E118: AI FOMO frenzy, macro update, Fox vs Dominion, US vs China & more with Brad Gerstner

00:00:00.000 | You want to run a marathon at 57 years old?

00:00:02.240 | 52 51 to 52.

00:00:06.480 | I'll be honest, I miss you. Can you come back to the United States, please? I know.

00:00:10.320 | I miss you too. I mean, the poker game can't by definition be as much fun if I'm not there.

00:00:15.440 | It plays at bigger states, and it's more challenging, but it's not as much fun.

00:00:19.760 | There's not as much laughing. What's on the menu tonight for austerity 2023?

00:00:23.600 | The Amuse Bouche is a Madeline with like a terrain of foie gras.

00:00:27.680 | Fantastic.

00:00:28.640 | In honor of freeburg.

00:00:30.000 | And then rutabaga rutabaga salad, and then some duck thing, duck breast,

00:00:34.560 | you know, I love duck. And then and then butterscotch panna cotta.

00:00:37.760 | Wow, that is great lineup. And you know what, I like the idea. We're doing some poultry.

00:00:42.960 | Chef Sean is firing on all cylinders these days.

00:00:44.960 | I feel feels very like engaged. He was very engaged. Yeah, he's kind of going for it.

00:00:50.800 | He's been on.

00:00:51.440 | Yeah, that was quite nice. The other day, Brad, because it's austerity measures.

00:00:55.440 | We had this incredible dish, and we're eating it. And then he said,

00:00:59.680 | caviar is on the bottom. And I was like, oh, so we just we don't put the caviar on top.

00:01:05.520 | They just put it on the bottom. The markets down.

00:01:09.040 | That's my style. Austerity.

00:01:12.160 | I'm not lying. Am I like, Oh, my God.

00:01:16.000 | No, he did say, guys, the caviar is on the bottom, not the top.

00:01:18.720 | This is

00:01:31.200 | all right, Saks is here, everybody. So that means we have a quorum.

00:01:38.720 | Hopefully, the Sultan of science, who is on Wall Street today,

00:01:45.760 | taking a company public. So congrats to our bestie Friedberg.

00:01:49.680 | Ding, ding.

00:01:50.640 | He couldn't make it. He's at a dinner. So with us, the fifth beetle, as it were,

00:01:54.640 | Brad Gerstner is here to talk all things macro. Welcome back to the pod. How's life been?

00:02:00.240 | Good to be back. A little domo arigato to you, Jason, as you eat your way through Japan.

00:02:05.680 | Yes, I am on my culinary tour. I'll be back

00:02:08.880 | Sunday. But I am having the time of my life here. Are you running AdWords on your food blog?

00:02:15.360 | That's what it's come back to. I'm back to the weblog zinc days. I'm just trying to make

00:02:18.800 | $2,600 a day.

00:02:21.360 | I noticed your tick tock got 22 likes.

00:02:23.520 | Yeah, you know, I'm trying to figure out tick tock. I'm gonna be right as they shut it down.

00:02:28.240 | That's when I'll figure it out.

00:02:29.600 | Will that rapture buy you another Japanese pancake or not?

00:02:32.480 | Those pancakes, man, are next level. The fluffy pancakes here. Everything actually with the

00:02:37.840 | exchange rate coming to Japan is so affordable. It's nuts. And this is a crazy week because it's

00:02:43.760 | the it's the Tokyo Marathon, but everything is so affordable. The people are amazing.

00:02:47.920 | It's the best country to visit in the world. I think, for me, it's Italy, Spain, I mean,

00:02:53.040 | Italy's right there too. But I would say Japan is like, it's definitely top two or three.

00:02:57.360 | What do you love about it?

00:02:58.480 | Best food. You know, I went there I took the I took the kids like five years ago,

00:03:02.880 | the older three at the time. But they were younger. And you know, there's there's a negative

00:03:08.640 | birth rate in Japan. And so number one, when you have any kid, but frankly, multiple kids,

00:03:14.160 | the the Japanese embrace you with so much love because they love seeing these big families.

00:03:19.600 | Yeah, they're unbelievably kind. We went to Kyoto, did the professor's walk, saw the cherry

00:03:25.120 | blossom festival, basically ate our way through Japan. That was my that was my only vacation trip

00:03:31.440 | I did. I've done like 10 or 12 trips for work. Once we I went with Reid Hoffman, and Reid set

00:03:38.000 | up this thing where we went through all these different parts of Tokyo and ate at this incredible

00:03:43.520 | sushi place. You have to go with somebody who can dial it in. Yes. And have all the hookups.

00:03:48.880 | Brad, you spend much time in Tokyo and Japan?

00:03:50.640 | I haven't. I've been there only twice. And that was when I was poor. And I stayed in a really

00:03:57.120 | small room and ate really shitty food.

00:03:58.800 | All right. So you're saying in 20 in 2022, when you became Oregon?

00:04:03.120 | Okay, great.

00:04:05.520 | He's like, we have rooms. He's like, it's our hostel. All right. And with us, of course,

00:04:12.240 | the next department, what cabinet position you're going for sacks? Which we wish we start floating

00:04:18.320 | here. Oh, my God. Here you are with the disinformation starting already. It's a

00:04:23.360 | compliment. Secretary of SAS is with us. DeSantis had a pretty great article on

00:04:28.080 | the Wall Street Journal. Really? I didn't saw one.

00:04:31.040 | When they revoked the special administrative status for Disney, he wrote an article,

00:04:35.360 | I think it was Wednesday, Tuesday or Wednesday in the Wall Street Op Ed.

00:04:39.600 | What was his premise that they was a corporate or as a culture

00:04:42.720 | that wokeism is basically modern Marxism, and we have to defeat it. This is his language, not mine,

00:04:49.440 | at every turn. And Disney needs to just be business people and not feed the vocal minorities inside of

00:04:58.400 | their company, like every other company should they should be subject to shareholder concerns

00:05:03.280 | that apply to the majority of shareholders. Well, I think this is why I think DeSantis is

00:05:08.240 | doing well with the Republican base. And you know, if you see polling of the Republican primary is

00:05:13.280 | he understands that it's not good enough just to have this sort of Reagan s totally hands off

00:05:18.400 | government approach. Because the radical left is advancing its agenda, not just legislatively, but

00:05:24.720 | through corporations through ESG, really through taking over key private sector institutions. And

00:05:31.200 | so he's willing to use government to push back on that agenda on behalf of parents or on behalf of,

00:05:38.960 | you know, what he sees as the majority of the country. And so it's a very different approach

00:05:44.480 | than you know, the Republican Party would have been 30 or 40 years ago. This is why, you know,

00:05:48.800 | in the parlance of the base, he understands what time it is. And what's required here is not again,

00:05:55.520 | this totally laser fair approach, but rather, a much more energetic, aggressive approach

00:06:01.760 | towards checking these bad ideas wherever they come from.

00:06:05.120 | It's not the only one. I don't know if you saw this week, Bill Maher went on a bit of a press

00:06:08.880 | tour, and he was on with Jake Tapper. And he made a very interesting, I think, point about

00:06:15.600 | liberalism versus woke ism. And it was quite articulate. You know, he's a pretty good observer

00:06:20.720 | of culture. He said, they're kind of casting out the liberals in the party for this woke ism and

00:06:25.200 | the intolerant nature of the woke movement versus the liberal movement specifically,

00:06:30.880 | under the lens of trans rights. But let's put that aside for now. We got a full

00:06:35.680 | docket before we get into the culture wars and presidential elections. Let's start

00:06:41.280 | with we'll go private markets to public markets. Because they obviously dovetail so nicely.

00:06:46.800 | Item one on the docket today, there is just a massive AI FOMO frenzy going on.

00:06:52.640 | economists published a piece this week about the insane fundraising in the generative AI space.

00:06:58.960 | This is stuff like chat GPT, stable diffusion, you've heard these names. And there are now 500

00:07:06.320 | generative AI startups, according to this report that tracks with what I'm seeing in the early

00:07:10.480 | stage and not counting the open AI 10 Billy from Microsoft investment donation, rev share round

00:07:17.680 | trip, whatever that is. They have so far collectively raised more than $11 billion.

00:07:22.320 | The article included this chart, which you can see if you're on our YouTube channel,

00:07:27.120 | and just tons of folks working in audio image, and text. So we're basically looking at the

00:07:35.440 | multimedia basically revolution of PCs in the 90s occurring again, and a complete platform

00:07:42.400 | platform shift. Doug Leoni from Sequoia, one of the greatest investors in history of Silicon Valley

00:07:48.880 | had this to say, and we will comment on the other side of this 52nd clip from Doug.

00:07:53.440 | I actually think that AI is the next platform shift, in the same way that mobile was the one

00:08:00.720 | before internet was the one before. So I think AI is real. But I said earlier, we're going to

00:08:06.560 | overestimate it in the short term, we're going to invest in everything in the same way that in 1999,

00:08:11.760 | we invested in everything. But then Google came out of that, or Facebook came out of that. So I

00:08:18.320 | think you have to have a good head on your shoulder, where you don't practice FOMO, where you

00:08:24.240 | don't chase every company, AI is real, AI is the next platform. But how do we not invest in everything

00:08:31.360 | that works? How do we make certain investments based on market maps based on thought processes

00:08:38.480 | that are more rational, and not do every investment just because every other venture

00:08:43.760 | firm is doing everything best. All right, Chamath, what do you think of this massive influx?

00:08:47.920 | I think it's important to think about what the incentives are, as Charlie Munger says,

00:08:54.000 | show me the incentive, and I'll show you the outcome. I posted it into our group chat credits,

00:08:58.320 | we sent all their private banking customers an offer, they are now offering 6.5% for a three

00:09:05.120 | month T bill 6.5%. And if you go back to what we talked about before, when the risk free rate is

00:09:17.600 | somewhere north of five or five and a half percent, and banks are willing to give you

00:09:21.840 | six and a half percent in the short term, you have to generate more than three times that

00:09:28.640 | to make an investment make sense when you're investing in the long term.

00:09:32.320 | So three month money is going to pay you six and a half or seven. If you're going to invest for 10,

00:09:36.800 | 15 years, which is what you need to do typically for a startup, you need to get 20 to 25%.

00:09:45.280 | So there's going to be a lot of pressure for venture investors to put the money to work.

00:09:50.880 | Because otherwise, their LPs, their limited partners, the people that give them the money,

00:09:56.080 | will have this attitude that goes somewhere along the following lines, okay, I've committed to you,

00:10:01.520 | why aren't you investing? Because otherwise, I can get paid six and a half percent on the front end.

00:10:06.640 | And so this is becoming very problematic. What am I paying you for? What am I paying you 2% a year

00:10:12.160 | in management fee for? So I think what happens, unfortunately, is the opposite of what Doug says,

00:10:19.600 | I think good investors will try to follow Doug's feedback and advice. And the ones that have a

00:10:25.360 | track record of distributions of DPI can do more of it than not. But I think most people will be

00:10:32.080 | under pressure to deploy the capital. And so the 500 odd companies, Jason, you mentioned,

00:10:36.080 | will get a lot of it, and it'll get torched, because most of them probably won't amount to

00:10:41.200 | much of anything in the short term, you will create way too much correlation. And you will

00:10:46.400 | have zero time diversity, which as we've learned, is a recipe for terrible returns.

00:10:51.200 | Time diversity being Hey, you deployed all this web to capital web three capital, sorry, crypto,

00:10:56.560 | whatever, in this very short period of time, you overpaid, you know, fire, literally on fire,

00:11:01.360 | Brad, when you hear Chamath talk about the 6.5%, and then you look at private markets, you invest

00:11:07.200 | across the lifecycle of companies, obviously, you're in some private companies, we all know

00:11:10.720 | very well, famously, snowflake, I think your biggest win ever, correct me if I'm wrong. And

00:11:16.160 | in terms of a private, how do you look at this? When you're a steward of capital, public markets,

00:11:23.120 | private markets, and then just YOLO, just put it into, you know, some charity bills, or,

00:11:29.680 | yeah, bonds or whatever. I mean, first, let's just frame, right, the chart that you showed,

00:11:35.120 | I think you should it said, you know, x open AI, I don't know, something like 10 or $11 billion

00:11:39.680 | have been invested into some 500 AI companies. I mean, I happen to agree with Doug that this is a

00:11:46.320 | platform shift on the same magnitude as the internet or mobile itself. In fact, it may be

00:11:50.800 | bigger than both of those. But, you know, when I look at 10 or $11 billion, you know, let's put it

00:12:00.800 | in context, meta is going to spend 20 billion in one year alone on AR VR. And this is on an entire

00:12:08.400 | platform. So I don't know, I, I think whenever you have something as tectonic as mobile or internet,

00:12:17.280 | it deserves a lot of investment. And yes, it's going to be messy. And yes, Chamath's right,

00:12:22.480 | the cost of capital, frankly, is limiting the amount of money going into these businesses

00:12:27.920 | already. So we see a lot of dry powder sitting on the sideline, this chasing new ideas.

00:12:33.760 | I think one way one way to frame it as well as I think about in 2000, we all knew that the internet

00:12:41.200 | was going to be big, we may have been lucky enough to conclude that search was going to be big.

00:12:45.360 | But if you invest in in Yahoo, or Infoseek, or AOL, or excite, like, you tore all that money went

00:12:53.680 | to zero. Right. So now think about just these large language models, right, the foundation

00:12:59.680 | models, which are driving and enabling all of it, open AI, you've got open AI, you got a drop,

00:13:05.040 | like you got co here, you got character, you got stability, you've got lambda,

00:13:09.920 | it is almost impossible to know with any certainty, much like it was with the search

00:13:15.680 | engines in 99 2000, who's going to emerge where the value capture is going to be, it may all end

00:13:21.440 | up with Microsoft and Google. I mean, this may end up looking like iOS and Android at the foundation

00:13:26.320 | model level. And so, you know, I think as investors, for example, on the foundation model side,

00:13:32.320 | I think it's very difficult to choose just one, particularly when the largest one is frankly

00:13:38.000 | captive and a proxy to Microsoft, and they're capping your upside return. So like, those are

00:13:43.600 | difficult investment decisions. That doesn't detract from the fact that I think it is as big

00:13:49.680 | as Doug suggests. And I do think there are going to be applications and tooling layer to come out

00:13:55.600 | of this, it's going to produce really big winners, I would say that we are spending an extraordinary

00:14:00.640 | amount of time. In this space, we haven't made a lot of investments, I think you have to study,

00:14:06.400 | you have to get deep. I mean, Chamath, certainly, and I have been investing in this space for at

00:14:11.040 | least a decade, maybe 15 years. But don't underestimate that the transformer model really

00:14:19.440 | did change the game here. And we're now producing impacts much larger.

00:14:24.320 | Saks, last week, you said, lab three and crypto didn't kind of stick with you, you didn't see the

00:14:30.240 | use cases. And you in the first inning here, or first at bat, you rattled off three or four really

00:14:38.960 | compelling use cases from summaries to you know, the the assistant guide on your side concept.

00:14:44.160 | Is this a Ken in your mind, because Brad just said it could be bigger than mobile,

00:14:49.840 | internet, mobile, AI revolution, if you were to look at those three, do you think it's bigger

00:14:55.520 | than actually mobile, and then we'll get into return profiles of 6.5% on cash versus what are

00:15:01.600 | VCs going to be able to do in this kind of market? Yeah, I mean, so I agree with Brad and Doug that

00:15:06.560 | this is the next big platform shift, whether it's as big as mobile, or it's more like social or

00:15:11.520 | cloud. I mean, those have been the big platform shifts over the last decade or two. And I think

00:15:15.600 | this is definitely on par with those. I think Brad's right, we don't know where the value

00:15:21.040 | capture is going to be, maybe it just all ends up accreting to the big companies who can make

00:15:25.440 | massive investments in this space. You know, one difference between the internet ecosystem today

00:15:31.120 | and 20 years ago is you do have these giant companies who are not totally incompetent,

00:15:36.000 | right? I mean, they do have lots of talented engineers. And, you know, like 20 years ago,

00:15:41.200 | you'd have the big companies would just sit on their hands in the face of a platform shift,

00:15:45.840 | and they'd just be sitting ducks who get disrupted. That's not going to happen today.

00:15:49.040 | That being said, I do think that any new platform shift creates opportunities for startups. And it

00:15:55.600 | may not be efficient the way that these opportunities get pursued in the sense that,

00:16:00.960 | yeah, Doug's right, that there's going to be a lot of spray and pray. But I think that it is

00:16:06.720 | kind of efficient for the ecosystem as a whole, right? Because like any smart engineer with a

00:16:12.720 | half decent idea ends up getting funded. And out of all of that, you get kind of a

00:16:16.640 | pre-Cambrian explosion where, you know, the ecosystem evolves a lot of different

00:16:22.240 | types of businesses. Most of them don't work, they get wiped out, they go extinct, but

00:16:26.320 | there'll be some good things that get funded. So we're more like, I think, Doug and how we see it,

00:16:30.960 | we don't want to spray and pray, we want to be very selective. We want to put more money behind

00:16:35.760 | fewer opportunities that we think are better. And Doug Leone, you know, I think he generally gives

00:16:41.520 | good advice of the tough love variety. And this is of a piece with that. And so I agree with him.

