E103: Tech layoffs surge, big tech freezes hiring, optimizing for profits, election preview & more

00:00:00.000 | What the ffff... What are you wearing, Jason?

00:00:02.800 | What? Oh, Uber had a big week, so this is the Uber-Montclair crossover hat.

00:00:06.800 | Oh, look at that.

00:00:07.600 | And I also bought a Montclair shirt.

00:00:09.360 | You bought that or I sent it to you? Oh, what? You got the watch and the mug?

00:00:13.120 | Oh, you don't know about the Apple-Montclair watch?

00:00:16.480 | Or the commemorative mug?

00:00:19.840 | Or the new tack?

00:00:22.640 | You don't know about the new neck tats that are coming from Montclair?

00:00:26.080 | Is that the new neck tack?

00:00:27.200 | Oh my god.

00:00:29.680 | Oh, so good.

00:00:31.200 | Let's just say somebody got their beak wet.

00:00:32.960 | I'm not saying that I got a $100,000 sponsorship,

00:00:36.720 | but we don't have a rule in the agreement about logo placement, do we?

00:00:43.280 | Listen, J. Cal, if anyone was willing to sponsor you,

00:00:45.920 | every square inch of your clothing would be covered in ads like a race car driver.

00:00:49.840 | It is. Look.

00:00:51.360 | You'd be like wearing a jumpsuit every day.

00:00:53.280 | You know, Montclair sponsorships are great.

00:00:54.960 | This is $5 plus $17 of shipping from France on Etsy.

00:01:00.160 | I'm ready to go.

00:01:02.000 | [MUSIC PLAYING]

00:01:18.800 | How was everyone's week? What did you guys do this week?

00:01:21.520 | Just busy, working, trying to be helpful where I can.

00:01:24.880 | And that'll be the extent of my comments today.

00:01:27.760 | How is Market Street this time of year?

00:01:29.520 | Look, there's all sorts of wild report.

00:01:30.960 | I've gotten all sorts of inbound from people asking me if I'm like leaving

00:01:34.320 | Kraft Ventures to do something at Twitter.

00:01:36.400 | No, it's not true.

00:01:37.200 | We're just, Jason and I are just pitching in and helping out while Elon establishes

00:01:41.200 | his permanent team at that company.

00:01:43.680 | Elon's the CEO.

00:01:44.880 | He's running it.

00:01:45.680 | He's the decider.

00:01:46.480 | He's making the decisions.

00:01:47.440 | And some of us are just kind of helping out in any way we can.

00:01:50.800 | And that's really the extent of it.

00:01:52.000 | It's a very much part-time thing.

00:01:55.360 | We're just helping a friend.

00:01:56.400 | But it's been blown up by the media into something much more than it actually is.

00:02:01.360 | It is 100% accurate.

00:02:02.800 | I am still doing my day job, podcasting, investing in 100 companies a year,

00:02:07.120 | just helping out on the margins.

00:02:08.720 | That's it.

00:02:09.220 | The end.

00:02:10.160 | I do want to try talking about one issue that's already public, because it's already been

00:02:14.240 | tweeted.

00:02:14.800 | So Elon had a tweet this morning about how there's now an advertiser boycott going on.

00:02:20.800 | And this falls on the heels of a bunch of reports that came out over the last couple

00:02:24.720 | of days that supposedly there's been a big influx of racist tweets.

00:02:30.640 | And Jason and I actually saw what was really going on, which was it's all not true.

00:02:35.120 | I mean, what happened is that within hours of Elon taking over the company on Friday,

00:02:39.200 | there was a 4chan attack, where basically people from this message board created bots

00:02:44.160 | to post hundreds of thousands of spam messages that contained racist words and epithets.

00:02:49.840 | And within hours, this has been detected.

00:02:52.720 | And Yoel, who runs the trust and safety implementation, he met with me and Jason, and Elon directed

00:02:59.760 | him to shut it down.

00:03:00.560 | And Yoel actually posted a tweet somewhere about it.

00:03:03.760 | That's the only reason I feel comfortable talking about it, is because you already posted

00:03:08.480 | the tweet somewhere, but maybe people haven't seen it, or they haven't connected all the

00:03:12.160 | dots here.

00:03:12.720 | But what's really, I think, unfair about this is that, as you've seen, it's not like your

00:03:19.280 | feed was all of a sudden filled with racist things.

00:03:21.120 | These were spam accounts or bot accounts that were posting to zero followers.

00:03:25.920 | They generally have zero followers, or if they do have followers, it's other bot accounts,

00:03:29.600 | right?

00:03:29.920 | So they're posting racist tweets into the ether, so to speak.

00:03:33.600 | It's not degrading anyone's experience.

00:03:35.840 | It was shut down promptly.

00:03:36.960 | But then what happens is these activist groups, they're monitoring the fire hose, right?

00:03:42.400 | And so they publish a report saying that racist tweets have gone up 500% since Elon took over

00:03:48.480 | Twitter.

00:03:48.800 | The truth is, Elon hasn't even had a chance to change anything about the content moderation

00:03:53.840 | policies.

00:03:54.320 | He's posted that.

00:03:55.360 | Like, guys, I haven't changed anything about content moderation.

00:03:59.040 | Whatever the rules are, they're the same rules that existed prior to him taking over.

00:04:04.320 | And this is just an organized operation by people who want to create that report.

00:04:10.320 | So then these activist groups basically publish this report, they feed it to news outlets,

00:04:14.720 | and then somebody then takes those reports and then feeds them to advertisers, and you

00:04:19.200 | get a boycott.

00:04:20.240 | But I think the point here is that Elon didn't do this.

00:04:23.920 | This is being manufactured by people who are not operating in good faith.

00:04:27.680 | They're trying to manufacture an incident that they can then use to hurt the company.

00:04:32.080 | Yeah, and it was thwarted immediately and fixed.

00:04:34.720 | Have you guys seen episode 333 of the Lex Friedman podcast?

00:04:38.480 | He interviews Andrej Karpathy, who is really, I mean, one of the great minds of our time,

00:04:45.600 | particularly around AI and ML.

00:04:47.600 | And the question that Lex asked, which Andrej expounded on, which I think is really interesting,

00:04:54.160 | is, what does the next generation of bots look like?

00:04:58.160 | And I think where the problem gets very hard for all platforms, so this is not a Twitter-specific

00:05:05.360 | discussion, is that you can now generate such real, lifelike human images that are unique,

00:05:12.000 | and you can also generate high-quality text to things like GPT-3 that can essentially

00:05:20.720 | push the boundaries of a low-level Turing test.

00:05:24.880 | I think the real problem over time for bots, for spam, for coordinated attacks on any platform,

00:05:33.760 | is that when you use these tools, you're going to have to become very sophisticated in how you try

00:05:39.200 | to detect them and then to block them.

00:05:42.000 | It's a really interesting discussion between two pretty meaningfully smart people.

00:05:47.360 | Karpathy was the head of autopilot at Tesla, right?

00:05:51.440 | Autopilot Vision, yeah.

00:05:52.400 | So he's really smart, yeah.

00:05:53.760 | I have no doubt that Elon is going to do a much better job stopping bots on Twitter once

00:05:59.760 | he has a chance to do it, because he's got this amazing team of AI engineers, and he's

00:06:06.720 | just going to be more focused on it.

00:06:07.920 | You know what I like the most about what I heard this week is the idea that you can do

00:06:12.800 | either micropayments or subscription to third-party content providers, because I think so much of my

00:06:17.840 | news feed is delivered to me through the Twitter app, and then I click on an article, and then

00:06:23.600 | it's like a paywall, or it's some sort of difficulty in accessing the content.

00:06:28.240 | Having some integration there or some ability to kind of make a micro-purchase to read an

00:06:32.640 | article is going to be, I think, a super feature.

00:06:35.360 | The other thing that I would love Twitter to experiment with is if you have a micropayments

00:06:39.440 | model to publishers, it would be great if you could publish content without a byline,

00:06:44.240 | a la The Economist, and see what that does to information quality.

00:06:48.400 | Right.

00:06:48.640 | If you do not get any credit to your individual name for writing stuff, but instead it goes

00:06:55.360 | to the Mass Ted publication, whatever it is, the Times, the Post, I think you could have

00:07:00.480 | a really important behavior change in how journalists cover the news.

00:07:05.120 | It's worth experimenting with, at least.

00:07:06.720 | And if you're paying them enough money, I think that you could probably demand that.

00:07:10.160 | Facebook could probably demand that today.

00:07:11.760 | You know, strip the byline away and just it just says New York Times.

00:07:15.360 | Just like today, it just says The Economist.

00:07:17.200 | Yeah, it is a The Economist is a very polarizing gig in journalism for that reason.

00:07:23.760 | There are going to be actually a lot of journalists who would prefer to have their byline taken off.

00:07:29.360 | One of the problems with journalism today is even if you're doing reporting in good faith,

00:07:33.920 | Chamath, and you put your byline on there, harassment, you know, threats, etc, can become

00:07:39.280 | very acute if you're just covering certain topics.

00:07:41.840 | And so I actually think a lot of, you know, writers and journalists would opt into this,

00:07:46.160 | they might prefer it.

00:07:47.360 | I think they should, because I think the two ends of the spectrum are better than this,

00:07:51.280 | you know, gross middle that we have the end of this one end of the spectrum is you have

00:07:55.760 | the New York Times, the Washington Post and The Economist with no byline and no attribution to

00:07:59.920 | reporters.

00:08:00.720 | The other end is if you want to build a brand that's based on your name, go start a sub stack.

00:08:04.880 | And I think that there's a very good balance there.

00:08:08.000 | And the New York Times could syndicate that as well.

00:08:10.480 | But if you separate the two, all of a sudden, the news becomes more likely to be truthful news

00:08:14.400 | versus, you know, well disguised opinion.

00:08:19.120 | The other issue is, you know, for readers, if you do choose to do a no byline publication,

00:08:24.400 | you're really going to need time to build trust and for people to understand what you're doing,

00:08:28.080 | because they will think you're taking the byline off in order to pursue a certain agenda, right?

00:08:32.880 | So that is the the that is the suspicion that can build up.

00:08:35.600 | The Economist has been able to do this over decades with trusted reporting.

00:08:39.600 | And sub stack proves that you can have no reputation whatsoever.

00:08:43.120 | And if you're publishing great content, you can build a great business from scratch.

00:08:46.720 | So, you know, you don't need to you don't need to pay your dues,

00:08:49.760 | quote unquote, by getting a byline at the New York Times to be a clever writer.

00:08:53.280 | You can start that business today and get paid.

00:08:56.240 | So I think the New York Times should just focus on being the New York Times.

00:08:59.120 | And sub stack should focus on individual people.

00:09:02.480 | And I think if you could clean up the middle, that would be much better for all of us.

00:09:06.000 | Anyways, I'm excited for you guys to help out and pitch in.

00:09:08.800 | I hope you guys do some good with it.

00:09:10.160 | I'd love to come back and use Twitter more often.

00:09:12.240 | Can we talk about the reporting that happened with the two guys that trolled the journalists

00:09:18.800 | and pretended to be fired employees?

