E133: Market melt-up, IPO update, AI startups overheat, Reddit revolts & more with Brad Gerstner

00:00:00.000 | I'm so fucking tired. I've slept six hours in three and a half

00:00:04.080 | days. Six hours. Wait, seven hours to the world series of

00:00:07.680 | poker with Helmut. So you spent no, no, no. First of all, I flew

00:00:12.160 | public took Southwest. What? Yeah, cost me. Yeah, cuz I got a

00:00:17.600 | ticket for 49 bucks. It's like so fucking incredible. Did you

00:00:20.080 | sit in seat a one also known as J cows reserve seat that has my

00:00:24.080 | name on it. I was in the front row. Yeah, you it's great. Like

00:00:27.600 | Southwest has these numbers and first class on Southwest. No, no,

00:00:32.160 | no, no premium. Plus, he was in the front row. No, there's like

00:00:35.600 | these signs that that like have a number that attaches to your

00:00:38.880 | ticket and then you stand in that line and then you go on in

00:00:41.360 | this orderly way. And so I was I had like a five or something. So

00:00:45.600 | I was like the fifth person on and then I sat in the front and

00:00:49.360 | I put my bags up top. Yeah, you carried your bags. Yeah. An hour

00:00:53.120 | later, I was in Vegas. It was so easy. Southwest is phenomenal.

00:00:56.640 | And then I flew back anyways. And after after losing as much

00:00:59.600 | money as I did, it felt good to fly for $49. I gotta be honest

00:01:02.800 | with you. Well, austerity measures have you can sleep

00:01:06.240 | better at night with austerity measures. And did you go to the

00:01:08.560 | all you can eat buffet and take it to go as well? No, I'd never

00:01:11.760 | do that. You never know.

00:01:13.040 | Rain Man David

00:01:18.480 | Sacks.

00:01:26.320 | Why did you fly Southwest? Why did I fly Southwest? Well, the

00:01:33.040 | planes in Europe was not that's number one. And then two, I just

00:01:36.800 | wanted some flexibility to get in and out depending on when I

00:01:39.520 | busted these tournaments. So let me tell you about these

00:01:41.360 | tournaments. The 100k is literally like a murderer's row

00:01:46.960 | of like every great poker pro. So it was like 96 of us or

00:01:51.520 | something. I got to be honest with you. It was so much fun.

00:01:56.720 | So much fun. Why? How so? You know that we play 40 minute

00:02:01.680 | levels, and you have to really get the chips moving, which

00:02:04.960 | means that there's only so much like, you know, Game Theory

00:02:08.080 | optimal poker, you can play and at some point, you just got to

00:02:10.720 | gamble it up and you got to take your shots and you have to be

00:02:13.120 | willing to bluff and, you know, you have to bet for thin equity.

00:02:16.000 | It's so much fun. And then you see some of these guys that just

00:02:18.960 | lose their minds. Anyways, it was it was really, really a lot

00:02:22.720 | of fun. I finished in the middle of the pack, like 42nd or

00:02:26.400 | something. So that was brutal. But then the thing that I'm the

00:02:28.560 | most proud of is and I went from that and I hopped in the 3k

00:02:31.920 | six six handed right afterwards, and there was like

00:02:34.880 | 1250 people in that and I got to 81st and whoa, the problem was

00:02:39.520 | like just couldn't get anything going. I couldn't get any real

00:02:42.000 | car like you need some card distribution like you have to at

00:02:44.960 | some point. Yes, make some hands you can't just, you know, I

00:02:47.920 | could bluff my way to 81st but I needed hands to really, to

00:02:51.840 | really, really have a chance to chip up and run it. Then I

00:02:55.040 | played in the Razz, which is seven card stud low. There's 126

00:03:01.280 | people now when I finished in the middle of the pack there and

00:03:03.520 | then this 10k bounty there was about 600 people and I finished

00:03:06.640 | like 150. Those are all respectable. I mean, I know play

00:03:10.400 | tournaments. I have no idea how to play tournament to be honest.

00:03:12.560 | I know how to play poker. I know how to play cash games, but

00:03:14.400 | tournaments are very different. So I feel like I was very ill

00:03:17.440 | prepared, but I had so much fun and you know the crazy thing is

00:03:21.760 | when you're playing for 12 hours a day, you are focused for

00:03:24.800 | 12 hours. The thing that I forgot is that you end up I

00:03:28.960 | ended up losing like two and a half pounds. Oh wow. If your

00:03:32.640 | brain is going going going for eight hours a day, biggest

00:03:36.320 | **** thing and I was I was mentally devastated at the end

00:03:40.320 | of each night. You're just lying in bed eyes awake. Yep. And

00:03:43.200 | then you can't sleep and so then you know you go and you

00:03:44.960 | play craps and **** break the casino for a couple 100 times a

00:03:48.960 | night there and then go back to bed. It's great. Sounds like a

00:03:52.000 | great week. The good news is is Phil was live blogging for you

00:03:56.800 | on your behalf from from Vegas over your shoulder. Oh, by the

00:03:59.840 | way, the other thing was I brought my phone, but I don't

00:04:02.240 | have anything on my phone like I don't have Twitter. I don't

00:04:04.480 | have any of that stuff. so I was just totally in the zone. It

00:04:08.160 | felt so great to not be connected to social flow

00:04:10.960 | experience. It's a flow experience when you can turn

00:04:12.960 | everything off and just be in the moment. Congratulations on

00:04:15.280 | the on the you know coming in the 10% of the field in the

00:04:18.400 | 3000 or 8% of the field. That's incredible dude. If I really

00:04:22.000 | practice at these tournaments, I think I would bank a couple,

00:04:24.160 | but I just don't have the time. The paradox there is that you

00:04:26.640 | did best in the largest field. If you can do this for three or

00:04:29.920 | four years and you go into those Raz fields when it's 100

00:04:32.880 | or those 25K 100 Ks when it's 100200 people in the 100 K.

00:04:37.840 | There's 999596 people like you really do have about a 1% shot

00:04:42.480 | of winning the thing, which is pretty incredible. Yeah. Raz

00:04:45.280 | too. Raz is always 100. I love tournament poker. That was my

00:04:49.360 | that was my game back in the day. It's because it's because

00:04:51.600 | you're afraid to lose money. so it's perfect for you put up a

00:04:54.160 | small amount of money and you can play for many hours. You're

00:04:56.240 | probably in your mind. You're probably dividing the number of

00:04:58.720 | hours by your buy in so that you can think about what your

00:05:00.880 | hourly cost is. I actually like tournament poker because when

00:05:03.920 | you lose you lose like you can't just yeah, rebuy and

00:05:07.440 | basically and then there's a broader macro strategy. You

00:05:10.160 | start to play the chips against the other players because you

00:05:12.960 | know how everyone else is playing based on how many chips

00:05:15.520 | they have in front of them. It's a great point. This theory

00:05:17.680 | of ICM, which is like independent chip model is

00:05:20.000 | exactly what you just said. The craziest thing freeberg happens

00:05:22.880 | right at the money bubble. These guys start. I've never

00:05:26.240 | seen this before. They ultra tank ultra tank. Oh yeah, they

00:05:29.920 | go in the tank for two minutes and then they fold so

00:05:32.640 | obnoxious when I used to play tournament poker. I'd sit I'd

00:05:35.360 | fold Ace King suited. You'd fold pocket Queens. You'd fold

00:05:39.360 | everything if you're on the bubble of getting into the

00:05:41.920 | money or you're on the bubble of getting to the final table.

00:05:43.840 | It just doesn't matter because if there's three guys with you

00:05:46.480 | that have smaller chip stacks, let them get blinded off and

00:05:49.840 | now you're in the money or now you're on the final table and

00:05:51.840 | then you'll play poker. It's like go get up go have some

00:05:53.920 | dinner. Come back in an hour. Don't even look at your cards.

00:05:57.040 | If you can cruise your way there, it's a totally different

00:05:59.840 | kind of game. Totally different. There's a guy that

00:06:01.920 | was tanking. He's a really lovely guy. British guy. I

00:06:05.280 | offered him the min cash just to not take. I was like, please

00:06:09.760 | stop taking for four minutes and folding your head. I'll just

00:06:13.360 | meet it as action. I had a guy do this in a tournament and I

00:06:16.640 | timed it with the rest of the table. I took out my phone. I

00:06:18.880 | timed it and I said, whatever number of seconds you do, I'm

00:06:22.160 | doubling and I just did that. It was so obnoxious that the

00:06:27.520 | entire table like the guy finally stopped. Well, in the

00:06:30.160 | in the 100k, we actually had a better setup which is that we

00:06:32.960 | had these iPads on the table and everybody gets a 30 second

00:06:36.080 | shot clock. So, you can't really **** around but then in

00:06:39.520 | these big field events, they're not going to have iPads on 100

00:06:43.920 | tables obviously. Yes. And so instead, people just tank

00:06:47.040 | forever and then you have to call the floor and you have to

00:06:49.280 | call time on these folks. The funniest thing though is like

00:06:51.920 | the last tournament I bought in for was a 10k secret bounty

00:06:54.560 | which means that on day two, when you knock somebody out,

00:06:57.840 | you actually, everybody stops the action. You go up on stage

00:07:00.480 | and you pull like out of, it's like treasure hunting. Yeah.

00:07:03.360 | And some of these bounties can be like a million bucks. And

00:07:07.680 | obviously, there's a lot of people there that kind of

00:07:09.920 | recognize me and when they saw me in the 10k secret bounty,

00:07:13.360 | there was like a movement. It was so funny. They were like,

00:07:15.920 | if you win the secret bounty and you win the million, we're

00:07:19.280 | going to revolt and burn the Paris Paris to the ground. It

00:07:23.840 | would have been so and I and I thought, you know, it's true.

00:07:26.480 | It'd be patently unfair if I was the one that won that million

00:07:29.200 | dollar secret about it. How many selfies did you take on

00:07:31.520 | Southwest? That's the question everybody wants to know how

00:07:33.920 | many people recognize you on Southwest and what was the shame

00:07:37.360 | that you felt was great. I'm gonna fly I'm gonna fly

00:07:40.480 | Southwest to Vegas all the time now. It's fucking great. It

00:07:43.280 | literally was honestly to get from my house to the gate where

00:07:46.560 | you stand to get into the plane. It was like plus or maybe 15

00:07:50.320 | minutes more than just driving on the tarmac like it was a

00:07:52.400 | nothing burger. J. Co. It's amazing what a down market can

00:07:56.400 | do to people. This is what is it Brad? This is the victory of

00:08:01.680 | the age of fitness. Absolutely. Southwest you were in the first

00:08:08.880 | row. You were the front row South by all right, listen,

00:08:12.160 | there's a big docket today. We've got a lot on the plate.

00:08:14.240 | David Sacks is busy in a star chamber right now selecting the

00:08:18.160 | next president of the United States. He's picking a VP and

00:08:20.960 | the cabinet for whoever's going to win. So he couldn't make it

00:08:23.600 | today. So we brought the fifth bestie Brad Gerstner back and

00:08:26.240 | great timing because the Fed decided to pause rate hikes in

00:08:29.920 | just yesterday, I guess and this would have been the 11th

00:08:34.480 | consecutive rate hike. Is that about right?

00:08:37.760 | That's right.

00:08:38.400 | And they anticipated two more 25 basis hikes before the end of

00:08:43.440 | the year. So here's just the Fed funds effective rate. So you

00:08:48.800 | can all can see it here over time. And there was also some

00:08:51.440 | big news this week. A couple of 2023 IPO candidates started to

00:08:57.840 | be floated. Obviously, we've been hearing about Reddit and

00:08:59.920 | Shripe for a while but arm confidentially filed for an IPO

00:09:03.520 | back in April. And they're seeking to raise between eight

00:09:06.000 | and 10 billion later this year. And that would be a pretty big

00:09:09.840 | deal for SoftBank, which owns the firm. And that could I guess

00:09:15.520 | save SoftBank, which has had a just a brutal run with the two

00:09:20.160 | different

00:09:20.560 | save SoftBank, the arm deal is being done is what's the

00:09:26.720 | valuation that's being done at SoftBank acquired on for 32

00:09:29.600 | billion in 2016. They don't know the valuation right now. They

00:09:33.120 | haven't put that out there yet. I mean, they were originally

00:09:35.040 | looking for anywhere from 30 to 70. But I mean, Brad, where do

00:09:37.840 | you think that comes out?

00:09:38.640 | I have no idea. I think that you know, they're shopping to get

00:09:43.200 | these anchor tenants into arm. If the IPO market was super hot,

00:09:48.480 | and this was really easy to get done, this would have been done,

00:09:52.160 | you know, so I think, you know, they're tiptoeing out because

00:09:55.040 | they need to get it into the public market. But, you know, I

00:09:59.920 | think that anybody who does an IPO today, okay, is going to

00:10:05.120 | demand a, you know, a rate of return into that offering. That

00:10:11.520 | is a significant margin of safety relative to all deals

00:10:15.280 | that were done in 2021. And what that means is, on the roadshow

00:10:20.720 | investment banks go and they try to drum up demand, they want to

00:10:23.520 | have anchors in the IPO book, they call firms like ours, they

00:10:27.920 | call strategic investors, they want to size up what that is.

00:10:31.120 | And, you know, they give you their expectation of fair value

00:10:35.520 | or where they think the IPO will trade to, of course, you meet

00:10:38.640 | with management, you ascertain and develop your own

00:10:42.400 | expectations of fair value. What I'm saying is, maybe in the

00:10:45.840 | peak, you know, in 2021, people were getting thinner and thinner

00:10:51.280 | in terms of the margin of safety they demand I my expectations,

00:10:54.960 | whether it's arm, whether it's Databricks, or other companies

00:10:58.480 | that are starting to queue up. And these are fantastic

00:11:00.720 | companies, right? Make no mistake about it. Nvidia tried

00:11:03.440 | to buy arm and, you know, Databricks is doing over a

00:11:06.480 | billion in revenue growing extraordinarily fast, led by an

00:11:09.360 | incredible team. But in order to get into the public markets,

00:11:13.200 | they have to, you know, step in with a bigger discount than they

00:11:16.400 | would have, you know, pre this correction.

00:11:19.280 | And just to put some numbers on it, arm had agreed to be

00:11:23.040 | acquired by Nvidia for 40 billion before the talks fell

00:11:25.840 | through. That was due to regulatory scrutiny. Bloomberg

00:11:28.400 | says arm is aiming for a valuation of 70 billion.

00:11:31.280 | Obviously, there's no confirmation about that. That's

00:11:32.960 | just the news, hopefully intelligently speculating about

00:11:35.600 | it. What exactly would you be buying for $70 billion? I

00:11:39.040 | thought they missed it. Yeah. arm had a window where they had

00:11:43.200 | to make some really important product decisions to be able to

00:11:46.560 | actually have reference designs that actually made sense beyond

00:11:49.920 | just simple mobile processors and CPUs. And they don't have

00:11:53.360 | any of that. So they have a good cash cow business, it's

00:11:56.080 | probably worth 25 billion. They paid 30 some odd 32. Yeah,

00:12:00.800 | they could have gotten it out for 40 something, but it's a

00:12:02.880 | mid 20s billion dollar company. No more. And if you're in if

00:12:07.200 | you buy it at the 20s, you're buying a cash flow yielding

00:12:10.480 | asset, and the good luck to all the players, I guess is what I

00:12:13.840 | would say. Clearly, it's a function of softbank seeking

00:12:17.520 | liquidity, right? I mean, they have this position for how many

00:12:22.640 | years now? Four years? No more. I think this was six, maybe six

00:12:27.840 | years. Yeah. When did they buy it? Was it 2016? I think it was

00:12:31.120 | longer. Yeah, 2016. They bought it. So this has been in the

00:12:34.640 | fiscal year ending March, the vision fund alone took a $32

00:12:38.560 | billion write down. Obviously, softbank has a big chunk of

00:12:43.520 | division fund, but this is not in division. It's not a division

00:12:46.720 | fund. Exactly. So this is on the balance sheet. Yeah. But it's

00:12:51.360 | clearly liquidity driver for them. I don't think that this

00:12:54.240 | is, you know, first of all, Jason, I don't think the point

00:12:56.960 | about softbank needs saving is necessarily true. It's not a

00:13:00.560 | company that needs saving, but they've certainly taken some

00:13:02.560 | hits. Well, they could use a win is what my point. Yeah. Yeah,

00:13:04.960 | they could use a win. But the last two quarterly calls, you

00:13:10.000 | know, Masayoshi-san was pretty repentant and humble. Right. In

00:13:16.480 | fact, he used that exact line, which we talked about it here.

00:13:18.480 | So this big liquidity need at some point for the business, so

00:13:22.080 | they can get this thing out and get liquid on it. It would

00:13:25.520 | certainly support the balance sheet more than anything. You

00:13:27.840 | know, the market is on a tear this year, Brad, is there now

00:13:32.080 | that everybody's buying back into tech stocks, I guess, two

00:13:35.840 | questions. Why is everybody suddenly buying into tech stocks

00:13:39.920 | when people think there's going to be a recession, and

00:13:44.160 | consumers have run out of money? And yeah, what's the thinking

00:13:49.520 | here of why so much money has gone to tech and this

00:13:51.840 | incredible rally? It's great to watch, but people seem to be

00:13:56.320 | perplexed by the rally. And then the Fed, even though they

00:13:58.880 | didn't do a rate hike, seem to put cold water on and say, Hey,

00:14:02.640 | listen, don't get ahead of yourselves. We're gonna probably

00:14:04.560 | do rate hikes later in the year. We all have short memories.