00:16:46.720 | That being said, there is a certain value to the ecosystem and having all these seed funds

00:16:52.080 | to spray and pray, right? Because this gets a lot of plants, a lot of flowers, and then you see

00:16:56.240 | what blooms. I would say, yeah, to build on that, Saks, this is a perfect inefficiency.

00:17:01.520 | You know, when you see it from the outside, you're like, well, this is super inefficient.

00:17:05.120 | Why so many companies, if you free your mind and just say their experiments, two or three person

00:17:09.360 | experiments, 500k to a million and a half in that first stage, when I invest right before you do

00:17:14.160 | when you do your series is at five or 10 million. Milestone based funding is back in the tech

00:17:20.720 | industry. And that was something, Chamath, that we lost for a little while there, people would

00:17:24.720 | just come out and they would raise a series B out of the gate, no product market fit, etc. Now what

00:17:29.920 | we're seeing is people are raising that 12 to 18 months, they got their backs up against the wall.

00:17:34.960 | Speaking of tough love, which you referenced Saks, that tough love of Hey, you have to hit the next

00:17:40.400 | milestone. What did you accomplish with the 1.5 million in order to get the 10 million in order

00:17:45.360 | to get the 30 million that 500 is going to go 10x, there'll be 5000 of these startups, but it'll

00:17:50.880 | quickly whittle down when it's your mouth as people go through this milestone based funding

00:17:55.760 | system in Silicon Valley,

00:17:57.600 | we haven't given enough time for a logical framework of investing to develop, which also

00:18:02.320 | is tied to a logical framework for entrepreneurship to emerge. We're just way, way, way too early.

00:18:08.480 | So the thing with all of these language models is that they are grist for the mill. And we talked

00:18:15.120 | about this before, if it was a highly proprietary asset, you would have never sold 49% of it to

00:18:22.480 | Microsoft for $10 billion, because you would assume that it was worth a trillion dollars.

00:18:27.040 | So it's a huge tell on the part of open AI, their deep understanding, and they understand it better

00:18:33.040 | than anybody else, that it's a bit of a capped upside. So what is uncapped, I guess, is maybe

00:18:38.880 | the better question. Well, if you look at the 1849 gold rush, as an example, the people panning for

00:18:45.920 | gold, in my opinion, are the people building language models today. They're going to come

00:18:50.880 | and they're going to go but who's going to win? Well, the pick and shovel providers one,

00:18:54.880 | Levi Strauss one. So what is the equivalent of that today? I think it's at the silicon layer,

00:19:00.960 | because you need to really re architect how compute will actually work in a world of all

00:19:06.400 | of these models, those folks will get paid. If you look at AMD and Nvidia, they've been getting

00:19:11.120 | paid for years, they continue to get paid, they probably will continue to get paid even more.

00:19:17.120 | And so folks that actually take a step into doing something hard and difficult in AI, like

00:19:23.520 | custom silicon could get rewarded. And then there's what I call the white truffles.

00:19:28.720 | What are these unique Alba white truffles, these singular sources of data that when used

00:19:36.800 | in reinforcement learning, make your output, just zinc. And that's where I think

00:19:44.880 | Facebook is an obvious white truffle core as a white truffle, but there are a lot of startups

00:19:51.120 | that could become white truffles, if they gather enough data. And that's like a pretty reasonable

00:19:57.600 | framework. And so in that framework, if you apply it to today, there's way few silicon startups,

00:20:03.920 | and there's way few white truffles. Instead, it's everything is the baloney in the middle,

00:20:07.280 | which is random people talking about some random model that's just going to again, become

00:20:11.680 | highly commoditized. You have to remember, all these models are open source, then none of them

00:20:15.360 | mean anything in the absence of the data you give it to train on 100% Brad, hey, okay.

00:20:20.720 | Well, I want to add one other piece of news that we saw this week, which is open AI announced that

00:20:27.360 | its developer AI, they were cutting the tax on that are basically the metered rate they charge

00:20:32.320 | to use it by 90%. So I think this is gonna be a game changer. I think this is based on the

00:20:40.240 | chat GPT 3.5 API. And of course, you're coming out with 4.0. Later this year, I've already had

00:20:46.400 | explained to the audience what an API is and why this is important. And for those people who don't

00:20:50.960 | know, this application programming interface, it allows a developer of some other application to

00:20:56.000 | build on top of you. So in other words, like a developer wouldn't have to use this chat interface

00:21:02.080 | to get access to the large language model, you could just submit your request through the API.

00:21:07.200 | And so give an example of what of like a popular app and how they might use it. Yeah. So yeah. So

00:21:13.840 | I think like notion actually had a demo that they published where it was a pretty incredible demo,

00:21:18.800 | maybe we can find it and it would do things they added actions in the demo, like generate a task

00:21:26.640 | list. So you could take like a document or a meeting summary, and would spit out recommendations

00:21:32.400 | for next steps or tasks, it could, you know, spit out a table. Basically, it's the autocomplete for

00:21:38.240 | everything that we talked about, right. So now notion doesn't need to build their own LLM

00:21:42.880 | expertise, they just don't use the API. So when the notion app, you say, Hey, I'm building a

00:21:48.960 | marketing plan, and you say, Well, okay, give me a list of things that should be on my marketing

00:21:52.720 | plan for my new app. It sends a signal to the chat GPT API, which will be on Azure Microsoft's

00:21:58.800 | platform. And then it gives you the data back, you don't have to build the language model.

00:22:01.520 | Yeah, incredibly powerful notion has all the content that they need, but they don't have the

00:22:06.480 | AI expertise. Now they don't have to generate your create AI expertise in house, they just use the

00:22:12.320 | API. I wonder really powerful. And but just to finish the thought here, I think that one of the

00:22:17.280 | things that's probably misleading about these stats around funding and the there's like almost

00:22:22.400 | 600 startups already, there are AI startups, is that, you know, what happens when there's a new

00:22:27.360 | wave is that founders are smart, right? And they know how to market themselves in the way that is

00:22:32.320 | most compelling to VCs. And they know that like VCs, frankly, are a little bit lemming like in

00:22:37.120 | terms of their migration to the next wave and wanting to glom on to the next big wave. So

00:22:42.160 | VCs are now looking for AI. If you're a founder, and you're you build one feature on top of the,

00:22:49.360 | you know, open AI API, now all of a sudden, you're going to market yourself as a AI company,

00:22:54.640 | you're not gonna market yourself as just a SaaS company.

00:22:57.360 | And so that's valid. Yeah, I mean, it could be gamed, or it could be like a great pivot,

00:23:02.000 | you know,

00:23:02.480 | yeah, and it's not it's not totally one or the other. I mean, it's just that if you have a

00:23:06.960 | plausible connection to AI as a founder, you're going to start marketing yourself as an AI company.

00:23:12.160 | And so that's how all of a sudden, you can have 600 of these companies, you know, that are all

00:23:19.120 | of a sudden out there in the wake of this sort of chat GPT is I think a lot of companies are

00:23:24.320 | recategorizing themselves. I literally had this experience, not three weeks ago, right before I

00:23:29.280 | went to Japan, serial founder and team that we've backed for that had an exit, said, Can I show you

00:23:34.640 | something? I said, Yeah, got on the zoom showed me a little proof of concept using chat GPT. And

00:23:42.160 | he said, This is my idea. This is the vertical. And I just said, Okay, what do you want? He said,

00:23:46.400 | 500k for 10%. I said, Okay, done. Great, let's learn. And it's an easy bet for us to make,

00:23:51.680 | because we know it's a serial team. For open AI, the way that it could become a trillion dollar

00:23:55.920 | company is actually by cutting the cost to such a low degree that nobody else can effectively

00:24:01.520 | compete with it. And then at that point, they can become a small, small, small tax,

00:24:05.680 | you'd rather just pay it than try to compete with it. And I think for open AI, that's actually a

00:24:09.440 | very brilliant strategy. So that's how they, they could get to become very, very large in valuation

00:24:15.840 | would be to become so pervasively relied upon, and where they take such a minuscule take rate

00:24:21.760 | of their participation in you building a company that could be really effective for them like cloud

00:24:26.880 | computing, right? Like we're going to just take such a small tax. Yeah, that's not a small tax.

00:24:30.400 | That's a large tax. That's the picks and shovels play in a way to create the developer ecosystem

00:24:34.720 | for AI and to your point, I mean, I think you raise a good point that you know, what was their

00:24:40.240 | motivation to take such a dilutive round, you know, the 10 billion that was evaluation at 3030.

00:24:46.720 | Yeah. And does that imply that they're not confident? I mean, that the flip side of it

00:24:50.000 | could be maybe they know, they want to compete on the basis of rapidly, you know, becoming the

00:24:55.840 | developer platform. And so they're going to subsidize that developer platform, you know,

00:25:00.560 | with negative gross margins for some period of time. And maybe that's why they need a lot of

00:25:04.240 | capital. And they were in kind of a reflexive loop of just cost of getting better versus the

00:25:09.360 | amount of money they had to get better. And so maybe they were forced to do it. And then in that

00:25:13.680 | point, how would you justify you would say, well, the other 50% is still hugely valuable. So that's

00:25:18.560 | enough for us. And I think that that's, that's very logical as well. Brad, you have your finger

00:25:23.120 | on the pulse of LPS, limited partners who back funds like Chamath, Saks is mine and yours.

00:25:29.520 | We heard 6.5% on your money for no risk. Well, you in Chamath's position is hey,

00:25:37.120 | you have to triple that if you want to be a private market investor. That's about 20%.

00:25:41.280 | 20% rule of 72. That means every three and a half years, you got to double.

00:25:45.360 | If you're doing that for a 10 year fund, you're looking at a five x fund is kind of table stakes

00:25:51.680 | then I think just back of the envelope math. What are LPS thinking right now? Are they looking at

00:25:56.320 | this world and saying I should just be all in cash? Or are they saying, yeah, everybody thinks

00:26:00.560 | we should be all be in cash. Therefore, there's not going to be enough money in private. Therefore,

00:26:04.560 | there's an opportunity there. We know the 6.5% rate. You know, that's not going to be here

00:26:09.920 | forever. It may be here for a little while, but we need to we need to keep investing in venture.

00:26:14.480 | Or are they just cutthroat about it? Like, let's pause venture investing, private market investing?

00:26:19.200 | It's a great question. First, when I look at the three year Treasury bill, it's like 4.7.

00:26:23.680 | Not to quibble here. So I think Chamas getting a little goosy, goosy on the 6.5.

00:26:27.840 | But the fact of the matter is, what does that mean? Goosy, goosy?

00:26:32.720 | You're super special. You're VIP JP.

00:26:38.160 | Maybe there's like some sort of like, bond rate that included corporates or something.

00:26:43.680 | Maybe it was 5.2 from Robin Hood on my Robin Hood account for J trading. So

00:26:47.840 | it's right. What is in that? What is in that Jason, they probably got some junk bonds and

00:26:51.760 | they're ripping you off. Whatever it is, I'm getting five points. It's so great. You are

00:26:56.480 | until you're not you are until you're not. It's 100% T bill, print season and junk bond fund.

00:27:02.320 | Look at the fine print, Jacob.

00:27:05.520 | You know, LPs have a 10 year view. They understand like most people. I mean,

00:27:12.080 | listen, if you look out at the 10 year, the reason the 10 year is, you know, that we have real

00:27:19.120 | interest rates at about one and a half percent. So that's the 10 year less expected inflation.

00:27:25.520 | When you look out is because people expect inflation to come down and they expect rates

00:27:30.800 | to come down. So if you were an LP and you said I'm not going to invest in venture in the next

00:27:34.720 | two vintages, which may be the best two vintages we've seen in a long time because prices are

00:27:40.000 | adjusting, etc. And I'm going to move it all into some rate bet. First, it's just very difficult to

00:27:45.600 | do. They don't move their allocations around that quickly. Now, a wealthy family as an LP could move

00:27:52.240 | their allocations around really quickly. But if you're Texas or you're Ohio, or you're a sovereign

00:27:57.040 | wealth fund, you're betting on the arc of value creation. I would say this, the consequence is

00:28:02.720 | they're narrowing their aperture as to the venture funds they want to allocate capital.

00:28:07.760 | Okay, explain that unpack who they are narrowing the aperture to.

00:28:11.600 | We've talked a lot on this pod about the power law. And the truth of the matter is whether we're

00:28:17.280 | talking about AI or software, or anything else that you know, people are going to be funding,

00:28:23.600 | it's 10% of the investments that are going to yield 90% of the returns. And so

00:28:28.720 | they're looking at that and saying, Who are the top 10 firms in Silicon Valley,

00:28:34.480 | I either want to get allocation to those firms who are seeing the best deals converting the best

00:28:38.560 | deals and are selective, like Saks talked about, or we just don't want to allocate. So I think,

00:28:43.680 | you know, what we saw over the last two years, Jason was an explosion of new funds,

00:28:48.160 | an explosion of new, you know, first time second time funds. I think subscale small funds,

00:28:55.120 | with no DPI, they're going to find a really, really tough time to Chamas point about DPI

00:29:02.960 | raising capital. Okay, to see the scale player scale. So part of that is clearing out the

00:29:08.800 | inventory from the last cycle. Two news stories this week about companies, you know, maybe

00:29:15.520 | struggling. Sequoia got off the board of citizen if you don't know citizen, that's that app that

00:29:20.720 | tells you where crimes are happening in your city. Very popular in San Francisco. It's literally

00:29:25.840 | goes off every 90 seconds. It's pretty dystopian. That company citizen, which is a pretty cool app

00:29:31.840 | has raised 130 million to date Sequoia led the series a in 2017. They did a pay to play around

00:29:38.080 | if you don't know what that is. Basically, if you don't invest, you get crammed down,

00:29:42.160 | how does the cram down work? Well, your shares in the company went down 10 to one.

00:29:46.160 | And you probably got moved to common shares as a part of as opposed to preferred, which has a

00:29:52.480 | series of protections, they get their money out first, yada, yada. But Sequoia refused to

00:29:57.920 | participate according to this FT story. Again, Sequoia did not comment on this. It's it's kind

00:30:04.720 | of something you don't do as a VC when something goes bad at a company and you leave the board.

00:30:09.360 | You generally don't want to say bad things or taint the company any more than leaving the board

00:30:15.280 | does. So a bunch of cram downs happening and then dovetailing with that Instacart according to the

00:30:21.440 | Wall Street Journal had a big Q4 as it prepares to go public. Instacart. If you remember, we talked

00:30:27.840 | about it on the show cut its internal valuation 75% last year from 39 billion to 10 billion.

00:30:35.520 | According to sources, Instacart Q4 results, according to the Wall Street Journal, up more

00:30:41.920 | than 50% even though order volume grew only 16% why they turned advertising on the app just like

00:30:47.760 | Uber and Amazon, a lot of these commerce folks, folks are building ad business inside of theirs.

00:30:54.640 | So what do you think about what's happening as we clear out this private? Anybody have thoughts

00:31:01.280 | on Instacart or the cram down rounds? Go either way with this, and then we'll go to

00:31:05.280 | I wouldn't focus too much on those two companies. I think we're going to see in the second half of

00:31:09.120 | 23. And all of 24 is a lot of medicine being taken a lot of down rounds, a lot of structure

00:31:15.680 | is going to be a tale of two cities, the hot area, you know, AI is going to continue to receive new

00:31:20.640 | investment. And all these companies that, you know, that receive peak valuations in 2021,

00:31:26.560 | are going to have a day of reckoning either, you know, if they're lucky, maybe they have a flat

00:31:31.840 | round or model modestly up round, but a lot of them are going to have down rounds or restructurings.

00:31:36.480 | And this is going to be going on for the next year and a half.

00:31:39.680 | What's your philosophy, Saxon, leaving a board, this is a really dicey issue when you give up

00:31:43.520 | on a company. What's the best practice there? How do you do it without damaging the company?

00:31:48.480 | Obviously, the founder relationships can be hard. What have you learned about this as a private

00:31:53.360 | market? Well, I think, I think that sometimes we like flip board members internally at craft just

00:31:59.760 | because people have different amounts of capacity. That's not a statement at all about the way craft

00:32:03.520 | feels about the company is just a reflection of our individual bandwidth, or whose expertise are

00:32:08.320 | needed at a time. But when the firm itself quits a board, I think there's no way to read that other

00:32:15.280 | than, you know, a statement of protest. And I don't know what happened with that company. But

00:32:19.440 | it seems to me that, you know, again, it could be a sign that the venture firm isn't happy with the

00:32:26.800 | way that they're being treated. The cram down, Chama. That's, that's a bitter pill to swallow.

00:32:32.880 | Why would founders do this cram down instead of just adding a little more to the top? And is there

00:32:38.640 | a way to do this without, you know, going scorched earth or poisoning the well as it were?