00:09:20.560 | Because I actually thought that was such an interesting moment this week that all the

00:09:24.880 | journalists immediately parroted it because it fed their narrative.

00:09:28.480 | But there was no fact checking done.

00:09:30.240 | There was no reporting done.

00:09:31.840 | And then several of them, including, I think, Deirdre Bosa from CNBC,

00:09:34.960 | came out and publicly apologized for that report.

00:09:38.080 | And if folks listening aren't familiar with what happened, these two guys came out,

00:09:43.200 | they pretended to be fired Twitter employees on Monday, walked out with a box.

00:09:47.280 | Oh, what's funnier, I woke up and they were like, Hey, we just got fired.

00:09:50.240 | It's terrible.

00:09:50.720 | Life is awful.

00:09:51.520 | No, it's even worse.

00:09:52.320 | Husband and wife.

00:09:53.360 | You know, the guy's name was one guy's name is Rahul Ligma.

00:09:57.200 | And the other guy's name was like Mike Johnson.

00:09:59.600 | So the whole thing was Ligma Johnson.

00:10:01.600 | So I now here's what's so funny about due diligence.

00:10:05.200 | Hold on.

00:10:06.000 | I read this story without giving away that punchline to my kids.

00:10:10.480 | All my kids immediately started howling.

00:10:13.520 | They're like, Dad, if you say these two names are Ligma Johnson.

00:10:17.520 | And I was like, Oh my God.

00:10:18.960 | And so, you know, when, when, like, you know, preteens can figure this out,

00:10:23.200 | but the journalism industry could not.

00:10:25.760 | It's kind of a very telling side.

00:10:27.440 | Freeberg made the key observation, which is they didn't figure it out because they

00:10:30.160 | didn't want to because it fit their narrative.

00:10:31.760 | So they don't fact check things that fit their narrative.

00:10:35.040 | This was my point about journalism.

00:10:36.720 | I just, it was so poignant to me this week when this happened,

00:10:39.520 | particularly as it relates to Twitter and the importance of call it open journalism

00:10:46.160 | or citizen journalism and the integrity of kind of, you know, of the voices that we all

00:10:51.040 | kind of trust as our kind of journalistic authorities that these guys came out and

00:10:55.200 | they were conned right outside Twitter's offices into telling a story that fit their

00:10:59.440 | sensational narrative.

00:11:00.480 | And it was really a kind of poignant moment for me.

00:11:02.400 | Well, do you remember that story?

00:11:04.160 | I think it was originally in Rolling Stone and then Rachel Maddow amplified it where

00:11:07.680 | it was in Oklahoma city where supposedly all these MAGA Republicans were eating horse

00:11:11.920 | paste because Trump told them to.

00:11:13.760 | And they were in, this is basically, I thought it was like a COVID therapy.

00:11:16.720 | And then they were going to the emergency rooms of all the hospitals and then they were

00:11:19.760 | turning away heart attack victims because there were so many of these people going to

00:11:23.440 | the emergency room.

00:11:24.160 | Anyway, it all turned out to be like a made up story, like a hoax, but the media reported

00:11:29.360 | it because the story was too good.

00:11:30.880 | Right?

00:11:31.120 | It just, it fit too many of their preconceptions to me.

00:11:34.080 | There's also one, there's another vector sex, which is live coverage is, um, you know, you

00:11:39.920 | really have to be careful because when doing live people will call in and say, Oh, they're

00:11:43.840 | at the scene of an accident.

00:11:45.280 | And then they will do a baba booey or whatever, you know, kind of charades.

00:11:49.600 | And so without fact checking and without saying, Hey, we haven't confirmed this yet, but these

00:11:55.280 | two employees are claiming this people want to get real time coverage.

00:11:59.200 | It's fine to do real time coverage.

00:12:00.880 | I think everybody in the audience has to understand so much credit.

00:12:03.920 | What about the editor?

00:12:05.280 | There was a picture and it said Ligma Johnson.

00:12:07.920 | No, that is so lazy.

00:12:13.120 | Why are you covering for these people?

00:12:14.800 | I'm not covering.

00:12:15.520 | I'm just trying to explain it.

00:12:16.960 | No, you're missing the point.

00:12:17.920 | Let me unpack the whole point.

00:12:18.720 | Let me unpack the whole point.

00:12:19.920 | There's also, you interrupted me.

00:12:21.440 | Well, here's the thing.

00:12:22.400 | There is a different standard for live news coverage.

00:12:24.480 | And then there we've ripped out fact checking from a lot of these publications and basic

00:12:28.480 | fact checking and a little bit of time I'm explaining why they make this mistake.

00:12:32.080 | I'm not protecting them.

00:12:33.200 | You want to know why they make it?

00:12:34.480 | That's part of it.

00:12:35.840 | But they've also ripped out fact checking and then they are in such a race to get the

00:12:40.320 | clicks on social media.

00:12:41.760 | No, no, here's what's going on.

00:12:43.280 | If the story fits their priors, they run with it immediately and they don't do any fact

00:12:47.520 | checking because they don't want to know that it's not true.

00:12:50.160 | That's what's going on.

00:12:50.960 | There is an element of that.

00:12:51.680 | They will check a story if it's a narrative they don't like, because they're gonna make

00:12:55.600 | they're gonna try and make sure it's not true.

00:12:57.200 | Yeah, that's true of both sides.

00:12:58.320 | And they'll use it as well.

00:12:59.760 | This thing, there's only one mainstream media.

00:13:01.440 | This is the mainstream media.

00:13:03.280 | Who's the alternative?

00:13:04.960 | It's Fox.

00:13:05.360 | What's the alternative?

00:13:06.160 | Fox is the number one news network.

00:13:09.200 | The alternative to the mainstream media is the Substack journalists.

00:13:12.400 | You think Substack journalists do this?

00:13:13.920 | Tell me the writer on Substack who behaves this way.

00:13:17.760 | There's a lot of different ones there.

00:13:18.800 | So who got fooled?

00:13:20.160 | What Substack writer got fooled by Ligma Johnson?

00:13:22.400 | I'm not defending it.

00:13:27.280 | I'm explaining.

00:13:28.000 | Matt Taibbi got fooled by Ligma Johnson.

00:13:30.400 | I don't think so.

00:13:31.280 | I'm not defending it.

00:13:32.480 | Don't make me defend Ligma.

00:13:34.560 | I'm not defending Ligma.

00:13:36.400 | You're both sidesing it.

00:13:37.600 | I'm not both sidesing it.

00:13:38.480 | I'm telling you what is happening in journalism today.

00:13:41.120 | They have ripped out fact checking and they are in a race to beat each other because the

00:13:44.720 | first person to get the story up gets the clicks.

00:13:46.720 | That's the dysfunctional thing.

00:13:48.480 | They tried to create a story when there was no story there.

00:13:51.120 | They went out.

00:13:52.560 | They went out outside of an office mid-market street.

00:13:55.840 | And they said, hey, there's this sensational thing happening.

00:13:58.560 | And there was no sensational thing happening.

00:14:00.480 | Correct.

00:14:00.880 | And so the little drop that fell into their laps, the little thing that fell into their

00:14:05.200 | laps became the story.

00:14:06.720 | Because that's the story they wanted to see created.

00:14:08.800 | There was no story beforehand that then that there were all these people being fired, walking

00:14:12.800 | out with boxes.

00:14:13.280 | And then they said, let's go send live TV producers down there.

00:14:15.760 | They sent the live TV producers down there.

00:14:17.680 | They did the same thing.

00:14:18.960 | Manifest.

00:14:19.460 | They did the same thing in New York at Bear Stearns.

00:14:23.520 | Story to cover.

00:14:24.160 | When they had other major layoffs at Bear Stearns and stuff like that during the financial

00:14:27.920 | crisis, of course, they sent people to do live coverage.

00:14:30.320 | Not defending it.

00:14:31.040 | I'm just explaining to you what's going on in the background as well with live TV and

00:14:34.640 | the gutting of newsrooms and having no fact checking.

00:14:36.880 | A lot of these stories go out.

00:14:38.080 | But what about the 20 years ago, they used to have a stocky check.

00:14:40.720 | My 11 year olds and 10 year old the copy editors are better copy editors than these adults

00:14:46.400 | at these.

00:14:47.040 | It's crazy.

00:14:47.680 | Incredible publications.

00:14:48.880 | My kids started howling.

00:14:50.480 | They were like, Dad, do you understand what you just said?

00:14:53.040 | It'll lick my jaw.

00:14:54.800 | I mean, come on.

00:14:56.080 | This is like prepubescent humor that these people fell for.

00:14:59.120 | It's it's ridiculous.

00:15:00.880 | It's embarrassing.

00:15:02.080 | It's certainly embarrassing.

00:15:03.120 | 100%

00:15:03.600 | It is embarrassing.

00:15:04.640 | And this connects with the 4chan board.

00:15:06.560 | It's the same problem.

00:15:07.760 | This is a grievance industrial complex, right?

00:15:11.280 | They're manufacturing grievances.

00:15:13.200 | It's funny in the case of Ligma Johnson.

00:15:14.880 | It's not funny in the case of the 4chan board.

00:15:17.520 | But these are people who are inventing stories.

00:15:19.600 | Because there's a certain area to manipulate media because they know it's so easy to manipulate

00:15:24.720 | the media.

00:15:25.200 | Right.

00:15:25.600 | Anyways, big shout out to Rahul Ligma.

00:15:27.360 | That was a great start.

00:15:28.320 | Well played, sir.

00:15:29.760 | Also happens to be a huge fan of the All In podcast, apparently.

00:15:32.560 | Well played, sir.

00:15:33.360 | He's welcome on as a bestie guestie anytime he wants.

00:15:35.840 | Oh, no, well, definitely not.

00:15:37.120 | All right, we should talk about layoffs and tech lift 13%

00:15:41.360 | riff 700 employees like yesterday.

00:15:45.600 | Stripe 14% riff 1000 employees open door chime,

00:15:49.440 | Dapper Labs, all hundreds of employees open door the most significant there 550 18%

00:15:54.960 | Dapper 22% and Twitter.

00:15:59.120 | We'll see what the riff winds up being but that's occurring as we're taping here.

00:16:02.480 | So and then Jason Apple did a pause.

00:16:04.960 | Amazon did a pause.

00:16:06.080 | Right and Google and Facebook have

00:16:11.200 | Yeah, maybe trying maybe signaling a pause but haven't they've been hiring like in absolutely

00:16:17.600 | and in crazy crazy pace and we'll pull up the chart here actually.

00:16:20.880 | It's instructive to look at Facebook and Google because they have not slowed down

00:16:25.120 | by any stretch of the imagination.

00:16:27.280 | Just by the raw numbers.

00:16:29.920 | This all started to peak in June and now is starting up again.

00:16:33.680 | So there's a website layoffs dot fyi that's been tracking all these layoffs you can see

00:16:39.520 | the number of layoffs these are kind of major layoffs and the number of employees impacted

00:16:43.680 | been pretty consistent in the third quarter, it started to die down in September.

00:16:50.080 | From the peak in May and June, and now this is gonna be picking up right?