00:14:06.960 | You know, tech had a devastating year in 2022. So this is a bit

00:14:12.080 | of a reversion to the meat. Right? If you remember the chart,

00:14:15.040 | we, you know, we showed a lot on this pod last year, at the end

00:14:18.480 | of starting at the end of 2021, was that we were trading at,

00:14:23.760 | you know, multiples that were, you know, 50 to 70% above their

00:14:27.120 | 10 year average. And at the trough, we were trading about

00:14:31.360 | 30 to 40% below the 10 year average, right? So the market

00:14:34.720 | corrected, it overshoots on the upside, because rates went to

00:14:37.680 | zero. And by the end of 2022, when you had Larry Summers and

00:14:41.680 | others who are going out and saying, we don't know what the

00:14:45.280 | upper bound of inflation and rates is, that's really scary

00:14:48.720 | to the markets. And so you add this overshoot to the downside,

00:14:52.320 | we're still trading below the 10 year average for internet and

00:14:56.480 | software companies based upon our numbers. And so when you

00:14:59.760 | look at this, as we said, at the end of last year, the

00:15:02.320 | framework changed early in this year, all of 22 was about two

00:15:07.440 | things is inflation going higher, and our rates going

00:15:11.120 | higher. And those things are debilitating for growth assets

00:15:14.400 | and growth multiples. By the beginning of this year, we

00:15:18.000 | started to have confidence that inflation had peaked, which

00:15:22.160 | meant that rates were largely in kind of, you know, spitting

00:15:26.000 | distance of their final destination. And the framework

00:15:29.760 | shift to economy, are we going to have a hard landing? Now

00:15:32.880 | remember, at the start of the year, Mike Wilson from Morgan

00:15:36.160 | Stanley, who may give him credit made the call in 2022. He said

00:15:40.640 | 22 was going to be awful. He was right. But he stayed in that

00:15:44.400 | bearish position at the beginning of 2021, said the

00:15:47.840 | economy is going to hit the skids in q1. And that we're

00:15:51.120 | going to revisit 3000 or 3200 on the S&P. Instead, we're

00:15:55.920 | sitting at 4300. So he was tragically wrong at the

00:16:00.080 | beginning of this year, because again, he was fighting, I think

00:16:03.200 | the last battle that he that was one, as opposed to looking

00:16:07.520 | ahead and saying, this is no longer about rates and

00:16:10.240 | inflation. So the NASDAQ has moved 30%. To start this year,

00:16:14.320 | you know, the Fed said yesterday, we're hitting pause,

00:16:18.080 | you know, the quote from Chairman Powell that has

00:16:20.960 | everybody a little bit perplexed, is on the one hand, he

00:16:24.000 | says, we're data dependent. On the other hand, he said, we're

00:16:27.920 | likely to have more rate hikes, right? And that rates are going

00:16:32.880 | to stay high for a couple years. Well, if we're data, you can't

00:16:35.920 | have a both ways. If we're data dependent, we have a hard

00:16:39.760 | landing, like Stan Druckenmiller thinks we're going to have in q4

00:16:42.800 | this year, then rates are going to get caught. But the market

00:16:46.960 | seems to like this. And let's talk about where we are. The 10

00:16:50.880 | years at about three, seven, the S&P is basically flat in terms

00:16:56.000 | of where it was and where it was before and where it was after

00:16:59.120 | the rate hike announcement. The economy appears to be

00:17:04.080 | reasonably good 80% of earnings in q1 beat, the guides were okay.

00:17:09.360 | Stan Druckenmiller said I shifted, you know, he pulled

00:17:13.040 | forward when he thought we're going to have a hard landing

00:17:15.280 | based upon the bank crisis, which now feels like it's a

00:17:18.560 | distant memory for many. And he's now calling for potentially

00:17:22.320 | a hard landing in q4. So the Fed just came out and said, No,

00:17:26.320 | we're not going to have a hard landing in q4, we think we're

00:17:28.640 | going to have 1% growth. They think that inflation to end the

00:17:33.120 | year is going to be at 3.2% versus the 3.7% Goldman

00:17:37.680 | consensus. What I would say is, you know, we've moved, but we're

00:17:42.000 | still below the 10 year average. But you have to start paying

00:17:45.360 | attention now to individual stocks that have likely gotten

00:17:48.960 | ahead of themselves or where they've taken an example of

00:17:51.520 | that. A lot of the return. Facebook, Apple, no, you know, I

00:17:57.360 | think a lot of the AI related stocks are now at or within 10%

00:18:02.320 | of our end of year price target. And when you when you see that

00:18:07.360 | take something like Nvidia, if I'm playing at home, or I'm a,

00:18:10.960 | you know, a professional investor, I may say, Oh, I'm

00:18:13.360 | going to go sell some long dated calls to buy a little

00:18:16.720 | protection to the downside. I don't think there's any

00:18:18.800 | problems with Nvidia, I think they're going to continue to

00:18:21.840 | perform, I think they're beat their numbers for the balance

00:18:24.400 | of the year. But you know, remember, at the start of the

00:18:27.520 | year, people thought they were going to miss their numbers for

00:18:29.920 | data center, people thought data center revenues this year,

00:18:33.440 | we're going to be negative. And they just revised their guide

00:18:37.120 | from 7 billion in q2 to to 11 billion in q2. So they've

00:18:41.760 | absolutely blistered their numbers, and the stocks gone

00:18:45.120 | from $125 you know, to over $400. So when you have those

00:18:51.040 | parabolic moves, just like we did with rates last year, I

00:18:54.480 | think it's wise to say it's a fantastic company, we want to be

00:18:57.760 | involved, it's going to continue to be one of our larger

00:19:00.320 | positions. But if I can lock in 20% yield, by selling calls six

00:19:05.520 | months out, I think that's a reasonable risk reward. So you

00:19:09.520 | know, I think that's where we are. And now the question

00:19:12.960 | really becomes and it's unknown and unknowable. Right? Are we

00:19:16.560 | going to have a soft landing, a medium landing, a hard landing

00:19:19.600 | in q4 and rolling into next year. And I would say as an

00:19:22.480 | investor, I'm very data dependent. You know, we're

00:19:25.040 | talking to companies, we're looking at a point should we

00:19:27.280 | all be looking at at this point, Shamath, you think jobs,

00:19:30.240 | unemployment, just the stocks and their multiples, and how are

00:19:34.480 | you looking at it as a capital allocator tomorrow? Still on the

00:19:38.080 | sidelines? What have I said like a broken record rates are

00:19:40.960 | going to be higher than you want, and they're going to be

00:19:42.800 | around for longer than you like. And now, Powell is basically

00:19:47.120 | telling you the same thing. So we're almost at the end of, I

00:19:53.760 | think the bottoming, though. I don't agree with Druckenmiller.

00:19:58.560 | I think he's wrong on which part that doesn't be a hard

00:20:01.360 | landing in q4. Yeah, and the reason there's not going to be

00:20:04.320 | a hard landing is you just saw China today basically say we're

00:20:06.880 | going to start to rip in trillions of dollars, they're

00:20:08.800 | going to stimulate the economy. You can't have a hard landing

00:20:11.600 | when China's printing trillions of dollars, not possible. So I

00:20:14.880 | think that what Powell was forecasting is that if China

00:20:18.640 | starts to basically turn on the money printer and go through a

00:20:23.600 | huge spate of quantitative easing, it's going to just

00:20:27.040 | inflate everything. Because they're just such a critical

00:20:30.320 | artery to the world economy. And so you just have to get

00:20:33.200 | prepared for rates just being sticky, and inflation being

00:20:37.360 | sticky. And I think that that's probably the most reasonable

00:20:41.040 | base case for the rest of the decade, rest of the decade,

00:20:43.840 | seven more years. Yeah, yeah. And so in that environment,

00:20:47.040 | the problem is that now you have the seven or eight most

00:20:52.480 | valuable tech stocks priced to perfection yet again. If you

00:20:56.880 | look at their enterprise value over their net income, these

00:20:58.960 | things are trading at astronomical yields that are

00:21:03.360 | less than half of the two year note, and now approaching

00:21:07.280 | sometimes less than half of the 10 year note, government bonds,

00:21:10.720 | that makes no sense. And if you subtract out those seven or

00:21:16.880 | eight biggest companies in the S&P 500, the S&P is not been a

00:21:21.520 | great asset. So the I think the equal weighted index, Brad, you

00:21:25.760 | probably know the exact number, the equal weighted index is

00:21:27.840 | just shit. So what does all this mean? I think it means that

00:21:32.240 | people are psychologically exhausted with having lost

00:21:35.280 | money. They are psychologically wanting to will the market up,

00:21:39.040 | they want to psychologically believe whatever will allow

00:21:42.800 | them to influence rates getting cut. But I think the most

00:21:49.280 | reasonable bear cases rates aren't getting cut. And whatever

00:21:51.600 | hope you had of rates getting cut just went out the window

00:21:53.520 | today, because there is no world in which you cut rates when

00:21:56.080 | China is going to print a trillion dollars or free bird,

00:21:58.080 | a lot of people seem to think that this big run up in the

00:22:01.600 | markets is AI related. Everybody's got an angle for

00:22:05.520 | their company, some of them super valid, like Microsoft and

00:22:08.320 | Google. Other ones feels kind of speculative. We talked about

00:22:12.960 | BuzzFeed talked about having AI journalists in their stock,

00:22:16.000 | which looks like it's going to be delisted, got a quick pop. Do

00:22:20.080 | you think the AI AI actually coming to market driving

00:22:25.760 | efficiency, driving revenue for companies is going to happen in

00:22:30.400 | the short to midterm? Or is it more like midterm to long term?

00:22:33.360 | In other words, is the AI rally overheated and fake?

00:22:36.960 | I don't know if I would assume that the pricing of equities is

00:22:43.040 | entirely driven by AI. I think there's a lot of factors and

00:22:48.080 | including a lot of folks maybe being on the sidelines for too

00:22:51.120 | long and needing to come and buy in at the same time. But

00:22:56.000 | I do think that there's a radical realization underway

00:22:59.520 | that a lot of businesses that are dependent on services that

00:23:06.400 | might be replaced by AI don't necessarily have the longevity

00:23:09.920 | today. Those are businesses that have been severely hurt by

00:23:14.240 | the point of view of what AI could bring to market and bring

00:23:18.240 | to industry. So there's a lot of stuff happening on the short

00:23:20.720 | side. On the long side, I think it's a distribution curve on

00:23:25.360 | like how quickly different industries will be affected in

00:23:28.400 | a positive way by AI. Certainly, the most obvious is demand for

00:23:34.000 | chips, because all this infrastructure is being built

00:23:36.320 | out. So that's the first. And so, you know, with a high

00:23:39.600 | discount rate, which is the environment we're in today, you

00:23:42.480 | can more quickly bet on those opportunities. And so you see a

00:23:45.840 | disproportionate bubbling and valuation and multiples on

00:23:49.040 | businesses like that. There are other businesses that are

00:23:52.800 | further down like services businesses, how long until

00:23:56.880 | lawyers are able to leverage AI how long until banks, investment

00:24:00.960 | banks are going to be leveraging AI to create new products and

00:24:04.400 | improve their margins. There's a lot of speculation, a lot of

00:24:07.200 | ideas, but the discount rate is quite high right now. And that's

00:24:10.160 | probably a few years out, to the point that the fuzziness

00:24:12.800 | wipes out the potential value.

00:24:14.320 | What do you mean by the discount rate in this context?

00:24:16.880 | So let's say that I think that investment banks are going to be

00:24:19.600 | severely changed in seven to 10 years, that's the time horizon,

00:24:23.920 | I think that their business is going to improve because of AI,

00:24:26.800 | as an example, or, you know, factory machinery automation,

00:24:31.040 | right manufacturing businesses, probably 10 to 15 years. So I

00:24:34.800 | can't really give them that much credit today. And so I apply a

00:24:38.480 | higher discount rate there. But there are other industries that

00:24:41.120 | are certainly being affected much more quickly. And you know,

00:24:44.240 | I'm sure Brad and his, his team of finance wizards probably have

00:24:48.720 | a board, you know, where they have this list of all the

00:24:51.600 | industries are going to be affected and what time horizon,

00:24:53.680 | I mean, that's the way you could kind of think about this. And

00:24:56.080 | over different time horizons, you could kind of accrue some

00:24:58.800 | net improvement to earnings and say, okay, you apply a discount

00:25:02.240 | rate to that, here's how much the stock should trade up and,

00:25:04.480 | and, you know, that's one way to kind of think about this. I

00:25:07.120 | don't think it's everything everywhere all at once.

00:25:09.040 | Great drop. Great reference, Brad.

00:25:12.560 | Great. By the way, I gotta tell you, I just saw that movie. I

00:25:15.280 | have to reference it because I saw it over the weekend. Have

00:25:17.440 | you seen that movie? Of course, of course. Yeah. What was your

00:25:20.080 | what an unbelievable film. I had not seen that film. I had

00:25:23.680 | carried kind of postponing it. Incredible. Anyway, what is it?

00:25:27.040 | What movie? It's a everything everywhere all at once. It won

00:25:30.560 | Best Picture at the Oscars last year. I don't trust the Best

00:25:35.280 | Picture Awards at the Oscars for a few years. I've just been

00:25:38.080 | duped by that award. Like you get some really crappy, like

00:25:42.480 | badass movies that are like, watch this movie and then report

00:25:45.440 | back. Let's I won't even say anymore, politically correct or

00:25:48.240 | whatever. And then there's a little virtue signaling they

00:25:50.720 | were doing a little catch up because of Oscar so white the

00:25:53.440 | movement to try to balance things out. In fact, people

00:25:57.040 | well, that doesn't exactly reinforce trust that actually

00:25:59.840 | destroys complete trust and reputational credibility. Yes,

00:26:03.520 | their virtues. And actually, that was something people said

00:26:06.720 | that everything everywhere all at once was possibly because

00:26:10.720 | it's an Asian guy. I don't even know what is it? What is it?

00:26:12.720 | It's a sci fi adventure, surrealist kind of romp.

00:26:17.520 | Michelle Yo is in it. She's very famous from crouching tiger

00:26:21.360 | hidden dragon. Correct.

00:26:22.480 | Quan is in it, who played short round in Indiana Jones. Jones.

00:26:30.560 | And I don't do my impersonation, but I would get

00:26:33.840 | canceled for doing the impersonation of him. In that

00:26:36.560 | fact, I must be like fucking 70 years old. Yeah, yeah. No, he's

00:26:40.240 | like, she's like, something but it's pretty great because he

00:26:43.840 | also won Best Actor Best Supporting Actor. And there are

00:26:48.400 | all these pictures of him with Harrison Ford and Steven

00:26:51.280 | Spielberg. The guys that made it are like music video directors.

00:26:56.560 | You got to go see this film. It's really good. It's a theater

00:27:01.760 | you have to go to

00:27:02.240 | watch it on Apple TV in one of your theaters tonight. Go to

00:27:06.640 | your theaters. Go to the theater on your plane and watch

00:27:09.600 | it. The theater is literally actually will do that. I'll do

00:27:13.760 | that. When I'm on the plane I ever had. I go to the bathroom.

00:27:17.920 | And it's a long flight back from Italy. So I'm taking my time.

00:27:21.680 | And I see that a sub a sub soap that I can't afford. It's like

00:27:27.040 | 100. Yeah, that one. So I see that and I'm like, wait a second.

00:27:30.880 | So I look in the cabinet underneath. I'm like, if there's

00:27:32.880 | two up here, there's got to be six down below. So I check in

00:27:36.240 | the galley. Of course, there's six down there. I put two I

00:27:38.720 | boost to my back, which I'm still not in my bathroom here.

00:27:43.520 | I check out he's got a TV setup. So I'm like, Oh, I wonder what

00:27:50.080 | movies are on here. And it's Netflix. He's got so much

00:27:52.800 | bandwidth on that frickin plane. That is on the plane. You don't

00:27:57.680 | have to download your movies before you take off on

00:27:59.600 | Chamath's plane. All right, let's get back to work here.

00:28:02.800 | By the way, have you seen that movie? Yeah, it's incredible.

00:28:07.120 | He's got to watch it. It's not the best film of the that was

00:28:10.240 | tar but I don't want to get into it with Chamath.

00:28:11.920 | Oh my god, I tried to watch tar. That movie sucks. It was so

00:28:18.720 | boring and fucking self absorbed and contrived.

00:28:21.440 | It is a little self absorbed. I'll admit.

00:28:22.960 | But I like about it. For anybody that has sleeping issues

00:28:26.640 | and otherwise needs to use a sleeping aid. I would just put

00:28:29.280 | that movie on because, you know, once you see Cate Blanchett,

00:28:32.640 | blathering on and walking back and forth from her kids fucking

00:28:35.520 | school and then some crappy piano play you'll fall asleep.

00:28:38.960 | And then what puts you to bed faster? Chamath Ambien tar or

00:28:46.000 | science corner science corner which one I love. I actually

00:28:49.200 | love science corner. I don't take I don't take sleep aids.

00:28:52.320 | I've taken Ambien three times in my life. Yeah, but that was

00:28:55.600 | recreationally during the day. That's no, no, it was

00:28:58.240 | prescribed to me because I wanted to try it. I also tried

00:29:00.400 | Lunesta once. They were they're both like, careful with that

00:29:04.640 | stuff, man. You'll start tweeting weird shit. Be

00:29:06.720 | careful. I tried those sleeping aids four times in my life and

00:29:09.760 | you wake up, I wake up with a it has a really bad tail effect.

