human can do. And that opens the door for a lot of different things that weren't possible before.

08:13If labor gets as [music] cheap as say $2 an hour or it just becomes a product that we can buy. So every single person in the world they can have a personal assistant like everyone has their own iPhone. People can also buy robots or rent robots to maybe even produce things or to build companies that previously maybe they couldn't afford or maybe they couldn't find the right people to do.

08:36This is a technological revolution that is different because it turns labor physical labor [music] into a product that almost anybody can access. AI research has really been accelerating. When you think about research, right, AI development, it's not something that is on a on a slope that is completely [music] flat.

08:54It's something that changes and it feeds back on itself because the better AI models get. The more of AI research can be automated, the faster it can be done. Loops that were previously required a lot of humans can now be running right 24/7 365.

09:06And they're also able to process a lot of information a lot faster. And so a lot of that uh what you consider efficiency gains is also going to be applied to robot AI research. And that can exist across multiple dimensions, right? It helps with the actual speeding up of the research.

09:25But there's also a lot of innovation and learnings from AI research that can be applied for physical AI research. Learnings in how to best do data annotation infrastructure around collecting data and annotating data. Learnings and innovations on how to structure mid-training on how to do reinforcement learning.

09:44A lot of the same concepts from LLMs can also be applied to [music] physical AI models. And so that's why I think the amount of time for these models to get really good is is probably a lot faster than people think. But at the same time, the models are going to get really good, but that doesn't mean we're going to have robots [music] doing all of that work in the next 2 to 3 years.

10:03Because even though the intelligence can get there, [music] we're still going to have a bottleneck with manufacturing. I can spin up a million instances of a chatbot instantly, but I can't do that for robots. I can't produce them out of thin air.

10:14[music] And so we're going to need to scale up all the factories. We're going to have to scale up the supply chain for all the components that go into a robot and that's going to take some additional time.

The Shift: Why Open Source wins

10:29One of my views is that open source models are going to get really good. 2 3 years ago, open source models were probably less than a few percentage of all tokens that were produced. Nowadays, open- source models produce something like 25 30% maybe even more of all tokens that are produced.

10:46They're getting really good and they're also saturating benchmarks. And so the gap between open source and frontier models, it used to be around 2 years. That was a few years ago. Now it looks something more like 6 months. We're going to get to a point where the open source models start to saturate the benchmarks.

11:03Even though there might be a gap between open source and Frontier, that gap may not matter for a lot of tasks in the world. Because if I'm doing a simple task like for example restocking shelves or uh you know assembling a computer mouse I don't need a really high level intelligence to do that.

11:21I don't need an Einstein [music] to be able to do these tasks. And so as long as these open source models get to that level which I believe they will the model layer were almost commoditized for physical [music] AI. We're not going to be there yet but I think that's somewhere something that we're going to get to in somewhere maybe the next 3 to 5 years.

11:39And so I think at that point intelligence [music] it becomes really cheap. What I consider you know the most valuable companies or the most important companies are probably going to be the ones that are doing deployments. [music] They're they're producing the hardware uh or you know they're innovating on new designs or components to make these robots even better.

11:57Nvidia is also a very big player in open source model development. NVIDIA if you look at them uh they're producing open source models for just general um you know LLM software engineering. Neatron. [music] They're really climbing the benchmarks.

12:10They're producing open source models for autonomous vehicles and they're also producing open source models for physical AI and and robot intelligence. And you know, some of the best researchers in the field are yes, they're across some of these closed source labs, but they also are at companies like Nvidia.

12:24I think everyone needs to keep in mind that for Nvidia, they're one of the most powerful companies in the AI space. They have a lot of resources. They have a lot of really smart people. It is an almost an existential threat for closed source models to win because as you saw with Anthropic starting to train on Google TPUs, if companies decide to optimize for and train on other hardware, Nvidia starts to lose their business.

12:51It becomes a bit of a threat to them. And so that's why they're putting so much effort into developing their own open- source models like Neatron, like the autonomous vehicle models, like you know, all the different physical AI models that they're developing, Brute, Cosmos, Dream Zero, etc.

13:06That is something that I I feel like can't be understated because it's if you're building just, you know, physical AI models, you have to think about I'm competing with one of the best AI companies in in the world.

US vs China: Why it's not a race

13:24I think some people like to frame this as US versus China. I think both industries are going to be massive in the future and I think they're both independently going to build really great hardware and and robot intelligence industries are going to develop a little bit independently in the sense that the robots that are sold and they're used in America are probably going to come from American companies and the robots that are bought and used in China, they're going to come from Chinese companies.

13:47the world is kind of coming to a place where a lot of countries they're interested in independence. They want to produce things in their own country. They don't want to be dependent on another country. They want to make sure that on their own they can survive and they can thrive.

14:02And so there's a lot of interest right now in the governments from both China [music] and America to really accelerate the development of robotics in in those individual countries. Some of them uh like China they've invested many billions of dollars either directly or indirectly through government funds in municipalities and [music] in the US that hasn't exactly happened yet but I leave believe we're going to get to there in [music] the future.