00:16:56.080 | Yeah, it feels like this is the double dip we were talking about.

00:16:58.880 | I think this is the beginning.

00:17:00.320 | This is not even unpack it.

00:17:01.600 | Well, I think that we had if you take a very balanced view of what happened this week.

00:17:06.720 | You have to start, I think, with the Federal Reserve and really what they said is rates

00:17:11.680 | will probably be higher than all of you think and they'll be higher for longer than all of you want.

00:17:17.360 | And again, without debating whether, you know, that's gonna come to pass or not.

00:17:24.000 | The thing that you can do is you can build a little sensitivity model to understand the

00:17:30.080 | mathematical implication of it.

00:17:31.760 | And basically what it means is that the dollar that's right in front of you.

00:17:36.560 | Is now meaningfully more important than the dollar that's far, far away from you.

00:17:40.160 | So let's just assume.

00:17:41.360 | That you know the Fed funds rate goes to five and a half percent or so.

00:17:46.480 | Even five let's go to the optimists and say it's only going to go to five.

00:17:51.200 | Tech companies have to achieve 500 basis points above that minimum.

00:17:55.520 | So we all have to generate 10 to 11 percent returns for us to be on a risk adjusted basis.

00:18:01.520 | Better than a government bond.

00:18:05.120 | The problem with that is all of a sudden, you know, if you're trying to generate cash,

00:18:08.480 | even three or four years from now.

00:18:10.080 | It's not worth that much.

00:18:12.560 | You need to generate dollars today.

00:18:14.800 | And so, you know, they are really reprioritizing the value of short-term profits.

00:18:20.240 | And that's going to affect how companies get money.

00:18:24.080 | The cost of capital.

00:18:25.680 | So how much dilution you have to take.

00:18:27.680 | So I think this is what companies are now bearing down for.

00:18:31.520 | They're realizing, oh, man, I need to get my cost structure way in line.

00:18:35.600 | It is way better now just to think about this contrast.

00:18:39.440 | It's way better to grow at 20 percent and be profitable.

00:18:42.320 | Then it is to grow at 100 percent and burn money because it's not clear where that

00:18:47.280 | second company is going to get the incremental dollars they need for growth.

00:18:50.320 | And that's just a mathematical realization when rates are five percent.

00:18:54.080 | Risk free rates are five percent.

00:18:55.280 | So this is this is that moment where you see that pivot from pivot growth to profit.

00:19:00.480 | Yeah, yeah, we can talk.

00:19:02.080 | We've been talking about it for six months, but this is this is this is how it is manifest in

00:19:07.280 | Silicon Valley companies is of scale is through layoffs and cost reductions and cost savings.

00:19:13.600 | So the investments in future growth are reduced and the timeline to drive greater profits

00:19:21.440 | is improved.

00:19:23.360 | I think if what Elon is going to do a Twitter or what is reported.

00:19:28.240 | So this is nothing to do with anything anyone told me, just what I've read in the reporting

00:19:32.240 | is accurate that he's going to cut so deep he's going to cut 30, 40, 50 percent potentially of

00:19:37.600 | the employee base.

00:19:38.400 | It really sets a new standard for how profitable a tech company can get.

00:19:44.480 | And again, I'll give credit to a Twitter poster named Postmarket, who I didn't give credit to a

00:19:48.880 | few weeks ago when I read this tweet, which I think was a good one, which was that Elon's

00:19:55.040 | really going to show everyone just how profitable these tech companies can be, just how lean they

00:19:59.440 | can be run.

00:20:00.000 | And, you know, when you're doing a 10 percent riff or a 13 percent riff, you may or may not

00:20:06.240 | even be getting to profitability with that riff when you cut 30, 40, 50 percent deep and you

00:20:12.160 | can actually turn a real profit on a business, an enterprise scale business like a Twitter or

00:20:17.040 | like many other enterprise software companies that are out there right now.

00:20:19.840 | It really kind of sets a new standard that a lot of folks might then end up saying, you know

00:20:24.320 | what, maybe we should go deeper.

00:20:26.000 | And there could be the case that private equity firms take a look at this.

00:20:29.600 | And there's a lot of these distressed mid cap and small cap software companies out there

00:20:33.760 | that private equity firms now realize, wow, you don't actually need 50 percent of the

00:20:39.440 | workforce in order to keep the product running and to drive to profitability.

00:20:43.440 | And you could see a bit of a flurry of buyout activity as more folks come in and maybe try

00:20:49.200 | and mimic the Elon playbook.

00:20:51.120 | So, you know, that's one kind of prediction I think may arise if Elon is successful in

00:20:56.000 | making Twitter a much more profitable enterprise.

00:20:59.200 | It could set a new model that catalyzes a lot of other M&A activity, a lot of other

00:21:03.440 | buyout activity of these distressed small and mid cap companies by by other actors.

00:21:08.560 | Can I build on what you're saying?

00:21:10.000 | Nick, could you please just throw up that tweet that I sent just for all of these guys

00:21:14.640 | to look at? Because I think it's incredible.

00:21:16.000 | So to your point, this is an incredible slide.

00:21:18.640 | This is an incredible slide.

00:21:19.840 | And essentially what it shows for those folks that are not watching this on YouTube is it

00:21:24.880 | essentially shows the private software universe and then the public software universe at different

00:21:31.440 | levels of valuation.

00:21:32.800 | So as an example, right now there are 15 companies, private companies that are valued greater

00:21:39.120 | than 10 billion dollars, and there are 40 public ones that are valued greater than 10

00:21:44.080 | billion.

00:21:44.880 | There are 50 companies between, you know, more than 5 billion, but only 60 that are

00:21:51.840 | public that are valued more than 5.

00:21:53.440 | And here's what's crazy.

00:21:54.960 | There are 400 companies who have an average valuation of 3 billion.

00:22:00.800 | And then there are already 70 companies in the public markets where they have a billion

00:22:06.320 | dollars of next 12 months of revenue.

00:22:09.840 | And it just goes to show you to your point, Freiburg, if these folks have to generate

00:22:15.680 | an 11% hurdle rate, their cost of capital is 11%.

00:22:19.840 | The companies on the left will have to go through a lot of very difficult cost cutting,

00:22:26.800 | potentially headcount reductions, you know, repricing of the product, all kinds of things.

00:22:33.360 | And many of them have.

00:22:34.640 | Yeah.

00:22:35.440 | No, none of them have.

00:22:37.040 | Oh, of these?

00:22:38.000 | And many of these are on the left.

00:22:38.560 | Yeah, on the left, right.

00:22:40.000 | There's almost 500 companies here that have to do an enormous amount of work so that they

00:22:45.760 | have a chance to be on the right hand side of this chart.

00:22:47.840 | The point is that you didn't have to do this when rates were zero.

00:22:51.840 | There was just an abundance of free money and risk seeking and duration that is now

00:22:57.520 | out of the market.

00:22:58.560 | Jamal, I think there's also a story that of the 200 companies that are software, public

00:23:03.120 | software companies that you see on the right, some number of them will need to go private

00:23:07.600 | in order to do the restructuring that the market is demanding that they do in order

00:23:11.120 | to get rightly valued.

00:23:12.800 | And to your point, it will happen at meaningfully lower valuations than where they probably

00:23:17.360 | went public or their last round, which will put you guys as you guys enormous pressure.

00:23:22.480 | Yeah, if you guys look at these 200 companies on the right, how many of them do you think

00:23:25.520 | go private over the next 18 months to get restructured?

00:23:29.360 | Allah, what you want is everyone is possible Twitter.

00:23:32.960 | 18 is 18 months is hard to predict.

00:23:35.200 | But to your point, freeberg, I think if you look at the number of them that are unprofitable,

00:23:39.360 | at least half of them will have difficulty.

00:23:43.200 | And about so I think about two thirds of these companies really have no line of sight to

00:23:47.600 | profitability in the next two to three years.

00:23:49.840 | And again, if you if you layer in this cost of capital argument, all of those companies,

00:23:55.280 | David will have to raise money at very egregious terms in order to keep themselves going as

00:24:03.120 | a public business, in which case their alternative is to go private in a PE transaction.

00:24:08.720 | So it's probably at least half these businesses.

00:24:11.040 | I mean, it's a lot.

00:24:12.560 | I think there's 100 p deals to be done.

00:24:14.240 | Yeah, 100 by Wow, sex.

00:24:16.240 | What do you think?

00:24:16.800 | Because you know, these businesses and the models, I mean, some of them, it's hard to

00:24:20.720 | get profitable if you're scaling SAS business, right?

00:24:22.880 | Like, you have to get to a certain scale before it's possible.

00:24:25.920 | Well, I don't, I don't, that's like a very specific question of like, how many of them

00:24:30.240 | are going to get acquired by PE firms versus going public or going private after being

00:24:35.600 | public?

00:24:36.240 | That's like a very specific question.

00:24:37.840 | I think the larger point is just that it feels to me like the economy is headed off a cliff

00:24:42.160 | right now.

00:24:42.880 | I mean, I can tell you within our larger portfolio of companies, like I can see the trajectory.

00:24:49.600 | So after Q1 board meetings, I would say about two thirds of portfolio companies were hitting

00:24:55.680 | their numbers and one third were missing.

00:24:57.680 | And it still appeared to be like problems related to those specific companies, not a

00:25:02.240 | macro trend.

00:25:03.360 | I would say after Q2 board meetings, two thirds were missing and one third were hitting their

00:25:07.920 | numbers.

00:25:08.240 | And you could start to feel, okay, maybe there's like a macro trend here.

00:25:11.680 | And I would say after Q3 board meetings, like now, the entire portfolio is reforecasting.

00:25:19.200 | Maybe there's like a handful of companies here or there that aren't, if you're one of

00:25:22.400 | those, congratulations.

00:25:23.840 | But like even the best companies in our portfolio now are seeing major headwinds.

00:25:28.080 | And this is just, I think, an economy-wide slowdown.

00:25:31.040 | Do you think there's restructuring possible?

00:25:32.800 | I mean, can these companies get...

00:25:33.600 | Well, they're going to have...

00:25:34.400 | Yeah, because...

00:25:35.520 | Let me just ask, in the public markets, do you think those public companies can get restructured

00:25:39.760 | as public companies in order to make these profits?

00:25:41.920 | Yeah, it just takes the will.

00:25:43.200 | Yes, of course.

00:25:43.840 | It just takes the will.

00:25:44.160 | It's extremely expensive.

00:25:45.200 | No, it's expensive.

00:25:46.560 | I don't even think it's will.

00:25:47.520 | I think it's just expensive.

00:25:48.640 | Yeah, I mean...

00:25:49.760 | Like look at Coinbase as an example.

00:25:51.200 | Like look, take Coinbase versus Carvana, right?

00:25:54.320 | These are both businesses that issued convertible debt sort of right before things got very,

00:26:00.800 | very hard.

00:26:01.760 | And if you look at where their convertible debt trades, it's trading basically at an

00:26:05.840 | implied yield of about 12 or 13%, both companies.

00:26:08.960 | Now, one is probably a legitimate bankruptcy risk, which is Carvana.