00:32:45.200 | We, again, putting this app and Sequoia aside, this is happening all over the ecosystem. So is

00:32:51.440 | there a way to do this gracefully? Or is it just going to be messy?

00:32:53.920 | I think it's going to be really messy. I mean, to state the obvious, no, no venture capital investor

00:33:02.240 | ever quits the board voluntarily of a great company that's doing well, that would be dumb.

00:33:09.120 | So as David said, sort of like the proof is in the pudding there. And at the same time,

00:33:15.680 | there are a lot of companies who don't want to see the writing on the wall, and will do all kinds of

00:33:25.360 | gymnastics to try to stick a landing on a contorted financing. And sometimes those things have real

00:33:34.240 | consequences to other investors who just don't think it's the right thing to do. I wouldn't read

00:33:38.800 | too much into this, except that good founders have a responsibility to do what's right for

00:33:45.520 | themselves and their employees. Nobody else. And the thing to keep in mind investors really,

00:33:51.680 | no, I think you I think you absolutely have to prioritize the people doing the actual work.

00:33:56.720 | And if and if you actually did prioritize them, what you would probably say to yourself is,

00:34:01.840 | oh, my gosh, there are people who I work with, who I look in the eye every day,

00:34:04.960 | because investors, you'll see once a quarter. But I have my fellow employees that I'm as a founder,

00:34:10.240 | that I look in the eyes every day, who've been toiling with me for umpteen hours a day,

00:34:15.840 | every day for years. And they are now totally underwater. What is the right thing to do for

00:34:23.280 | them? And I think if you just answer that question, you wouldn't do all these contorted things,

00:34:28.880 | you would just reset the valuation, you would refresh the equity pool,

00:34:33.520 | you would issue options back out to those employees, and you would move on.

00:34:37.360 | It's all these other things that get in the way of answering that simple,

00:34:42.160 | simple question, where people fuck it up.

00:34:44.400 | And I've done that before.

00:34:46.640 | You sacked if you don't have a team, and you don't have a motivated team, you have nothing.

00:34:50.560 | I've done that before. I don't want to rehash one of my more miserable experiences. But I was

00:34:55.040 | dealing with a company that had a grossly inflated valuation, it was a total problem case.

00:35:00.080 | We voluntarily slashed the valuation in half and reissued options to the employees

00:35:04.080 | to keep them motivated.

00:35:05.120 | No big deal.

00:35:06.000 | Yeah, yeah, exactly.

00:35:07.440 | And it's not that it's no big deal, but it requires some amount of fortitude.

00:35:11.280 | And like, you know, understanding your priorities, I guess.

00:35:16.560 | But you're about to what do you think, you know, like, first, I think it's revealing

00:35:20.800 | that we think what happened here is so out of the ordinary. I mean, you flashback to 2001 to 2004.

00:35:29.040 | Sequoia, I don't think funded a single loser in their portfolio.

00:35:32.560 | Right? Like, that's a time where you walked away from the ones that weren't winning.

00:35:37.440 | And you fed the ones that were, because you have limited capital, and you don't know when

00:35:42.400 | you're going to raise your next capital, this idea that you have unlimited capital, you can

00:35:46.400 | give money to anybody, no matter what they're doing with respect to their plan, I think,

00:35:50.800 | is a function of the last 10 years.

00:35:53.120 | But to Chumas points, the idea of tough talk, you know, either out of CEOs or out of board

00:36:00.000 | members has been in short supply in Silicon Valley, this idea that saying the truth,

00:36:05.760 | just speaking the words about needing to get fit or needing to lower the valuation,

00:36:10.240 | that somehow that is founder unfriendly is nonsensical.

00:36:13.920 | The truth is founder friendly, by definition, and I think to Chumas point,

00:36:20.160 | the less complicated you make this, right, you reset the valuation, you re up the option pool,

00:36:25.840 | and then everybody has a choice to make.

00:36:27.920 | And if the people who are on the board and backing the company choose not to re up for

00:36:32.320 | whatever reason, they no longer believe in the path forward for the company that's incumbent

00:36:36.000 | upon the founder to go find people who will.

00:36:38.320 | That's not abandonment as it's being framed in this story.

00:36:41.040 | It is a trade.

00:36:42.320 | And I think maybe if you look at public market investors, Brad, nobody gets upset by a trade,

00:36:48.640 | trade to trade.

00:36:49.760 | But in the private markets, there's a lot more emotion involved a lot more relationship material

00:36:54.320 | and this founder friendly concept of like, you're abandoning me.

00:36:58.160 | It's like, no, the the trade here, it makes no sense for this firm and for this fund and

00:37:02.800 | for these LPs, right?

00:37:03.840 | You know, it's sometimes, sometimes the founder needs to have the courage to look in the mirror

00:37:09.680 | and say, what I'm doing is not working.

00:37:11.680 | I had a plan, I missed the plan by 70%.

00:37:14.560 | I'm lighting capital on fire.

00:37:16.960 | This is a charity, not a business.

00:37:18.960 | It's best to say it didn't work, shut it down and move on and do something else.

00:37:23.200 | Okay, so of course, you're referencing Salesforce.

00:37:24.960 | So we'll pivot to that.

00:37:25.920 | I'm joking.

00:37:26.480 | It's not that bad.

00:37:28.320 | But I think this is a good time to maybe talk about the public markets and inflation and

00:37:34.000 | what we're seeing in macro.

00:37:35.120 | So can I set up a question for Brad, actually?

00:37:37.440 | Sure, go ahead.

00:37:38.000 | Yes.

00:37:38.320 | Yeah.

00:37:38.560 | So so on a previous podcast, I laid out my theory of how you could just use the two year

00:37:44.480 | bond rate relative to the Fed funds rate to understand where the bond markets sort of

00:37:51.520 | prediction market about inflation is going.

00:37:53.760 | And a month ago, the two year bond rate was at 4.1% relative to 4.5% Fed funds rates.

00:38:00.880 | In other words, the bond market was betting that interest rates would go down between

00:38:06.560 | now and two years from now relative to where the Fed had it.

00:38:09.600 | So therefore, it believed that inflation had been conquered.

00:38:13.840 | Now, fast forward just one month later, and the two year bond rates at about 4.9%.

00:38:19.200 | You're the Fed funds rates about four and a half percent.

00:38:23.120 | That is a massive swing, basically 80 basis point swing in the I guess, the two year bond

00:38:30.400 | rate.

00:38:30.720 | And so the market seemed to be saying all of a sudden, not just that they expect rates

00:38:35.600 | to be higher longer, but also that the Fed needs to keep raising.

00:38:40.320 | And that is a big change.

00:38:41.680 | So Brad, what is the basis for that?

00:38:44.240 | And what do we now believe about inflation?

00:38:47.840 | I think just a few weeks ago, we were thinking that this problem was licked and the market

00:38:52.400 | took off like a rocket, it ripped.

00:38:55.040 | Now, all of a sudden, it seems like investors are really worried that inflation is not over.

00:38:59.440 | So where does this stand right now?

00:39:02.240 | Well, I think when we started the year, you know, the 10 year was close to three, two,

00:39:07.600 | we're now we're closer to 4%.

00:39:10.000 | The 10 minus two is as negative as it's been in the last probably 10 years.

00:39:15.200 | So the market is clearly saying, you know, we saw some inflation prints that came in

00:39:19.600 | hotter.

00:39:20.320 | I think it's now consensus, which you guys have been saying on the pod, that, you know,

00:39:25.520 | although the second derivative is slowing, that it's sticky, right, we're going to get

00:39:29.840 | stuck at this four, four and a half, three and a half.

00:39:32.560 | And it's the slope of the curve downward is going to be slower.

00:39:37.040 | We've gone from thinking we're going to have 225 to now thinking we'll have three or four,

00:39:41.200 | you know, and so I think everybody is now bracing for more inflation.

00:39:46.560 | But remember, when we started the year on January 1, the consensus wisdom was we were

00:39:51.120 | going to retest the S&P at 3200, we're going to have an earnings recession, and that inflation

00:39:56.240 | was going to continue to run hotter.

00:39:57.920 | The only surprise in my mind so far this year is how well the equity markets have held up

00:40:03.680 | in the face of a 10 year that's gone parabolic.

00:40:06.800 | Right, and an actual earnings recession, right.

00:40:09.520 | And you, you know, you posted, you know, in our thread, Chamath about just quality of

00:40:13.840 | earnings, you know, even the earnings beats are pretty low quality.

00:40:17.440 | And so I think, you know, we now are going to have a couple inflation prints coming up

00:40:23.520 | over the course of the next couple weeks that are going to be important.

00:40:26.240 | My hunch is, you know, everybody has tilted again on, you know, what we saw in the last

00:40:32.480 | couple prints.

00:40:33.600 | My suspicion, if you look at Morgan Stanley and Goldman Sachs, the consensus view is that

00:40:38.960 | we're still heading in the direction of 4% faster than I think people emotionally think.

00:40:45.280 | So I would say there's maximum uncertainty in the world.

00:40:48.960 | The fear that inflation is uncapped the way Larry Summers was articulating November and

00:40:54.400 | December is less today than it was.

00:40:57.200 | But what's emerged is this idea that we're going to have higher rates for longer, and

00:41:02.000 | we're going to have higher inflation for longer.

00:41:03.920 | Now, the question I throw back at you is the market abhors uncertainty.

00:41:09.760 | The market's done totally fine during periods where we had 3% inflation and 5.5% rates,

00:41:17.760 | right?

00:41:18.080 | When the internet boom that was, you know, 2000 to 2005 rates were a hell of a lot higher

00:41:24.320 | than the rates are today.

00:41:25.840 | So I don't think that higher rates and higher inflation means that we can't, you know, invest

00:41:32.640 | in venture backed companies that have huge secular growth.

00:41:35.280 | The world doesn't end.

00:41:36.240 | But what I do think it means is like, if there's massive uncertainty in the world, if allocators

00:41:42.720 | of capital don't know whether rates are going to double again, whether inflation is going

00:41:47.760 | to double again, then everything just shuts down.

00:41:50.000 | And that's really bad for the economy.

00:41:51.920 | I don't see that happening right now.

00:41:53.520 | But I do think that the prints over the course of the next eight weeks are going to be important.

00:41:57.440 | Chamath, you have any macro thoughts here?

00:42:00.960 | At the same time, this is happening.

00:42:02.400 | We saw rents broke in the last month.

00:42:04.720 | So rents got cheaper.

00:42:05.840 | Yeah.

00:42:06.480 | A governing principle, I think I probably said it too many times, but I'll say it again,

00:42:10.720 | rates are going to be higher than we like, and they'll stay here longer than we want.

00:42:16.000 | So if you use that as a principle, whenever the consensus thinks we're done, it's been

00:42:23.040 | pretty profitable to be on the other side of consensus.

00:42:25.760 | And so I still kind of maintain that we're probably going to have a five and a half percent

00:42:31.840 | fed funds rate.

00:42:32.560 | Which means that, I don't know, maybe Credit Suisse will offer me seven and a half percent

00:42:37.440 | soon on three month T-bills, but we're going to have higher rates.

00:42:40.560 | And I do think Brad's right, though, in the sense that as long as we know that then that's

00:42:44.960 | it and we can forecast it into the future without it changing too much, it'll be okay.

00:42:50.880 | But right now, what you're seeing is a lot of make believe going on in the stock market.

00:42:58.640 | So Nick, if you want to just throw up that image.

00:43:02.160 | So this is a really interesting chart.

00:43:04.480 | This is the chart of cash flow versus earnings.

00:43:07.280 | Yeah.

00:43:07.780 | So this is something that I saw in Bloomberg, which I thought was really interesting.

00:43:11.360 | And if you focus on the period of 2020 to 2024, what you see is the white line, which

00:43:16.960 | is net income adjusted for depreciation amortization.

00:43:20.240 | And the blue line is cash flows from operations.

00:43:23.200 | So what does that mean?

00:43:24.000 | And this is for S&P 500 firms.

00:43:28.080 | This is the best 500 companies in the world.

00:43:30.160 | Yeah.

00:43:30.960 | And the white line is what you tell Wall Street in terms of what you make on paper.

00:43:37.120 | The blue line is what actually appears in the bank account.

00:43:41.680 | So why could there be a gap between what you tell somebody you made, I made a dollar versus

00:43:47.120 | what's in the bank, 50 cents.

00:43:48.800 | Well, the reason is that there's all kinds of accounting tricks that you can use, accruals,

00:43:54.800 | inventories, and all of these things allow you to present a healthier earnings report

00:44:02.240 | than is actually true.

00:44:03.520 | And so right now, we have the worst earning situation.

00:44:08.240 | So the worst gap between what we are telling people versus what is actually in the bank

00:44:13.920 | account that we've had for 30 years since 1990.

00:44:17.360 | And so it just brings into focus the fact that we may be in the last few innings of

00:44:24.560 | trying to make sure this all looks okay.

00:44:27.280 | In which case, one faction of the investing world who thinks that this earnings recession

00:44:35.840 | is actually at hand would be kind of right.

00:44:38.240 | And then what they would say is that once we all realize that these earnings are fake,

00:44:42.880 | and you reset down 15%, that's where you get to the mid 3000 in the S&P 500.

00:44:49.600 | Right now, it's around 4000.

00:44:50.800 | I don't know if that's true or not.

00:44:53.120 | But there's more and more evidence that would support that the way that they see the world

00:44:59.760 | could be credible.

00:45:00.640 | The other side says, Hey, listen, this is a bump in the road.

00:45:05.360 | We're getting a handle on things.

00:45:07.440 | And it's stabilizing.

00:45:08.560 | So even though it's higher than we'd like, it's not going to change that much.

00:45:11.600 | So now just think about 1015 years from now, and let's go.

00:45:14.400 | And those are the folks that want to rip the money into growth stocks and tech stocks again,

00:45:18.880 | how does the consumer play into all this record low unemployment, like it's 1% in Utah,

00:45:24.080 | three and a half percent for the country, two and a half jobs for every American who's

00:45:27.280 | unemployed.

00:45:27.920 | And then these rents coming down.

00:45:30.560 | But consumers have seemed to have burned off all that extra money they had.

00:45:35.120 | So Brad, when you look at the consumer driven economy that the world lives in,

00:45:39.920 | that's not true.

00:45:40.480 | Because you have to understand, stimulus is still entering the economy, it's just harder

00:45:44.560 | to measure.

00:45:45.200 | So for example, take Social Security, you have cost of living adjustments in Social

00:45:49.280 | Security, that's lifting payments by 10 and 15%.

00:45:52.240 | Because it's backdated for what was going on last year.

00:45:55.120 | And remember, last year, we had two, three, four, 5% inflation rates.

00:45:59.680 | So there is more and more money coming into people's pockets that we don't realize.

00:46:04.640 | And we're all on the hook for that as US taxpayers.

00:46:07.600 | So I think it's very dangerous to kind of look at one data point and try to pick off

00:46:12.480 | what's happening in consumer land.

00:46:14.000 | Because there's all kinds of hidden ways in which money gets back to people.

00:46:17.680 | Brad, you have thoughts on the consumer?

00:46:20.080 | Because, you know, I test, it does seem like consumers are still spending money.

00:46:25.520 | But the cost of goods in some cases is coming down.

00:46:29.440 | I mean, how do you look at the consumer and try to make sense of what's going on here?

00:46:32.880 | Because it does seem the United States is in its own little bubble here world of just

00:46:38.080 | over employment.

00:46:39.040 | Still, even though we're seeing these layoffs in 10.

00:46:41.840 | Well, I would say number one, that the pop we've seen in rates, which impacts consumers

00:46:47.840 | by way of higher mortgages, higher variable expenses on their credit cards was offset

00:46:52.320 | over the last few months by lower energy costs.

00:46:54.640 | So their cost of gasoline went down.

00:46:56.240 | Add in the things that Chamath's talking about, and I'm not sure you took a lot of money out

00:47:00.800 | of people's pockets.

00:47:02.000 | I would say this, that again, what we're talking about here, retail sales have continued to

00:47:06.720 | do really well.

00:47:07.760 | E-commerce sales in January were quite strong.

00:47:11.200 | That would all be consistent with a soft landing.

00:47:15.040 | But here we are, you know, again, talking about macro.

00:47:18.800 | I think when you spend this much time talking about macro, doing what we do, you know, like

00:47:23.680 | last year, I'll be the first to raise my hand and say, you know, like our friend Bill Gurley

00:47:27.840 | would say, it leads you in the wrong direction.

00:47:29.440 | The fact of the matter is, it's totally unknown and unknowable where we're going to go over

00:47:34.080 | the course of the next three or four months.

00:47:35.920 | I think there's a better ability to predict maybe over the course of the next couple of

00:47:39.600 | years.

00:47:39.920 | But the fact is, if you would have told any, I was just with a bunch of investors who probably

00:47:45.920 | represent a trillion dollars of public market demand, 10 or so long only investors, if you

00:47:51.440 | would have told any of them that the 10-year was going to be at 396, they would have told

00:47:54.880 | you that the NASDAQ would be down 10% to start the year.