00:29:13.440 | So like, I woke up super groggy. I only get five or six hours of

00:29:17.520 | sleep with it. So anyways, I do take melatonin and that's really

00:29:21.440 | good. That works. That's natural. It does the trick for

00:29:24.480 | me and then I try to just everybody on melatonin all of

00:29:26.960 | a sudden, like everybody I know takes melatonin. Are you sure

00:29:29.840 | it's a natural way to ease into sleep? Yeah, for me, what I do

00:29:33.120 | is like I use it as part of a routine where like, typically

00:29:36.320 | around 10 like all the, you know, devices, things get

00:29:40.160 | silenced and do not disturb mode and I'm in a really restful

00:29:43.840 | place by 10 o'clock. I mean, usually by 1015 to 1030 I'm out

00:29:47.040 | like a light. I wish I just got this infrared sauna. You guys

00:29:51.120 | have infrared saunas. This is like the new hotness and man

00:29:54.240 | that is incredible. You get a heart rate goes way up and then

00:29:57.680 | you sleep like a baby. Okay, let's get back to AI. Brad. Are

00:30:01.440 | people getting too much credit in their stock prices and is the

00:30:04.560 | radio contrast therapy after the infrared sauna? I don't know

00:30:07.920 | what contrast therapy is. What is that? Meaning when you do the

00:30:10.480 | hot then you jump into like an ice bath? No, I'm getting an ice

00:30:13.600 | bath for next for my little outdoor sauna area and I'm going

00:30:17.120 | to start doing that. I did that with my friend Antonio and

00:30:19.840 | turn it friend of the pot Antonio gracias. He's got one of

00:30:22.480 | those cold plunges. We jump in the cold plunge together. He's

00:30:24.640 | got this thing at 45 freaking degrees. He says don't try to do

00:30:28.400 | too much. You'll have a heart attack. So I go in, I get 45

00:30:30.800 | seconds in, I start breathing like, really heavily. And I'm

00:30:35.840 | like, I gotta get the hell out of here. He does six minutes.

00:30:38.400 | Yeah, I do four minutes, three times a week. What temperature

00:30:44.080 | what temperature 42 to 44. The research paper that everybody

00:30:47.920 | references now, I think her name is Suzanne's Soderbergh or

00:30:51.040 | something like that. She's the Swedish researcher. Huberman did

00:30:55.200 | it on his podcast that Rogan did it anyways, the the data is

00:30:58.800 | like an app, like a little less than an hour of heat. And 11

00:31:04.640 | minutes of cold per week per week was shown to be

00:31:07.600 | physiologically optimal. So I do three times a week, 20 minutes

00:31:10.880 | of heat, followed by four minutes of cold plunge three

00:31:14.640 | times a week. Do you have like a cold plunge where you set the

00:31:16.800 | dial on it? Or is it? No, no, I just I'm watering. No, I do old

00:31:20.320 | school. I, I use the Mr. Steam in my bathroom. Because I after

00:31:24.960 | I'm done working out, the last thing I want to do is schlep

00:31:26.960 | outside, find my slippers, put on a robe, I'm not going to do

00:31:29.840 | any of that. So I walk upstairs, I do the Mr. Steam at like 110

00:31:33.200 | degrees. And then while I'm working out, somebody just makes

00:31:38.080 | an ice bath for me and put a bunch of ice in a tub, fill it

00:31:42.320 | with water and just jump in it. So what do they do? Do they

00:31:45.200 | carve like a bunch of baby seals in ice? And then they just when

00:31:48.320 | you get no, no, no, all the ice cubes were made to look like my

00:31:51.440 | face. So I have these shapes of yourself. So I'm like, look at

00:31:55.520 | myself. Yeah. No infrared gets up to like 130 140 degrees and

00:32:01.120 | your heart rate will go up to 140 150 degrees in this. It's

00:32:04.160 | all different experience than the Mr. I was recently on a ski

00:32:08.000 | trip. Yeah. And it's a this extraordinary sauna. It's wood

00:32:13.040 | fired. Okay, tell me about this. So that so the lead guide on

00:32:17.760 | this trip, we go down there, he gets the thing heated up before

00:32:21.120 | we show up right and I show up with this great athlete down

00:32:23.920 | there. And we go in the hotbox because you know, this is the

00:32:27.280 | thing to do. Yeah. And I look at the thermostat. I think it's

00:32:30.880 | broken. It shows like it's hard peg that like 225 degrees

00:32:36.320 | Fahrenheit. That's a lot of you walk in your I mean, you slow

00:32:40.320 | cook meat at 225. That's my lips are burning, you know, and

00:32:46.640 | there's this person sitting in there. He's like, now this is

00:32:49.120 | the way you do it right? Tough guys, you know, do it at this

00:32:52.000 | temperature. Like, alright, so you know, we sit in there for

00:32:54.240 | like 1010 minutes, and then we go and we jump in, you know, in

00:32:57.760 | a frozen lake. And about 10 minutes later, we're taking off,

00:33:01.520 | we had to leave this particular place. And, you know, people are

00:33:04.640 | waving goodbye. And they're looking, you know, they have to

00:33:07.920 | look over the sauna as they're waving goodbye. And they notice

00:33:11.280 | that the sauna is on fire. Ah, yeah.

00:33:20.480 | People are taking this a bit to the excess. It's a little crazy.

00:33:23.280 | Alright, so back to back to the docket here. AI. Yeah, people

00:33:27.040 | getting too much credit in public markets kind of running

00:33:29.600 | with this before it's actually ready for primetime. Just to add

00:33:32.560 | to freebergs point here. There are a lot of people talking

00:33:36.320 | about doing things in startups. I see people actually doing

00:33:39.120 | things I would say four out of five startups that we've

00:33:41.920 | invested in, and the majority of them that were being pitched on

00:33:44.800 | right now are not only talking about AI, which they were all

00:33:47.440 | talking about it three years ago, they're actually

00:33:49.520 | implementing it now because the tool sets are available. I just

00:33:52.160 | had a call. Thank you freeberg for putting me in touch with the

00:33:54.560 | Google people. I just did a call this past week with Google and

00:33:58.400 | they gave me some previews of what they're working on. I can't

00:34:00.560 | say anything about it. But it's it's mind blowing. I think

00:34:03.200 | Google's not as far behind closed AI.

00:34:05.200 | Brad, what's your read on Google? Now? We had a little

00:34:07.440 | fuffle when I when I talked about Sundar's reaction to, you

00:34:12.240 | know, AI and the concerns that others might have on folks

00:34:16.880 | talking about the company. I mean, what's your point of view

00:34:18.480 | on Google today? I don't know if you talked about this.

00:34:20.320 | Yeah, yeah, no. Well, I mean, I think, you know, I had this, I

00:34:25.040 | had this dinner, this incredible dinner, actually, Thursday at

00:34:27.920 | the pub. And, you know, it's how I know, Silicon Valley is

00:34:31.360 | back, because it was just like serendipitous. We threw it

00:34:33.440 | together in the afternoon, you have this like, or extraordinary,

00:34:36.400 | you know, CEOs there. And, you know, you had Mustafa, one of

00:34:41.680 | the co founders, deep mind there, and rich Barton from

00:34:44.560 | expedience, just just an incredible group. And the $20

00:34:47.440 | trillion question is, how does the entire open architecture of

00:34:53.040 | the web get re architected in the age of AI? Another way of

00:34:57.040 | asking asking the question, because we're all kind of

00:34:59.120 | playing small ball, right? We're all talking about, oh, you

00:35:01.920 | know, our TPUs, GPUs, you know, and what clouds going to get

00:35:05.360 | accelerated, that's kind of the small ball, the big ball here,

00:35:08.800 | the $20 trillion question that has defined the entire internet

00:35:13.200 | for our entire careers, has been web search. And I will tell

00:35:18.800 | you that the conversation around that table, there's increasing

00:35:23.040 | confidence that whatever comes next, right, the top of the

00:35:26.400 | funnel is up for grabs. And all of those dollars over a period,

00:35:30.800 | again, a five years, seven years is going to get redistributed.

00:35:34.640 | And make no mistake, Google is well positioned to make its

00:35:39.040 | claim for that. But its claim is going to come at the expense

00:35:43.920 | of search. And so Google may create the best AI in the world.

00:35:47.920 | But it's going to have to fight off the cannibalization of core

00:35:52.240 | search. And the question is, in this new thing, and so rich

00:35:55.840 | Barton, you know, an incredible product founder, right? Think

00:36:00.080 | about Expedia, Zillow. Yes, and Zillow. So he's founder of

00:36:03.600 | Expedia and founder Zillow, two vertical search engines that

00:36:07.200 | dominated right there particular verticals. And the topic of the

00:36:10.960 | conversation was that the new UI, right, the new way you

00:36:15.680 | interact with your customers, right, is not optimizing a web

00:36:19.840 | page. It's not optimizing an application. He calls it the

00:36:24.320 | race to intimacy. The race to intimacy that you have to build

00:36:29.280 | a conversational UI. I've run that race a few times.

00:36:32.480 | No, and it's related race.

00:36:35.520 | I think that was a sprint, not a marathon.

00:36:37.520 | Sometimes it's been a marathon.

00:36:40.400 | And the penultimate question is, who ends up on top? Are you

00:36:45.200 | always on top, Jamal?

00:36:46.240 | I run really good middle distances. And then if I need to

00:36:50.960 | just make it, you know, run a Boston Marathon, I can if I

00:36:53.760 | want, but I don't.

00:36:54.480 | Okay, yeah, sure you can. Yeah.

00:36:56.400 | But I think, you know, I took a poll.

00:36:57.920 | Does he think, sorry, does he think Zillow is dead? I mean,

00:37:00.560 | he's no longer a shareholder, I'm guessing.

00:37:02.320 | I mean, he's the CEO.

00:37:03.680 | He's the CEO. He's the chairman.

00:37:05.280 | Sorry, not Zillow. Sorry, not Zillow. Expedia. Pardon me.

00:37:07.760 | What does he think about Expedia and travel?

00:37:09.360 | Well, you know, you and I had this conversation, Gurley

00:37:11.760 | chimed in, the Kesh chimed in on Twitter. Well, you're not on

00:37:14.000 | Twitter, but they chimed in. You know, about the conversation

00:37:18.640 | from last week's pod, every vertical search engine and

00:37:22.720 | Google itself, that architecture is suspect. Right? The

00:37:27.360 | question is just over what timeline is it suspect, but the

00:37:31.280 | world is moving past 10 blue links, information retrieval

00:37:35.360 | that looked like a card catalog is not where we're going.

00:37:38.560 | You no longer need an index, you need someone to do the

00:37:41.200 | retrieval from the index for you. That's the new service.

00:37:44.000 | And extract the knowledge.

00:37:45.600 | And yeah, that's what I mean, it's personalized to you. But I

00:37:48.080 | think one of the questions that's still outstanding from an

00:37:50.480 | architectural point of view, in terms of your interaction with

00:37:53.840 | all the data in the world, is, are you as a user going to have

00:37:58.560 | a number of independent relationships with your travel

00:38:01.600 | search engine, your travel agent, or you're going to have a

00:38:04.720 | relationship with your doctor medical office, and you're going

00:38:07.040 | to have a separate relationship with your, you know, financial

00:38:11.360 | advisory type service? Or are you going to end up seeing

00:38:15.200 | similar to the challenge we have in search versus vertical search

00:38:17.840 | today, an aggregator of services, because there's value

00:38:21.920 | in cross populating the data and the knowledge about you across

00:38:25.280 | those services. So sure, you know,

00:38:28.160 | it's gonna be the no, it's gonna be the former, because like,

00:38:30.400 | obviously, there's value to the company, because every company

00:38:34.320 | wants to profiteer from you and monetize you in nine different

00:38:38.400 | ways and maximize the equity for their employees and their

00:38:41.840 | founders, and their board and their shareholders. But that's

00:38:44.640 | not what people want, right? So like, for example, when you go

00:38:47.200 | to a doctor, would your doctor be better off if, you know, she

00:38:51.040 | also had all of your data from, I don't know, pick your other

00:38:54.640 | service providers, of course, maybe you could make a claim

00:38:57.840 | that if they had all of your personal information, and they

00:39:01.200 | understood your risk factors, they could do a much better job.

00:39:04.160 | But the reason you don't do that is you want some segregated

00:39:07.280 | relationships, it gives you some level of privacy, but mostly it

00:39:10.320 | gives you control in a world of AI, where you can be more

00:39:13.120 | conversational. The idea that humans will want to get reduced

00:39:16.800 | to talking to one thing for everything, I think is wrong. I

00:39:21.200 | think instead, it's actually going to be hyper fragmented,

00:39:24.400 | because the best in class use cases are going to be the things

00:39:28.240 | that people want, and then be, it gives the user control. The

00:39:32.400 | one thing I would tell people is do not give up all of your data

00:39:36.800 | to one thing who's professing to be at all, they are going to lie

00:39:40.320 | to you and trick you. And you're going to have a social media

00:39:43.200 | problem writ large all over again.

00:39:44.960 | There's another way to think about this, which is the reverse

00:39:47.360 | of the client server model, where today, you as you are the

00:39:51.760 | client, you are the node on the network, and you're communicating

00:39:54.960 | with the center of the network, which is the server, which is

00:39:57.760 | the service provider, and all the data sits there, and you're

00:40:00.560 | getting data in and out of their product to suit your particular

00:40:03.840 | objectives. But the future may be that more data is aggregating

00:40:07.440 | and accruing about you, you end up becoming a server, you then

00:40:11.600 | have the option just this speaks to kind of the architecture on

00:40:14.160 | the internet. Imagine if every individual had their own IP

00:40:16.960 | address, and that individual's IP address had behind it behind

00:40:21.440 | your ability to control lots of information and lots of output

00:40:24.720 | about all your interactions across the different network of

00:40:27.680 | service providers that years, that's a very smart framework, I

00:40:30.800 | think, and that object and ultimately what you have to agree,

00:40:33.920 | you want to be able to rent that data to services. I don't even

00:40:37.280 | think it's about rent is Yeah, as much as it is about, you should

00:40:40.240 | have the reason the reason rent well that then you have to rent

00:40:43.120 | it, you can't give it to them because that's be stupid. That's

00:40:45.280 | right. Your goal, your usage, like let's say the doctor says,

00:40:49.040 | Hey, can I can I get access to your health data, or sorry, your

00:40:52.640 | Apple Watch activity data for the last year, you then have the

00:40:55.680 | option to provide that data to them through some permission

00:40:58.960 | type service that you then make available. So there will be

00:41:01.840 | interconnectivity amongst the service providers, but entirely

00:41:04.560 | gated and controlled by the user. Look, you're seeing this

00:41:06.800 | up front now with Reddit. When in this world, the people that

00:41:11.920 | create the content are actually in control of the data. And if

00:41:15.520 | you try to like monetize an API, without paying the people that

00:41:19.360 | created it or giving them control, they'll revolt. You're

00:41:22.480 | seeing it happen. Now Reddit lost what 90 some odd x percent

00:41:25.920 | of all of their content because the mods were like, fuck you to

00:41:29.440 | Reddit. Well, think of that writ large where everybody is asked,

00:41:32.880 | Hey, great service. Hey, I'm this great service. I can solve

00:41:36.240 | x, y and z problem for you. Just give me all your data. And

00:41:39.120 | then if you're not asking, Well, what do I get? And they're

00:41:42.400 | like, well, you're going to get a whiz bang service. And that's

00:41:44.480 | all they say you say you're being tricked. It's already

00:41:47.440 | happening. I mean, there's an open source lawsuit against

00:41:49.920 | Microsoft's GitHub co pilot, and you have the Getty lawsuit. And

00:41:54.240 | you know, it, there's also a corollary for this Google tried

00:41:58.000 | to kill Expedia already, they tried to kill yell. And it

00:42:01.200 | didn't work. Folks use both services. And you know, if you

00:42:04.320 | if you are trying to boil the ocean, like chat, GPT might, I

00:42:08.400 | think it's not going to work because there's going to be so

00:42:10.480 | much innovation, so much community brand and all that

00:42:13.040 | kind of stuff. And these llm seem to be trending towards

00:42:16.560 | good enough or some kind of parody that I think you're

00:42:19.680 | right. Some people are just not going to give their data over

00:42:21.840 | wholesale. I've been using the Zillow plugin to get exact. And

00:42:25.920 | the Zillow plugin sucks on chat. It's getting slightly better.

00:42:29.040 | Well, I guess the wrong model.

00:42:30.880 | This will exist on Zillow site, Zillow will not let chat GPT

00:42:36.560 | take their business, you're going to go to Zillow site and

00:42:38.320 | you're gonna say, Hey, show me homes that have a sauna and an

00:42:41.680 | ice plunge. And that are four bedrooms and that are you know,

00:42:44.560 | fixer uppers or not fixer uppers and have in suite bathrooms and

00:42:48.720 | whatever. And it's just going to give you that list. Why would

00:42:51.440 | they give that business to close down?