00:26:14.400 | That's what the market would think.

00:26:15.840 | Whereas the other one, I think it has a very fortified balance sheet and could weather

00:26:20.160 | the storm.

00:26:20.720 | Coinbase.

00:26:21.280 | But unfortunately, in a moment where rates are, again, the risk-free rate goes to five,

00:26:27.440 | five and a half, our cost of capital to do business goes to 10 or 11, these guys have

00:26:32.720 | to pay 12 or 13%.

00:26:33.760 | My gosh, it's really, really dilutive to be in business right now.

00:26:38.720 | So it just goes to show you that you can stay public.

00:26:42.560 | But if you want to get incremental money to cover your burn, the only way you can do it

00:26:47.440 | without really, you know, blowing up your cap table and doing a massive recap will be

00:26:53.280 | through convertible debt.

00:26:54.320 | But it has a huge overhang and you risk turning the keys over to the debt holders of the company.

00:27:00.320 | So the alternative for that business is to go into the hands of private equity and get

00:27:07.120 | out of the spotlight of these public markets.

00:27:09.520 | But public private equity is very smart.

00:27:13.520 | And the thing that's happened to them is they can't raise debt.

00:27:17.200 | Right.

00:27:17.520 | So what do you think they do, they just have to pay 50% less than what they would be willing

00:27:20.960 | to pay before because they have to write, you know, 100% equity check.

00:27:24.560 | So there is no free lunch anymore, I think is the big is the big point to point out anywhere

00:27:31.200 | in the market right now.

00:27:32.240 | I think one of the things I'm most concerned about or would be is I was talking with a

00:27:36.400 | friend who works at a private, you know, unicorn software company.

00:27:41.040 | And he we talked about the numbers of the business.

00:27:44.160 | And I was like, Oh, that company is probably worth x.

00:27:46.080 | And I gave him a number.

00:27:47.280 | And then I asked him how much money they've raised, and they've raised more than x.

00:27:50.000 | So I was like, dude, your options are worthless.

00:27:53.440 | Like, you know, this is a real problem, I think that's probably going to become very

00:27:56.880 | systemic for scaled unicorn software companies, what happens to these businesses sacks in

00:28:02.560 | the market, you know, as they kind of need another round, but the value of the company

00:28:07.920 | is now less than the total cash that they've raised that all is sitting as preferred stock.

00:28:11.360 | Listen, it's survival of the quickest, those who are most willing to adapt the most quickly

00:28:18.640 | are going to survive and the ones that are stubborn and refuse to accept the new regime,

00:28:22.320 | the market regime are going to die.

00:28:24.560 | We showed that chart, remember that chart from Sequoia months ago, on this podcast,

00:28:29.440 | remember that where it basically showed what happens if you're a company that doesn't cut

00:28:34.560 | burn until the very end, then you're still gonna run out of money and die.

00:28:37.680 | But if you make the cut right away, quickly, you have enough runway to weather the storm.

00:28:43.120 | And I think that what we've seen is, you know, at my firm craft, yeah, this is exactly it.

00:28:48.640 | Yeah, we showed this months ago, we've been begging our founders to embrace this.

00:28:52.560 | We did a portfolio, a review with our entire set of founders of our portfolio companies,

00:28:58.800 | we did one in February, when we felt the markets were changing.

00:29:01.920 | And we did another one in May, and we showed the slide.

00:29:04.960 | And this is the most important thing for founders to internalize, is you have to make

00:29:09.120 | the changes quickly.

00:29:10.400 | You know, one way for them to think about it is, let's say you're a unicorn company, okay?

00:29:14.240 | And you raised at the peak, let's say second half of 2021, you raised $100 million at a billion

00:29:19.920 | dollar valuation.

00:29:20.800 | And let's say you've got 50 million left in the bank, right?

00:29:23.280 | So you've burned 50 million.

00:29:25.200 | A lot of these founders are thinking that 50 million they've got left is only 5% dilution.

00:29:29.440 | But that's what it was historically.

00:29:31.280 | If you were to raise a new round today, you might only be valued at 250.

00:29:35.280 | So that 50 million you have left is actually 20% dilution.

00:29:39.200 | And that's if you could even raise, which might be very, very hard.

00:29:42.560 | The most important thing founders can do is forget about the historical terms on which

00:29:47.600 | you raise that money.

00:29:49.040 | Forget about how much money you were burning in the past.

00:29:51.360 | Just think about how much money you have in the bank today.

00:29:54.240 | Impute a valuation to it, so you really internalize how much dilution that money represents, and

00:30:00.640 | then create a new plan moving forward to preserve that cash as long as possible.

00:30:04.880 | Can I say something else quickly on top of this?

00:30:06.880 | I think that's really good advice.

00:30:08.560 | The thing that again, people should do is you should just build a little spreadsheet

00:30:15.040 | for yourself to understand what the alternative financing options are for people who are in

00:30:20.960 | the business of investing.

00:30:22.400 | So David, to your point, the current three month T-bill rate is 4%.

00:30:27.280 | You can buy munis now between 4% and 5% that are triple tax advantaged.

00:30:32.240 | You can buy high quality corporate bonds that are 6%, 7%, 8%.

00:30:36.640 | And so it's very...

00:30:38.640 | You can buy stocks that have a dividend yield of 5% of growing market leading companies.

00:30:43.920 | Growing.

00:30:44.880 | And so all of a sudden...

00:30:45.360 | With 5% dividend yield.

00:30:46.880 | Exactly.

00:30:47.280 | And so all of a sudden, like turning around and giving it to a company where there is

00:30:50.720 | no end in sight in terms of it doesn't get you to profitability is a really, really hard

00:30:56.720 | thing to do.

00:30:57.200 | I was talking to an entrepreneur, David Soloff, just yesterday, and he said it really well.

00:31:03.360 | He's like, listen, you know, I'm not a macro economist.

00:31:06.560 | I'm not trying to forecast, but he's like what I understood yesterday.

00:31:10.480 | This is David talking about the Fed as an entrepreneur.

00:31:12.960 | The angle of attack has changed.

00:31:16.160 | The Fed has said this is not going to be some triangle sawtooth.

00:31:20.080 | It's not going to go up sharply and then come back down sharply, which is what we would

00:31:24.960 | all want if we wanted things to get back to normal sooner.

00:31:29.360 | The angle of attack is now a little bit slower, which means it's going to take longer to get

00:31:34.560 | where we need to be.

00:31:35.360 | And then we're going to stay there for a lot longer than we want.

00:31:38.560 | And when you roll those two things together, a lot of companies may run out of money.

00:31:43.360 | And so if you can't get to default alive, you have to look at your cost structure and

00:31:49.040 | figure out how to right size this thing, because the cost of capital is just going to be really,

00:31:54.240 | really expensive.

00:31:55.200 | And this was the Fed's goal, right?

00:31:56.480 | They want to take away this free capital, they want to slow the economy down.

00:32:00.400 | And it seems like they're making progress.

00:32:02.240 | They did the 75 basis point hike this week.

00:32:05.440 | But we're adding jobs to the economy, we have more job openings, and we had 2.6% GDP growth.

00:32:11.920 | So I guess my question to the everybody here is, what is the Fed going to have to do?

00:32:18.000 | Or can they stop this consumer and this growth?

00:32:22.400 | It's very strange, right?

00:32:23.680 | Paolo Paolo said, he'd rather overcorrect and break things because he has a toolbox to fix

00:32:30.400 | the broken bones.

00:32:31.760 | But he doesn't have a toolbox to fix if they under correct, and they have rampant inflation.

00:32:36.880 | I mean, not more explicit, you can't get Jason, so he's going to take rates until demand is

00:32:43.360 | destroyed, and enough demand is destroyed, such that inflation is tamed.

00:32:48.320 | But that has huge implications to all of us, because we all have to do our job, trying to

00:32:52.880 | build a company, trying to raise money, trying to invest money.

00:32:55.920 | It's just getting much, much, much harder than I even thought.

00:33:00.640 | So like, you know, for me, I'm like, wow, I thought that we could get through the worst

00:33:04.800 | of this by mid 23.

00:33:06.400 | But now you have to plan for the worst, which means, okay, now I'm thinking that men rates

00:33:11.200 | could be higher for much longer, which means, you know, we could be in this market till

00:33:16.240 | early 25.

00:33:17.280 | And you may say, hey, that's way too conservative.

00:33:20.480 | Yeah, but you have to plan for conservatism in this point.

00:33:23.280 | So how do I invest money right now?

00:33:25.280 | Honestly, I'm like, I should just put more into T bills.

00:33:29.040 | Isn't that crazy?

00:33:30.400 | If a company's like H math can have another 10 15 20 million bucks?

00:33:33.280 | I'm like, wow, I mean, I don't think that that gets you anywhere.

00:33:36.960 | And oh, by the way, that 10 or $20 million, I can generate 4%.

00:33:40.880 | What a tough trade off, right?

00:33:42.880 | For Well, for somebody who has access to private markets, which should be high growth companies

00:33:47.360 | to take the guaranteed for over the 50 x 25 x 10 x, whatever we're trying to bet on here.

00:33:53.680 | Yeah, it's not just the guaranteed for but if you want to take tech risk, then you could

00:33:58.080 | go buy the corporate bonds of some high quality companies for the 10 or 11%.

00:34:01.760 | So you take moderate risk.

00:34:03.280 | So you're also competing with that not to zero risk.

00:34:05.200 | Can you explain that for the listeners what that corporate debt is and why it, you know,

00:34:08.560 | pays more?

00:34:09.280 | There are there are, you know, high quality public companies, tech companies that have

00:34:13.760 | bonds, and that's corporate debt.

00:34:15.760 | And they obviously have to pay a higher rate than what the Treasury pays, because the Treasury

00:34:20.480 | is is risk free.

00:34:21.440 | And corporations could default.

00:34:23.520 | So there is some risk to it.

00:34:24.560 | It's not zero risk.

00:34:25.600 | But, you know, it's like, if you're willing to take tech risk, then why wouldn't you buy

00:34:29.760 | a bond at 10%?

00:34:30.560 | Meaning the equity always has to beat that threshold return.

00:34:34.080 | But But hey, can we just go back to the jobs report for a second?

00:34:37.920 | I mean, the US government could default, but it's considered the least likely to default

00:34:42.320 | of all issuers of debt in the world.

00:34:44.400 | And that's why I said, yeah, that's why people call it the risk free rate, because it is

00:34:50.720 | the least risky,

00:34:51.440 | the US can always repay its debt, because the debt is denominated in dollars, and the

00:34:56.000 | Treasury can always at the end of the day, print more money that would just be monetizing

00:34:59.360 | the debt.

00:35:00.080 | Other countries that owe money in dollars, and obviously don't control the US Mint, they

00:35:05.600 | can't do that.

00:35:06.240 | So they could actually default.

00:35:07.520 | But since we're the world's reserve currency, we're never going to default.

00:35:10.640 | However, the dollars that you get paid back by the US government might be worth a lot

00:35:15.440 | less in the future because of inflation.

00:35:17.200 | And that's the real risk you have to think about.

00:35:19.120 | But there's no default risk, right?