00:47:57.840 | And it did just the opposite.

00:47:59.360 | So I think you got it, you know, you're you have a bunch better chance, particularly if

00:48:03.520 | you're playing at home, right, than trying to guess the direction of that find five companies

00:48:08.720 | that you think are going to grow and earn more money, irrespective of the direction

00:48:13.280 | of rates and inflation, own those and enjoy your life.

00:48:16.560 | I'm looking at the world and going, sacks, my lord, I'm seeing great founders, great

00:48:22.400 | companies, and five to $10 million valuations, and I can buy 510 15% of these companies.

00:48:28.640 | This feels like the best it's been for me as an angel investor, seed investor seed fund

00:48:34.400 | for a long time.

00:48:35.680 | This is fantastic.

00:48:36.800 | Great deal flow.

00:48:39.120 | The deals are taking six weeks to close.

00:48:41.120 | We're having very thoughtful discussions.

00:48:43.200 | People are taking a real focused approach to how they deploy the capital.

00:48:47.440 | It is not YOLO.

00:48:48.400 | People are building models again.

00:48:50.480 | People are showing their cac they're being thoughtful about how they spend the money.

00:48:54.400 | They're being thoughtful about salaries and hiring.

00:48:57.200 | So what what's your you seem to think that, you know, what we're seeing here is challenging

00:49:04.000 | or a problem.

00:49:04.720 | What are your thoughts on how it's affecting your day to day business as somebody who is

00:49:10.640 | a company builder?

00:49:11.840 | Well, let's separate two things.

00:49:13.520 | So there's the tech ecosystem, and there's the economy as a whole.

00:49:16.880 | The fact of the matter is that tech already had its bubble in 2021.

00:49:20.640 | It had its crash in 2022, and now we're largely on the other side of that.

00:49:25.520 | There's still a lot of companies like we talked about that are going to need to restructure

00:49:28.960 | who raised during the bubble and may not have come to grips with that.

00:49:31.760 | But if you're talking about new investment, new rounds, new companies are starting with

00:49:36.400 | a clean sheet of paper and a blank slate.

00:49:38.640 | You're right.

00:49:39.200 | Things seem good and normal, right?

00:49:41.680 | People are making intelligent investments.

00:49:44.080 | And obviously, the innovation cycle doesn't have anything to do with the macro picture.

00:49:48.640 | I mean, technology wants to evolve, and it's great engineers and product people who drive

00:49:55.840 | those ideas forward, and they're not thinking about interest rates.

00:49:59.280 | I never thought about the Fed funds rate at all when I was a founder running companies.

00:50:03.760 | So let's just put that aside and acknowledge that great, great innovation is going to keep

00:50:08.800 | happening, no matter what the macroeconomic picture looks like.

00:50:12.720 | That being said, I mean, just for the listeners of the show who aren't startup founders, I

00:50:18.400 | tend to be a little bit gloomy about the macro picture right now.

00:50:22.160 | Because, yeah, it's true that what Brad said, that we've had good economies with 5% rates

00:50:27.040 | before.

00:50:27.920 | But I think you also have to look at the pace of change or the rate at which the Fed funds

00:50:33.520 | rate has been going up.

00:50:35.040 | And if you look at the chart of rate increases, it is a very steep chart of rate increases.

00:50:42.720 | And I just think that for the last decade or so, we've been operating in this zero interest

00:50:47.360 | rate or ZERP environment with lots of monetary stimulus.

00:50:51.920 | And I think a lot of companies, a lot of parts of the economy got addicted to that stimulus.

00:50:59.280 | They got hooked on drugs.

00:51:00.960 | Now, all of a sudden, you're putting them through withdrawal very, very quickly.

00:51:05.440 | And obviously, the withdrawal pangs are going to be worse if you can't taper off slowly.

00:51:10.400 | So it looked like just a few weeks ago that the Fed was done raising rates.

00:51:14.400 | Now, we know that they're not.

00:51:16.000 | We don't really know when they're going to stop.

00:51:19.040 | So I tend to be a little bit gloomy with respect to the big macro picture, because I just don't

00:51:26.320 | see how you can change rates this fast.

00:51:29.440 | And I mean, you look at like real estate, for example, we just saw the first year over

00:51:33.440 | year decrease in the housing market in a while.

00:51:37.360 | And again, that's all driven by rates, the cost of mortgages going up.

00:51:40.880 | And two big defaults in the first two big defaults.

00:51:43.840 | Yeah.

00:51:44.080 | So I think that there's going to be some pain ahead.

00:51:48.560 | Now, ironically, from the standpoint of the tech ecosystem, we may have already taken

00:51:52.960 | our medicine, and we may already be on the other side.

00:51:55.520 | Actually, that is a good way to to look at as we took the medicine, it's painful.

00:51:59.440 | And Jason, maybe maybe that's the segue to talking about Benny.

00:52:05.440 | I would say we haven't took it, we're taking it.

00:52:08.080 | We're starting to take our medicine.

00:52:10.240 | Well, it makes sense that Benny off with his, you know, very

00:52:13.600 | loving family kind of approach to running the company might actually it might take him

00:52:21.200 | a little while to become a bit cutthroat.

00:52:23.280 | So as everybody knows, Benny off, and Salesforce have had a lot of turnover, a lot of senior

00:52:31.360 | executives have left voluntary or involuntary.

00:52:34.160 | But shares were up 11%.

00:52:36.560 | On Thursday, after reporting their Q4 earnings, they're up 14% year over year, small net loss.

00:52:44.080 | But the company bought back $2.3 billion worth of its stock, we're going to see more of that

00:52:49.520 | for sure.

00:52:50.560 | And they're going to be increasing its share buy back program to $20 billion going forward.

00:52:57.200 | And like meta, which suddenly got fit and got religion.

00:53:00.960 | Benny off is now basically with all these activists, I guess on on his ass, he says,

00:53:09.840 | in this is the quote from the earnings call, we're more closely scrutinizing every dollar

00:53:14.880 | of investment and resource and very focused on driving operational excellence and automation

00:53:19.920 | across our business focusing on four key errors, strong long term expense for structuring employee

00:53:24.080 | productivity, there it is.

00:53:25.840 | Product innovation and building relationships with shareholders.

00:53:29.360 | profitability is our truly our number one strategy.

00:53:33.760 | And that's my number one strategy.

00:53:35.280 | That's the number one thing we talked about at the start of every meeting we have in this

00:53:39.920 | company, quite a turnaround your thoughts, Brad,

00:53:43.520 | I don't think the story is that, you know, that Benny off, you know, made these cuts

00:53:48.560 | and that activists are around the rim, what was significant was his comments that he made,

00:53:54.400 | and I tweeted about it today, you know, he said, every CEO in Silicon Valley has looked

00:53:59.040 | at what Elon Musk has done, and asked themselves, do they need to unleash their own Elon within

00:54:06.480 | them.

00:54:06.720 | And, you know, listen, we've been talking about this for nine months.

00:54:11.200 | The reality is, if you look at the employee count at Salesforce, in 2015, they had 19,000

00:54:18.080 | employees.

00:54:18.720 | As of last year, they had 80,000.

00:54:21.680 | In seven years, they 4x the number of employees, they were a mature company.

00:54:27.680 | By 2015, their employees cagored at 23%.

00:54:30.800 | You know, we don't talk about it in this way.

00:54:34.320 | But these large companies, these employee bases, they're not unions, but they may as

00:54:39.520 | well be.

00:54:40.880 | Right?

00:54:41.380 | Why would that be?

00:54:43.280 | I just think there's, there is, during this age of excess, where it was just easy for

00:54:49.760 | people to hire more people and build more things not to make tough choices, etc.

00:54:54.480 | Right?

00:54:55.520 | We just had an explosion like we've never seen in Silicon Valley, in the number of

00:55:00.240 | employees in these businesses, meta went from 10,000 to 80,000, 85,000, Google went to 185,000.

00:55:08.400 | And at those levels, it's very difficult to govern them.

00:55:12.640 | And when the CEOs went to make decisions in the businesses, there would be protests,

00:55:18.800 | revolts, within the business, 30 or 40,000 people would sign petitions, even say, no,

00:55:24.160 | we're not going back to the office.

00:55:26.000 | No, we're not going to work three days a week.

00:55:28.400 | No, you can't name our AI bot, what you want to name it because it offends us.

00:55:34.000 | And so to me, what's more significant is over the last six months, we've seen courage,

00:55:41.120 | gain momentum in Silicon Valley.

00:55:42.720 | Right?

00:55:44.240 | What's deeply underappreciated about meta and the changes they made, it would be one

00:55:49.520 | thing if it was just window dressing, we cut 10% of the workforce, kind of tighten our

00:55:54.240 | belt a little bit.

00:55:55.440 | But Zuckerberg got on his call and he said, we only have two priorities in 2023.

00:56:00.720 | One is efficiency, and he went into depth about once they started cutting people, how

00:56:06.320 | the company got faster, the product release cycle sped up, the employees got happier.

00:56:12.320 | And now it's an end in itself to delay or the business.

00:56:15.760 | That's what we're hearing out of Benioff as well.

00:56:18.320 | And I think it's, you know, people can quibble with how Elon went about the change, which

00:56:25.920 | you and you and David are very familiar with at Twitter.

00:56:29.680 | But the reality is, he lit a fuse in Silicon Valley that is giving courage, whether it's

00:56:36.240 | private companies, series B companies, pre IPO companies, public companies, I've had

00:56:41.760 | that conversation more times than you can imagine over the course of the last six months.

00:56:47.440 | And I think it's a really important change, because I think it breathes new productivity

00:56:52.000 | into all these businesses.

00:56:53.440 | And importantly, it unleashes these engineers back into the ecosystem to start the next

00:56:59.040 | wave of companies.

00:57:00.160 | Yeah, Jason, I mean, you and I got to tag along with Elon during that transition phase

00:57:04.480 | at Twitter.

00:57:05.120 | And the thing that I took away from it was just how much agency, you know, CEOs have

00:57:12.640 | that they're not using.

00:57:14.400 | I mean, Elon went in there, and he basically changed whatever he saw that he didn't like,

00:57:20.400 | I mean, unsentimentally and quickly.

00:57:23.120 | And, you know, and so you look at all these other companies, you talk to CEO sometimes,

00:57:28.720 | and they act like they're prisoners of their companies.

00:57:31.520 | Like, I can't change this, I can't change that.

00:57:34.000 | Stockholm syndrome, yeah.

00:57:35.120 | Yeah, it's like, you know, I've got all these employees and all these layers, and but I

00:57:39.200 | can't, you know, there's always some reason I'm afraid of the bad PR, or, you know, whatever

00:57:43.840 | it is.

00:57:44.480 | And I, you know, the thing I came away realizing is just how much agency, particularly founder

00:57:50.400 | CEOs have, that they just don't use, you know, they're always like hemming and hawing and

00:57:54.880 | wringing their hands, and acting like they're tied down by this or that.

00:57:58.800 | And the reality is, they can do whatever they want, just about, you know, within the bounds

00:58:03.680 | of what's what's legal.

00:58:04.800 | And, and I think they're starting to realize, oh, wait a second, like, I actually can do

00:58:09.920 | that, you know, I can walk into my company one day, and if there's a team that's not

00:58:13.440 | performing, that's giving me answers that don't make any sense.

00:58:16.960 | I can start over.

00:58:17.680 | I'm just gonna start over.

00:58:19.840 | Yeah, I mean, if you can't get it done, then we need to have somebody who can do it.

00:58:24.720 | And it's, it's incredible.

00:58:26.560 | Like, we were doing an analysis on this week in startups of the, you know, employees per

00:58:32.240 | company and the revenue per employee per headcount.

00:58:35.040 | And I got roasted for having this calm, even having this conversation.

00:58:39.600 | And now here we are, Chamath, people are looking at efficiency, we're looking at, you know,

00:58:45.120 | really, how efficient can these companies be run?

00:58:49.120 | Is there a limit to where this is going?

00:58:52.160 | And if we were to look at this as a process, where are the fangs, the Amazons, the Googles,

00:58:57.840 | Facebook's, where are they at in terms of percentage to being at Elon, if you if you

00:59:05.760 | were to put Twitter and Elon as the goal, where are these companies and I don't know

00:59:10.000 | that that is the goal, maybe maybe he's cut too much, who knows, we'll find out.

00:59:13.360 | I think it's a it's a it's a pretty radical experiment.

00:59:15.680 | experiment he's doing there.

00:59:16.800 | Yeah, I don't think that's a reasonable or an achievable goal for a public company.

00:59:23.520 | Okay, I mean, I think the thing we have to keep in mind is Elon is also capable of doing

00:59:27.520 | that because he paid $44 billion of his own money to buy something that he owns outright,

00:59:32.800 | that no longer has revenue pressure to outside stakeholders, different circumstance revenue

00:59:38.480 | went down 70% at Twitter.

00:59:40.080 | Well, that only affects him and his ability to pay whatever he borrowed in order to buy

00:59:45.200 | that company.

00:59:45.680 | And as long as he's willing to fund that somehow, he's literally allowed to do whatever he wants.

00:59:50.480 | That's no longer the case when you're borrowing money from other people to build your business,

00:59:55.440 | which is what every other capital market participant does public market participant does and private

01:00:01.120 | market participants.

01:00:02.000 | So I think that that distinction is just a little bit important, because it probably

01:00:06.640 | means that there is a shadow of what Elon is doing, that's probably the threshold of

01:00:11.600 | what's possible.

01:00:13.040 | And it's probably, you know, sort of 50% headcount reduction, that's probably the, the bound

01:00:20.240 | in which things break.

01:00:22.640 | Because I think the thing to keep in mind is that over time, this stuff is like collagen

01:00:29.040 | in the body, it just like, it creates these interconnected webs of just very difficult

01:00:35.280 | stuff that you sin you that you cannot tease apart blockages.

01:00:39.360 | So even if you tried to go in and cut 50% of a company like Facebook, or Google or Microsoft

01:00:46.320 | or Apple or Amazon, it would be so difficult, because all of a sudden, the coordination

01:00:52.000 | that happens at that scale, I think would get lost.

01:00:54.720 | So I'm not sure if it's possible, you kind of have to do what they're doing, which is

01:00:59.520 | cut 5%, then cut 10%, then cut 5%, then cut 5%.

01:01:04.000 | And I know it frustrates people on the outside looking in, but I think it's the it's probably

01:01:08.160 | the only way it can be done without torpedoing the company.

01:01:12.000 | What does that do on a culture basis, then, because that is the big critique, hey, you're

01:01:15.920 | creating now this culture of fear, I guess the opposite of that is you're creating a

01:01:19.120 | culture of performance and expectation.

01:01:20.800 | So how do you think about it on a culture basis, because that keeps coming up from founders

01:01:24.560 | to David's point,

01:01:25.680 | it depends, because I think companies when they're smaller, I mean, I can tell you,

01:01:29.120 | when I was a part of the Facebook senior management team, we would rank all the employees.

01:01:37.920 | So we had a very good sense of who was the best and the most performant all the way down

01:01:41.840 | to who was not and we were able to do that.

01:01:43.600 | Probably up to two or 3000 employees.

01:01:46.560 | That's not possible at 50,000 and nor is it fair.

01:01:49.680 | So because you don't know who these folks are, the real contributors are, you have to

01:01:55.280 | do what Elon did, which is literally go person to person and say, who is unbelievably performant,

01:02:01.680 | or critical.

01:02:03.280 | Yeah.

01:02:05.040 | In the absence of doing that, you just don't know who to let go.

01:02:07.760 | And so you have no choice except to bleed down the question that I have, and Brad, maybe

01:02:12.160 | there's a smart analyst on your team that can do it is right.

01:02:14.960 | And it's more of a statement as well.

01:02:16.160 | Can you imagine the totality of stock based comp that's been given out by all these companies

01:02:22.800 | since 2015?

01:02:24.160 | When they were cagering their employee bases by 25% a year, I bet you it's a trillion and

01:02:31.920 | a half dollars at least.

01:02:33.520 | You think it's that you think it's in that order of magnitude?

01:02:36.480 | 100% this has been the greatest grift in the history of Silicon Valley for sure.

01:02:41.280 | Let's pause for a second.

01:02:42.960 | Can you explain what we're talking about here?

01:02:44.800 | Stock based compensation obviously is the stock given to employees.

01:02:48.800 | It's generally not counted.

01:02:50.240 | Well, let's do it in the accounting, right?

01:02:51.920 | Let's do it this way.

01:02:52.640 | Let's just say that you believe in capitalism.

01:02:55.600 | Okay?

01:02:56.240 | Yep.

01:02:56.560 | So if you if you believe in capitalism, let's say the four of us start a company.

01:03:02.160 | And there's $1 of profit and we each own 25% of the company.

01:03:06.720 | Got it.

01:03:07.220 | Normally, what you would say is each of us get 25 cents.