00:42:53.520 | Can you take a crack just at summarizing what we all just

00:42:56.400 | said? Because your initial question was, Friedberg was

00:42:59.760 | like, what does this mean for Google? Well, we all just said

00:43:01.840 | that what we're certain of is there's not going to be 10 blue

00:43:06.240 | links and a model of search that they have monetized in a way

00:43:10.160 | that has been the most prolific business model in the history of

00:43:13.200 | capitalism. Right? So that's a problem for them, you know, from

00:43:17.040 | a business model perspective. So they're going to have to

00:43:19.520 | reinvent their business, that's going to be hard to do. It's

00:43:21.520 | like rebuilding the plane on the fly. But then if you just go

00:43:24.880 | to the two models that we outlined here, on the one hand,

00:43:27.760 | Chema said, you know, you're going to work with all of these

00:43:30.320 | agents. That's exactly what Mark Zuckerberg said on Lex. He's

00:43:33.520 | like, you're not going to have one super agent, you're going to

00:43:35.440 | have, you know, hundreds of agents. And he thinks of

00:43:38.160 | WhatsApp and all of his platforms as the new open web,

00:43:41.360 | where all of these agents will live and you'll interact with

00:43:43.680 | them. You'll interact with your Zillow agent there, you'll

00:43:46.080 | interact with your booking agent, your Expedia agent there,

00:43:49.360 | etc. On the other hand, Chad GPT, Hyatt, Inflection, Reid

00:43:54.160 | Hoffman, and Mustafa, and many others think that the benefits

00:43:59.440 | of general intelligence, this will be the first time that we

00:44:02.720 | solve vertical problems horizontally, right? And their

00:44:06.720 | metaphor, the compare there is, we all don't have 100 personal

00:44:12.240 | assistants in our office, you have one that gets to know you

00:44:15.680 | really well, they get to know what you like to wear, how you

00:44:18.000 | like to travel, the things you like to eat the things you like

00:44:20.960 | in your house, how many kids you have. So there's real leverage

00:44:24.560 | in that, in that horizontal knowledge that can then be

00:44:27.920 | applied to these different verticals. I think the answer

00:44:30.640 | lies in between, your personal assistant will do a lot of the

00:44:34.480 | general stuff, okay, whether it's pie, chat, GPT, whatever

00:44:38.480 | googs comes up with, etc. But I think they will subcontract the

00:44:42.400 | work, whether they chain it out via, you know, behind the scene,

00:44:46.720 | you know, mechanism to other agents. So for example, if

00:44:50.960 | you're interested in traveling to this undisclosed location

00:44:54.720 | that I'm at in Europe right now, you know, my, my assistant

00:44:59.440 | doesn't know anything about this place. So she may interact

00:45:02.960 | with a specialist for this particular place to get you that

00:45:06.960 | magical experience. So, you know, I don't think you have to

00:45:10.720 | pick one or the other, but architecturally, $20 trillion

00:45:14.320 | of value on the web is built around web pages, advertising,

00:45:21.840 | and e commerce, right and sending traffic to those other

00:45:26.080 | places. And what we're all saying, unequivocally, is it's

00:45:29.760 | moving to knowledge extraction, and intelligent agents. And I

00:45:33.760 | think that's tech Tom, but I still think there'll be clicks.

00:45:36.240 | I you know, I have been using BARD a whole bunch, and they have

00:45:40.960 | made massive rapid progress just to give you but one example

00:45:44.160 | here, I'll share my screen, it is pretty extraordinary how

00:45:47.280 | quickly they're figuring this out. And I did this just in the

00:45:49.920 | search while we're talking about the five best Greek

00:45:51.440 | restaurants in the Bay Area obviously came up with coca and

00:45:55.040 | you know, other ones. And then I asked it like, hey, what are

00:45:59.360 | the top items on each of these menus, they started putting

00:46:01.760 | images in and linking to Yelp. And then I said, Hey, tell me

00:46:04.880 | the most expensive wines and it actually got that from Kokari

00:46:09.600 | they have a Chateau Margaux 2009 for 1500 Chamath I don't

00:46:12.640 | think it's good enough for you. But what year is it? It looks

00:46:15.840 | like 2009. Yeah, they have Screaming Eagle 2013. I don't

00:46:20.080 | know if that's a no go Harlan 2014. No, no, no, no. Yeah. But

00:46:25.360 | anyway,

00:46:26.240 | Harlan's good. Harlan's good. Okay, good. So we got to save.

00:46:29.280 | Anyway, this I did the same exact search like four weeks

00:46:32.400 | ago, it didn't have images, and it couldn't get me the items on

00:46:35.360 | the menus. And these could all be links. And these could all be

00:46:38.480 | paid links. So in these results, there's nothing to stop Google

00:46:42.560 | from saying, Hey, Yelp, if you want, we'll put your

00:46:45.120 | information here or not up to you. You choose do robots.txt

00:46:48.880 | except when to call it AI dot txt, you tell us what you want

00:46:52.480 | to be included. And if you want to be included, we want, you

00:46:55.280 | know, it's a marketplace for clicks will include three of

00:46:57.440 | your images with clicks, and we'll call it sponsored, they

00:46:59.840 | are going to be able to insert ads into here that are better

00:47:03.200 | than the current ads, and that will perform at a higher level.

00:47:05.520 | And they're going to know us, this could actually be the

00:47:07.520 | reverse of what everybody's thinking. This could lead to

00:47:10.080 | higher CPMs and higher cost per click because of intent.

00:47:12.960 | By the way, I mean, the the 2014 is actually, I think,

00:47:17.600 | underrated, and it's very highly rated, but I think it is an

00:47:21.360 | excellent one. That's an excellent.

00:47:23.920 | Jason, as to your point, I think all of that. I mean, that's

00:47:27.280 | impressive. It's true. You can also do it on chat GPT. I'll

00:47:30.560 | just say the number of people I interact with on a global basis

00:47:34.400 | who talk about chat GPT versus Bard is like 10 to one today.

00:47:39.120 | Now Google is not that's going to change real fast. So it's got

00:47:41.680 | massive distribution power. Let me tell you what I what I also

00:47:44.800 | think. But to your point, Brad, about this, I just want to I

00:47:47.440 | want to respond to your barred versus GPT for that's people are

00:47:52.000 | not paying attention. And when Google puts this on the homepage,

00:47:56.240 | yeah, and start sending 5% of users to it, and obviously, it's

00:47:59.440 | expensive to do it, our people are going to have their eyes

00:48:01.840 | jump out of their head. I think Google's going to be chat GPT

00:48:05.040 | for I'm saying it right here right now. I think they're going

00:48:07.520 | to beat them because I think that they're better at indexing

00:48:10.160 | all this information and understanding it than anybody on

00:48:12.160 | the planet. And they have the largest ad network. If they get

00:48:16.000 | this done in the next six months, I think it's going to

00:48:18.880 | increase the cost per click, because they're going to know so

00:48:21.520 | much about each user continue, Brad. I know I'm in the minority

00:48:25.200 | here. No, no, I mean, listen, I think a lot of Google's revenue

00:48:28.560 | comes from de facto navigation of the web, they turn they turn

00:48:31.920 | the URL into a navigation box. There are a bunch of ads there

00:48:35.600 | that, you know, people click on, they don't even know they're

00:48:37.920 | clicking on ads. And, you know, they generate a lot of revenue

00:48:41.920 | off of that. But let's be clear, Google is firing at this. I just

00:48:47.280 | don't think it's going to be as monopolistic as they are in

00:48:49.920 | search. I think there are going to be other competitors who are

00:48:52.880 | going to be well financed, you're going to have access to

00:48:54.880 | the data. And today, you have well north of 100 million people

00:49:00.000 | who are paying to, you know, a huge percentage of those to use

00:49:04.720 | chat GPT. And I think this, you know, it's the first

00:49:08.560 | competition, but, you know, Friedberg knows he and I had the

00:49:12.000 | back and forth, they reported earnings, stock was flat, I said

00:49:15.440 | on CNBC that we had sold our shares, we bought back some of

00:49:19.120 | the shares around Google IO, because we do think they're

00:49:22.240 | going to be a player, we think they're going to be a

00:49:23.760 | beneficiary. But I would say as I sit here today, the

00:49:27.520 | distribution of potential for them is less than it was before

00:49:33.040 | chat GPT, you know, the distribution of upside, they

00:49:38.320 | have some competitors now, who are going to be vying for this

00:49:43.040 | next new thing. And I wonder whether or not, you know, as

00:49:46.880 | they try to navigate, you know, you're saying they're going to

00:49:49.360 | take some of this traffic from search and feed it into this

00:49:52.240 | other thing, this other thing better monetize as well as

00:49:54.640 | search, or by definition, that means revenue goes down.

00:49:57.920 | It feels like Google is so close to figuring this out. I

00:50:01.200 | mean, I've been doing some barred searches.

00:50:02.880 | Jake, how much Google do you own? How much Google?

00:50:05.120 | Not enough, not enough. I've just been playing with the J,

00:50:08.160 | on my J trading.com.

00:50:09.440 | He's thinking of adding this.

00:50:13.280 | Like a buy in or two. But let's pivot over to this Reddit thing

00:50:18.560 | because it's super important that people understand this.

00:50:20.480 | I'm gonna buy 17 more shares. I'm gonna buy like a Harlan

00:50:25.200 | 2014 equivalent insurance. No, my J trading is up right now.

00:50:29.040 | J trading.com. Shout out to my trades. I did it as for fun.

00:50:32.400 | I'm at like 20% return. 6%

00:50:34.640 | Well, Jake, you're kind of quiet for a while. So when you're

00:50:37.360 | down, you don't talk about it. No, I had

00:50:39.120 | a thing. I liked and I didn't want to change them.

00:50:43.040 | Do you track them and exit or what do you do with

00:50:45.440 | I'm going to track the exits, but I haven't exited any.

00:50:48.000 | If you go to J trading.com, you can play along.

00:50:49.840 | But how can you only be up 20% when Facebook has doubled?

00:50:56.560 | Oh, sorry. 22.43.

00:50:58.320 | Yeah, but Facebook doubled off the bottom. The whole goal of

00:51:00.720 | trading J cow is to maximize your highest conviction.

00:51:04.960 | Maximize your highest conviction. What do you do?

00:51:06.880 | Put a nickel to put 5% into Facebook.

00:51:10.160 | I don't know. I just I just bought companies.

00:51:12.160 | I know. When you talked about it on group chat,

00:51:15.520 | I made the train companies. You got to put a lot of chips on

00:51:18.320 | the table. I mean, you have that's I think what's the

00:51:20.720 | optimal number as a day trader, Brad, what's the optimal number

00:51:23.920 | of names I should have? You're not a day trader. You don't

00:51:26.320 | trade. As a long trader, what's the number of names I should be?

00:51:32.560 | You have too many. I think with your level of insight, you know,

00:51:38.160 | on the things that you really believe in, there was such

00:51:41.040 | asymmetry in that position at the time that you bought it, it

00:51:44.080 | was your best idea, you should have put at least 30% of

00:51:47.760 | whatever you're going to allocate to this.

00:51:49.520 | That's what I'll do. Yeah. I mean, it's done. Okay. I mean,

00:51:53.280 | listen, I'm up. What did I buy? But 500 shares and my basis is

00:51:58.160 | 47. I'm at 140. So it was a good trade.

00:52:00.400 | Now imagine if you could, you know, 10 or 20 x. Yeah, that's

00:52:03.520 | what I should have done. Yeah. All right.

00:52:04.880 | Jason, how wait, hold on. How much have you put into all those

00:52:07.360 | stocks? 1.5 million. I basically took I had some money in an

00:52:11.360 | index fund laying around and I was like, let me do this 5

00:52:13.600 | million. I did J trading as a blatant attempt to get a sponsor

00:52:17.440 | for this weekend startups. So I was like, Robin Hood or E trade

00:52:20.800 | will sponsor this and I'll make it like a segment.

00:52:23.120 | So I was like, let me do like a segment where I trade and see if

00:52:26.960 | I can secure the bag and it you know, the markets are so crushed

00:52:30.400 | that nobody's spending advertising from Robin Hood or

00:52:32.560 | E trade or interactive brokers or Bloomberg but I also did

00:52:36.160 | it because I wanted to become better at public market trading

00:52:38.960 | to your point to last week's conversation conversation to

00:52:41.440 | mom is under understanding when to sell and when to go long when

00:52:45.600 | you get distributions as a VC. That was really the reason I

00:52:48.160 | tried to do it was just to try to have skin in the game. You

00:52:50.880 | know, just like learning to play PLO or you playing the Razz

00:52:53.680 | tournament. I just wanted to it's very it's very easy. Once

00:52:57.120 | you get shares distributed to you immediately sell them. And

00:53:00.480 | then and then hold on. And then re underwrite from scratch from

00:53:04.880 | there. Okay, once the money is sitting in your account, even if

00:53:10.000 | it takes a day, a week a month, it's not like the stocks going

00:53:12.640 | to rip and triple on you over the next 30 days. re underwrite

00:53:16.560 | it from scratch. And then see if you have that much conviction

00:53:19.440 | when you see the money in your bank account.

00:53:20.960 | I like it. I would just tell you guys the distributions, you

00:53:25.200 | know, there were a lot of firms that rode, you know, a lot of

00:53:30.720 | these big names, right all the way down. You know, that they

00:53:36.000 | got public, but they didn't distribute much if any. And

00:53:40.240 | it's really don't say the names, but what do they rhyme

00:53:42.640 | with? I'll start I'll start. But what's my boy? Yeah, go ahead.

00:53:48.320 | You go you go next. You pick one. Not doing it. Bliger

00:53:53.280 | bliger. Dreeson borrow. It's Malander's blonde. Freebird just

00:53:59.760 | dropped off. With this conversation. All right, listen,

00:54:04.320 | we all got our asses kicked. Except for me. uber's up 67%

00:54:08.800 | this year. Oh, come on. Come on. Let me what what I was

00:54:11.520 | doing. Andresen Blore. It's all of it. What tends to happen is

00:54:17.200 | things hit the bottom. So little bit. And people are so

00:54:21.520 | relieved that they bounced a little bit today, immediately

00:54:25.200 | start distributing because LPs are hammering them. LPs are

00:54:29.200 | like, why did you not send us this, you know, snowflake when

00:54:32.960 | it was at $400 a share? Why did you not send us this door dash?

00:54:37.120 | Why did you go through any name, you know that you can think of,

00:54:40.880 | but then people compound the mistake, I think that as soon

00:54:45.760 | as they get a little relief, boom, it's out the door. And

00:54:48.800 | then the thing doubles on them. And I just think, you know, part

00:54:53.280 | of the benefit of me having to get up every day, 5am deal with

00:54:57.680 | public markets, and think about long or short, it's what we're

00:55:00.640 | talking about in the fall of 2021, around the table before

00:55:04.160 | the poker games, which is the public market is tilty, it

00:55:08.480 | doesn't feel good. And that, you know, we stopped making

00:55:11.600 | venture investments in October of 21. Principally, because of

00:55:15.680 | how we felt about public markets at that point in time. And so I

00:55:18.560 | think a discipline, in fact, I was meeting with a managing

00:55:21.440 | partner of a very big venture firm in Silicon Valley this

00:55:24.960 | week, they just started about a year ago, or six months ago,

00:55:28.720 | doing public market investing. And they said it was incredibly

00:55:32.560 | valuable to how they think about distributions and what they're

00:55:36.000 | doing in the venture. But that's what it's been for me, I have

00:55:38.320 | now started to learn how these things are priced. And I just

00:55:40.640 | think it's great as a learning thing. For me, I have to make

00:55:43.440 | two decisions when to distribute to my LPs, which I just give

00:55:46.800 | them the shares the second I have them and let them make the

00:55:48.800 | decision. But that is also personally for me, do I want to

00:55:51.440 | hold it or do I not? I like your suggestions. Nice punch up

00:55:54.000 | Chamath of looking at the cash and then deciding if you want to

00:55:56.320 | read. Did you guys see this crazy thing from calipers where

00:55:58.880 | they were like, yeah, they were they were down like, four, I

00:56:02.960 | mean, horrible returns on the venture side. And so their

00:56:05.360 | decision was to double down. Well, they didn't have they took

00:56:08.560 | like a decade off from venture, the returns of what they did

00:56:12.080 | invest in venture were atrocious. To be fair, I don't

00:56:14.720 | know how the board has changed to calipers, but calipers brought

00:56:17.600 | in a new CIO, an entire new team. And so they can't be held

00:56:22.640 | liable for, you know, that track record, I did kind of see

00:56:26.160 | something on Twitter about I was shocked, it would be very

00:56:28.640 | difficult to manufacture that bad a track record, if what I

00:56:32.240 | saw was accurate. However, I would say the team that is there

00:56:36.560 | now the portfolio that they're putting together, and doubling

00:56:39.680 | down where I think venture is kind of at the bottom or bottom

00:56:43.600 | third, and this is the bottom, I think, bottom third, I don't

00:56:47.360 | know, bottom half, you know, listen, in venture, you got to

00:56:50.640 | find three things. You got to find, you know, you don't want

00:56:53.680 | to invest all your money at the top. So you got to get the bot,

00:56:56.640 | you know, bottom third, none of us can call the bottom. But you

00:56:59.200 | know, last year, at the end of 22, we were certainly in the

00:57:02.000 | bottom third evaluations, then you want to be early in a major

00:57:06.080 | platform disruption. I think we all agree we're early in a major

00:57:10.000 | platform disruptions, probably the third of our careers. And

00:57:13.920 | then you want to back one of the best firms, best brands in

00:57:16.160 | Silicon Valley, like if you do, like and people know who those

00:57:18.880 | are, if you do those three things, you know,

00:57:21.200 | simultaneously, like you got a good shot at producing really

00:57:24.320 | incredible vintage,

00:57:25.120 | just to put some numbers on the CalPERS thing. So you can

00:57:26.800 | respond to it. America's public largest public pension CalPERS,

00:57:30.400 | that's California's manages some 444 billion in capital on

00:57:35.040 | behalf of California's 1.5 million state school and public

00:57:38.160 | agency employees is leaning into venture. After years of

00:57:42.560 | bringing down its VC exposure to 1% to a 1% target, the

00:57:46.880 | institution investor is now looking to increase its

00:57:49.120 | allocation more than sixfold, obviously 6% from 800 million to

00:57:53.280 | 5 billion, the Financial Times reported. So thoughts on that

00:57:56.960 | month?