00:35:21.520 | Whereas with corporate debt, there is.

00:35:23.280 | But let's go back to this, the jobs picture for a second.

00:35:26.640 | Jason, you asked about this.

00:35:28.240 | So there is news this morning that we added 261,000 jobs in October.

00:35:32.400 | And obviously, given that there's an election in a few days, then the administration is

00:35:36.640 | eager to point to this.

00:35:38.240 | But if you dig a little deeper in the report, I just posted the link there, you see in the

00:35:42.640 | raw numbers that there's actually 328,000 fewer employed Americans.

00:35:48.000 | And the number of unemployed Americans actually increased to 36,000.

00:35:52.400 | And the labor force participation rate declined for the third consecutive month to 62.2%.

00:35:59.440 | So I don't really understand how all these numbers add up.

00:36:03.040 | But the point is, the data is very mixed.

00:36:05.600 | And there's definitely a negativity in there.

00:36:08.800 | And this feels to me like the last gasp of the bull market where there's this residual

00:36:15.840 | job creation.

00:36:17.120 | But you look at just what's happened in the last week, where it's stripe cutting.

00:36:21.200 | I mean, stripe's probably the single highest quality, I think it's probably the most valuable

00:36:25.600 | private company in Silicon Valley.

00:36:27.280 | SpaceX.

00:36:27.600 | No, SpaceX is.

00:36:28.640 | Oh, well, SpaceX, okay.

00:36:29.840 | But like software, pure software company, they had a 14% cut, you're starting to see

00:36:34.240 | now the rifts really start to pile up.

00:36:36.560 | So I think we're at the beginning now of a long cycle of the unemployment rate going

00:36:41.920 | up.

00:36:42.160 | I mean, it just feels like the economy is slowing so fast.

00:36:45.840 | The markets are, you know, they've been puking now for six months.

00:36:50.560 | It just feels like this is the beginning of a like really serious recession.

00:36:54.080 | Yet we had GDP growth, yet we had job openings.

00:36:58.240 | No, remember we had two quarters of net negative GDP growth.

00:37:02.320 | This is when we had the debate about what a recession is.

00:37:04.640 | It was true that if you looked at growth in nominal terms, it appeared to be strong, and

00:37:09.440 | then it was net negative once you subtracted the inflation rate.

00:37:12.640 | You know, we said several months ago, my prediction was a double-dip recession where you had this

00:37:17.600 | shallow technical recession, then it bounced back in Q3.

00:37:20.400 | But now I think we're headed into the second part of it, which is the real recession, a

00:37:24.320 | recession characterized by joblessness.

00:37:26.720 | And you're starting to see economists say we're going to go from 3.

00:37:29.600 | Something percent unemployment rate to say five or 6% unemployment next year.

00:37:34.000 | So I think we're just beginning to see the job cuts start to add up.

00:37:38.480 | This is, I think this is what Powell meant, which is, you know, he'll take it as far as

00:37:44.160 | it takes, and then he can fix it on the back end by reintroducing, you know, quantitative

00:37:50.000 | easing and reintroducing lower interest rates to stimulate demand.

00:37:55.600 | But there is one of the odds he gets this right.

00:37:57.760 | It seems to me that the Fed has a habit of reacting too slowly.

00:38:01.600 | They were too slow to react to inflation.

00:38:04.480 | My guess is that they'll be too slow to react to the recession.

00:38:08.240 | So we'll end up with a period of rates being higher than they should too long, and then

00:38:12.480 | they will correct, they'll drop rates, but that could be two years from now.

00:38:16.320 | And meanwhile, we could be in a pretty deep recession.

00:38:18.000 | I think you're probably right.

00:38:18.720 | Here are the two charts for you to look at the GDP by quarter.

00:38:22.960 | And then after that, the labor participation rate.

00:38:25.760 | So there's your GDP, q1 q2 being negative q3 bouncing back, we'll see what happens in

00:38:30.560 | q4.

00:38:31.200 | Here's your Fed force participation rate for labor, as we discussed,

00:38:35.600 | the thing with the labor participation rate that we're still not sort of like truly factoring

00:38:39.440 | in is like, you know, we had a million Americans die because of COVID.

00:38:42.880 | And, you know, starting in that Trump presidency, we lost like seven or 8 million immigrants.

00:38:48.080 | So those 8 million people have a huge effect on this number.

00:38:52.000 | Yeah, right.

00:38:52.640 | And it's not properly really factored in.

00:38:54.560 | Because if, if, if you see that at the start of the Trump presidency, it's just it just

00:38:58.960 | fell off a cliff, basically.

00:39:00.160 | And you also have people who retired early, that was a big trend.

00:39:03.760 | And this all peaked in 2000.

00:39:05.920 | Labor participation hit that like 67 68%, I think is the peak.

00:39:09.920 | And just slowly going down as boomers retire early, because they made so much on their

00:39:15.120 | 401ks and homes.

00:39:16.320 | And then you're right, trim off, we've had negative, we've really cut immigration the

00:39:21.600 | last whatever, five, six years, I think there's an element in here that's missing on how much

00:39:26.800 | people individually are finding other ways to earn income that doesn't qualify and show

00:39:32.160 | up in the labor force numbers.

00:39:33.440 | People have set up Etsy stores, Shopify stores have tripled since COVID.

00:39:39.520 | People are making more money on YouTube on Instagram on Tick Tock than ever before.

00:39:45.600 | There's a whole new class of work that revolves around the individual, creating their own

00:39:52.160 | business creating their own income stream that simply taken off and has taken off.

00:39:57.600 | It was it was kind of a trend pre COVID.

00:39:59.360 | But it really took off during COVID.

00:40:01.760 | And there's an element of this that's really more about the transition of how people work

00:40:05.440 | and how they earn.

00:40:06.160 | That isn't reflected in these numbers.

00:40:08.400 | I don't think that the idea that everyone should go be an employee at a company is necessarily

00:40:12.720 | the right way to think about labor going forward.

00:40:15.040 | The amount of money that individuals are earning is probably the better way to frame this up

00:40:19.680 | going forward and really thinking about the earning power and the economic health of this

00:40:24.000 | country.

00:40:24.320 | This is something important you're bringing up here.

00:40:27.040 | Gig workers are about 9% of the workforce.

00:40:30.880 | And Uber and Dara had they grew over 70% this year.

00:40:35.680 | But I think the big number that I watched for was drivers are making $36 an hour in

00:40:40.640 | the United States working for Uber.

00:40:42.320 | So you're exactly right.

00:40:43.360 | People are finding other options, whether it's DoorDash, Uber, and that doesn't qualify

00:40:47.360 | in labor force, right?

00:40:48.320 | Because they're no, it does.

00:40:49.360 | Independent contractors are counted.

00:40:51.760 | Yeah, they are counted.

00:40:52.960 | That's based on my preliminary research.

00:40:55.600 | If somebody wants to fact check us, that'd be great.

00:40:57.600 | But my understanding is independent contractors, which is what gig workers are classified under

00:41:02.320 | are counted in labor participation.

00:41:03.840 | I don't know how they're counted.

00:41:05.600 | So we'll look that up and figure that out.

00:41:09.120 | There was a story in BBC that the Bank of England has now warned that the UK is facing

00:41:15.280 | its longest recession since records began.

00:41:18.640 | Some of this is getting to be fear porn.

00:41:20.320 | Yeah.

00:41:21.620 | But look, here's what I think is scary about going into a recession is number one, you

00:41:25.760 | don't really know how long it's going to take to get out.

00:41:27.760 | We know the average recession lasts about 18 months.

00:41:29.840 | But the truth is once it starts, you just don't know.

00:41:32.080 | And the second thing is you don't really know who's been stress tested.

00:41:35.280 | People claim that they can weather the storm.

00:41:38.160 | But the truth is that there's no way to simulate, truly simulate a stress test.

00:41:43.360 | They claim they can.

00:41:44.560 | But the only way is to really subject an institution to that pressure and that stress.

00:41:49.840 | And then you see if they come out the other side.

00:41:52.400 | So that's the issue is you're just going into this.

00:41:54.640 | There's a lot of unknown unknowns.

00:41:57.600 | And this is why I would just urge founders to be cautious is because if the recession

00:42:03.680 | ends up being shallower and shorter than people expect, great.

00:42:07.200 | You'll be surprised to the upside.

00:42:08.960 | But if the recession ends up being deeper and longer than expected, you don't want to

00:42:13.760 | go out of business.

00:42:14.320 | You want to be protected against that.

00:42:15.680 | So again, we've been saying this since February and May.

00:42:19.120 | But again, I just reiterate, I think it really makes sense for founders to be conservative,

00:42:24.880 | prioritize your survival above all else.

00:42:28.000 | This recession probably will last about two years.

00:42:30.640 | You want to make sure you survive it.

00:42:32.640 | And to Shama's point, if you survive it with lower growth, that's fine.

00:42:35.840 | You can keep growing on the other end of this thing.

00:42:37.920 | But if you go out of business, because you grew too fast, then you're not going to get

00:42:41.920 | the chance to fix that problem when the recession is over.

00:42:44.560 | I just don't see anybody rewarding hyper growth that is burning a ton of cash where you have

00:42:51.040 | to be back in market every year.

00:42:52.720 | Because it's just very hard to feel comfortable that the conditions on the field aren't going

00:42:59.680 | to be drastically different a year from now, right?

00:43:02.400 | It's not like we know that it's going to be better or worse.

00:43:06.080 | And I think that that uncertainty is actually really bad for companies.

00:43:09.440 | So to your point, it's just like a lot of folks have tried to shy away, David, from

00:43:15.600 | actually revisiting their valuations.

00:43:17.200 | They've done these complicated converts, and they've tried to basically, you know,

00:43:21.680 | it's I think it's sort of like managing their ego or the board's ego.

00:43:27.280 | And I think like the next shoe to drop has to be these founders and these boards just

00:43:32.800 | saying, OK, let's just take the hard medicine.

00:43:34.640 | What's the real market clearing price and valuation?

00:43:37.440 | Let's get a third party to price it.

00:43:38.800 | And let's get new fresh equity and then move forward.

00:43:41.840 | Because if you don't do that, and you wait until everybody's trying to do it, then it's

00:43:46.720 | going to be a really tough scenario.

00:43:48.160 | So better to your point, you know, this is why like Stripe, it's so smart, better to

00:43:53.040 | cut now.

00:43:54.720 | Again, it's always hard to let people go.

00:43:56.880 | But it's better to do that now than 18 months from now.

00:44:00.240 | Because you just have no idea how much more expensive or hard it's going to be then.

00:44:04.960 | And who's going to even be in the business of lending money or investing money in 18

00:44:09.520 | months.

00:44:10.020 | And you know, that that sounds pretty crazy.

00:44:12.480 | But it's like, I think that that's, that's the moment that we're in to your point,

00:44:16.240 | Friedberg, I did a little research here.

00:44:18.080 | And according to the Fed of St. Louis, if you counted casual workers, informal workers,

00:44:27.440 | over doing over 20 hours a week of informal work, aka gig work, you would increase labor

00:44:34.560 | participation between a half point and a point if you counted all of them, maybe even slightly

00:44:39.680 | more than two percentage points higher.