01:03:12.160 | Right?

01:03:13.600 | Reasonable.

01:03:14.400 | We own 25% each, there's $1 of profit, we each have 20.

01:03:17.760 | So that means that in four years, right, we each will have made $1 because so let's just

01:03:21.760 | say it costs $1 to get off the ground or $4 to get off the ground.

01:03:24.880 | All in summit budget, we believe.

01:03:26.880 | We all would have been made whole, we all would feel great.

01:03:29.200 | And then now every year afterwards, that 25 cents we get is profit.

01:03:33.040 | Now let's say that Jason, you add a fifth person, and Brad and David and I can't say

01:03:39.440 | anything about it.

01:03:40.640 | Okay.

01:03:41.280 | And that fifth person now gets a fifth of it.

01:03:44.000 | Right.

01:03:44.500 | And so now all of a sudden, our 25 cents goes down to 20 cents.

01:03:48.320 | Then let's say you add five more people now all of a sudden are 25 cents went to 20.

01:03:54.320 | And then it went to 10 cents.

01:03:57.840 | Yeah.

01:03:58.560 | And at some point, Brad and David and I raise our hand and say, Hey, this is not the deal

01:04:03.200 | we signed up for.

01:04:04.080 | And you say, well, too bad because revenue would not be what it is.

01:04:08.720 | And profits would not be what it is without these extra six people.

01:04:13.360 | And that's effectively what everybody debates when they own a stock.

01:04:17.600 | The shareholders want that number to be as small as possible.

01:04:21.440 | And I think what Brad is observing is that in Silicon Valley, what has happened is there's

01:04:28.240 | been poor accountability for what all of those extra people do.

01:04:32.320 | And profits haven't written risen fast enough to make the existing three people on the cap

01:04:38.880 | table feel okay about it.

01:04:40.560 | And that instead of talking about three people and six and $1, you're talking about trillions

01:04:47.120 | of dollars and hundreds of 1000s of extra shareholders, Brad, millions of extra share.

01:04:52.400 | And then we have some charts here so we can do some fun with numbers.

01:04:55.600 | I think taking a step back, I think it's very important to realize that stock as a form

01:05:01.920 | of compensation to create alignment, excitement in the early stage of venture capital is part

01:05:08.160 | of the true magic of Silicon Valley.

01:05:10.240 | You know, you're starting a company, you ask somebody to go on this adventure, take a bunch

01:05:14.720 | of risks, they often have to cut their pay, they could get at Google by half to join your

01:05:20.160 | adventure, it's only fair that you give them stock in the company and they share the ups.

01:05:23.840 | And if the company smokes it, they get rich for taking that incremental risk on their

01:05:29.280 | behalf and on their family's behalf.

01:05:30.800 | What's happened over the last 15 years is something totally different, which is this

01:05:38.000 | stock as a form of early stage compensation, right, continued.

01:05:42.800 | And there's a feature in Silicon Valley as companies came public, one way to kind of

01:05:50.880 | hide an expense in a business is to bury it in SBC.

01:05:56.240 | So let's say Google wanted to hire somebody for $4 million, which they're doing today

01:06:00.560 | in AI.

01:06:01.120 | But instead of paying them $4 million in cash, which would all count against their operating

01:06:07.040 | profit, they give them $500,000 in cash and $3.5 million in stock.

01:06:12.800 | And let's say they make all that stock investable immediately, Jason, in this year.

01:06:17.120 | It's obvious to you and I that's just cash, the person turns around and sells it.

01:06:21.200 | It's a real expense of the business, real expense to the shareholders.

01:06:24.560 | But when they report their earnings, and they report adjusted EBITDA, they adjust out the

01:06:29.840 | $3.5 million that they gave by way of SBC.

01:06:33.440 | Why did stock based comp SBC get excluded from accounting?

01:06:38.560 | What is the history of that?

01:06:40.480 | And is that going to change now?

01:06:41.840 | Are people going to say and shareholders demand in this new economy in this new, you know,

01:06:47.040 | sort of reality?

01:06:48.160 | Hey, you know what, you can't play fun with numbers here.

01:06:50.880 | Stock based comp has to come out.

01:06:52.720 | What would you like to see Brad?

01:06:54.560 | It's fairly esoteric, but there are back in the mid 2000s 2004 2005.

01:06:59.840 | There was an accounting, there was a big debate about this Warren Buffett was famously saying,

01:07:05.200 | listen, it doesn't matter whether you pay in stock, whether you pay in cash, whether

01:07:09.520 | you pay in cans of beers, like it all costs the same.

01:07:13.280 | He's right.

01:07:14.080 | And so there was a debate.

01:07:15.840 | We had a statement and accounting statement FASB 123.

01:07:19.840 | And in that statement, it said gap EBITDA must include the cost of stock based compensation.

01:07:28.320 | So all of a sudden, if I'm reporting gap EBITDA, I got to include the cost of stock,

01:07:32.480 | which it does today.

01:07:33.440 | But what but but what did everybody do?

01:07:39.200 | But what happened?

01:07:40.000 | They started adjusting it out.

01:07:41.920 | Right?

01:07:43.280 | Because they said, Hey, this is a real expense, right?

01:07:46.640 | Because we're not it's not cash.

01:07:48.160 | We're giving out the dollar solid.

01:07:49.760 | Do they come up with a term for this?

01:07:50.880 | Adjusted?

01:07:51.360 | No, they just call it adjusted.

01:07:54.160 | Just a joke.

01:07:55.680 | Crime.

01:07:56.000 | The crime here is that when rates fell to zero, and everybody was making money on tech stocks,

01:08:05.600 | nobody wanted to rock this boat.

01:08:07.920 | And everybody just said, you know, like adjusted EBITDA kind of ignored, I can, I can model it

01:08:13.040 | into my future dilution.

01:08:14.480 | So we model up share count over the course of the next three years.

01:08:18.400 | But this literally over the last five years, went parabolic.

01:08:22.800 | Because I just shared with you the number of employees exploded.

01:08:27.120 | The amount of share based compensation exploded.

01:08:31.280 | I think there's a competition for those employees, we would assume based I think just reported

01:08:35.440 | SPC, which hold your hat, sacks was 70% of revenue, not 70% of their earnings, 70% of

01:08:46.560 | their revenue.

01:08:47.440 | Just for Coinbase we're talking about here.

01:08:49.680 | That's for Coinbase.

01:08:50.800 | And so you know, last week, there was something that I thought was pretty brave.

01:08:54.960 | Booking.com on their earnings call, really called this out.

01:09:01.040 | And what they said is, listen, we've been playing by the rules.

01:09:05.840 | We understand that stock based comp is cash.

01:09:10.240 | And they say every every metric we report includes the impact of stock based compensation.

01:09:16.160 | And if you look over the last 15 years, if I'm an owner of booking.com, I was only diluted

01:09:23.040 | by about 5%.

01:09:25.440 | If I was an owner of Salesforce or Expedia, I was diluted by about 25%.

01:09:30.640 | That's 25% of my ups were given away.

01:09:35.600 | Right.

01:09:36.720 | But yet those things were adjusted out when they reported earnings.

01:09:40.800 | And so, you know, what's become in vogue today is CFOs get on their calls and they say, no,

01:09:46.320 | no, no, no, don't worry, we're gonna buy back a lot of shares.

01:09:49.520 | So we won't have much dilution.

01:09:52.400 | Okay, but if you take my 2 billion of profits that Chamath just talked about, and it goes

01:09:57.760 | right out the door, just to buy back the shares you just issued, you're effectively round

01:10:02.720 | tripping that money, then it just proves the point.

01:10:05.440 | It's cash.

01:10:06.640 | It's an expense to shareholders.

01:10:08.560 | And my biggest problem with it is it's led to the bloat.

01:10:13.920 | Because if companies actually had to account for this as cash, right, as opposed to being

01:10:21.680 | able to do it, they wouldn't hire as many people, they wouldn't pay as much in stock

01:10:26.400 | comp.

01:10:27.040 | And I'll end with this because I want to end with the solution.

01:10:30.160 | Every comp committee on every board, frankly, their heads spin when you start talking about

01:10:37.520 | this subject.

01:10:38.160 | They bring in a comp consultant.

01:10:40.560 | And the comp consultant, they is really the CYA for the comp committee, because they want

01:10:47.280 | to approve a comp plan that's been recommended by the management team.

01:10:50.560 | And they just want to know, is this what everybody else is doing?

01:10:53.200 | Okay, so everybody's doing it.

01:10:56.320 | So the comp consultant looks around and says, yeah, all your peers are doing this.

01:10:59.840 | This is why Charlie Munger said, I'd rather throw a pit viper down the front of my shirt

01:11:04.800 | than hire a comp consultant.

01:11:06.160 | Right?

01:11:07.440 | What is going on on these comp committees?

01:11:09.520 | If you give bonuses to anybody in your business that is based on an adjusted EBITDA metric,

01:11:17.760 | rather than free cash flow per share, per share is the key here.

01:11:23.120 | It's negligence.

01:11:24.080 | It's negligence.

01:11:26.160 | So if comp committees just walk in and they say the gold standard as a public company

01:11:30.960 | is 50 basis points, annual dilution, that's Apple, that's booking.com, Visa, MasterCard,

01:11:36.880 | or even below that.

01:11:38.080 | That's the gold standard once you're in the public markets.

01:11:40.800 | And we will never incentivize our employees on the basis of anything that excludes.

01:11:48.000 | Stock comp, and it has to be on a per share basis.

01:11:51.040 | That would be a massive leap forward for public company accounts.

01:11:54.480 | Seems reasonable.

01:11:55.280 | Anybody have any other thoughts on that?

01:11:56.800 | Stock based comp?

01:11:57.520 | No.

01:11:58.400 | All right, Sax, where do you want to go?

01:12:00.480 | You want to go Fox?

01:12:01.440 | I'm willing to do Fox.

01:12:02.320 | Yeah, let's do Fox.

01:12:03.360 | I mean, Fox is kind of crazy.

01:12:05.120 | Okay, so Rupert Murdoch had been deposed here with this Dominion voting system lawsuit.

01:12:11.920 | They're suing Fox for 1.6 billion in damages over claims made on air.

01:12:17.120 | That we all know, around technology enabled election fraud.

01:12:21.360 | We remember this wild period at the end of the last election cycle with this incredibly

01:12:26.720 | false claim that the election was stolen.

01:12:29.040 | Something, you know, both sides of the aisle said did not happen.

01:12:33.120 | However, it seems that the hosts on Fox knew it wasn't happening, knew it wasn't true,

01:12:40.720 | but were engaging in entertainment of allowing these people to come on air and say the election

01:12:46.720 | was stolen.

01:12:47.520 | So Murdoch said, I would have liked us to be stronger in denouncing it in hindsight.

01:12:53.920 | And when asked if he could have stopped the host from highlighting these allegations,

01:12:58.720 | these false allegations on air that were obvious to everybody, he said, I could have, but I

01:13:02.720 | didn't.

01:13:03.200 | He said the truth.

01:13:04.080 | He's not allowed to lie in court.

01:13:06.000 | Yeah.

01:13:06.640 | Just on air, but not in court.

01:13:08.240 | I mean, Sax, to be fair, like you really care about freedom of speech.

01:13:13.520 | You really care about the libel laws.

01:13:15.680 | You really care about the GOP.

01:13:17.680 | Obviously, you bring it up every week here.

01:13:19.440 | So when you looked at and but you were very clear, you were not happy about the election

01:13:25.680 | denial, all that, like false claims that Trump made and these insane people he put around

01:13:30.320 | himself.

01:13:30.640 | So how do you look at these Fox hosts and listen, you've been on Tucker and other things,

01:13:36.000 | knowingly spreading lies about something as important as the election, and then doing

01:13:43.760 | it in the most cynical ways.

01:13:45.120 | We sit here and every week we roast the media, the mainstream media, you particularly go

01:13:49.680 | after the dams and the left and the media elites.

01:13:52.160 | How do you feel about these media elites who are part of the GOP machine lying incessantly

01:13:58.160 | about something as important as the election integrity of the United States of America?

01:14:04.880 | First of all, you're trying to tee this up as some giant dunk on me, Jay Cal.

01:14:08.000 | No, I'm not.

01:14:09.280 | You said from the beginning, I need to remind the audience, you didn't believe in this.

01:14:13.280 | Exactly.

01:14:13.840 | Let's go back to November of 2020 on this show, because there may be a lot of parts of

01:14:18.720 | the audience that weren't watching back then.

01:14:20.400 | I was really clear that I said Sidney Powell and 100% and Rudy Giuliani, I thought they

01:14:27.440 | were wackos.

01:14:28.480 | And this whole idea that the Dominion voting machines had somehow been rigged, and somehow

01:14:34.080 | it involved Hugo Chavez was a wild conspiracy theory.

01:14:36.720 | So I said at the time, 100%, and I also said that I thought that once the Supreme Court

01:14:42.400 | denied certiorari to Trump, I said that he had his right to have his day in court and

01:14:48.080 | to challenge the election in court, but once that the court threw out his claims, and the

01:14:53.280 | Supreme Court denied certiorari, that that whole thing needed to stop.

01:14:56.480 | And it didn't stop.

01:14:57.840 | And that's why the Republicans lost that Perdue runoff seat in Georgia on January 5th, and

01:15:02.640 | then you had January 6th.

01:15:03.600 | So I've been warning against this for a long time, Jay Cal.

01:15:06.640 | Now with respect to Fox, I think you need to basically get a little bit more nuanced

01:15:11.600 | in what you're saying there.

01:15:13.120 | Because I think within Fox, there were actually two groups of hosts.

01:15:16.880 | So there is one group of hosts that I think you could say were Trump loyalists.

01:15:21.680 | And they basically not only platformed the Sidney Powell lies, but also endorsed them.

01:15:28.000 | And Rupert Murdoch admitted that they went too far and actually endorsed.

01:15:31.920 | And so you had Hannity and a couple other hosts do that, even though Hannity was a

01:15:35.920 | good host, even though Hannity had some text messages that indicated he didn't believe

01:15:39.360 | it.

01:15:40.360 | So I think he came across the worst.

01:15:41.600 | However, there were within Fox skeptics of the Sidney Powell theory.

01:15:46.480 | And so I'd put Tucker Carlson in that camp, I put Laurie Ingram in that camp.

01:15:50.640 | And Tucker had Sidney Powell on his show on, I think it was November 19th, I think this

01:15:56.400 | was 16 days after the election.

01:15:57.760 | It was a 20-minute interview in which he grilled her and he kept coming back to, "What is your

01:16:02.560 | evidence?

01:16:03.560 | What is your proof?"

01:16:04.560 | And if you were paying attention, he demolished her.

01:16:06.640 | I mean,

01:16:07.640 | I remember that notable.

01:16:08.640 | Yeah, exactly.

01:16:09.640 | So I mean, honestly, no one looks great when all of your text messages come out.

01:16:13.280 | And you can nitpick about this or that text.

01:16:15.280 | But the bottom line is, I think Tucker did his job.

01:16:17.720 | You know, yes, he platform Sidney Powell, but he platformed her in order to dismantle

01:16:22.080 | her.

01:16:23.080 | And you kind of have to be pretty dopey not to see that she was dismantled after the appearance

01:16:27.840 | on Tucker.

01:16:28.840 | Would you say that he would be liable for knowingly platforming these people and endorsing

01:16:34.520 | them in some way?

01:16:35.720 | Or is it their freedom of speech in your mind, as an attorney here, or somebody with that,

01:16:43.520 | you know, legal degree?

01:16:44.520 | Where does it stand?

01:16:46.120 | Like put aside if this was if this was CNN doing it, MSNBC will switch what publication

01:16:50.560 | if this was the New York Times, and they knowingly lied, knowingly platformed some coops, conspiracy

01:16:57.120 | theory, what should the price they pay for?

01:16:59.680 | And then how does that affect the freedom of speech that we all think I think universally

01:17:03.800 | on this podcast, especially and in Silicon Valley, or at least we used to, that freedom

01:17:08.480 | of speech is really important.

01:17:09.660 | Do you have the freedom to lie and platform?

01:17:12.600 | coops like this?

01:17:13.600 | Let me answer you directly, Jason, I think this would be a better world if Fox reliable,

01:17:17.360 | but I don't think they're gonna be because that's not the legal standard.

01:17:19.640 | I believe that if a television network knowingly spreads and endorses baseless accusations

01:17:27.800 | against somebody, which they know or should know is basically untrue, I think they should

01:17:32.440 | absolutely be liable for libel or defamation.

01:17:35.360 | But that is not what the law requires under New York Times versus Sullivan, you're required

01:17:39.000 | to show that that they knowingly spread misinformation.

01:17:42.480 | But in addition, you have to show that they had actual malice, which is that their intent

01:17:47.720 | was malicious.

01:17:49.120 | And I think, you know, Rupert Murdoch is a wily old dog, because he admitted on the

01:17:53.560 | stand everything but the thing that was most important for the plaintiffs to prove, which

01:17:58.920 | is actual malice.