00:57:57.440 | Well, I mean, this is the moment there's a lot of venture

00:57:59.600 | firms that are hard up for money. And so they may have a

00:58:04.000 | shot, they can get allocations. Now, in order to get into these

00:58:06.800 | funds, the problem that they have to realize is they may be

00:58:10.240 | buying a bunch of toxic assets or a bunch of toxic partners in

00:58:14.320 | the sense that a lot of these people have been getting run

00:58:16.720 | over for the last three or four years. We don't know again,

00:58:20.800 | we've said before, most venture investors are probably

00:58:23.520 | unprepared for the shock because they've never lived through

00:58:27.520 | one. There's been a lot a lot of junior muckety mucks that were

00:58:30.640 | hired because they were XYZ middle level exec at rando

00:58:34.800 | company means nothing. So I don't know, I think it's smart

00:58:39.760 | that they have I mean, they have to be thought first of all,

00:58:42.400 | how is it that the caliph like, literally, it's like, I know,

00:58:48.320 | some trillions of dollars being made in your backyard and some

00:58:51.360 | genius was like, well, the thing that's creating all the wealth

00:58:54.560 | in the world, which is in our backyard, where we probably have

00:58:57.280 | the best pitch in order to get into these funds.

00:58:59.120 | And you just come down Leonie and say, Hey, oh my god, give me

00:59:03.680 | the list of 10 and put money on those 10 and call it a day.

00:59:06.720 | Oh my god, that's unbelievable. That's unbelievably derelict.

00:59:10.160 | That's unbelievably sloppy and

00:59:13.120 | sorry, that's it. Sorry, let me just finish. That's actually

00:59:17.120 | that's the best word to use. When you look back on a decision

00:59:20.480 | like that, there's no numerical justification that one could have

00:59:23.360 | made in the 2000 teens to have made that decision, except that

00:59:26.640 | that was an emotional decision. And when you're running a half a

00:59:30.800 | trillion dollar fund, there is no room for emotion, you should

00:59:34.080 | not be allowed, there should be some. So I think that that shows

00:59:37.280 | a very hollowed out and at a minimum, imbecilic risk

00:59:43.200 | management infrastructure at CalPERS that needs to get fixed.

00:59:45.840 | So whether the allocation goes up or down, if I was a teacher,

00:59:49.760 | and my money was being managed by them, I say, man, these people

00:59:53.440 | I would want to understand how they're making decisions. Because

00:59:56.800 | I don't, I would want to see the investment memo that got them to

01:00:01.200 | decide as an investment committee that 1% in the most

01:00:05.040 | important asset class that's in your backyard, that's making all

01:00:07.600 | the money in the world made any sense. I just want to read that

01:00:10.480 | memo and see, could I agree with that? Because then I would want

01:00:15.200 | to do so. Hold on, then I would want to read the investment

01:00:18.240 | memo that says we're going to change course and get back to

01:00:21.040 | five or 6%. Because if that process isn't fixed, these

01:00:24.320 | decisions are just going to be equally bad, you're just going

01:00:27.440 | to compound bad on top of bad because, again, they clearly did

01:00:31.040 | a terrible job. And then on top of that, they had horrible

01:00:35.840 | partner selection, because the people that they did invest in,

01:00:38.800 | because the data is public, have performed horribly. So what

01:00:43.280 | changes now all of a sudden, right? Because if the best firm

01:00:46.560 | still don't want you in increasing it from 800 million

01:00:49.040 | to 5 billion just means you're going to lose 4.2 billion more

01:00:51.600 | than you would have otherwise at 800 million.

01:00:54.400 | says here, they made two bets, they had bet on looks like

01:00:59.120 | light speed in the last couple years, light speed and TPG. So

01:01:03.520 | we'll see how those go.

01:01:04.400 | I do have some data on this, because we've spent a lot of

01:01:10.320 | time talking with them. And as you know, Jason, we were just

01:01:12.640 | talking, you know, like talking to folks like my bottle of who

01:01:15.120 | I California is one of the largest sovereign wealth funds

01:01:18.880 | in the world, right? This is not just a state. This is bigger

01:01:22.240 | than most countries, right? This is one of the biggest

01:01:24.560 | economies in the world. I would say that what my interactions

01:01:29.120 | with the new team have been very impressive. And I will tell

01:01:32.880 | you, they're not just looking at funds and building a new

01:01:36.000 | portfolio. I think they are thinking about doubling down at

01:01:39.120 | the right time. And they're thinking about thematic bets

01:01:42.640 | against super cycles like AI to say, let's allocate this much

01:01:47.040 | money, who are the three or four deep strategic partnerships

01:01:50.560 | that we can have to drive, you know, return on that. So I think

01:01:54.320 | it's I think they're on their way. But I agree with you.

01:01:56.880 | They're the sovereign wealth fund of the most prolific state

01:02:00.800 | in the world. And they should have outsized returns, not

01:02:03.440 | trailing. I just want to point out one thing here is the power

01:02:06.560 | of writing to map you decided to write your annual letter a

01:02:09.280 | couple years ago. Brad, you also will write a letter, famously

01:02:13.520 | the Facebook getting fit one or the meta getting fit one. The

01:02:16.560 | power of writings and I just did this for the launch on four.

01:02:20.000 | And when you write a deal memo compared to doing a deck,

01:02:23.360 | they're the questions you get are so qualitatively different.

01:02:28.400 | And the people you attract are so different. It is

01:02:30.960 | extraordinary. I am advising startups across the board to

01:02:35.840 | write really tight deal memos because I write these we make

01:02:38.000 | these deal memos internally when we make an investment. But man,

01:02:40.960 | is it great for clarity of thought and for the person on

01:02:43.280 | the other side to just stop and read 1000 words or 2000 words

01:02:47.120 | as opposed to go through some stupid performative deck. It's

01:02:51.040 | just so such a better process. Maybe you could you both could

01:02:53.680 | speak to that or Friedberg. I don't know if you're you've been

01:02:55.440 | writing deal memos. But maybe for people who are listening or

01:02:58.240 | capital allocators and founders, I've been writing for years.

01:03:00.720 | Why? And what is the what is the what does it do for you?

01:03:04.240 | Yeah, well, it allows you to actually find people who will

01:03:08.400 | critique things in a thoughtful, intelligent way. It's

01:03:11.280 | hard to critique decks because you use broken English, you use

01:03:14.480 | fancy graphics, all of a sudden, somebody that's very good at

01:03:17.840 | like graphical layout can dupe somebody else. And so you don't

01:03:21.760 | get to good outcomes because this weird groupthink effect

01:03:25.360 | sets in when you look at decks. So I'm not a fan of decks, I use

01:03:29.440 | them, but they need to be a companion to some sort of long

01:03:32.800 | form narrative document. And I just think it's more useful, you

01:03:37.360 | get people who can really think about what they agree about what

01:03:40.800 | they don't agree about, it shows the intellect of the person

01:03:43.600 | writing it, quite honestly. I just think it's a it's like a

01:03:47.760 | basic skill that people should have. It's a useful skill to

01:03:50.800 | teach people as well. decks are very dangerous. I think if

01:03:54.000 | you're going to make decisions, I would encourage you the bigger

01:03:56.720 | the decision, the deck is insufficient, it can be a

01:04:00.000 | companion piece, but it needs to be attached to long form

01:04:02.320 | documents. But the long form documents don't need to be long

01:04:05.360 | either 2345 pages, but without it, I think you're going to

01:04:09.520 | allow some really bad decisions to creep into some good ones.

01:04:12.240 | freeberg any writing from you?

01:04:13.600 | For deals? Okay,

01:04:18.400 | he ran, he doesn't talk about writing. All right, as everybody

01:04:23.280 | knows, Reddit is on strike right now, I should say the mods who

01:04:26.800 | run Reddit are on strike. 95% of Reddits went dark, they basically

01:04:31.520 | turned off new posts, or they just went private. Basically,

01:04:34.000 | nobody could join, nobody could see the content, I believe is

01:04:37.120 | what that means between Monday and Wednesday. And the reason

01:04:41.440 | they're doing this is because Reddit decided it would start

01:04:44.000 | charging for its API. So who gets impacted by using the API?

01:04:48.480 | It turns out apps, we saw this at Twitter as well, when Twitter

01:04:51.440 | started changing its pricing for its API. And this means that

01:04:56.240 | some of the really high end Reddit apps would have to pay

01:05:00.160 | $20 million a year for access to read its data. Now, they

01:05:05.280 | originally had said they were changing this pricing because

01:05:07.760 | they were going to train AI models. And they wanted anybody

01:05:11.600 | using that data, i.e. Google barred or chat GPT for enclosed

01:05:16.400 | AI, they wanted them to pay for it. And Steve Hoffman was

01:05:19.440 | explained all this in a New York Times profile in April, you can

01:05:22.400 | go search for that Reddit wants to get paid for helping to teach

01:05:24.800 | big AI systems. The largest app is called Apollo. Just so you

01:05:29.120 | know, if you're not into those Reddit really came out with

01:05:31.520 | their app. Really late. This was a function of the 2005 to 2015

01:05:37.040 | timeframe. Back then. Web 2.0 startups didn't have a lot of

01:05:41.280 | capital. So they let other people build on their API's and

01:05:43.920 | build apps. Some of those apps caught steam and are actually

01:05:46.240 | better than the apps developed, at least for a while, it was

01:05:49.920 | better than the Twitter app and the Reddit app. So thoughts on

01:05:53.760 | this freeberg. There's a history here is mimicked at both

01:05:59.520 | Facebook and Twitter, both of whom had open API's that

01:06:03.520 | provided access to third party app developers to build tools

01:06:07.760 | on top of the platform by accessing either user data or

01:06:10.640 | content off of the network, and then making that available via

01:06:15.440 | some different product function, some different UI than the

01:06:19.920 | native tools allowed. If you'll remember, Facebook started to

01:06:23.040 | kill off its API and in the process killed a number of

01:06:25.600 | these third party app developers, the most prominent

01:06:27.920 | of which was Zynga. I think this was around the 2012

01:06:31.280 | timeframe. You guys know if I'm right on that, I think it's

01:06:33.520 | right. Sounds right. And you know, we saw the same thing

01:06:36.400 | happen in Twitter, where if you guys remember, in the early

01:06:40.160 | days, a lot of users accessed tweets from people that they

01:06:44.080 | followed through third party apps and third party apps all

01:06:46.880 | competed for the user. And ultimately, Twitter's

01:06:50.880 | management team realized that having direct access to the

01:06:53.760 | user, being able to control the UI, the UX and not just become

01:06:57.440 | a data network, but to actually become a service for users made

01:07:03.520 | a similar sort of change. So you know, Reddit's motivation

01:07:07.120 | around AI training is an interesting one. But it does

01:07:09.600 | speak to this idea that the social network companies social

01:07:12.880 | in the sense that the users themselves are creating the

01:07:15.600 | value they're creating the content at both Facebook, at

01:07:19.120 | Twitter, and at Reddit, ultimately, the company loses

01:07:23.680 | the value if that data that content gets extracted, and

01:07:28.880 | they can't monetize it or capture the value somehow. And

01:07:32.320 | it's a lot different, you know, every company ultimately wants

01:07:34.560 | to become a platform company, meaning that they can offer

01:07:37.920 | multiple products or services to users that sit on top of some,

01:07:42.800 | you know, network they've created, and in the process,

01:07:45.360 | create a network effect, because more products, more apps

01:07:48.080 | creates more users, more users, you know, be guts, more, more,

01:07:51.600 | more apps, and so on. That works well, in some contexts,

01:07:55.120 | like an Apple App Store context, but in the context

01:07:59.120 | where there is a network unto itself, like Facebook, Twitter

01:08:03.280 | and Reddit, meaning that there is already a user network that

01:08:06.720 | is generating value in the form of the content that's being

01:08:09.040 | produced and consumed, you don't necessarily gain anything by

01:08:12.560 | then building an app network on top of it. And I think that's

01:08:15.600 | been one of the kind of key learnings that's repeated

01:08:17.760 | itself over and over with Twitter and Facebook. The thing

01:08:21.040 | about Reddit, it's always been a community service. If you

01:08:23.840 | guys remember, like in 2014 2015, Ellen Powell stepped down

01:08:27.840 | after there was a Reddit revolt, she was the CEO at the time.

01:08:30.240 | And she fired an employee at Reddit that ran the q&a site for

01:08:35.840 | Reddit mods, and their users and the network, the community

01:08:38.960 | was super pissed off when this happened, and they all revolted,

01:08:41.440 | and they were going to shut down the service. And ultimately,

01:08:44.320 | Ellen, you know, got removed from her role as CEO when this

01:08:48.320 | happened. So you know, because so much of the value of Reddit

01:08:51.840 | isn't in the management team. It's not in the work that the

01:08:54.960 | software engineers do that run the company. It's not the VCs or

01:08:58.320 | the shareholders, the value of Reddit is inherent in the

01:09:01.040 | community. It's inherent in the individuals that build the

01:09:03.520 | content on that platform. And that community has convened many

01:09:06.960 | times in the past at Reddit to change the rules to say this is

01:09:10.240 | what we want this community to become. And this is how we want

01:09:13.120 | this management team to operate. And so it's a really uniquely

01:09:16.720 | positioned business says a lot about how social networks in

01:09:20.240 | this kind of modern era are operating, it really speaks to

01:09:22.880 | how much of the value ultimately accrues to the shareholders in a

01:09:25.200 | business like this, when the users themselves can step in and

01:09:28.080 | unionize and say, Hey, you know what, we're not going to allow

01:09:30.960 | this much value to be pulled out of the network in this way, we

01:09:33.760 | want this to change. So I think it'll it'll have a lasting

01:09:36.800 | effect in terms of investing in social network or social media

01:09:40.480 | type businesses where the users are generating so much of the

01:09:43.120 | value and have the ability to kind of communicate with one

01:09:45.760 | another and control where value ultimately falls.

01:09:48.400 | Tremont, you were at Facebook, I think when Zuckerberg realized

01:09:52.400 | enabling a bunch of folks to use the API wasn't as good as

01:09:56.480 | controlling the user experience, having a uniform user

01:09:58.960 | experience. And it got deprecated. And I remember Zynga

01:10:04.080 | and a bunch of other people had games and we're sucking users

01:10:07.360 | off the platform. There was a LinkedIn competitor at one point

01:10:09.760 | that was growing at a credibly violent pace. And I guess y'all

01:10:13.840 | made a decision. We don't want you sucking our user base off

01:10:17.120 | the platform. Maybe you could expand on what the decisions

01:10:19.760 | were at Facebook at the time.

01:10:20.800 | That was one of the things I ran, I think one of my teams was

01:10:23.600 | responsible for Facebook platform. Yeah, it was just a

01:10:27.280 | very clinical decision around enterprise value. Look, the

01:10:30.320 | thing with Reddit is that it's a hot mess. And in order to try

01:10:37.040 | to create enterprise value, they decided to really leverage

01:10:43.040 | the mods so that there was some level of control. And that

01:10:49.280 | control was necessary so that they could basically sell ads.

01:10:52.480 | That's how this thing moved in lockstep. Because the minute

01:10:54.880 | that there was corporate venture investors and other investors

01:10:58.480 | and a need to generate enterprise value, and is it worth

01:11:02.240 | 2 billion or 5 billion or 10 billion, whatever the number was

01:11:05.120 | that they thought they were worth, they had to make money,

01:11:07.600 | right. And Huffman was very straightforward about that. And

01:11:10.400 | wanting to go public and the whole nine yards. But because

01:11:13.760 | it was such a hot mess, the mods became this integral part of

01:11:18.320 | the ecosystem, so that they could actually drive reasonable

01:11:21.680 | revenue. But then what happened was, it also allowed them to

01:11:26.240 | basically take over. And I think that it was a pretty

01:11:32.160 | significant miscalculation. Because I think that what they

01:11:36.160 | needed to do was really redefine the economics of how revenue

01:11:40.320 | generation splits would work before they could do all of this

01:11:43.280 | stuff and try to monetize the API. So I think like, they got

01:11:46.160 | the order of operations wrong. But I also think it's very

01:11:49.280 | fixable. And I think that they have some very smart people

01:11:51.840 | around that table. So as long as they're, again, willing to be

01:11:55.360 | clinical and unemotional, like we were, they'll get to the

01:11:58.320 | right answer, which is, give them a healthy rev share. That's

01:12:01.760 | the future. Freeberg, you know, what version of what freeberg

01:12:04.800 | said is true. The content creators need to get paid, you

01:12:07.600 | know, why, you know, you see content creators now on YouTube

01:12:10.960 | making millions, 10s of millions, hundreds of millions,

01:12:14.080 | and a few unique cases, billions. And then we are all

01:12:18.160 | content creators, yet most of us on these old legacy platforms

01:12:21.280 | make nothing. So that that exchange has to change. Brad,

01:12:26.000 | any thoughts with this to rally IPO?

01:12:27.600 | Not on that. But I mean, I think, you know, you bring up

01:12:30.160 | this thing about meta, you know, did anybody pay attention to,

01:12:34.720 | you know, Zuck's launching project 92. Right. And project

01:12:39.360 | 92 is going to take on Twitter. It's a text based social

01:12:43.360 | network that's going to pay creators and they're courting

01:12:46.720 | apparently Oprah Winfrey, the Dalai Lama, and all of their

01:12:50.400 | creators that are already on their current sites are saying

01:12:54.160 | we will use this thing to interact and we will compensate

01:12:58.000 | you. And then on Lex Friedman's podcast, he mentioned

01:13:00.720 | something about, you know, having been inspired a little

01:13:05.680 | bit by what was going on with blue sky. So I'm super

01:13:09.920 | intrigued. You know, he talked about it at this all hands

01:13:12.480 | meeting, I think Chris Cox talked about it. So it looks

01:13:15.120 | like meta may be revisiting some of these things that they

01:13:17.840 | shelved a while back. You know, it doesn't have any direct

01:13:21.280 | implications on the Reddit front. But I think there's a

01:13:26.160 | suggestion here that it may be more about putting the

01:13:30.320 | control back in the hands of the user. From a data

01:13:34.240 | perspective and a monetization perspective, that would be a

01:13:37.360 | pretty gangster move. You know, and an interesting way to

01:13:41.840 | leverage the platform. And I don't really hear anybody

01:13:43.920 | talking about it.