00:44:41.200 | So probably about a point seems like a realistic way to look at labor participation.

00:44:46.000 | And of the eight points, or maybe now the six or seven points to 10%, it would then

00:44:52.000 | account for 10 to 20% of the 10% drop in labor participation.

00:44:56.560 | It's just alarming statistics, because if most people have most of their personal net

00:45:02.880 | worth tied up in their home asset, and their home values are declining, or going to decline.

00:45:07.280 | And we're seeing this dramatic spike in consumer credit in the US, it paints a really ugly

00:45:14.480 | picture for the next two years.

00:45:16.000 | Wow, guys, I'm just looking at I'm just looking at the markets today, get labs down 15% snowflakes

00:45:21.360 | down 13%.

00:45:22.240 | Monday's down 14%.

00:45:24.800 | At last, it's down 30%.

00:45:27.680 | In one day, Yelp is down 17%.

00:45:30.560 | These are open door is down 16%.

00:45:33.120 | So it's just a horror.

00:45:35.760 | Oh my gosh, the cloud computing index, WCLD has hit a new low for the year, it's down to

00:45:42.560 | 23 bucks, I think the previous low was 25 is down almost 8% today.

00:45:46.400 | And this is on a day in which the NASDAQ is down less than 1%.

00:45:49.040 | So the point is,

00:45:50.720 | People are rotating out of growth stocks.

00:45:53.440 | Yeah, it's just brutal.

00:45:54.640 | And so, listen, if you're a startup founder, you got to realize these are like some of

00:45:58.240 | the highest quality public

00:45:59.360 | Twilio is down 40% today.

00:46:01.520 | Twilio is down 37% in a day today.

00:46:05.360 | Whoa.

00:46:06.420 | But guys, this is this is just math, you know, it's not a judgment on any of these companies,

00:46:12.400 | it's just pure math.

00:46:13.680 | This is why I think you have to be utterly unemotional in this moment.

00:46:17.360 | And if you're if you're a CEO, running a company, particularly a SaaS business,

00:46:22.080 | you have to really figure out how to

00:46:24.880 | how to right size your cost basis and make this money last profitable industrial companies are

00:46:31.040 | up.

00:46:31.280 | Bill Gurley had a tweet a tweet about this a few months ago about how the biggest mistake

00:46:35.760 | people make in riffs is they just do like a tepid riff, like a 10% ish riff, and they have

00:46:40.880 | to come back and they do it again.

00:46:42.160 | And they do it again.

00:46:43.360 | This is what I think the the Elon action this week really sets a standard, he shows the

00:46:48.160 | entirety of Silicon Valley, that you can cut deep and you can turn a profit and you can do it fast.

00:46:53.440 | And it could set a new standard for how folks are managing this jack Welch used to in his

00:46:57.680 | management principles, recommend dropping the bottom 10% of people every year.

00:47:02.160 | And so, you know, the 10 13% cuts don't really pass muster as a public market investor kind

00:47:07.840 | of looks at the the management across these different companies to turn a profit, they're

00:47:12.240 | going to say the folks that are making the deepest cuts, the fastest are the ones that

00:47:14.880 | are going to get valued.

00:47:16.080 | It's unfortunate, and it's a difficult circumstance for everyone in Silicon Valley to deal with

00:47:20.480 | from the employees, to the investors to the public and private shareholders.

00:47:24.480 | It's really brutal.

00:47:25.520 | One quick question.

00:47:26.080 | It's really just this kind of market motivation that's underway right now.

00:47:29.920 | Here's the chart.

00:47:31.040 | And my question for you is when do Google and Facebook stop this?

00:47:35.520 | I mean, if you look at the number of employees being added, it is truly extraordinary.

00:47:39.760 | Here's the chart.

00:47:40.560 | And this includes the latest quarter.

00:47:42.560 | So they are not turning off hiring yet.

00:47:48.240 | What do you think?

00:47:49.440 | Hold on, didn't they announce a hiring freeze?

00:47:51.360 | They announced that they were at Google, they announced that they were going to hold people

00:47:56.480 | accountable to better performance, and they were going to go do more with less.

00:47:59.760 | And then they added more people.

00:48:00.960 | Facebook said they would do a hiring freeze.

00:48:03.520 | And they added jobs.

00:48:05.520 | They added jobs last quarter, yeah.

00:48:07.520 | Well, you're right.

00:48:08.080 | They just announced a hiring freeze.

00:48:09.600 | You look at Apple, Apple just announced in non-R&D functions a hiring freeze.

00:48:14.160 | This is Apple, like the most valuable, most profitable company in the world.

00:48:17.920 | So if Apple basically is putting the brakes on non-engineering hiring, that tells you

00:48:23.840 | something about how fast the economy is slowing down.

00:48:25.760 | I think that was a huge signal.

00:48:28.160 | The point Freeber makes is, you know, I think it's a good thing that Apple is doing this.

00:48:32.160 | The point Freeber makes is so correct, which is, if you're doing a RIF, obviously there's

00:48:37.120 | a reason why, but I think we're seeing too many RIFs where the details of the RIF and

00:48:42.720 | the magnitude of the RIF don't match up with what the objective of the RIF is.

00:48:46.720 | The objective of the RIF for a lot of these companies should be to get them cash flow

00:48:51.840 | positive, or at least to put them on a runway or trajectory where they can get cash flow

00:48:57.760 | positive with their existing cash on the balance sheet, right?

00:49:00.720 | They won't need to raise money again.

00:49:02.080 | And we're seeing a lot of companies where they don't achieve that, and they have to

00:49:06.160 | come back again and again and hit it again.

00:49:09.200 | And that creates more turmoil for the company, and it's more unfair for the employees.

00:49:14.320 | By the way, Sax, to that point, I'll just say how deep these companies are cutting and

00:49:18.720 | how quickly management is expressing to their shareholders how they're going to turn a profit

00:49:24.080 | becomes a signal for those shareholders on whether or not they want to stay in that stock.

00:49:28.080 | And the companies that are doing it fast and are doing it deep, the investors and the shareholders

00:49:32.480 | say you do actually have a path that makes sense here, I'm going to stay in the stock

00:49:35.520 | cash today versus cash in the future.

00:49:37.600 | Charles, let me ask you a question in terms of strategy for one of these companies, let's

00:49:41.280 | say the Facebook Corporation, or perhaps even Google, or Apple, even if they were to cut

00:49:48.720 | their expenses, which might take obviously a RIF.

00:49:51.680 | And then because their stock prices are so depressed right now, maybe even a mid cap

00:49:56.400 | one like a Twilio or an Uber or an Airbnb, they were cut costs and then start buying

00:50:01.520 | back their shares, which some companies have been doing.

00:50:04.400 | What would that do in terms of the markets appreciation of those stocks or management

00:50:08.160 | teams?

00:50:08.480 | I think it's hard to tell.

00:50:09.600 | I think that the if you have not lost investor trust, I think it would be really well rewarded.

00:50:18.960 | If you have become unreliable and undisciplined, even those cuts, I think would be met with

00:50:27.920 | some amount of excitement, but probably not a broad based support.

00:50:33.280 | So, you know, it then it just goes to narrative, meaning if Google did it, I think that people

00:50:39.360 | really trust Sundar and Ruth.

00:50:41.280 | And I think the stock would go bonkers.

00:50:44.720 | They would they would probably move very quickly into the echelon of Apple and Apple is sort

00:50:50.240 | of a first among equals like they're just they're just in a different class unto themselves.

00:50:55.360 | Facebook, I think is a little bit harder because I think folks have gotten burned and, you

00:51:01.040 | know, they would have to make some really, really deep cuts.

00:51:03.520 | But then, you know, where do you do it?

00:51:05.600 | You can't capitulate on this meta strategy.

00:51:07.680 | But then the other part is where you make all the money.

00:51:10.400 | And so you have this huge morale issue that you have to manage.

00:51:14.560 | So it's just a really hard game to play.

00:51:17.040 | Just one more thought on on on the RIF stuff.

00:51:20.560 | I think one thought experiment for founders is to think about what was your plan at the

00:51:25.600 | end of 2019?

00:51:26.800 | Why do I say that?

00:51:28.240 | Because 2020 and 2021 were two of the most distorted years ever in the history of financial

00:51:34.000 | markets and the economy because we had COVID and then we had the reaction to COVID.

00:51:38.480 | Right.

00:51:38.720 | And so you saw there was this, you know, Zoom's market cap hit 100 billion, all the

00:51:43.600 | e-commerce companies were doing extremely well.

00:51:45.840 | You know, you had all this money printing, you know, you had zero interest rates and

00:51:50.080 | so on.

00:51:50.960 | You had SaaS companies hitting all-time highs at the end of 2021.

00:51:54.400 | So we lived through this incredibly distorted time.

00:51:57.040 | So as a thought experiment, go look at what your plan for 2020 was supposed to be when

00:52:02.880 | you created it at the end of 2019.

00:52:05.040 | Because that was the last time that you were thinking without any distortions, you know,

00:52:10.080 | that were then created.

00:52:11.200 | And I think if you were to go back and look at your 2020 plan, again, created at the end

00:52:16.320 | of 2019, you'd probably see that you could get by with half the headcount you have now

00:52:21.600 | because probably you doubled your headcount during the last two years during these heady,

00:52:25.360 | heady times.

00:52:26.560 | And yet I think founders start thinking, "Oh, I can't go back to operating, you know,

00:52:30.480 | I can't operate at half the level of headcount."

00:52:32.880 | But you were, you were operating with half the level of headcount by definition at some

00:52:37.600 | earlier point.

00:52:38.560 | I also think sometimes I think what founders say is, "What will people think if I cut 50%?"

00:52:43.200 | Meaning all of a sudden the perceived success of my business would be different.

00:52:47.680 | And I think that this is where you have to realize, no, like there's a lot of ego tied

00:52:52.480 | up in these things, which slows people down from doing the thing that they need to do.

00:52:56.560 | It's a really, it's a really hard spot.

00:52:59.120 | It's hard to do.

00:53:00.000 | I mean, look at Airbnb as an example.

00:53:02.160 | I mean, they did this ginormous riff during COVID because they had no choice.

00:53:07.040 | I mean, their revenue went essentially to zero.

00:53:10.000 | And now the business is incredibly strong.

00:53:12.640 | It's throwing off massive amounts of free cash flow.

00:53:14.960 | And the stock market seems to really love what Airbnb has done.

00:53:17.760 | And a similar story over at Uber in terms of having done significant riffs and probably

00:53:22.800 | could do significant ones going forward.

00:53:24.400 | Yeah, but Jacob, let's just be clear.

00:53:25.760 | Airbnb is still down almost 75% off its high.

00:53:28.880 | Right.

00:53:29.760 | So when you say the stock market, love it.

00:53:31.200 | So they're up today 3%, so meaning they're not down 30% in one day, but they have gone

00:53:36.960 | down with the rest of the market.

00:53:37.920 | They have gone down with the rest of the market.