14:25The US has already shown that they're interested in funding domestic companies. They've funded and provided financing to rare earths processing companies directly invested in semiconductor companies like Intel. And I think it's pretty clear that there's a similar amount of support that's going to come to the domestic robotics industry in America as well.

14:43It is true that the US is somewhat ahead on the physical intelligence models. At the same time, there are some really great research groups in in China. Some that are associated with Alibaba, for example, that are building robot models that are pretty close to the frontier.

15:00They have really smart researchers there. And there's also really smart researchers in America as well. Eventually, both countries are going to get there. probably independently, but also they're going to collaborate in doing so because there's a lot of open- source research that's published, research that helps both countries.

15:17[music] And so, I wouldn't really think about it as as a race or, you know, one's a little bit ahead and one's a little bit behind. I I think it's really kind of short term because I think at the end of the day, in 5 years from now, 10 years from now, both countries are going to be able to get there themselves.

Where to build now: The white space of robotics

15:37in terms of where people might want to build. I think there's so much white space because there are hardware platforms that exist. It makes the development a lot easier for someone that wants to build for a specific application. And so I think you can really think about robots as kind of like the smartphone, Apple, right?

15:51They make the iPhone, but there's this whole developer community that exists outside of people that are just building applications. people that were building applications for time management, for taking notes, etc. That can also happen for robotics where maybe I want to build uh you know robot applications to teach robots or the skills on how to cook really well or maybe how to do elder care or maybe I want to build a robot application to help uh increase uh you know the efficiency of certain [music] farming standards or uh agriculture techniques.

16:28I mean you can really think of anything where physical labor is involved as a potential robot application that can be built that that is you know such a large white space. A company that we haven't invested in but we're watching quite closely is is Unatree and also you know other Chinese companies.

16:44A lot of these companies, what they do is they haven't they don't take the same approach as the US companies or a lot of the US companies, they wait until they have the product that's perfect that they're ready to basically sell into, you know, the home or factory environment and and it works absolutely perfectly.

16:59The approach that the Chinese companies are taking is they're releasing their hardware, their robots as more of a platform for research [music] or entertainment for people to build on. It's not necessarily a case where I can buy a Unistry robot and then it it'll immediately be able to do everything I wanted to do.

17:17But it's also a pretty interesting business or commercial strategy because now that the robots are out in the world, you get a little bit of of a of a developer mode. You get a little bit of a deployment mode because people then become comfortable with using those Unity robots, right?

17:33There could be developer tools. There could be data collection platforms that are specific to the Unitary robots. If people are doing a lot of robot-based data collection, that might be now unitry specific. And so if you're building models that use a lot of this unitry [music] specific data, those models might run better on Unitry robots as opposed to other robots.

17:54And so I think that's a pretty interesting strategy that we're not seeing [music] too many companies in the US take. There's one company in our portfolio called Dexmate that is selling robots and you can consider them using a similar strategy.

18:06But that I think is a pretty interesting approach that can result in a lot of other maybe downstream effects because [music] now that everyone has access to these robots, other people can build applications on them. [music] And so those applications don't necessarily need to come from the the company that's building the robots.

18:26It can come from outside researchers or other startups that just want to focus on the AI side of things as opposed to building the hardware and figuring out the manufacturing component themselves. I actually think the industry is really early.

18:40So I don't think anybody's missed anything yet because you look at the robots today and they're getting a lot better, but they're nowhere near if for example Opus 4.8 8 or chat GPT or any of the LLM models, right, where they're actually doing a lot of the work that humans would do and they're being used across almost every company in in the world today.

19:00We're not there for robotics and that's what makes it really exciting time as well because there is still still a lot of opportunity for people to join really exciting companies that have a great growth trajectory or start making investments in the space themselves.

19:14I I think the first thing to do is is really just start doing more research, talking to friends that might be working in the industry. If you really want to, right, be involved in some way, either by joining a company, starting your own company, or investing.

19:28It's pretty underappreciated how hard building a robotics company actually is. I'm seeing online these days a lot of people from different industries saying, "Hey, look, I'm going to go out and start a robotics company." We're really excited about the industry and we think there's going to be a lot of great companies that come out of this, a lot of great technology that comes out of it.

19:46But it is also really hard the amount of kind of uh knowledge that you need to kind of accumulate over over many many years, amount of experience you need to have, right? Like this is not building a software company. To be able to understand uh you know all the components needed to build a successful humanoid company or robotics company from you know mechanical design to electrical engineering, high rate manufacturing, how to actually deploy the robots in the real world.

20:10It's a little bit maybe uh underappreciated. There's going to be a lot of maybe investment that goes into the space. There's going to be a lot of startups that go out. But I would maybe caution people to um just appreciate a little bit more how how difficult it is.

20:23And you're you're going to need a lot of real experts. People that have years, decades of experience in the space, people that have had a significant amount of experience working at other real, you know, manufacturing or robotics environments before to be able to really build a successful company.