01:13:44.640 | There's a really easy solution here for Reddit. Those mods,

01:13:49.280 | most of them do it for fame, glory and affiliation community.

01:13:53.840 | But if some number of them wanted to monetize their

01:13:57.840 | activity there, why not allow people to subscribe to sub

01:14:00.960 | reddits and pay a membership fee and split it with the mods

01:14:04.560 | that that seems like it would be a high scale move, getting

01:14:08.160 | Patreon, you know, subscription services to let them make a

01:14:12.080 | little bit of money. And then with these, it's only three apps

01:14:14.240 | that are being affected, they should just either buy those

01:14:16.320 | apps and bring those teams internal or I think it's not

01:14:19.760 | where they get split revenue with those apps, they could tell

01:14:21.680 | those apps that that's the key issue. It's like it's like if

01:14:24.320 | you're going to try to monetize API's on user generated

01:14:26.880 | content, I think what's happening here is the internet

01:14:29.840 | is saying, Okay, that's enough, because we're going to leak our

01:14:32.960 | activity someplace else where we can directly monetize it. So

01:14:36.000 | that's the whole point. I think in this current version of the

01:14:38.400 | internet, the value is going to go and again, further, further,

01:14:42.640 | further erode away from the centralized apps, and more

01:14:47.520 | towards the individual people, or in this case, these hubbard

01:14:50.880 | spokes, these mods, and not to the centralized organization

01:14:54.400 | that that has the housing, the Reddit, the Facebook of the

01:14:57.760 | world. So that's just the trend that's happening, the

01:14:59.520 | Instagrams of the world. And there's nothing wrong with that.

01:15:01.920 | YouTube as well. It's just where the pendulum is swinging.

01:15:06.320 | So I think that Reddit just has to cut them a deal.

01:15:09.840 | Pretty easy to do. Speaking of AI funding, there was a breaking

01:15:16.320 | news story. Just in the last 48 hours, a startup named Mishra AI

01:15:21.600 | has raised 105 million seed round, they're calling it should

01:15:26.480 | be at about a 240 million valuation, according to

01:15:29.440 | reports. One of the co founders is a deep mind researcher, I

01:15:34.400 | guess people were saying this is insane, because they haven't

01:15:36.480 | written any code yet. And they've been working on the

01:15:38.080 | company for a couple of weeks.

01:15:39.920 | Why these rounds are so big is I guess that you have to buy all

01:15:43.600 | these h 100s. And they're expensive. And these rigs are

01:15:46.080 | very expensive. I mean, you guys saw this that Nat Friedman

01:15:49.920 | basically published that he spent $75 million on a bunch of

01:15:55.680 | hardware. And if you were one of his portfolio companies, you

01:15:58.560 | could use it. So getting these h 100s and a 100s to train on

01:16:02.720 | seems to be a non trivial task. And so and they're very

01:16:05.520 | expensive, even if you can get ahold of them. So I think what

01:16:09.280 | we're talking about is basically that these rounds have to go up

01:16:11.840 | my end, because if you notice, like the post, you had to raise

01:16:16.880 | the post, so that it wasn't so utterly dilutive as to

01:16:20.320 | completely disincentivize the employees. But let's be honest

01:16:23.840 | here. Nobody's writing $105 million seat check that 105

01:16:27.280 | million is chopped up, probably 10 ways to Sunday. So there's a

01:16:30.240 | bunch of people putting in fives and 10s and 15s.

01:16:32.400 | I'll just be honest in the round, and they said it was

01:16:35.680 | massively oversubscribed.

01:16:37.280 | Yeah, so I so it's everybody taking a little teaser bet. The

01:16:41.360 | problem with these teaser bets is they never hit in the way

01:16:43.760 | that you think maybe you'll get your money back. With all the

01:16:46.560 | dilution that's going to happen, etc, etc. This is not the way to

01:16:50.160 | make money, guys. I'm just going to be honest with you. So

01:16:52.160 | whoever's putting money in thinking they know what the fuck

01:16:54.080 | they're doing, you might as well just light it on fire, go to

01:16:56.640 | Vegas and have some fun with it because you will make more you'll

01:16:59.200 | get more enjoyment from that than you will for making these

01:17:01.360 | kinds of investments. You think that's dumb, stupid, stupid bet?

01:17:05.440 | Brilliant bet. Well, by the way, this has nothing to do with

01:17:08.320 | the company. Nothing.

01:17:09.040 | When you're betting 4 million in $105 million round of 240 plus

01:17:15.280 | you do not know what the fuck you're doing. That is not the

01:17:18.560 | job. So again, Mr. There are gonna be a couple monster

01:17:23.120 | rounds, I think announced next week, like that are gonna make

01:17:25.920 | this one look like kids play. So a lot more of this is coming.

01:17:30.560 | You're exactly right. This is about buying h 100s and compute

01:17:35.440 | everything we're talking about, right and essential ingredient

01:17:38.480 | is compute and it's a scarce resource.

01:17:40.560 | My God, these people that put the money in the seed round

01:17:42.800 | should have just bought Nvidia call options like you make more

01:17:45.920 | money. Well, and there's downside.

01:17:48.000 | And it's insane.

01:17:49.040 | Nvidia has a floor. And by the way, because in just in case

01:17:52.320 | Mistral doesn't work, Nvidia will sell those h 100s to

01:17:54.880 | somebody else.

01:17:55.360 | The resale value. Yeah, they probably have the option to

01:17:57.600 | resell them.

01:17:57.760 | Crazy.

01:17:58.560 | I do think you're right on these teaser bets. This is a power

01:18:01.840 | law business. There's a massive pressure on young junior

01:18:07.600 | partners, principals within these firms to do something.

01:18:11.200 | Fire them.

01:18:12.560 | It's not just teaser bets. What happens in these fires, they

01:18:16.880 | want to get the logos because they need to explain to the

01:18:20.720 | company.

01:18:21.520 | No, actually, no, that's even worse. The GP that can't manage

01:18:24.720 | their fucking principal should be fired.

01:18:27.120 | Right.

01:18:27.840 | And so I should those the young people should shut the fuck up.

01:18:30.880 | Okay, be lucky you have a job. Learn the craft. It'll take you

01:18:36.080 | a decade. And if you are proposing stupid bets like this,

01:18:40.160 | again, sizing matters. Again, I'm not talking about the

01:18:43.200 | company here. I'm just saying when you make a $5 million $3

01:18:46.640 | million deal memo for $105 million round, that is stupid.

01:18:51.440 | Okay. And so if you're the partnership that allows those

01:18:55.280 | kinds of things to leak through, you don't know what you're

01:18:58.160 | doing. So at some point, somebody should be held

01:19:01.520 | accountable for this. And I guess what's going to happen is

01:19:03.920 | the returns of CalPERS are going to cascade through everybody

01:19:06.480 | else. Well, at least I own some, you know, h 100s for a

01:19:09.280 | minute.

01:19:09.920 | So let me stipulate I think this could

01:19:12.080 | do you want to take the other side? No, this is just an

01:19:14.480 | incredible team that's going to do you know that this may turn

01:19:17.520 | out to be a fantastic bet. Or I don't know light speed or

01:19:20.720 | whoever led this round. Let me let me say something different.

01:19:24.000 | In 1997 98. We had a similar phenomenon. Everybody thought

01:19:28.960 | internet search was going to be huge. There was massive FOMO

01:19:32.240 | and chasing and everybody scrambled to get a search logo.

01:19:36.880 | Alta Vista, InfoSeek, Lycos, Go, Planet All, you know,

01:19:43.120 | GeoCities, just go through the list, you know that people were

01:19:46.400 | scrambling after. And the truth of the matter is almost all

01:19:49.440 | those companies went to zero, even though you got a couple

01:19:52.800 | bets, right? You got the internet, right? You got search

01:19:56.000 | right. But you didn't have to invest $1 in search until 2003.

01:20:00.400 | And you would have captured 98 99% again,

01:20:03.120 | I do it again now for social networking, same thing, do it

01:20:05.920 | again for social networking, Brad, say all the names, say all

01:20:08.560 | the names. It's the same thing. Same thing. And so, you know,

01:20:13.920 | when you when I look at it today, we have a huge anti

01:20:17.600 | portfolio for AI. It's painful. We've said no to over 60

01:20:22.720 | companies, right? We, you know, but when we look around, I see a

01:20:28.960 | lot of our competitors doing a lot of these deals. Maybe their

01:20:33.520 | teaser bets, I don't really know the size they're putting into

01:20:36.240 | those companies. But I suspect that if we believe this is as

01:20:40.080 | big as it's going to be and going to play out over decades,

01:20:44.080 | then putting a bunch of really small bets in order to buy a

01:20:47.040 | network or buy relationships or buy logos, etc. I don't think

01:20:50.800 | it's going to work any better this time than it worked then

01:20:53.920 | around social networking. But to be clear, there are gonna be

01:20:56.640 | some people who lead these deals, who help these companies

01:20:59.920 | build incredible businesses. And those will, you know, they're

01:21:03.120 | going to be some winners here. I think there's time to

01:21:06.080 | participate in the winners. Right now, a lot of this is

01:21:09.360 | unknown and unknowable, it will become more clear in the 123

01:21:13.840 | years ahead. The problem is for the LPs, like if you are the LP,

01:21:17.440 | I am an LP and a bunch of venture funds, this stuff really

01:21:20.080 | turns my stomach because I'm like, wow, I am losing money

01:21:23.440 | every day. When I see these things. That's why I get so

01:21:25.840 | emotional about this. I think to myself, if the GPS that I've

01:21:29.680 | given money to are doing these kinds of deals, I'm screwed. At

01:21:34.640 | best, maybe I'll get back 50 or 60 cents on the dollar. And I

01:21:38.080 | immediately start thinking to myself, I really need to write

01:21:40.320 | this down. And I'm re underwriting that person and

01:21:42.800 | that organization, because I'm wondering, how can you let these

01:21:45.760 | things happen? Because if you just look back in history, you

01:21:49.680 | have to be really, really negligent to not learn that

01:21:53.520 | these things never work out the way that you think they are. And

01:21:56.080 | especially these kinds of rounds and this nominal ownership, the

01:21:59.440 | inability to defend ownership, it's just not a path to success.

01:22:03.360 | I mean, also, if you think about this, Chama, you know, what

01:22:06.640 | company in recent history that got overfunded actually use that

01:22:10.080 | money logically, the magic of Silicon Valley is the milestone

01:22:13.040 | based funding system. And whenever you short circuit that

01:22:16.480 | this money becomes a huge distraction to founders, if they

01:22:19.920 | were to receive 10 million 25 million work for a year or two,

01:22:23.600 | then raise another 25 or 50 million, they don't need to

01:22:26.480 | raise all this money at once. This is like taking your ABC

01:22:29.360 | round, putting it all in 100% is distract founders. And then

01:22:33.040 | everybody coming for a salary says, well, you got 105 million

01:22:35.760 | in the bank, I want $3 million, I want $5 million.

01:22:38.640 | What's the best example guys of a huge financial winner that

01:22:42.240 | raised these ginormous amounts of money? What's the

01:22:44.480 | pre launch of a product? There's no product here.

01:22:48.080 | What's the best example magically? What is it?

01:22:51.360 | of disasters that actually No, no, no.

01:22:54.800 | What is the best example of a great company? I'm putting

01:22:58.400 | crime quotes that raise these kinds of amounts so early in

01:23:02.080 | the site?

01:23:02.640 | Quibi.

01:23:03.140 | No, Brad, do you have an example? What's made?

01:23:08.160 | There are people who raised a lot of money over the life

01:23:10.480 | cycle, like an Uber.

01:23:11.680 | We're talking three rounds at once.

01:23:15.680 | What was your first seed check into Uber? What was the total

01:23:17.840 | seed? Right? I can tell you what Facebook's was it was $500,000.

01:23:22.880 | It was 125. I think.

01:23:25.040 | Okay, Facebook's was $500,000. Yeah, we need a lot of money

01:23:29.280 | later. We needed a lot of money later. But no, it's 5 million.

01:23:33.120 | Sorry, 500,000 safe at five, five posts.

01:23:35.520 | $5 million valuation for Uber 1.25. And they went in.

01:23:39.200 | Here's another thing, everybody walks in, they say, well, I have

01:23:41.520 | to raise this much money. And as it's good, there's a circular

01:23:47.200 | logic. I have to raise this money because I have to have all

01:23:50.800 | this compute. And I say, well, okay, you got to train it, you

01:23:54.480 | know, we want to have a vertically integrated model, we

01:23:56.160 | want to train them on it. Okay, so there's a huge upfront cost.

01:24:00.000 | And they're like, but I don't want to take a lot of dilution.

01:24:02.560 | So I have to raise it at a really high price. And so you

01:24:06.400 | say, okay, well, that's, that's a challenge for you, not

01:24:10.160 | necessarily a good thing for us. And then they say, Oh, and I if

01:24:13.920 | you ask the question, is this an ongoing expense? They're like,

01:24:16.400 | Oh, yeah, we're gonna have to retrain, like, we're gonna have

01:24:18.400 | to continue to spend this money. And I'm like, well, so if you're

01:24:22.720 | a software company, for example, and you say, well, what's my

01:24:26.160 | cogs, if all of a sudden you have an embedded cogs, that's

01:24:30.160 | massive and recurring, right? For your compute costs that we

01:24:34.480 | haven't had in the past, then the revenue on the other side of

01:24:37.840 | that, it's got to be a multiple of what a traditional software

01:24:41.280 | company might have, in order to get back to that set of

01:24:44.320 | economics. So I think there's this, there's a scramble, and

01:24:48.800 | understandably, so if you think the big win AGI, or, you know,

01:24:53.120 | this autonomous agent that's going to, you know, be the top

01:24:57.600 | of the next funnel, that thing is going to be worth a lot. But

01:25:01.600 | to me, those are lottery tickets at this at this stage.

01:25:05.440 | Can I tell you a little secret? Here's a little secret. When you

01:25:10.320 | put in $100 million into a startup to buy compute, you are

01:25:16.240 | not buying whiz bang next generation IP, you are

01:25:20.880 | subsidizing capex. And that is a job that many, many other

01:25:26.800 | people do at a very low hurdle rate. And so it is a law of

01:25:33.600 | capitalism, that it could be the most incredibly innovative

01:25:38.000 | company in the world. But if you are offering money to them,

01:25:41.760 | to fulfill a low yield thing, you are just not going to make a

01:25:48.400 | lot of money. When you put money into a startup, that is their

01:25:54.800 | writing code to build groundbreaking IP, you own

01:25:58.560 | something that's really real. But that's because 80 cents on

01:26:03.200 | the dollar is going to core critical R&D in that point in

01:26:06.000 | time. And then they raise a lot of money at a lot less dilution

01:26:10.080 | when 80 cents on the dollar goes to sales and marketing, then

01:26:12.800 | they raise a lot of even more money at an even smaller,

01:26:15.520 | smaller amount of dilution, you start to get to scale

01:26:17.840 | internationally. So you start to see right more dollars, less

01:26:22.000 | return, right, you're owning less of the critical

01:26:24.880 | differentiation. So if everybody is like, oh, it's so expensive

01:26:29.760 | for compute, I need to raise 100 billion. Well, buddy, you

01:26:33.120 | know, that's like a leasing function. You know, you're,

01:26:36.880 | you're like, all of a sudden, like the best VCs in the world

01:26:39.840 | have become like Comerica Bank. Yeah. I mean, they could have

01:26:43.440 | done it with the same structure, right? Comerica could have

01:26:45.680 | given them 50 million to buy these machines, and maybe they

01:26:48.320 | should and Comerica and JP Morgan and somebody else should

01:26:50.880 | basically say, Hey, you know what, here's a lease line for

01:26:52.880 | your H 100. Because I know they're worth so much. And I'll

01:26:55.520 | just Yes, write it at 10%. And, and my point is that the fact

01:26:59.920 | that people don't understand this is why the money will get

01:27:02.880 | torched. I would love a critique that says actually,

01:27:05.040 | Chamath, you're an idiot. I'm right. I know that that's

01:27:07.600 | happening. But here's why I still see it happening. I don't

01:27:10.240 | hear any of that. Here's the problem with that critique.

01:27:12.640 | Okay, so you asked like, what are the biggest projects in

01:27:15.040 | history? You know, around startups think about AWS, I

01:27:18.640 | don't know, they spent 400 million probably, in order to

01:27:21.600 | get AWS off the ground, but it wasn't done by a startup. Right?