00:53:39.920 | But it feels like the business I'm talking about the business fundamentals when you're

00:53:43.840 | throwing off almost a billion dollars of free cash flow.

00:53:46.400 | Yeah, now you're going to start people are going to perceive that business maybe as

00:53:48.960 | of this cohort, the flight to safety, right?

00:53:52.320 | Or same thing with Uber throwing off free cash flow.

00:53:54.320 | Now, I think a lot of these names are going to I don't own Airbnb right now, but I do

00:53:57.840 | own Uber.

00:53:58.640 | I think the people throwing off the free cash flow are going to look pretty attractive

00:54:01.360 | and be able to buy their stock back maybe.

00:54:04.240 | All right, everybody, let's talk about the midterms.

00:54:06.720 | A lot of big Senate races and obviously governors, Pennsylvania, Georgia, Arizona, Wisconsin,

00:54:15.360 | Ohio, all really important races.

00:54:17.840 | sex, what do you think?

00:54:19.120 | Well, it looks to me like there's gonna be a republican wave, there was an interesting

00:54:24.480 | article actually on CNN, where they it's called five scary numbers for Democrats.

00:54:28.960 | And what they point to is that Biden right now has a 42% approval rating.

00:54:37.360 | 61% of the American people say he hasn't focused on the key problems.

00:54:40.800 | So this is called the out of touch index.

00:54:43.200 | 51% say the economy is no issue compared to only 15% for abortion.

00:54:46.960 | And then 78% say we're on the wrong track.

00:54:49.200 | I don't think I've seen a right track wrong track index that was so negative.

00:54:53.440 | And 75% of the country says we're in a recession.

00:54:57.360 | So you know, when you look at polling numbers like that, it must translate, I think, into

00:55:02.240 | a republican wave and you have now real clear politics currently has the GOP gaining four

00:55:08.080 | Senate seats.

00:55:08.720 | So winning in Arizona, Nevada, Georgia, and New Hampshire, that's a big change from just

00:55:13.680 | a couple weeks ago, and winning 31 house seats.

00:55:16.480 | So this is this is kind of what it's looking like right now.

00:55:19.920 | But look, the margin is still within the within the margin of error on the polling.

00:55:25.760 | So Nate Silver's pointed out that within one standard deviation, you could either have

00:55:31.200 | a republican wave or you could have basically the republicans fizzle out.

00:55:35.520 | So it's going to be very close.

00:55:37.440 | But ultimately, I think this breaks republican.

00:55:40.880 | Yeah, the to me, the way that I've I'm looking at it right now is that it seems like most

00:55:47.520 | scenarios, the republicans will have the majority in the house.

00:55:50.560 | And the real question is what happens in the Senate.

00:55:54.000 | It's really, really kind of a coin flip.

00:55:55.840 | And that's going to be really interesting to see.

00:55:59.280 | So, you know, things where I thought would break republican in the Senate, like Pennsylvania

00:56:04.560 | are now back to almost the, you know, a statistical dead heat.

00:56:07.440 | So it's a really interesting moment, actually, it's, but most scenarios, David, I think you'd

00:56:13.920 | agree is that the republicans win the house.

00:56:17.200 | And then there's a non there's a plurality of scenarios where they also in the Senate,

00:56:20.880 | the house will almost certainly go republican.

00:56:23.120 | But I think the Senate now the official percentages are 55% likely to tip republican.

00:56:28.160 | But I just think that in a wave year like this, where the wrong track sentiment is so

00:56:33.920 | high, I think all these races that are a dead heat, they're more likely to break in one

00:56:38.880 | direction as opposed to like a random distribution, which is why I think you could just as easily

00:56:43.840 | end up with an, you know, instead of it being a 51 49 Senate, it could be 5545.

00:56:51.440 | Because all these things could break the same way.

00:56:53.040 | So right now, so I would slightly disagree in Pennsylvania, I think Oz has improved as

00:56:58.480 | a candidate Fetterman did that debate.

00:57:00.240 | And since he suffered that stroke, he kind of came across as somebody

00:57:03.120 | how do we feel about that?

00:57:04.640 | That I, I had very, very hard to watch that happen.

00:57:08.560 | And yeah,

00:57:09.760 | I mean, the guy, the guy has suffered a stroke and is sad, but he you know, he doesn't

00:57:13.760 | present as someone who can be a senator right now.

00:57:16.000 | I think Oz is gonna win that race.

00:57:17.600 | What does the science say about that?

00:57:18.880 | Like, are we as a society, is this a good idea to have somebody post stroke be in office?

00:57:23.440 | I'm not picking any political side here.

00:57:24.640 | I'm just talking about the medical issue.

00:57:26.560 | Oz is actually doing the right thing right now, which is he's not actually focusing on

00:57:29.920 | that issue, because it's so obvious, he doesn't want to be seen as beating up on Fetterman.

00:57:34.240 | And instead, he's focusing on the issues.

00:57:37.840 | And actually, Fetterman's issues are very unpopular in a state like Pennsylvania.

00:57:42.720 | So I actually think for both reasons, Oz is going to win that I think Fetterman's manifestly

00:57:47.600 | unqualified, but also I think his positions are fairly unpopular.

00:57:50.400 | So I think Pennsylvania will will will almost certainly tip.

00:57:54.080 | So let me pull up the chart here, just so people can see Ohio's going Republican.

00:57:57.840 | And then Arizona, I think is really the interesting one where Blake Masters is now

00:58:02.560 | tied after being behind Mark Kelly throughout this campaign.

00:58:06.320 | He is now tied in Newport.

00:58:08.720 | He's tied now?

00:58:09.280 | Oh God, he's so unpopular.

00:58:10.960 | Your guy is really unpopular.

00:58:12.560 | And now he's tied.

00:58:13.760 | It's popular.

00:58:15.040 | Jake, that was your interpretation.

00:58:17.280 | It's a Peter Taylor.

00:58:18.320 | He was he was doing really poorly, I think, because I think, listen, I think that I think

00:58:23.520 | that Arizona is probably gonna be the closest race in the country.

00:58:26.160 | I think it's gonna be a nail biter.

00:58:27.360 | But I think Blake's gonna pull that out.

00:58:28.640 | Saks, what do you think are the biggest policy shifts that take place in this country?

00:58:34.640 | Post this predicted red wave?

00:58:37.280 | Is there anything that changes?

00:58:39.360 | So just, you know, talk to folks about what's on the docket from a legislative point of view,

00:58:44.160 | going into the next Congress, with all these new candidates,

00:58:48.800 | the reality is we have a separation of powers in this country, and you're going to have

00:58:52.640 | divided government, the Republicans will will control Congress, the Democrats will control

00:58:57.040 | the presidency.

00:58:58.160 | And so as a result, you're going to be largely in a gridlock situation.

00:59:01.840 | But gridlock may be a lot better than what we've had over the last couple of years.

00:59:05.520 | So, you know, you've had basically this orgy of spending and money printing,

00:59:09.520 | and I think that's going to stop, obviously.

00:59:11.280 | The other thing that's going to happen is Republicans may not be able to pass much

00:59:15.200 | legislation, but they're gonna be able to do investigations.

00:59:17.600 | And there's a lot of questions that need to be answered, I think, about still about COVID,

00:59:21.600 | you know, these lockdown policies that we had, it started at the top at NIH, why did they happen?

00:59:26.480 | We need to start having accountability for some of these horrible decisions that were

00:59:30.400 | made during COVID.

00:59:31.600 | And there's been no willingness in Washington to hold anyone accountable.

00:59:34.240 | At a minimum, they need to have some congressional investigations and find out why we pursued

00:59:38.880 | such bad policies over the last couple of years.

00:59:41.360 | By the way, did you see did you see what happened this week where the CDC, you know, after this

00:59:46.960 | entire opioid epidemic, and all of these lawsuits, the CDC came out and actually said, Hey, listen,

00:59:52.800 | we need to really make sure that we're getting access, putting opioids in the hands of Americans

00:59:59.040 | who are really suffering with pain management and whatnot.

01:00:01.920 | And I didn't read the article to really understand the details.

01:00:05.120 | But I just thought it was an incredible headline where it's like, it's just it's so counter to

01:00:09.360 | the narrative of what we've been told is happening, which is like, you know, over prescription and

01:00:12.880 | misprescription.

01:00:14.080 | If we learned anything during COVID is to question every organization, everybody and to really

01:00:19.760 | collect your own information.

01:00:21.440 | While, you know, looking at these organizations, we trusted over time, I know, I look at the

01:00:26.560 | world differently now that you couldn't say COVID was possibly a lab leak without having

01:00:31.280 | your podcast taken down or being banned on YouTube.

01:00:34.400 | And now ProPublica has done an investigation.

01:00:37.680 | And they're saying along with Vanity Fair, and they're going to win a Pulitzer for this, I bet

01:00:40.720 | that this conspiracy theory from two years ago is probably actually the leading theory and that

01:00:46.320 | the Wuhan lab lab was showing, if you didn't see it, reporting an incident in late November of

01:00:54.800 | last year before COVID broke 2019.

01:00:57.920 | It's really, it's really incredible.

01:00:59.360 | There was an article in the Atlantic that came out over the past week called let's declare a

01:01:04.240 | pandemic amnesty.

01:01:05.920 | No.

01:01:06.420 | And let's do a pandemic investigation.

01:01:08.800 | Right.

01:01:09.600 | So basically, yes, all the experts who told us, Jason, that we weren't allowed to have an

01:01:14.880 | opinion, because we weren't expert enough, that if we raise any questions about the origin of the

01:01:19.520 | virus, that it might have come from a lab, that that basically needs to be censored.

01:01:23.040 | The people who said we had to do lockdowns and implement all these authoritarian tactics.

01:01:26.800 | Now they're saying that they need an amnesty.

01:01:29.920 | And what that really means, no one's looking, no one's looking to criminally prosecute them.

01:01:34.080 | What we're looking to do is have some accountability around the public policy.

01:01:37.360 | What they want is they want to pull the expert card to say that they're the only ones who get

01:01:41.760 | to have an opinion and make a decision.

01:01:43.520 | But then when it all goes horribly awry, they basically want to be completely insulated and

01:01:47.520 | unaccountable.

01:01:48.000 | No accountability.

01:01:49.440 | No way, no way.

01:01:50.480 | We're not going to give you full investigation.

01:01:52.880 | We're in alignment on this.

01:01:53.840 | That's right.

01:01:54.240 | Can I just tell you why?

01:01:55.680 | I just want to say, sex, we're in alignment on this for a rare moment of peace on this podcast.

01:02:00.400 | The same thing after 911.

01:02:02.480 | Shouldn't all Americans understand what happened after 911?

01:02:05.520 | And what the failures were in our intelligence, just so we can get better.

01:02:08.640 | I'm not picking a political horse here.

01:02:10.800 | But it's kind of crazy that you could people said to our podcast and other people who were

01:02:16.080 | questioning it, forget about what political party you're in just want to understand how

01:02:20.000 | the world works.

01:02:21.200 | What are the chances that this breaks out in the one or two places where they're studying

01:02:25.520 | the coronavirus that you have a lab leak?

01:02:27.440 | It was so obvious to everybody.