01:18:00.200 | He admitted that they platform things that they, you know, knew or should have known

01:18:04.600 | were false.

01:18:05.600 | He admitted that he should have put a lid on it sooner.

01:18:08.060 | He admitted that he knew it wasn't true.

01:18:09.960 | But he said the reason they did it is because they're afraid of their audience or a portion

01:18:13.800 | of their audience going to some rival network.

01:18:16.240 | So basically, what he said is, in not so many words, is that his motivation was greed.

01:18:21.660 | And in our system of law, that is a complete defense against claims of defamation.

01:18:25.760 | Now, I think what we need here is to rewrite the defamation laws.

01:18:29.120 | I think the Supreme Court needs to overturn New York versus Sullivan.

01:18:32.920 | Clarence Thomas is basically intimated that he would support that.

01:18:37.040 | I think that would be a great thing to do.

01:18:38.640 | I think actual malice should not be the requirement for libel.

01:18:42.400 | I think if a television network or a publication puts out information they know is false, they

01:18:47.680 | should absolutely be liable for it.

01:18:49.400 | And that is enough to show.

01:18:50.840 | And if we did that, by the way, it wouldn't just be Fox in this particular case.

01:18:54.720 | It'd be CNN and MSNBC.

01:18:56.840 | We have to completely revise their coverage.

01:18:58.920 | And all of these tech reporters who do nothing but defame the tech industry, the entire tech

01:19:04.220 | press just about, is a slow-moving defamation lawsuit.

01:19:08.160 | Elon Musk would probably be the richest man in the world just based on all the defamation

01:19:11.640 | lawsuits he could bring if we were to overturn New York Times versus Sullivan.

01:19:15.720 | The richest, richer guy?

01:19:17.040 | Yeah, because all they do is defame Elon Musk every week with claims that are ridiculous.

01:19:23.320 | So listen, let's revise the whole thing.

01:19:25.640 | Okay, wow.

01:19:26.640 | There you go, folks.

01:19:27.640 | Very, very intellectually honest.

01:19:29.280 | I like it.

01:19:30.280 | David, so what you're saying is you expect the Dominion lawsuit to fail.

01:19:36.160 | Can it be appealed all the way to the Supreme Court?

01:19:39.040 | Can this be the case that rewrites New York versus Sullivan?

01:19:41.880 | Good question.

01:19:42.880 | That's a good question.

01:19:43.880 | I'm not sure.

01:19:44.880 | I mean, I think that'd be great if it did.

01:19:45.880 | Just to be clear, listen, I think that if Fox were somehow found guilty, I think one

01:19:49.440 | and a half billion is kind of a ridiculous amount of damages.

01:19:52.400 | I don't think Dominion was damaged to one and a half billion.

01:19:54.840 | But do I think that it would be a good thing if this lawsuit were challenged all the way

01:19:59.560 | to the Supreme Court and they overruled New York Times versus Sullivan?

01:20:02.320 | That'd be a great thing.

01:20:03.320 | Let's fund the lawsuit.

01:20:04.320 | I would fund that lawsuit.

01:20:05.320 | But the next thing I want to do is sue MSNBC and CNN for all the nonsense they spread every

01:20:12.000 | night.

01:20:13.000 | Just to be clear, I have a couple of things that I would want to go and get correct, clean

01:20:17.560 | up.

01:20:18.560 | I just want to be clear here, though, Brad, David's guy, Tucker, he did the right thing.

01:20:23.440 | That's the most important part of the story, isn't it, David?

01:20:26.880 | You're still a sucker for Tucker.

01:20:28.240 | You're not being nuanced.

01:20:29.520 | You want to throw Tucker under the bus.

01:20:30.840 | I think Tucker did his job.

01:20:31.840 | No, I don't.

01:20:32.840 | I think Tucker did his job.

01:20:33.840 | Paradoxically.

01:20:34.840 | Tucker did his job.

01:20:35.840 | Tucker did his job, yes.

01:20:36.840 | Yeah, I think the guy who looks a little worse is Anity because Anity in the text admitted

01:20:40.920 | he didn't believe the story.

01:20:42.280 | But as a Trump loyalist, he endorsed the bullshit theory.

01:20:45.560 | That's no good.

01:20:46.560 | No good.

01:20:47.560 | Brad, you come on the show every couple of episodes and pitch in here as our fifth Beatle.

01:20:52.500 | Would you like to touch the third rail?

01:20:54.720 | What are your thoughts?

01:20:55.720 | And would you like to get some incoming email from all your LPs about your position on Fox

01:20:59.840 | News and Trump?

01:21:00.840 | I mean, I think that's humiliating.

01:21:01.840 | I mean, we just I just feel like I sat through a University of Chicago law school class.

01:21:09.520 | It was awesome.

01:21:11.680 | And I think we have some good issues here that we still got to tick off on J. Cal.

01:21:15.760 | Yes.

01:21:16.760 | Okay, well, we got to talk just for a second about China as it relates to tick tock.

01:21:21.840 | Because because this right here we go.

01:21:23.800 | This Holly hearing that's coming up.

01:21:25.440 | So we've got a hearing in Congress.

01:21:28.300 | Let's start with you are a shareholder, a significant shareholder in ByteDance, the

01:21:32.240 | parent company of Tick Tock.

01:21:33.240 | We have to correct, correct, correct.

01:21:35.360 | And you absolutely you started that and my kids use Tick Tock.

01:21:38.640 | And my kids use reels and everybody you and I've had a spirited debate on Yes, you're

01:21:43.320 | a shareholder.

01:21:44.320 | Okay, so about this, so I so I haven't seen it up.

01:21:46.960 | You want to see it?

01:21:47.960 | But hold on a second here.

01:21:48.960 | Like because just like sacks had to defend himself before he even got started.

01:21:52.240 | Otherwise, you wonder my credibility.

01:21:53.240 | I have to do the same thing.

01:21:56.720 | I'm a shareholder of meta, who stands to do incredibly well, if Tick Tock in the US is

01:22:04.400 | banned.

01:22:05.400 | So you have a spread.

01:22:06.400 | Wait, you win either way.

01:22:08.080 | I've got a hedge on good.

01:22:09.920 | Okay, you know, Tick Tock in the US gets banned.

01:22:13.000 | But you know, the con the context here is the Tick Tock ban debate is heating up.

01:22:19.560 | Right.

01:22:20.560 | And it's all in a march up to the Holly hearing.

01:22:23.200 | I think it's on March 23.

01:22:25.840 | And there's real like we spent a lot of time at the start of this pod on inflation, I think

01:22:30.240 | a much bigger issue right now.

01:22:32.280 | I was just with all these investors, the main issue on their mind was global decoupling

01:22:37.160 | between China and the United States.

01:22:39.560 | We're going to see a level of Chinese hate leveled out of out of Congress both sides.

01:22:47.280 | I mean, we heard it Chamath at dinner at your place not so long ago, that this hearing is

01:22:51.840 | drawing more demand for speakers from both sides of the aisle than any such conference

01:22:57.200 | in a long time.

01:22:58.720 | But there's a lot of there's a lot of heat now around Tick Tock should it be banned.

01:23:04.120 | And when I when I look at the situation, if you frame it for ByteDance, because Chamath

01:23:09.520 | talked about this a couple weeks ago, it's been reported.

01:23:13.600 | ByteDance's revenue is about $120 billion.

01:23:17.120 | It's been reported their profits are about $25 billion.

01:23:21.060 | That is almost identical in size to Meta.

01:23:23.320 | Meta is worth about $450 billion.

01:23:24.920 | So $120 billion top line.

01:23:27.240 | It's also been leaked that in that Tick Tock is about $14 billion of that.

01:23:32.720 | And that US Tick Tock is $3 to $4 billion.

01:23:37.040 | US Tick Tock $3 to $4 billion of $120 billion and it loses money.

01:23:42.640 | So there's a lot of debate, should we ban it?

01:23:45.640 | Should we not ban it?

01:23:46.640 | Is it going to go public?

01:23:47.640 | What should happen?

01:23:48.640 | What do you think?

01:23:49.640 | What do you want to happen as a shareholder?

01:23:50.640 | And I think it's a pan American.

01:23:52.320 | I think this is a puppet debate over a much bigger conversation that's going on.

01:23:57.240 | One of the things I've urged the company to do over the course of the last several years

01:24:02.120 | is parental controls.

01:24:03.560 | My kids use Tick Tock, they use reels.

01:24:06.240 | And what I want is to be able to set effective time limits.

01:24:08.980 | And I also want Tick Tock has incredible video content in math, in science and history.

01:24:15.440 | I want to be able to set a slider and say 20% of the videos that get shown over this

01:24:20.600 | one hour period have to include some of these math and science videos for my 12 year old.

01:24:25.280 | Then he can elect to not watch at all or watch it.

01:24:28.480 | They announced those product changes yesterday.

01:24:32.480 | So they're teeing up those product changes.

01:24:34.240 | I don't happen to think there's a nefarious plot.

01:24:37.100 | But I also understand that people might not want this.

01:24:40.920 | And so like, listen, I think we should have a debate.

01:24:43.080 | I think that the CEO of Tick Tock should show up, he should speak the truth at the Hawley

01:24:48.200 | hearing and if the US Congress wants to ban Tick Tock in the US or force a spin or a sale,

01:24:53.560 | I think we should do it and stop debating it.

01:24:55.520 | But the much larger conversation is whether we have a hard or a soft decoupling with China.

01:25:02.080 | And I think this is just canary in the colon.

01:25:04.120 | All right.

01:25:05.120 | So let me just tee up also, and Chamath I'll get your reaction.

01:25:08.880 | On Monday, the White House gave government agencies 30 days to remove Tick Tock from

01:25:12.280 | all federal devices, all federal agencies must delete Tick Tock from phones and systems

01:25:16.240 | and prohibit internet traffic from reaching the company.

01:25:19.000 | This is following moves by Canada and the EU and Taiwan.

01:25:23.960 | And obviously, there is a bigger House Committee focused on China that held its first meeting

01:25:30.680 | this week.

01:25:31.680 | So there is the bigger picture.

01:25:32.840 | But let's start with the smaller picture.

01:25:35.000 | Number one, Chamath, do you think it's a security risk to have a Chinese company have this kind

01:25:38.920 | of access and influence with Tick Tock specifically?

01:25:42.240 | And what do you think the remedy should be for that?

01:25:44.400 | And then we'll get big picture.

01:25:45.400 | I want to get sacks involved in this as well.

01:25:47.320 | Should it be banned?

01:25:48.600 | Should they have this kind of access to Americans and influence?

01:25:52.560 | Should it be banned?

01:25:53.560 | No, because I believe in a free market.

01:25:57.720 | Will it be banned?

01:25:59.480 | Yes.

01:26:00.640 | Because it's the most obvious cultural way to pick a fight with China without actually

01:26:12.480 | picking a fight with China.

01:26:13.920 | So yeah, I think it's going to be the most obvious victim of all of this.

01:26:18.880 | And so I don't know my advice to my friends who are shareholders, not just Brad, but others

01:26:23.880 | is sell, sell it, move on.

01:26:27.280 | It's in the Warren Buffett, what Warren Buffett calls the two hard bucket.

01:26:31.640 | Saks, do you think that this is a national security issue?

01:26:35.800 | Do you personally believe Tick Tock should be banned?

01:26:40.200 | Or do you like me believe that we should just do a reciprocation test in order for Tick

01:26:45.000 | Tock to be allowed here in the United States, then Twitter, Facebook, Meta, Instagram, LinkedIn,

01:26:51.240 | etc. need to be allowed in China and you have this many days to reciprocate or else it's

01:26:56.320 | banned.

01:26:57.320 | I don't think Jamal is right that Tick Tock is going to be GPC roadkill and GPC stands

01:27:01.720 | for great power competition.

01:27:03.200 | You're going to start hearing that term more and more.

01:27:05.240 | It's going to become the organizing principle of American foreign policy.

01:27:08.400 | And I just think that Tick Tock is all caught up in that.

01:27:12.720 | And you know, personally, I'd like to understand what it is exactly that they're doing with

01:27:16.240 | Tick Tock.

01:27:17.240 | And so just having these vague accusations, I'd actually really like to understand the

01:27:21.400 | underlying surveillance that they might be doing.

01:27:24.400 | Yeah, I'd like to know a lot more about that.

01:27:27.080 | But in any event, I just think you're gonna get caught up in this, again, GPC, that's

01:27:31.360 | going to be the dominant organizing principle of our foreign policy.

01:27:37.120 | I think that people are coming around to realizing that it's China, not Russia, that is the central

01:27:43.760 | global competitor and adversary of the United States.

01:27:46.780 | It's the only country in the world that's a potential peer competitor to the US.

01:27:50.240 | economy is roughly the same size, the US has got four times the population.

01:27:55.040 | It's the one that we really need to watch out for.

01:27:57.600 | I think there's growing realization in Washington, that the Ukraine war is a little bit of a

01:28:04.680 | misdirect and that we need to basically get back to doing what we were doing before the

01:28:09.880 | war, which is pivoting to Asia.

01:28:12.280 | And by the way, thinking about that just for a second.

01:28:15.560 | I think David, you're totally right, because the game theory now, to me, makes a lot more

01:28:20.760 | sense in the frame in the framing of GPC.

01:28:23.400 | So for example, if you think about what the CHIPS Act does, right, the CHIPS Act basically

01:28:29.960 | says we are going to near shore, or onshore, every capability we need, so that we can make

01:28:37.840 | and manufacture all the critical semiconductors for all of our interests, technological, business,

01:28:44.200 | military, etc.

01:28:46.000 | But what is that really?

01:28:47.480 | What that is, is an option to not have to defend Taiwan.

01:28:52.480 | And why is that important?

01:28:53.840 | It's because today if Taiwan were invaded by China, we get pulled into a conflagration

01:28:58.180 | that we don't know how it ends.

01:29:00.000 | We don't know what the beginning, middle, or end of it looks like.

01:29:02.300 | It's extremely dangerous and precarious.

01:29:04.920 | So spend a couple trillion dollars, create financial incentives, build a bridge to Korea

01:29:10.960 | and to Japan so that they bring onshore and into Mexico all the capabilities we need with

01:29:17.240 | Western Europe, who are already our allies already, along with Japan and Korea.

01:29:21.720 | And now all of a sudden, we have complete optionality.

01:29:24.040 | And now we can deal with the greater Chinese hegemony in a much more balanced way.

01:29:29.160 | So I think the GPC framing is shared, by the way, between the Democrats and the Republicans.

01:29:36.720 | So this is why it's so much bigger than one single company.

01:29:39.780 | That's why I think I think tick tocks roadkill Brad, if we frame it as a competition, we're

01:29:44.240 | not framing it as a war.

01:29:45.920 | We're in competition.

01:29:47.240 | And part of that is going to be this decoupling is this decoupling helpful to America?

01:29:53.080 | Is it helpful to humanity?

01:29:55.640 | Is it better that we decouple a bit this interdependency maybe got a little too deep as we saw during

01:30:01.040 | COVID with supply chains?

01:30:02.800 | Well, I mean, it's a great in a great power struggle.

01:30:05.320 | It is what the words imply.

01:30:07.240 | Right?

01:30:08.380 | So I don't, you know, part of the reason you want to have trade with China, and part of

01:30:15.160 | the reason we don't want to have a hard decoupling is, you know, a long standing theory that

01:30:19.880 | company countries that trade together are less likely to go to war.

01:30:23.880 | So you know, I think if you listen to what's coming out of this, you know, these select

01:30:29.420 | committee this week that held his first hearing is on the on the extremes, you hear people

01:30:35.440 | saying hard decoupling, right?

01:30:37.080 | And in the middle, you have people saying, Listen, we need to define a circumference

01:30:41.040 | around national security.

01:30:43.000 | And we need to decouple as to all things that are within that circumference.

01:30:47.840 | Now I will tell you that the debate is about how large is that circle.

01:30:51.640 | So it starts off as for example, sophisticated computer chips out of Nvidia.

01:30:56.720 | So China, you know, can't compete with us in the AI arms race.

01:31:01.080 | But it's quickly emerged into, you know, batteries, energy, food, supply chains, it

01:31:08.400 | the circumference has now become almost as large as the economy itself.

01:31:12.520 | I would argue that it's not just the chips act.

01:31:14.640 | It's also IRA, which is another trillion dollars of funding for basically onshore and supply

01:31:21.560 | chains, vital materials to build batteries, etc.

01:31:28.480 | You know, so I think it's a very reasonable policy by both parties to pursue, it's clear

01:31:33.760 | that we're going to have some decoupling.

01:31:36.800 | I think it's a it's a it's going to lead to an interesting question on the part of China.

01:31:42.400 | You know, she was out last week saying, you know, I'm going to make a speech about peace

01:31:47.120 | with Russia.

01:31:48.120 | You know, this is more David's territory.

01:31:51.280 | But my hunch is that there may be, you know, if China, China thinks there's going to be

01:31:56.520 | a hard decoupling from an economic perspective, this is bad for global economic growth.