01:27:25.520 | You think about what Zuck's spending on the metaverse, it's

01:27:28.160 | not being done right by a startup. The truth of the

01:27:31.280 | matter is the hyper can go back to a p a ws AWS was dog fooded

01:27:35.600 | on Amazon retail, of course, of course. And Oculus was done on

01:27:39.600 | Kickstarter, and the cash flow of Amazon retail, fed the

01:27:42.640 | development of AWS. Correct. My point is that when you think

01:27:47.280 | about what these hyper scalers are going to do, they're not

01:27:50.000 | going to spend a billion, they're not gonna spend 10

01:27:51.760 | billion, they'll spend $100 billion, right in order to be in

01:27:55.600 | this race. And so if you're backing a startup that says I'm

01:28:00.640 | going to build a better chat GPT, right, just like open AI

01:28:05.040 | discovered themselves, they sold 51% or 50% of the company to

01:28:09.040 | Microsoft for a reason. They had to, they had to have the data

01:28:12.480 | and they had to have the compute. This is a nuclear arms

01:28:15.520 | race around compute. And so but I think it's, this is it's

01:28:19.600 | financially illiterate, for someone to think that they are

01:28:23.280 | actually doing anything other than subsidizing capex when

01:28:26.720 | you're giving $100 million to a startup to literally buy chips

01:28:31.440 | and servers and rack and stack up 40% of their equity. That's

01:28:34.960 | the other thing this equity is so valuable. Why would you want

01:28:36.880 | to give 40% of it when you could get an equipment lease and keep

01:28:39.920 | it? You can't get those you can't get I mean, if the VC is

01:28:44.960 | put in 50 million instead of 105 you don't think America

01:28:47.840 | would come on the back end with 25 million of course they would

01:28:50.400 | Brad is right this happened in 98 99 2000 where all of this

01:28:55.040 | money was getting flushed down the drain going into buying

01:28:57.440 | data center capacity where I remember even at Facebook like

01:29:00.240 | we were racking and stacking our own servers. And then we then

01:29:04.160 | we ultimately got big enough where we actually built out our

01:29:06.240 | east coast and west coast data centers and data centers all

01:29:08.320 | around the world but it was very expensive and in that moment

01:29:12.400 | again, all of those companies just lit all that money on fire

01:29:16.160 | it they torched it there was no remnant equity value for that

01:29:20.160 | capital. And so I guess I guess I guess I'm just I'm just

01:29:23.840 | questioning like what does a GP think they're actually buying

01:29:27.360 | Well 80% 80% of it's going to hardware I mean they're buying

01:29:32.640 | the other 20% buying chips I mean it doesn't make sense and

01:29:36.480 | that's going to get I want to make one point here and

01:29:39.600 | freeberg I want I want to get your input on this as well it

01:29:42.160 | constraint is important for founders and the thing that I

01:29:45.600 | find really troubling about this is and putting this startup

01:29:48.960 | aside because crypto people also went through this for the last

01:29:51.520 | three or four years where they were overfunded how did that

01:29:53.680 | turn out it was 10s of billions of dollars burnt of LP monies

01:29:58.240 | people's retirements and college endowments and it's going to be

01:30:01.440 | quite a postmortem but look at say you invoked meta it's

01:30:05.600 | important for people who don't know this to know that that was

01:30:08.560 | a kickstarter shout out to Palmer lucky he raised a couple

01:30:13.440 | of million dollars in 2011 I think it was on a kickstarter

01:30:18.240 | pre selling the devices right constraint makes for great art

01:30:21.920 | constraint makes for great startups you need to have

01:30:25.040 | pressure on a startup for them to deliver you cannot give

01:30:28.240 | startups five years of runway and expect it's going to work

01:30:31.680 | it just doesn't work and I've seen this movie so many times

01:30:35.280 | but now we've gone through 18 months of nobody doing anything

01:30:38.240 | I guess in VC land so folks on Santa Rosa are itchy they want

01:30:42.640 | to justify why they should still be drawing 2% on the full fund

01:30:47.360 | they want to try to show activity so that they can raise

01:30:49.520 | the next fund and continue to stack fees and all of these

01:30:53.120 | sort of leads to these suspension of financial logic

01:30:56.560 | but it gets replaced with financial illiteracy which is

01:30:59.440 | why there's an optimal fund size right and this is why the

01:31:02.080 | people that pay the price are ultimately the LPs and it may

01:31:05.360 | be the case that CalPERS maybe actually avoids a lot of these

01:31:07.920 | pitfalls because by missing yeah they missed all the returns

01:31:10.800 | but then they missed writing the mega follow on checks for all

01:31:14.720 | of these folks that they and then they would have torched

01:31:16.880 | okay I'm going to take the other side of that go ahead

01:31:19.280 | Brett I think it's nearly impossible to conceive that all

01:31:22.880 | of these bets that are currently being made are bad

01:31:25.120 | bets I think is major platform disruption but I you know

01:31:30.480 | instead I think the right way to think about it is it's about

01:31:33.440 | pacing and if you're trying to if everybody thinks they're

01:31:37.360 | going to build the next Google they're going to build the next

01:31:40.160 | autonomous agent that's going to sit on top of the funnel

01:31:42.880 | that's going to be worth a trillion and therefore they can

01:31:45.120 | burn a billion dollars training models that's not we're not

01:31:48.720 | going to have 10 of those winners okay but at the same

01:31:52.640 | time there's a lot of stuff getting funded that is in the

01:31:55.840 | application layer that is in the tool layer and these are

01:32:00.000 | not the big headlines that you're reading about but these

01:32:03.120 | are really interesting businesses that are solving

01:32:05.920 | real problems in the software and tooling layer here you know

01:32:10.400 | in the smaller model layer vertically oriented things

01:32:13.680 | around life sciences or you know targeting you know

01:32:17.920 | financial services or things in the application layer you know

01:32:22.400 | like character.ai etc so I do think there are a lot of good

01:32:26.160 | things getting funded that will deliver real value but I agree

01:32:30.880 | with you the problem that there's a there's a second

01:32:33.440 | problem to this Chamath if you drop a billion or 2 billion or

01:32:36.880 | 3 billion into something you have not only a a product

01:32:42.480 | challenge you have a distribution challenge right we

01:32:46.320 | know all the hyper scalers are going to play Google is going

01:32:49.120 | to play meta is going to play and so you got to compete and

01:32:53.120 | then beat them and it used to be that you would say well if I

01:32:56.480 | get a lot of traction they'll buy me if I'm Instagram or

01:32:59.040 | WhatsApp like they'll buy me well we have such a regulatory

01:33:03.280 | nightmare in Washington DC today no hyper scaler can spend

01:33:08.800 | over a billion dollars to buy any AI company not even that

01:33:12.320 | 400 million gifts get what is a giphy I was even in the United

01:33:17.120 | States today we replaced mergers and acquisition right with copy

01:33:21.760 | and compete because we've said to hyper scalers you're not

01:33:26.720 | allowed to acquire any of these companies so the unintended

01:33:31.280 | consequence of the regulation in Washington is that

01:33:34.640 | entrepreneurs and founders and venture capitalists who might

01:33:38.400 | otherwise have had a good idea built something with some

01:33:41.040 | traction they can't find a home for it in the way you know that

01:33:45.760 | WhatsApp found a home or isn't that a good thing Instagram is

01:33:48.880 | that a good thing I don't think I don't think no public and be

01:33:52.240 | independent is a better presupposes that everything can

01:33:55.600 | become a big and profitable business there are a lot of net

01:33:58.720 | net can would ever become a big and profitable business now on

01:34:03.600 | its own no chance well it's still not a big and profitable

01:34:06.720 | business okay so that's what I'm saying so maybe I should

01:34:09.680 | have died I mean maybe it's being kept alive but I mean it's

01:34:12.240 | actually don't you think it's great for the market I think

01:34:15.120 | it's great and it got it was it was innovative technology it

01:34:18.240 | was yeah it you know you you were able to back it with some

01:34:21.840 | good funding and I think what's coming is going to be really

01:34:24.240 | exciting but it took a really long runway a lot of capital a

01:34:28.160 | lot of intelligence in order to build unfortunately we've killed

01:34:31.360 | that so you have a two sided problem we're spending more than

01:34:34.320 | ever to fund and start these companies and we you know have

01:34:38.720 | undermined a lot of the downside protection free bird

01:34:41.520 | your thoughts so if you look at how the capital is being

01:34:44.560 | deployed if it's mostly being deployed to train models then

01:34:47.680 | the question has to be is there really a sustainable advantage

01:34:52.880 | that arises by being the first to train the models and then

01:34:56.640 | being able to persist an advantage by training new models

01:34:59.760 | from that foundational model going forward and the reason

01:35:02.880 | that that matters so much is because you have to really have

01:35:06.880 | a deep understanding if you're going to invest a lot of

01:35:08.880 | capital here you have to have a deep understanding for how

01:35:12.080 | quickly model development and training is accelerating and

01:35:15.600 | how quickly the costs are reducing so something that costs

01:35:19.200 | like we said open AI spent $400 million training models for

01:35:23.040 | GPT for if they spent $400 million in the last couple of

01:35:26.560 | years you could probably assume that doing the same trading

01:35:30.080 | exercise could be done for five to $10 million 18 months from

01:35:34.160 | now to generate the same model that's a you know 100 x cost

01:35:38.400 | reduction and I'm just ballparking it here but if

01:35:40.960 | that's really where things are headed then does the $100

01:35:45.520 | million to train models today really make sense if trading

01:35:48.720 | those same models can be done for $5 million in 18 to 24

01:35:52.000 | months and that's where it becomes a really difficult

01:35:55.040 | investment exercise and one that you have to really

01:35:57.680 | critically understand how cost curves are moving in AI the same

01:36:00.880 | thing was true in DNA sequencing in the early days and it's

01:36:03.200 | following by the way a similar cost curve is DNA sequencing

01:36:06.720 | which is actually greater than Moore's law greater than a 2x

01:36:09.840 | cost reduction every 18 months we're seeing something much

01:36:13.040 | greater than that in machine learning right now in terms of

01:36:15.760 | cost reduction and model training so ultimately the

01:36:18.640 | business model has to have some advantage that by being the

01:36:22.320 | first to market you can then generate new data that gives

01:36:25.280 | you a persisting advantage and no one can catch up with you and

01:36:27.920 | my guess is if you get under the hood of the business models

01:36:31.040 | it's unlikely going to be the case and it's very likely going

01:36:34.000 | to be the case that you don't know when the market advantage

01:36:37.760 | will lie when you will be able to kind of create a persisting

01:36:40.480 | mode a mode that expands as you get more data and can train

01:36:43.200 | more and this is why it's so hard to invest generally in

01:36:46.800 | technology is because you don't know the point at which the

01:36:49.840 | market tips relative to the point at which the technology

01:36:53.120 | tips so there's a moment where the technology gets so cheap and

01:36:57.040 | then the market maybe adopts after the technology gets cheap

01:37:00.240 | and at that point it's a totally different game remember

01:37:02.560 | in the mid 2000s where we had memory shortages and we used to

01:37:05.280 | have to buy ram yeah i mean it's just like it's all this

01:37:08.720 | stuff and it's like if vcs are funding this stuff just you just

01:37:11.840 | like like the equity on fire guys not going to be worth

01:37:15.040 | anything brad's point is right which is the question is what's

01:37:18.400 | possible now where can you build a sustaining advantage now

01:37:22.240 | rather than go after big model development cycles where the

01:37:25.040 | cost curve is going to come down by 100 fold in some period

01:37:28.080 | of time in the near future is there a business model

01:37:31.280 | advantage you can build by being in the market first building a

01:37:34.320 | customer base accelerating your features getting user feedback

01:37:38.160 | and that certainly exists in the application and the tools

01:37:40.640 | layer as brad is talking about that seems like such a no

01:37:43.520 | brainer for disruption across many different segments many

01:37:46.960 | different verticals many different markets right now

01:37:48.800 | versus trying to compete further down the stack where it

01:37:53.280 | takes hundreds of millions of dollars of capital and in a

01:37:56.000 | couple of months that hundred millions of dollars of capital

01:37:58.320 | can be replaced with 5 million bucks of training exercise and

01:38:01.120 | compute can I take the other side of that yeah all that

01:38:03.280 | coordination makes no money today so to your point when you

01:38:06.400 | cut the actual input cost by 100 fold the coordination cost

01:38:10.720 | goes from being zero to being worth less than zero right I

01:38:13.920 | don't see any money being made there either and all the people

01:38:16.400 | that say I'm sure there's going to be some genius in the

01:38:18.560 | comments but what about open source it's like what about it

01:38:21.200 | opening I also just gave an update on their cost structure

01:38:25.920 | for their API and they just dropped it 25 to 75% again this

01:38:30.720 | is after the tenfold drop they did last year play this out 100

01:38:33.840 | million dollars of capital spent training today is a million

01:38:36.960 | dollars spent doing training in a three years yeah three years

01:38:40.560 | 18 18 to 36 months somewhere in that time frame is likely the

01:38:43.680 | time frame so why would you spend all this money today when

01:38:46.560 | an 18 to 24 month things are gonna get so much cheaper you

01:38:49.120 | know I think the further up the value stack you go the more of

01:38:52.400 | an opportunity to truly kind of innovate disrupt and make

01:38:54.880 | capital as possible what happens in 24 months so when you've made

01:38:58.880 | a bunch of hundred million dollar investments and they're

01:39:00.800 | all zeros you get fired

01:39:05.440 | maybe unfortunately as an investor to mop is that what

01:39:09.840 | you're asking at some point you don't get invited to join the

01:39:14.160 | next fund think about the alternative investment strategy

01:39:17.280 | with lots of capital where the cost curve is not coming down

01:39:20.640 | as quickly in terms of where that capital is being deployed

01:39:23.200 | for example building rockets to go to space or building

01:39:27.520 | infrastructure to transport power or building roads you

01:39:31.840 | could raise a billion dollars to build a tollbooth system or

01:39:34.800 | port let's use a port a shipping port is a good example you

01:39:38.480 | could spend a billion dollars to build a shipping port it's not

01:39:41.600 | that the cost of building a shipping port is going to come

01:39:43.760 | down by 10x in 18 months so it makes sense to raise a billion

01:39:47.680 | dollars and build a friggin shipping port and charge my

01:39:50.880 | boy to come out vcs thought they were underwriting IP

01:39:54.640 | instead they're just actually subsidizing capex it's a

01:39:57.040 | building for thing it's the craziest thing Brad is this a

01:40:00.400 | problem of the optimal venture fund size that Fred Wilson

01:40:03.920 | talks about that Bill Gurley talks about a lot of the OGs

01:40:06.880 | say hey 250 400 600 million there's an optimal size here

01:40:11.760 | for four or five partners in a venture fund to put money to

01:40:14.160 | work is this part of the problem right now which also

01:40:16.720 | happened in crypto is you had billion dollar $2 billion fund

01:40:20.080 | sitting around and different venture brand names having four

01:40:24.160 | or five of these multi billion dollar funds burning a hole in

01:40:26.960 | their pocket and getting frisky over this you know 18 month

01:40:31.040 | pause and is this about optimal fund size making bad you know

01:40:37.120 | we have over a billion dollar fund so if I if I if I take the

01:40:40.320 | other side of that the people are going to say you're talking

01:40:42.160 | your book but I don't think this is about large funds I

01:40:46.480 | think this is about good and bad decisions at the end of the

01:40:49.280 | day some of these decisions will pay off like for example

01:40:52.880 | what's the largest bet size from a billion dollar fund that

01:40:55.520 | you've made or will make I think out of that fund would be

01:40:59.600 | $100 million most likely but we may cross it over other funds

01:41:04.480 | and have you know bigger bets certainly that happened two or

01:41:08.720 | three times that would you do it all at once like this or might

01:41:11.440 | it happen over you know a series ABC kind of situation where

01:41:14.480 | you build a position I would say you know we're not writing I

01:41:18.400 | you know we haven't written $100 million check into a series

01:41:21.200 | day and I don't think most of people to Chamas point that

01:41:23.760 | you're talking about are writing $100 million checks into those

01:41:26.400 | series days the mistral round that you reference I imagine the

01:41:29.600 | lead check into that was maybe 50 maybe 50. So listen larger

01:41:34.960 | fund sizes enable you to participate in companies that

01:41:40.800 | require more capital and and these companies do require more

01:41:44.480 | capital. So you may take the position that all these

01:41:47.520 | companies are going to zero that's not my position my

01:41:50.880 | position simply is that I do believe there is a bit of over

01:41:55.360 | exuberance that too many things are getting funded right and

01:42:00.480 | that's you know like the margin of safety the margin of return

01:42:06.000 | being required is probably lower than it should be but

01:42:10.160 | there's no doubt out of this vintage in my mind that you're

01:42:12.960 | going to have some epic companies now I don't know if

01:42:15.440 | what Mustafa and Reid Hoffman are doing at inflection is you

01:42:20.320 | know building pie to take on chat GPT and to take on bar to

01:42:24.160 | be the intelligent assistant. The ambition is extraordinary.

01:42:28.320 | The cost of compute is high but the first mover advantage is

01:42:32.720 | also high right because whoever secures this position you know

01:42:37.600 | Bill Gates said he's been playing around with it it's one

01:42:39.840 | of his favorite agents or whatever that's an interesting

01:42:42.720 | comment I think it's pretty good but I think chat GPT is out in

01:42:46.160 | front in this regard. I think a lot of people are going to try

01:42:49.120 | to compete for that space but you know I can't imagine that

01:42:52.800 | all these researchers leaving deep mind right are going to be

01:42:56.640 | able to compete for the most sophisticated model to answer

01:43:00.720 | general purpose questions so I don't think it's the large fund

01:43:03.280 | size. I think it's just a lot of exuberance to participate in

01:43:07.280 | what everybody perceives to be a massive platform disruption. I

01:43:11.440 | think that can be true just like the internet was in 1997 and a

01:43:16.320 | lot of these bets can can and will likely go to zero. How

01:43:19.760 | great is America you just rent other people's money they pay

01:43:22.720 | you 2% and then you're allowed to get exuberant yet keep your

01:43:26.160 | job when you lose it. God bless America. Well I mean the the

01:43:31.760 | issue Chamath is it takes 10 years to prove you're bad at

01:43:34.960 | this job. No no no no no it takes 10 years to prove you're

01:43:40.080 | good and it takes 20 to prove to prove that you can be

01:43:43.520 | consistently good and didn't get lucky but it in a few years

01:43:47.680 | you can tell that somebody sucks. Can LPs tell? Well I'm

01:43:51.920 | not sure that they get the visibility because when LPs

01:43:54.560 | interact with GPS, they're grinned fucked for the most

01:43:57.120 | part. So I don't know probably not but when I interact with

01:44:01.280 | them just as a peer to peer level and I see the deals that

01:44:05.360 | get done it's pretty easy to understand that some people just

01:44:07.760 | suck. They don't know how to make money I guess is the point

01:44:10.640 | which in the job that's the job is to make money to

01:44:14.400 | consistently make money. Okay Brad take care and let's go to

01:44:18.080 | science corner. Bill Gates wants to genetically modify

01:44:21.600 | mosquitoes. Is this fake news or real? Incorrect fake news.

01:44:25.840 | It's fake news. Okay. Explain. The reference is from RFK

01:44:31.520 | Jr's tweet that he sent out where he retweeted someone

01:44:34.960 | talking about this mosquito factory in Colombia and this

01:44:39.680 | guy basically put out a tweet saying oh look Bill Gates has a

01:44:44.320 | mosquito factory in Colombia it's the largest in the world

01:44:46.720 | 30 million genetically modified mosquitoes are released every

01:44:49.520 | week into 11 countries because Bill knows better than nature

01:44:52.960 | what could possibly go wrong RFK Jr then took it upon himself

01:44:56.720 | to retweet and say should Bill Gates be releasing 30 million

01:45:00.160 | genetically modified mosquitoes into the wild part of the

01:45:02.800 | mentality of earth as engineering object what could

01:45:05.600 | possibly go wrong. So I really wanted to take issue with this

01:45:09.520 | because I do think that this is the sort of misinformation

01:45:12.560 | that both create scientific illiteracy and damages and

01:45:18.480 | impacts negatively some of the significant progress that can be

01:45:22.000 | made in medicine and in science. So I want to speak very clearly

01:45:25.760 | as to what is going on what the science is behind it why this is

01:45:29.360 | super important and then we can speak philosophically if you

01:45:32.800 | guys are interested on kind of should we be doing this sort of

01:45:35.520 | stuff and why so what's real here like what what are actual

01:45:38.640 | facts versus fake news maybe that's a good place to start the

01:45:41.200 | most common disease carrying mosquitoes are called edis

01:45:45.920 | Egypt Egyptia. It's a species of mosquito that carry yellow

01:45:50.960 | fever, dengue, Zika, a number of viruses that obviously are

01:45:56.880 | pretty adverse to human health. Each year about 400 million

01:46:01.200 | people are infected with dengue virus via this mosquito vector

01:46:05.440 | 100 million become ill and 21,000 deaths are attributed to

01:46:09.040 | dengue globally 200,000 cases of yellow fever each year causing

01:46:12.960 | 30,000 deaths. These are pretty significant health concerns and

01:46:17.360 | it turns out that in mosquito populations not in this

01:46:20.080 | particular species that carry these viruses but in other

01:46:23.120 | species of mosquito there's a bacteria a natural bacteria

01:46:27.040 | called Wolbachia and this bacteria exists in nature and

01:46:30.320 | sometimes these mosquitoes get infected with this bacteria so

01:46:33.200 | they carry this this bacterial bug and this bacteria is really

01:46:37.440 | interesting because it causes what's called cytoplasmic

01:46:40.080 | instability in the mosquito cells which actually makes the

01:46:43.440 | mosquito largely resistant to a lot of viruses and there's a

01:46:47.280 | bunch of theories for this mechanism and why this is the

01:46:49.680 | case but it causes the mosquito to not be able to carry and

01:46:54.080 | spread these viruses that are super adverse to human health.

01:46:56.960 | So number one there's a natural bacteria that's found in nature

01:47:00.400 | and up to 40% of mosquitoes are already infected with it. Number

01:47:04.640 | two is it's not common in the mosquito species that is common

01:47:08.800 | in these areas that are spreading these awful viruses

01:47:10.800 | to humans and so there's been a project that's been going on

01:47:14.160 | now for 12 plus years where they're taking large amounts of

01:47:18.480 | mosquitoes and breeding them specifically to have this

01:47:21.840 | bacteria in the mosquitoes and then they release those

01:47:25.440 | mosquitoes into the wild and over time the bacterial

01:47:28.720 | infected mosquitoes start to become a larger percentage of

01:47:31.120 | the population and as a result the vector of carrying these

01:47:34.720 | awful viruses into humans goes way down. There was a study

01:47:38.560 | done in Indonesia where they took these Wolbachia infected

01:47:41.760 | mosquitoes and they released them into the wild and they

01:47:44.560 | looked at a population that was in a region where they released

01:47:46.880 | them in a population that they didn't. In the region where

01:47:50.080 | they didn't release them 9.4% of people ended up getting

01:47:53.760 | infected with dengue fever and where they did release them only

01:47:58.160 | 2.3% were infected. So it was an amazing 75% reduction in the

01:48:03.280 | infection of people by these mosquitoes and so the whole

01:48:07.520 | point is just to kind of you know move the mosquito

01:48:09.920 | populations in a way without doing any sort of genetic

01:48:12.880 | modification but by exposing them to this bacteria so that

01:48:15.760 | they don't carry these viruses into people but you know,

01:48:19.120 | because that's a nuanced point there, Friedberg, the it's not

01:48:22.560 | genetic modification or it is it's not I just explained it's

01:48:26.000 | a bacteria and they just expose the mosquitoes they're exposing

01:48:29.360 | the so that they end up getting infected with this bacteria and

01:48:32.080 | then as they breed the mosquitoes breed in this

01:48:34.240 | facility, you have you have to have to an infected male and an

01:48:37.920 | infected female for the offspring to have the bacteria

01:48:40.960 | if you have an infected male, they're actually infertile,

01:48:44.480 | they can only fertilize an infected female. So unless you

01:48:47.760 | do this breeding work, you don't end up seeing this happen

01:48:50.320 | naturally in the environment where the Wolbachia starts to

01:48:52.560 | spread. Where's the genetic modification misinformation

01:48:56.160 | coming from? Whereas from from from the presidential

01:49:00.080 | candidate, RFK Jr, who just propagated it. And so this is

01:49:03.040 | why I want to make this point because this whole idea that oh

01:49:05.920 | should we be engineering the earth? Let me just say something

01:49:08.000 | about engineering the earth. Humans used to wander around the

01:49:11.760 | earth or proto humans did without access to food. And

01:49:15.600 | until we realized that we could plant a seed in the ground and

01:49:18.240 | grow crops and started to engineer the earth in the form

01:49:21.360 | of farming, we did not have access to a reliable source of

01:49:24.480 | calories. Human ingenuity, human engineering gave us the ability

01:49:28.000 | to do this gave us the ability to feed ourselves. Similarly,

01:49:31.120 | humans got infected by viruses by bacteria by fungus and died

01:49:35.360 | at a young age over and over again. And when humans began to

01:49:39.200 | engineer medicine and engineer unnatural substances, because

01:49:43.600 | he makes this point, oh, should we be interfering in the natural

01:49:46.080 | world? What is natural is for people to get infected with

01:49:49.040 | viruses or bacteria and die. And if not for the advent of our

01:49:52.800 | engineering and our ingenuity and our ability as a species to

01:49:56.000 | create solutions through science, which allows us to do

01:49:58.960 | discovery, and then through engineering, which allows us to

01:50:01.600 | make solutions that solve problems that humans face, we

01:50:05.360 | would all be dead at a young age, and we would not have

01:50:07.280 | realized the progress that we've had as a species. So I really

01:50:10.720 | get ticked off when I see guys like RFK, Jr. And others not

01:50:15.280 | just propagate this, this BS misinformation spiel about Oh,

01:50:19.440 | genetically modified this and that science is bad. But to then

01:50:22.960 | say, should we be messing with the natural world? Because I

01:50:24.960 | would say to him, what about when your kid got infected, and

01:50:27.360 | you gave your kid antibiotics, maybe you shouldn't have done

01:50:29.600 | that. And this is a group of people who are saying that you

01:50:33.040 | shouldn't do that, right? There is a movement to stop taking

01:50:35.280 | antibiotics because it's making it because it's it's having an

01:50:39.360 | I'll tell you a couple things. There are bad pesticides that

01:50:43.440 | impact human health and cause damage to our DNA. There is bad

01:50:47.200 | sunscreen that is endocrine disruptors and can damage human

01:50:50.480 | health. There are plenty of chemical products that are made

01:50:53.200 | that we use in everyday products that cause cancer. There is an

01:50:57.040 | endless string of things that are wrong with the system of

01:51:00.320 | engine, the systems of engineering that we do use. That

01:51:03.360 | doesn't mean that they're all bad. That doesn't mean that we

01:51:06.560 | then say, hey, you know what, let's not do anything. Let's not

01:51:09.600 | do any engineering. Let's not use any antibiotics. Let's not

01:51:12.480 | use any technology in food. And that's the challenge is, you

01:51:16.080 | know, getting into the details on like, I'll tell you, I don't

01:51:18.720 | use any sunscreen products with myself or my kids. I only use

01:51:22.400 | zinc. And I have a similar sort of nuanced approach to

01:51:24.560 | understanding what things we should or shouldn't use in our

01:51:26.640 | lives. Because of a pause,

01:51:28.880 | can you please explain that? Because I didn't know this. What

01:51:32.880 | am I doing? Am I getting what? Explain?

01:51:35.680 | Yeah. So there's a number of substances, which are known

01:51:39.440 | endocrine disruptors that are found in sunscreen. I think it's

01:51:42.960 | like one of the craziest things that we haven't made these

01:51:45.040 | products illegal at this point. But the only sunscreen that you

01:51:49.680 | should use is natural mineral sunscreen. This Sorry, I

01:51:52.800 | shouldn't say that you should I should say this is what I chose

01:51:54.880 | to do based on the data that I've seen. What's a good brand?

01:51:58.720 | What brand any brand that sinks just zinc sunscreen, just look

01:52:01.280 | at the back. If there's anything but zinc in it, don't use it.

01:52:03.680 | Zinc oxide. Is that? Yes, I totally refer to zinc oxide

01:52:09.120 | sunscreen. Yeah. That's the ingredient in it. So I don't

01:52:15.600 | know what you guys. Wow. But here, let me just send you this.

01:52:20.240 | But are you saying that you're not allowed to have any other

01:52:22.560 | ingredient like there's no stabilizers? There's nothing

01:52:24.880 | else? No, no, that it's it's the principle ingredient has to

01:52:29.440 | be zinc oxide versus some other chemical you're saying? Yeah,

01:52:32.960 | so oxybenzone. I don't use any products with oxybenzone. That's

01:52:36.240 | like the most common sunscreen ingredient. octinox eight is the

01:52:39.680 | other one homo salate and the parabens all of those product

01:52:43.200 | categories, which are the most common products used in

01:52:46.320 | sunscreen. They're absorbed by your skin, they go into your

01:52:49.120 | bloodstream and their endocrine disruptors. Now the problem with

01:52:51.440 | the zinc sunscreen and the mineral sunscreen is it

01:52:53.600 | actually stays on your skin. So you look like you're wearing

01:52:56.160 | it's really hard to rub it in. You gotta really really rub it

01:52:58.480 | in. So they're actually not popular from a cosmetic point

01:53:01.120 | of view. People don't like wearing them because they look

01:53:03.440 | like idiots and it's really hard to. Yeah, that's the stuff I

01:53:06.800 | use in the summer that is it drives me crazy because I look

01:53:09.760 | like this weird ghost shiny ghost thing. I know but I do

01:53:13.600 | use that. That's like really hardcore about that. So that's

01:53:17.040 | an example of understanding nuance, right? It doesn't mean

01:53:19.760 | all sunscreens are bad. And it doesn't mean that we shouldn't

01:53:23.200 | use sunscreen. But understanding what the risk factors are that

01:53:27.040 | are associated with different ingredients or different

01:53:30.000 | engineering that's been done to make sunscreens available is

01:53:32.480 | important. But that's so many levels deep. It's a really

01:53:34.960 | difficult thing. So then people end up being scientifically

01:53:37.120 | illiterate and being wrong. Because someone like RFK Jr.

01:53:40.400 | comes along and says, Hey, should we really be engineering

01:53:42.720 | the earth with genetically modified mosquitoes? And then

01:53:45.040 | people have this call to action, shut those things down, shut

01:53:47.600 | those things down. And they're incredibly beneficial and

01:53:50.000 | effective. They're not taking any sort of genetic editing to

01:53:52.480 | market. They're not doing anything that people might

01:53:54.640 | consider risky. And we can have a separate conversation about

01:53:57.200 | the risks and benefits of genome editing. That's another

01:54:00.560 | topic. But how much of this? freeberg Archima as we get ready

01:54:04.640 | to wrap here is a reaction to what happened with COVID-19. And

01:54:09.280 | people's fear now of and getting sort of educated on gain of

01:54:12.560 | function research. And, you know, this sort of recency

01:54:15.920 | effect of my Lord, doing some of this science feels like it's

01:54:20.160 | too dangerous, certainly too dangerous to do inside a city.

01:54:22.800 | And what's the point of taking bats out of caves and doing

01:54:26.400 | gain of function research? How much of it has to do with that

01:54:29.040 | right now? And it's a sort of the downside to questioning

01:54:32.240 | that technology can can be asymmetric, you can have like

01:54:36.720 | nuclear weapons can wipe out the world, they can wipe out the

01:54:39.920 | whole population. Yeah, you know, Tala makes this point on

01:54:44.000 | his argument against GMOs, which I would argue against him on

01:54:47.680 | this point, but we can do that another time. If he's willing

01:54:50.080 | to come on. I'd be super happy to debate him on this point. But

01:54:53.600 | the idea being that there's super asymmetric downside. And

01:54:57.760 | so you know, what happens is people see incremental

01:55:01.840 | improvements from technology, and they don't really praise

01:55:05.120 | those incremental improvements. They assume that to be the case,

01:55:08.000 | it's a linear step function. But when something goes wrong,

01:55:11.200 | it's a big step down. And then people are like, Oh, wow. And

01:55:15.120 | then people get scared of technology. And then people

01:55:17.520 | want to step away from it. And this is true in anything that

01:55:19.520 | relates to your health, to food systems, to the environment now.

01:55:23.440 | Now, it doesn't mean that all technology is bad, or all

01:55:26.560 | engineering is bad. But you know, as mistakes are made in

01:55:29.200 | the system, as new things are discovered, we have to retrench

01:55:32.400 | and change what we're doing. But it doesn't mean that we

01:55:34.480 | should stop progress. And it doesn't mean that the whole

01:55:36.560 | system of humans figuring out how to engineer ourselves of

01:55:39.520 | the world around us, to benefit the health to benefit the

01:55:42.640 | planet to benefit other species on the planet, isn't a critical

01:55:46.080 | mission and effort that we should be undertaking.

01:55:48.080 | Well, the sunscreen thing is really tilting. I mean, I just,

01:55:50.720 | I need to make sure I'm pretty sure we have a good one. But I

01:55:53.200 | don't. Yeah, I'm on this right now. I'm at this has got me a

01:55:56.480 | little nervous with my kids. I like these. Like, I have all my

01:56:01.680 | kids have long sleeve sunshirts. And I try to do that, I think

01:56:07.120 | is like the key thing. And because I, my family has skin

01:56:10.400 | cancer, I have to do that since I'm dark skinned, free bird. I

01:56:14.000 | mean, do you want to avoid skin cancer? I mean, I don't know.

01:56:16.800 | Yeah, I wouldn't wear like a rash guard thing, you know?

01:56:20.240 | Yeah, you know, it's a summertime, you're in the bed,

01:56:22.160 | you know, you want to show you want to show off your revenge

01:56:25.280 | body. I get it. I get it. All right, everybody, on behalf of

01:56:29.920 | sacks. Let me just say Ukraine, Ukraine, Ukraine, Biden, Biden,

01:56:35.920 | Biden, and Francis. Mayor Francis is now in the race. So I

01:56:41.040 | guess we'll have him on the pod. We already talked to him. Oh,

01:56:44.640 | okay. So yeah, at the summit last year. And also, we're doing

01:56:48.400 | a survey for the podcast all in podcast.co slash survey, all in

01:56:53.760 | podcast.co slash su r v. Why if you got to this point in the

01:56:58.160 | podcast, please fill out our survey or listener survey. And

01:57:01.680 | we will see you all next time. On the all in. Bye bye.

01:57:06.720 | Let your winners ride.

01:57:09.920 | Rain Man David Sacks.

01:57:12.720 | And it said we open source it to the fans and they've just gone

01:57:18.800 | crazy with it.

01:57:19.520 | I love you.

01:57:20.160 | West Coast Queen of Kinwam.

01:57:21.920 | I'm going all in.

01:57:23.440 | Let your winners ride.

01:57:24.240 | Let your winners ride.

01:57:26.160 | Besties are gone.

01:57:29.680 | That is my dog taking a notice in your driveway.

01:57:34.320 | Oh, man.

01:57:36.960 | My avatar will meet me at the

01:57:39.040 | We should all just get a room and just have one big huge orgy

01:57:41.760 | because they're all just useless. It's like this like

01:57:43.600 | sexual tension that they just need to release somehow.

01:57:45.840 | Wet your feet.

01:57:48.480 | Wet your feet.

01:57:50.480 | We need to get merch.

01:57:53.280 | Besties are back.

01:57:55.280 | I'm going all in.

01:58:01.760 | I'm going all in

01:58:03.760 | (mystical music)

E133: Market melt-up, IPO update, AI startups overheat, Reddit revolts & more with Brad Gerstner

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