01:32:02.200 | This is bad for China's growth.

01:32:03.680 | I don't think it's bad for growth.

01:32:04.960 | I think it's bad for inflation.

01:32:06.880 | Explain.

01:32:07.880 | Well, because I think that we'll have many versions of everything everywhere.

01:32:12.200 | So we will more redundancy.

01:32:14.320 | Yeah, more redundancy.

01:32:16.360 | We're gonna rely on Central and South America in a meaningfully bigger way.

01:32:21.240 | And what that'll mean is that there'll be more jobs and economic prosperity for those

01:32:24.800 | countries.

01:32:25.800 | And if you feed it to the United States, China will feed it less.

01:32:28.040 | And as a result, there'll be more inflation because you won't have the cost advantages.

01:32:32.160 | By the way, China is not just going to sit there and take this lying down.

01:32:35.840 | They've already punched back a few times.

01:32:38.240 | So for example, in the middle of the summer, China introduced a tariff and slowing the

01:32:43.640 | export of certain materials and technology to make solar wafers.

01:32:47.320 | Now, why is that critical?

01:32:49.200 | Well, again, talked about this before, but we are going to take the marginal cost of

01:32:53.560 | energy to zero in this country.

01:32:55.720 | And the levelized cost of energy, particularly via solar is the cheapest it's ever been.

01:33:01.320 | And so what China sees is, oh my gosh, if the United States has abundant free energy,

01:33:07.520 | now a huge component of what drives costs is gone.

01:33:12.960 | So now the United States could partner with El Salvador, Mexico, Honduras, you know, Argentina,

01:33:18.720 | Brazil,

01:33:19.720 | Vietnam is happening here too.

01:33:20.720 | Yeah.

01:33:21.720 | No, but I'm just saying it's close by.

01:33:22.920 | Yes, right.

01:33:23.920 | And if you can deliver zero cost energy to those places, now the manufacturing capability

01:33:28.000 | could exist there.

01:33:29.000 | My point is, it's such a complicated chess piece.

01:33:31.280 | So China's not taking any of this lying down.

01:33:33.200 | But I think that what David's framing is totally accurate.

01:33:36.680 | This is the beginning of a GPC and it's an economic tit for tat that we're going to play

01:33:41.920 | out.

01:33:42.920 | We tax chips, they tax solar panels, we go after TikTok just as a confusion maker, right?

01:33:50.120 | Yeah, there's gonna be a lot of follies back and forth here.

01:33:54.000 | I can tell you the the there's a very easy test for if China sees TikTok as a strategic

01:34:00.960 | asset.

01:34:02.960 | And that's, it's going to create more shareholder value, Brad, if they were to spin it out and

01:34:07.360 | make it a publicly traded American company with American shareholders, it would create

01:34:10.320 | more shareholder value for ByteDance.

01:34:12.600 | Therefore, if they don't spin it out, that means they're not acting in the interest of

01:34:16.520 | shareholders and shareholder value.

01:34:18.920 | They're acting in the interest of their national security.

01:34:22.120 | Pretty clear reciprocation and collaboration would be a much better model, I think for

01:34:27.680 | for working with the Chinese and hopefully we can find some things I might just elaborate

01:34:32.400 | on Brad raised the the Chinese peace proposal on Ukraine, which I think is an interesting

01:34:37.800 | topic.

01:34:38.800 | Can we you guys want to go there for a minute?

01:34:40.800 | Sure.

01:34:41.800 | Yeah.

01:34:42.800 | All right.

01:34:43.800 | Can I take a shot explaining what the Chinese were doing?

01:34:44.920 | I think it was a clever diplomatic maneuver by the Chinese to try and grab the moral high

01:34:48.960 | ground here.

01:34:50.200 | They're basically saying, listen, we're interested in peace, we're going to put forward a proposal.

01:34:54.000 | The Americans fell into the trap of basically dismissing it right away, throwing cold water

01:34:57.800 | on it.

01:34:58.800 | The US State Department has done this twice before.

01:35:00.720 | Remember, back in March of last year, Naftali Bennett from Israel tried to negotiate a peace

01:35:05.920 | deal and he himself said that it was the West, the Americans who rejected it.

01:35:10.760 | He thought it had a 50/50 chance of succeeding.

01:35:13.320 | You then had the peace process in Istanbul, Turkey, with Erdogan presiding over it.

01:35:17.960 | You had the Istanbul communique, which again, they were very close to having a peace deal

01:35:23.960 | and Blinken and the US threw cold water on it.

01:35:26.520 | So what's happening here is that the US is not playing its traditional role as peacemaker.

01:35:32.760 | We try to go in and mediate these conflicts.

01:35:36.000 | We're doing the opposite of that.

01:35:37.000 | We're throwing cold water on the peace process.

01:35:38.520 | Now, why are we not acting as the mediator?

01:35:40.600 | I'll tell you why.

01:35:41.600 | We are a co belligerent.

01:35:43.640 | This is an American proxy war that we're fighting against Russia.

01:35:46.360 | So we have no interest in mediating a peace process.

01:35:48.760 | And moreover, we're not trusted to mediate a peace process because we're one of the effectively

01:35:53.760 | one of the combatants.

01:35:54.760 | So it's a PR strategy by Xi Jinping to take the global moral high ground.

01:35:59.040 | I agree with that.

01:36:00.040 | I said it on Twitter a couple of weeks ago.

01:36:02.560 | This is amazing that he's starting the peace process.

01:36:05.080 | We want regime change.

01:36:06.380 | We want to deplete and we want to ankle Putin.

01:36:09.120 | They want to keep him in the game.

01:36:10.320 | The more despots there are, the worse, the better it is for them.

01:36:13.840 | They would like to keep the Legion of Doom going.

01:36:16.880 | They don't want to see regime change and democracy in Russia.

01:36:19.520 | Eventually, I don't think that's how they view it.

01:36:21.560 | But listen, Jake, Jake, I was very close to getting it.

01:36:24.040 | But here's where I would disagree with you a little bit.

01:36:26.520 | Let me explain.

01:36:27.520 | Okay, go ahead.

01:36:30.600 | So from the Chinese point of view, the war in Ukraine is like mana from heaven.

01:36:36.560 | Okay, they love this war.

01:36:39.140 | Number one, okay, because it's interfering with the US's pivot to Asia.

01:36:44.480 | We were basically in the process of redeploying all of our force, all of our military to containing

01:36:49.600 | them in East Asia.

01:36:52.080 | And now we're bogged down in Europe.

01:36:54.240 | Okay, so that's number one.

01:36:55.360 | Number two, we are massively depleting our stockpiles of weapons.

01:36:59.680 | We've used something like nine years of stingers and five years of javelins.

01:37:04.520 | And we're running out of ammunition.

01:37:05.520 | I can't believe it.

01:37:06.520 | We're running out of artillery.

01:37:08.000 | The Russians actually have a six to one artillery advantage, which is why they're actually doing

01:37:11.380 | much better in this war than people are acknowledging.

01:37:14.220 | We should come back to that.

01:37:15.840 | The last thing is that the Chinese now are benefiting from the economic sanctions on

01:37:21.300 | Russia because Russia is now selling them oil and gas and all their minerals at a big

01:37:26.940 | discount.

01:37:27.940 | Subsidy.

01:37:28.940 | So this has been a wonderful thing from the Chinese standpoint.

01:37:31.460 | So this is the problem with us thinking in this Marvel movie way of the world in which

01:37:36.660 | we're the super friends and we're against the Legion of Doom.

01:37:40.300 | Okay, is because there is no natural alliance in the real world between China, Russia and

01:37:45.340 | Iran.

01:37:46.340 | These are three very different regimes with different types of governments who naturally

01:37:52.140 | would not get along.

01:37:54.220 | They would be adversaries.

01:37:55.220 | Naturally, they'd be suspicious of each other as China and Russia were during the Cold War.

01:38:00.600 | But we have pushed them closer together.

01:38:03.080 | This is the problem with having this overly moralistic view of foreign policy.

01:38:07.460 | Over to you, Jason.

01:38:08.460 | What do you think?

01:38:09.460 | Tell us your question.

01:38:10.460 | Your question.

01:38:11.460 | What's your question?

01:38:12.460 | Yeah, I mean, you frame it as the Legion of Doom.

01:38:15.220 | So just explain.

01:38:16.220 | Well, it's the axis of evil, the the 50% of the

01:38:21.080 | brainiac would not be working together if it weren't for declaring a war on both of

01:38:28.520 | them.

01:38:29.520 | So essentially, Pakistan, Iran, and China work together on nuclear technology.

01:38:36.840 | So they do when it's convenient for them work on things like nuclear bombs.

01:38:41.500 | So there is an affiliation, but you're correct there.

01:38:45.500 | They're the 50% of the planet of humans on this planet who live under authoritarians.

01:38:51.420 | And so they, they're authoritarians, they're always going to think in their own interest,

01:38:54.620 | they're always going to think in their own interest above their own peoples, let alone

01:38:58.260 | the people of another country, they don't care, they don't care about human rights,

01:39:01.980 | they don't care about the rights of humans.

01:39:04.060 | And they certainly don't care about the rights of humans in another country.

01:39:06.660 | And the West is on a noble mission to spread democracy in the world.

01:39:11.260 | And that is a noble thing worth fighting for, and is worth defending free countries from

01:39:16.620 | despots I know that you are a fan of these folks, sacks apparently, and you think they

01:39:21.060 | should be able to run amok, I will take the other side of it.

01:39:23.620 | I think the West should act in unison.

01:39:25.300 | The only criticism I have is that we're not acting in unison.

01:39:28.900 | I would like to see the West instead of sending Biden to Ukraine.

01:39:31.900 | Hold on.

01:39:32.900 | Where do I say?

01:39:33.900 | I like to have 20.

01:39:34.900 | You've talked enough, you just accused me of somehow being fans of these people.

01:39:38.140 | Where did I ever say that I was a fan of Xi and China or Putin or the ayatollahs in Iran?

01:39:44.220 | Hold on.

01:39:45.220 | You said we provoked Putin.

01:39:46.220 | Putin invaded another country.

01:39:47.740 | Hold on.

01:39:48.740 | You said we caused it.

01:39:49.740 | I said, hold on a second, hold on a second.

01:39:53.540 | I am arguing for a geopolitical strategy that benefits the United States.

01:39:57.460 | I'm on Team America.

01:39:59.140 | And your policy of driving these people into an axis of evil is foolish for the reason

01:40:03.780 | I said, which is we are going to power up the Chinese economy so they are a much more

01:40:08.660 | formidable enemy to the United States.

01:40:10.860 | That is the last thing we need to do.

01:40:12.460 | Now with respect to-

01:40:13.460 | You've stated-

01:40:14.460 | Hold on a second.

01:40:15.460 | Let me finish.

01:40:16.460 | You had a chance.

01:40:17.460 | With respect to Ukraine and Putin there, there's no question that Putin invaded, okay?

01:40:22.280 | He is the aggressor.

01:40:23.280 | However, the question you have to ask is why?

01:40:26.180 | And the fact of the matter is that first of all, we fomented a coup in Ukraine in 2014.

01:40:33.380 | This is your democracy spreading that you like.

01:40:35.260 | It's all of a sudden we got these NGOs and we got Victoria Nuland from the State Department

01:40:39.420 | in there basically fomenting these coups.

01:40:41.700 | It doesn't work out quite the way you think, Jay Kal.

01:40:43.940 | That's problem number one, okay?

01:40:45.780 | Then we try to run NATO right up to Russia's border, okay?

01:40:49.740 | And you expect them just to accept that because we're a benevolent superpower.

01:40:53.220 | That's not the way the real world works.

01:40:55.380 | Putin was tremendously threatened by that and it wasn't just him.

01:40:57.920 | It was all Russian elites.

01:40:59.840 | Read the Bill Burns memo from 2008, "Yet means yet."

01:41:02.800 | He explains that even the liberal elements within Russia were tremendously threatened

01:41:07.560 | by NATO expansion.

01:41:09.320 | That is what basically poisoned diplomatic relations between the United States and Russia

01:41:13.800 | and it was a major cause of this war.

01:41:17.000 | Now listen, just because you don't think it's provocative doesn't mean that the Russians

01:41:21.860 | don't think it's provocative.

01:41:23.360 | You have to be able to put yourself in the other guy's shoes for just one second.

01:41:27.600 | The fact of the matter is there were diplomatic steps that we could have taken to defuse this

01:41:31.320 | crisis in this war and we didn't do it and now look what's happened.

01:41:35.160 | Hundreds of thousands of people have been killed and Ukraine's been destroyed.

01:41:38.040 | It's been absolutely destroyed.

01:41:39.040 | Let me tell you right now, it looks like they're losing this war.

01:41:42.200 | I don't see where your superhero policy has gotten us except to make China richer and

01:41:47.920 | more powerful and to destroy Ukraine.

01:41:50.760 | That is where your naive idealism has gotten us.

01:41:53.660 | Yeah, and I would say if you, if left to your devices and you're not engaging and not presenting

01:42:01.020 | a united front against Putin, he will invade country after country.

01:42:04.620 | The West must fight for democracy.

01:42:06.480 | We must fight for human rights, even if it's uncomfortable and you seem to think we provoked

01:42:11.440 | him to invade this country.

01:42:12.980 | He's a murdering dictator, authoritarian who has been murdering his own people and other

01:42:18.700 | people for his entire career and he will continue to do so.

01:42:22.980 | Let me clarify because you're putting words in my mouth.

01:42:25.060 | Okay.

01:42:26.060 | When you say that, I think that we provoked him.

01:42:28.180 | What I believe, what I believe is that we took actions that in Russian eyes were provocative.

01:42:33.180 | Yeah, you said we provoked it.

01:42:35.540 | I'm saying that from their subjective point of view, they saw these actions as provocative.

01:42:39.460 | They said so.

01:42:40.460 | Listen, the Russian elite, we provoked it is your position.

01:42:44.780 | No, I just explained that's not the words I would use.

01:42:47.340 | Still on his position is that in their eyes, they were provoked.

01:42:51.100 | Jason, we're talking about, we're talking about and no, what you're doing right now

01:42:58.060 | is like dishonest.

01:42:59.740 | I just explained the language that I would use.

01:43:02.260 | Yes, yes.

01:43:03.260 | We provoke them.

01:43:04.500 | We took actions that in Russian eyes were provocative.

01:43:07.300 | There's a difference.

01:43:08.300 | Provocative, provoked.

01:43:09.300 | Yes.

01:43:10.300 | The act of provoking.

01:43:11.300 | Stop lying.

01:43:12.300 | Okay.

01:43:13.300 | It's going to be too much.

01:43:14.300 | Okay, let's move on.

01:43:15.300 | Let's move on to the next one.

01:43:16.300 | Let's move on to the next one.

01:43:17.300 | Let's move on to the next one.

01:43:18.300 | Let's move on to the next one.

01:43:19.300 | Let's move on to the next one.

01:43:20.300 | Let's move on to the next one.

01:43:21.300 | Let's move on to the next one.

01:43:22.300 | Let's move on to the next one.

01:43:23.300 | Let's move on to the next one.

01:43:24.300 | Let's move on to the next one.

01:43:25.300 | Let's move on to the next one.

01:43:26.300 | Let's move on to the next one.

01:43:27.300 | Let's move on to the next one.

01:43:28.300 | Let's move on to the next one.

01:43:29.300 | Let's move on to the next one.

01:43:30.300 | Let's move on to the next one.

01:43:31.300 | Let's move on to the next one.

01:43:32.300 | Let's move on to the next one.

01:43:33.300 | Let's move on to the next one.

01:43:34.300 | Let's move on to the next one.

01:43:36.300 | Now you're backsliding.

01:43:37.300 | Hold on.

01:43:38.300 | You're backsliding right back to your legion of doom.

01:43:41.300 | No, I believe the West should present a united front and we should hold the line with Russia

01:43:46.800 | invading other countries.

01:43:48.380 | That's my belief.

01:43:49.380 | I do not think we should be doing this solo.

01:43:50.700 | I think we should not be sending Biden.

01:43:53.060 | We should be sending 15 leaders of countries to Ukraine.

01:43:56.780 | We should be sending people in and we should be doing a peace process.

01:43:59.660 | And I think the military industrial complex, largely driven by the GOP is what's at fault

01:44:05.700 | here.

01:44:06.700 | They want to use these weapons.

01:44:07.700 | They want to replenish the supply and they want to regime change.

01:44:10.740 | I don't think we should be going for regime change.

01:44:12.060 | I think we should be building bridges.

01:44:13.100 | So do you?

01:44:14.100 | My point is a little more subtle.

01:44:16.420 | You're doing it right there.

01:44:17.420 | You're basically engaging in this ridiculous rhetoric that we've seen in the media, which

01:44:21.460 | is that if you simply want a more realistic American strategy, because you believe it

01:44:26.460 | benefits America, that you're automatically accused of somehow being a Putin sympathizer.

01:44:31.300 | You're doing what the mainstream media has done.

01:44:32.820 | No, I'm not.

01:44:33.820 | I just said to you, it should be the entire West as a group, as a block negotiating with

01:44:39.220 | Putin.

01:44:40.220 | What do you think?

01:44:41.220 | It's fine for Xi Jinping to be part of that.

01:44:43.540 | I welcome Xi Jinping, Germany and the United States and France and the UK all getting together

01:44:48.380 | and trying to get these two parties to settle.

01:44:50.340 | What do you think we're doing?

01:44:51.640 | What do you think we're doing right or wrong with China right now?

01:44:55.740 | Right or wrong?

01:44:56.740 | What do you think we're doing right and wrong or right wrong or I think we should be in

01:45:01.740 | discussions with them consistently.

01:45:04.380 | I don't believe we should be isolating them.

01:45:06.220 | I think we should be looking for areas we can collaborate on the environment, tech,

01:45:10.780 | technology, you agree with the chips act, you agree with basically on shoring and you're

01:45:15.780 | showing all the critical infrastructure we need is I think we should not be dependent

01:45:19.420 | on any foreign we should we should have energy security.

01:45:23.780 | We should have metal security.

01:45:25.780 | Of course, yes.

01:45:27.380 | But I think every country should I think China should have that we should have it every country

01:45:31.500 | should aspire to be resilient and not be dependent on another country and being dependent on

01:45:36.280 | a dictator like Germany was on Putin, or we were with China for medicines or for, you

01:45:42.220 | know, medical equipment or tips.

01:45:44.300 | We do not want to be in that position ever.

01:45:46.060 | One question just just on Ukraine, just for a second, Jake out, would you be willing in

01:45:49.820 | order to achieve a peace deal for Ukraine, would you be willing to agree to two things?

01:45:55.020 | Number one, that Ukraine would be a neutral country instead of part of NATO?

01:45:59.180 | And number two, that we would recognize for me being part of Russia, would you be willing

01:46:03.380 | to give those two things?

01:46:04.500 | I think that's up not up to me.

01:46:06.140 | I think it's up to the people of Ukraine and Russia to sort this out.

01:46:09.780 | And it's up for the West to set the table for them to do it.

01:46:12.900 | And part of setting the table for them to do it is to make it more painful for them

01:46:16.820 | to stay at this war.

01:46:18.080 | So if they are told if you keep fighting over these things, and you don't come to a resolution

01:46:21.820 | between those two parties who have to live with that resolution, that is the uncomfortable

01:46:26.420 | thing that will force them.

01:46:27.980 | And that could be China, us and India all working together, all of us working together

01:46:32.420 | to force those two parties into a solution that works for them.

01:46:35.180 | We have Brad for 10 minutes, I want to move on, I want to show you guys a tweet about

01:46:38.340 | Harvard students.

01:46:39.340 | And I want you guys to react to Draymond's comments, because they're just fucking incredible.

01:46:43.500 | I don't know if you guys saw this, but isn't that unbelievable?

01:46:48.060 | It says there was a study at Harvard that found that 43% of white students there are

01:46:53.900 | legacy athletes, or related to donors or staff.

01:46:59.680 | That's unbelievable.

01:47:00.680 | Is that public knowledge?

01:47:02.500 | Or is that like kind of leaked information?

01:47:04.260 | I wonder this is from Dolores Handy.

01:47:06.260 | I don't know who that is.

01:47:08.580 | Maybe we could click on who the source of that is.

01:47:11.060 | legacies gotta go, right?

01:47:12.900 | That concept?

01:47:13.900 | Should I just go away?

01:47:15.900 | Yeah, is there a valid reason to have legacy?

01:47:20.380 | Is there a valid reason to have legacy?

01:47:22.720 | It feels unfair.

01:47:24.020 | It feels un-American that these important institutions give preference to people who

01:47:29.060 | are stupider and achieve less if this is an achievement based system.

01:47:34.220 | It just feels unfair.

01:47:35.220 | Yeah, I mean, well, we know we know that the first class had 0%.

01:47:40.820 | So we know what the trend line looks like.

01:47:42.620 | So at some point, we're approaching 100%.

01:47:44.580 | I think we're just debating what question right?

01:47:46.300 | One of the things I would like to see Chamath is what's the relative performance 10 years

01:47:51.380 | after graduation between the legacies and the kids who had to fucking scratch and fight

01:47:56.380 | to get into the place?

01:47:58.020 | Oh my god.

01:47:59.580 | Yeah.

01:48:00.580 | I mean, I think we know the answer.

01:48:01.900 | Well, you would think there would be higher performers, the latter group, but you would

01:48:05.540 | also think that if legacy got you into Harvard, then the legacy and your career is going to

01:48:11.380 | get you into other things, right?

01:48:12.980 | You'll have the end in other places.

01:48:14.660 | They're the ones who are miserable and walking around, you know, rich and haven't achieved

01:48:19.860 | anything.

01:48:20.860 | Yeah, listen, Saks didn't get into Stanford based on his dad's buying a building, right?

01:48:28.380 | That's for sure.

01:48:29.940 | Okay, so here is a video from Treymung Green.

01:48:34.180 | What I do want to go back to is Black History Month.

01:48:38.480 | This is actually the first time you've seen me in a Black History Month shirt.

01:48:42.780 | All Black History Month and it's very intentional and I really just threw this shirt on because

01:48:47.700 | I didn't have another shirt to throw on.

01:48:50.020 | But Black History Month, at some point, can we get rid of it?

01:48:54.580 | Like at some point?

01:49:01.620 | Why we got to keep getting the shortest month to celebrate our history?

01:49:05.300 | We got governors who want to take our history out of schools and I'm not going to be the

01:49:10.620 | fool to go say, "Yeah, we can celebrate it for 28 days."

01:49:14.940 | So at some point, I'd like to get rid of it.

01:49:17.420 | It's, you know, we're making all these changes in the world.

01:49:21.820 | Can't talk about these people, can't talk about those people, can't say this, can't

01:49:24.820 | say that.

01:49:26.380 | At some point, it's time to get rid of Black History Month.

01:49:28.620 | Now get rid of Black History like they're trying to do, but Black History Month?

01:49:35.460 | No.

01:49:36.460 | Teach my history from January 1st to December 31st and then do it again and then again and

01:49:43.700 | then again and then again.

01:49:46.020 | That's what I like to see.

01:49:47.020 | Wow.

01:49:48.020 | Strong.

01:49:49.020 | So good.

01:49:50.020 | Love that guy.

01:49:51.020 | Love that guy.

01:49:52.020 | He's the best.

01:49:53.020 | He's the fucking best.

01:49:54.020 | That was strong.

01:49:55.020 | He's the best.

01:49:56.020 | I'm going to take the last 10 seconds of that.

01:49:58.300 | We all need to tweet that.

01:49:59.820 | Yeah, be relentless.

01:50:01.500 | Chamath, there was a correction we needed to make about the Stripe chart last week.

01:50:05.620 | Go ahead.

01:50:06.620 | Yeah, so...

01:50:07.620 | You have the floor.

01:50:08.620 | We talked about some Stripe stuff last week and my analyst came to me after the show was

01:50:12.580 | published and there was a couple of miscalcs in the spreadsheet that generated the graphic,

01:50:16.860 | which big up to him for calling it out very quickly.

01:50:19.140 | Anyways, I just wanted to show you the updated one just so that we could make sure we get

01:50:22.540 | that on the record.

01:50:23.540 | I guess this would be a purple color.

01:50:24.980 | Is that purple?

01:50:25.980 | Yeah.

01:50:26.980 | That's actually when you calculate net revenue and I think what [inaudible 00:10:00] did

01:50:29.980 | was calculated gross revenue, which is in the red.

01:50:32.620 | So we showed this, but it actually should be purple.

01:50:35.700 | So that's the updated, accurate version of the analysis.

01:50:40.220 | So there you have it, folks.

01:50:41.660 | What does that mean for Stripe versus Adyen in terms of just... which is a better business,

01:50:46.820 | just to summarize it?

01:50:47.820 | No, I mean, to be honest with you, it says what we said before, which is that the previous

01:50:53.420 | valuation was very expectation heavy and the new valuation is definitely more in line,

01:51:00.780 | but still very rich relative to other companies who have large profitability and large growth

01:51:08.180 | rates.

01:51:09.180 | I think that's the key takeaway, which is it's very hard to both have huge margins and

01:51:14.980 | grow at mediumly high double digit rates.

01:51:19.740 | The few that can, Visa, MasterCard, and Adyen tend to trade at a very different valuation

01:51:25.700 | set than everything else.

01:51:27.580 | And so I think that's the challenge for Stripe.

01:51:29.140 | If they can do it, they'll be in that class.

01:51:31.100 | Okay.

01:51:32.100 | For the sultan of science doing his SPAC in New York, having an incredible dinner at Carbone

01:51:38.100 | right now.

01:51:39.100 | Can I say, can I say...

01:51:40.100 | Enjoy the vegetarian...

01:51:41.100 | I pre-tilted him.

01:51:44.060 | He texts into our group chat.

01:51:45.380 | Don't do it.

01:51:46.380 | Don't do that.

01:51:47.380 | Don't do that.

01:51:48.380 | Don't do that.

01:51:49.380 | Let me know if you want me to dial in and save the episode.

01:51:51.940 | My Insta reply, Gerstner's on fire.

01:51:54.740 | We're all set.

01:51:55.740 | Why would you do that to him?

01:51:56.740 | Unbelievable.

01:51:57.740 | It ruined his dinner.

01:51:58.740 | Unbelievable.

01:51:59.740 | He has to go find his safe place.

01:52:04.420 | He's irreplaceable.

01:52:05.420 | Except, you know, this episode is pretty good.

01:52:08.780 | Pretty good.

01:52:09.780 | Pretty good episode.

01:52:10.780 | Pretty good.

01:52:11.780 | Pretty.

01:52:12.780 | Pretty.

01:52:13.780 | Pretty good.

01:52:14.780 | We love you.

01:52:15.780 | We love you, Sultan.

01:52:16.780 | Oh my God.

01:52:17.780 | It wasn't a bad episode until J. Cal started ****ing again.

01:52:20.780 | The Legion of Doom, are you kidding me?

01:52:23.780 | Just like you strike January 6th.

01:52:25.780 | You can't strike words in English.

01:52:27.900 | You can't strike a single word.

01:52:29.500 | You struck my single word last week when I called you out as a Trump voter.

01:52:32.380 | When J. Cal gets under pressure in a debate, he falls back on all the usual virtue-signaling

01:52:36.620 | and ****.

01:52:37.620 | Oh yeah.

01:52:38.620 | Yeah.

01:52:39.620 | Okay.

01:52:40.620 | Who did you vote for in 2016, 2020?

01:52:41.620 | Be honest.

01:52:42.620 | See, like you're doing right now.

01:52:43.620 | Look at this.

01:52:44.620 | Oh God.

01:52:45.620 | Did you vote for Hillary and Biden?

01:52:46.620 | You're pro-Putin.

01:52:47.620 | You know, there's actually a meme.

01:52:52.100 | There's a meme on Twitter that anyone who disagrees with me is Russian disinformation

01:52:56.980 | or pro-Putin.

01:52:57.980 | I haven't seen that one yet.

01:52:58.980 | That's pretty funny.

01:52:59.980 | That's basically you.

01:53:00.980 | I don't think you're pro-Putin.

01:53:01.980 | I only try to make sure people understand.

01:53:02.980 | Okay, finally, correction.

01:53:03.980 | Thank you.

01:53:04.980 | During this entire year of Ukraine, Ukraine, I say every time, to be clear, you're not

01:53:09.980 | saying Putin is right for invading Ukraine.

01:53:12.340 | And you're like, no, of course not.

01:53:13.340 | Oh God, just stop.

01:53:14.340 | No, thank you for saying that.

01:53:16.340 | I appreciate that.

01:53:17.340 | I always try to say that.

01:53:18.340 | He's making a correction.

01:53:19.340 | It's a very nuanced discussion.

01:53:20.340 | It's a very nuanced discussion.

01:53:21.340 | Like we could, nobody's in favor of this war.

01:53:24.340 | Nobody.

01:53:25.340 | Nobody's in favor of it.

01:53:26.340 | Everybody's trying to resolve it.

01:53:27.340 | I think we just have different views of what resolution looks like.

01:53:30.340 | Did you guys read this crazy article in Bloomberg Businessweek about Praz-Michel, the founder

01:53:36.340 | of, the co-founder of the Fugees and his entanglement with the one MDB scandal?

01:53:41.340 | Did you read this article?

01:53:42.340 | No, I have no idea.

01:53:43.340 | Here's how the article starts.

01:53:44.340 | I like the culture at the end.

01:53:46.340 | Let's put the tinfoil hats on and do culture at the end.

01:53:49.340 | His phone rings and it's a Chinese woman that says something like, you know, your cousin

01:53:54.340 | wants to meet you.

01:53:56.340 | He goes to the Four Seasons where he gets a note that says, walk around the building

01:54:00.340 | twice to make sure you're not followed.

01:54:01.340 | Goes back into the Four Seasons, gets a key card, goes upstairs into a room where they

01:54:08.340 | then escort him to a different room in a penthouse, take all of his phones and he meets with the

01:54:12.340 | vice chairman of security for China where that guy is asking for an introduction to

01:54:18.340 | Trump.

01:54:19.340 | It is, that's how the article starts.

01:54:21.340 | It is incredible reading.

01:54:23.340 | Incredible, incredible reading.

01:54:26.340 | I encourage all of you to read it.

01:54:28.340 | It's so, what is it called?

01:54:30.340 | Juicy.

01:54:31.340 | It's so juicy.

01:54:32.340 | Spicy.

01:54:33.340 | If you want to read some crazy story, there is a company called Wirecard in Germany and

01:54:38.340 | there's a New Yorker article about the biggest fraud in German history.

01:54:42.340 | I highly recommend reading this one.

01:54:45.340 | We didn't get to it today, but oh my God, if we had like a long reads post show, it

01:54:49.340 | would be incredible.

01:54:50.340 | I personally don't think we should promote any stories by the mainstream media.

01:54:54.340 | We have no idea whether they're true or not.

01:54:56.340 | I mean, serious.

01:54:57.340 | Gentlemen, we'll see you soon.

01:54:58.340 | Thank you so much for filling in.

01:55:00.340 | Love you, Brad.

01:55:01.340 | Thanks, bro.

01:55:02.340 | Yeah.

01:55:03.340 | Pretty, pretty good.

01:55:04.340 | Love you guys.

01:55:05.340 | I'm David Sachs, the pacifist of peace, the Sultan of science, Brad Gerstner, the dictator

01:55:10.340 | Chamath.

01:55:11.340 | I'm the world's greatest moderator and speaker at your corporate event for 50 to 75 times.

01:55:16.340 | Jake out.

01:55:17.340 | Talk to my speaker bureau.

01:55:18.340 | Let's get this gripped on people.

01:55:20.340 | We'll see you next week.

01:55:21.340 | Bye bye.

01:55:22.340 | Love you guys.

01:55:23.340 | Bye bye.

01:55:24.340 | We'll let your winners ride.

01:55:25.340 | Rain Man David Sachs.

01:55:26.340 | And it says, we open source to the public.

01:55:27.340 | And they've just gone crazy with it.

01:55:38.340 | Love you, West Coast.

01:55:39.340 | Queen of Kinwam.

01:55:40.340 | Besties are gone.

01:55:41.340 | That is my dog taking a notice in your driveway.

01:55:42.340 | Sachs.

01:55:43.340 | Oh, man.

01:55:44.340 | My avatar will meet me at Blitz.

01:55:45.340 | I'm going to be a part of it.

01:55:46.340 | I'm going to be a part of it.

01:55:47.340 | I'm going to be a part of it.

01:55:48.340 | I'm going to be a part of it.

01:55:49.340 | I'm going to be a part of it.

01:55:50.340 | I'm going to be a part of it.

01:55:51.340 | I'm going to be a part of it.

01:55:52.340 | I'm going to be a part of it.

01:55:53.340 | I'm going to be a part of it.

01:55:54.340 | I'm going to be a part of it.

01:55:55.340 | I'm going to be a part of it.

01:55:56.340 | My avatar will meet me at Blitz.

01:55:57.340 | We should all just get a room and just have one big huge orgy because they're all just

01:55:58.340 | useless.

01:55:59.340 | It's like this sexual tension that they just need to release somehow.

01:56:00.340 | Wet your feet.

01:56:01.340 | Wet your feet.

01:56:02.340 | Wet your feet.

01:56:03.340 | We need to get merch.

01:56:04.340 | Besties are gone.

01:56:05.340 | I'm doing all in.

01:56:06.340 | I'm doing all in.

01:56:13.340 | I'm doing all in.

01:56:20.340 | Going all in

01:56:22.340 | You

E118: AI FOMO frenzy, macro update, Fox vs Dominion, US vs China & more with Brad Gerstner

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