01:02:29.280 | The other reason why you need to have accountability for this is that there is still a long tail,

01:02:33.600 | especially around the damage that we did to our kids educationally.

01:02:37.760 | Yes, now, and now the over prescription of stimulants.

01:02:40.480 | And so if you don't have answers, you can't go after these problems like there was a there

01:02:46.480 | was the like, stimulant prescription is now the single biggest epidemic in children.

01:02:52.640 | It is now twice as prescribed as contraceptives and asthma drugs.

01:02:57.920 | And why Chamath?

01:02:58.880 | Why are we doing this to get them to score higher on a test to be more attentive in school?

01:03:03.120 | Well, it's actually this negative feedback loop where these children were miseducated

01:03:09.200 | during COVID.

01:03:12.080 | It had huge psychological and academic damage to them.

01:03:16.960 | Our test scores have fallen off of a clip relative to how we used to do relative to

01:03:22.560 | other countries.

01:03:23.280 | I think the teachers unions have found a way to try to explain it.

01:03:27.440 | To basically shield themselves from any sort of critique.

01:03:32.320 | And so the loop and then part of that loop is then to look at a bunch of kids that are

01:03:37.520 | underperforming in school. And instead of saying, well, maybe these lockdowns and masking

01:03:42.880 | and all of these things that we implemented, actually had a huge impact.

01:03:46.560 | They say, you know, you're misbehaving.

01:03:48.320 | So let's put you on a stimulant.

01:03:50.400 | Yeah, it's crazy.

01:03:51.200 | We're in that loop right now.

01:03:52.480 | Just so you guys know, the data is outrageous.

01:03:55.040 | Twice as many prescriptions for stimulants as the sum of contraceptives and asthma drugs

01:04:02.080 | for all American kids.

01:04:03.840 | Yeah, it's not that suddenly everybody's got ADHD.

01:04:06.400 | It's and we failed them.

01:04:07.360 | We failed our children.

01:04:09.600 | And we're going to use stimulants to have them catch up.

01:04:11.680 | We know, but we should be doing summer schools, after school programs, we can whatever, we

01:04:16.880 | failed them because of our response to COVID.

01:04:18.880 | That is why we need answers to all that stuff.

01:04:20.560 | Because you need to link these things together to have some real accountability.

01:04:24.480 | Absolutely.

01:04:25.040 | Here is the just so we have the people see the numbers.

01:04:27.520 | Here's the 538 poll of how Joe Biden's popularity has switched.

01:04:32.160 | This is 654 days into his presidency started out really strong 54%.

01:04:38.880 | And now a little rebound since the summer.

01:04:41.760 | Obviously, that dip started with the economy, it's the economy stupid.

01:04:46.880 | And if we go down a little bit on the same page, and you zoom in on the left there, you

01:04:50.720 | can see compared to Donald Trump.

01:04:51.920 | He started out much more popular than Donald Trump day by day.

01:04:55.600 | And now he's just as unpopular as Donald Trump was at this point in his presidency.

01:04:59.360 | Well, look, I mean, look, the setup is really interesting for 2024.

01:05:02.320 | Because it's probably going to be the case that we're in the middle of a recession going

01:05:06.240 | into that election cycle.

01:05:07.360 | Maybe we'll be sort of like getting ourselves out of it.

01:05:10.720 | But there'll be a lot of economic damage, high unemployment.

01:05:13.440 | And, you know, typically, folks in power will have to sort of be held accountable for that.

01:05:19.440 | It's a really interesting setup that both Gavin Newsom and Ron DeSantis have to figure

01:05:25.360 | out now and navigate if they're going to get the nomination on each side.

01:05:28.640 | And breaking news today, Saks would love to get your thoughts on this.

01:05:32.240 | Axios says, and we'll go to Science Corner next, that Trump's going to announce on November

01:05:38.000 | 14, that he is running for president.

01:05:40.800 | Look, I kind of have the Joe Rogan philosophy on this, which is why give it oxygen.

01:05:44.720 | Let's just wait and see.

01:05:45.760 | There's certainly no need to talk about it before it happens.

01:05:47.840 | You know, we're not even past this election yet.

01:05:51.120 | But, but hey, I want to go back to the Biden popularity, because I think part of the issue

01:05:55.920 | here is what are the arguments that Biden is making to the country about why people

01:06:01.200 | should vote Democratic?

01:06:03.120 | And he gave another speech on Wednesday night where he basically claimed that if you vote

01:06:08.480 | for a different party, that that is a threat to democracy.

01:06:12.480 | In other words, the perpetuation of single party rule is what you must do if you care

01:06:17.520 | about democracy.

01:06:18.640 | That is a sales pitch that's not going to appeal to anybody outside of the viewers of

01:06:22.560 | MSNBC.

01:06:23.280 | It's just not.

01:06:24.080 | He's not talking about the issues that really matter to the country.

01:06:27.120 | You know, what the country wants to know is that he's focused on the economy, he's focused

01:06:30.960 | on inflation, he's focused on crime, he's focused on the schools and fixing this learning

01:06:36.560 | loss that Chamath was just talking about.

01:06:38.480 | He's not doing those things.

01:06:39.600 | Instead, he's basically saying that the Democrats should be kept in power forever, because there

01:06:44.400 | was a riot at the Capitol on January 6.

01:06:46.320 | And look, that was a stain on the country.

01:06:48.800 | Okay, it was terrible that that happened.

01:06:50.320 | But that is not a reason, hold on a second, that is not a reason to keep

01:06:53.760 | Democrats in power forever.

01:06:55.440 | And actually, there's a liberal guy, a liberal Democrat named Josh Barrow, who wrote a pretty

01:07:00.640 | good blog about this.

01:07:02.240 | And what he said is, "The message is that there's only one party contesting this election

01:07:08.000 | that is committed to democracy, the Democrats, and therefore only one real choice available.

01:07:11.920 | If voters reject Democrats' agenda or their record on issues including inflation, crime,

01:07:16.480 | and immigration, they have no recourse to the ballot box.

01:07:19.040 | They simply must vote for Democrats anyway."

01:07:21.520 | And that argument is just not flying.

01:07:23.120 | And actually, he's a Democrat who is pointing this out.

01:07:26.720 | But I don't think that Democrats are getting the message on this.

01:07:30.400 | But I think they will after this election.

01:07:33.280 | And they're gonna have to find a new sales pitch to the country.

01:07:35.280 | Well, you know, and he does have a good sales pitch, doesn't he, Chamath, with these major

01:07:39.360 | bipartisan wins.

01:07:41.120 | He had the infrastructure deal got done, the technology bill, and the chips.

01:07:44.640 | You got gas prices going down.

01:07:46.160 | The problem-

01:07:46.640 | You got GDP growth, you got job growth.

01:07:48.960 | The problem is that those things happened, frankly, too early in his presidency.

01:07:52.880 | And things are getting materially worse.

01:07:54.720 | So I just sent you a link.

01:07:55.760 | Can you just throw this up here for a second?

01:07:57.920 | You know, Jason, you mentioned this cheaper gas thing.

01:08:01.040 | But the reality is, if you look at this, we have now depleted our strategic oil reserve

01:08:06.160 | by almost 50%.

01:08:06.880 | Yeah.

01:08:08.400 | So we are running out of oil that we can introduce into the market at effectively zero cost

01:08:14.720 | to bring the price down.

01:08:16.320 | And because we've lost our relationships with folks like Saudi Arabia, there's no way to

01:08:21.120 | influence them in order to produce more.

01:08:23.760 | In fact, they're gonna cut supply so that they can control the prices that they have

01:08:29.280 | which that they can sell into the market.

01:08:31.760 | And so now what are we left with?

01:08:33.360 | Well, the only three places where you can have incremental supply of energy, which the

01:08:37.680 | country still needs, is from Russia, Iran, and Venezuela.

01:08:43.120 | And so, you know, all of these things, Jason, I think, come back and really put Biden in

01:08:48.240 | a tough place because as as SAC says, he does have to answer to all of these things because

01:08:52.480 | these are his decisions.

01:08:53.520 | Look, I still believe in the Democrats, you know, I am hoping I gave a million bucks to

01:09:00.320 | the Senate PAC trying to sort of tip the Senate, I really think it's important that we have

01:09:04.800 | a split government because I've kind of I gave up on the house.

01:09:07.200 | I think it's clear that the Republicans are going to win, but the Senate is still is still

01:09:11.120 | up for grabs.

01:09:12.640 | And the reason is because I think that we need to sort of have stasis so that nothing

01:09:18.160 | bad happens between now and 2024 because I think the economic conditions on the ground

01:09:22.960 | are going to be bad in and of themselves.

01:09:25.200 | And then just the one last thing I'll say is the instructive thing that I think we should

01:09:32.240 | look at is what happened in Germany.

01:09:33.760 | Because what happened in Germany is really interesting when the economy turns and inflation

01:09:39.040 | is out of control and energy is out of control.

01:09:41.120 | What they basically did was they sidelined the European Central Bank.

01:09:46.560 | They stepped in with their own balance sheet and said, you know what, we're going to nationalize

01:09:50.960 | assets.

01:09:51.440 | And I know that this sounds crazy to say, but if it can happen in a place like Germany,

01:09:56.160 | I know most people would say it'll never happen in America, but I'm not so sure.

01:10:00.560 | And I think that you want to make sure that there's a split government so that these things

01:10:06.320 | are never possible.

01:10:07.760 | And so hopefully there's some, you know, common ground in a Democratic Senate and a

01:10:12.240 | Republican House, and we just kind of get through 24 and see where the chips land.

01:10:16.560 | And I still think it's going to be Desantis versus Newsom.

01:10:20.480 | Friedberg, any final thoughts here on politics?

01:10:23.280 | My first observation is that I think it's funny that Chamath and Sachs are funding opposite

01:10:28.400 | sides of the electoral cycle.

01:10:31.280 | Yeah, why don't you just guys just give the money to me and Friedberg to get a plane

01:10:34.480 | each other's money.

01:10:36.800 | I could think of other ways for you guys to use that money.

01:10:38.560 | But David and I may have cancelled each other out.

01:10:40.400 | You're right.

01:10:40.960 | I mean, so far, Peter Thiel made the better trade.

01:10:43.280 | He's it looks like the Teal wave in the Senate.

01:10:45.440 | So look, I would say my very broad statement is democracies evolve in a cyclical nature

01:10:52.240 | over time, right?

01:10:53.360 | You often see swings from one political party to the other.

01:10:57.360 | And it's just the nature that once someone's been in office, they form the new establishment.

01:11:03.840 | And then folks on the next election cycle want to vote against that establishment because

01:11:07.840 | there are things that they want that they aren't being given today.

01:11:10.880 | And therefore, the democracy forces a change from what is the current establishment back

01:11:15.520 | to the other side.

01:11:16.560 | And generally, political parties seem to kind of adopt whatever the other side is.

01:11:20.320 | And that's how the cyclical evolution of democracy seems to play out.

01:11:23.840 | The recent trend that has been more alarming, which I think we can kind of take pause to

01:11:28.320 | notice is the rise of populism, where populism is this really kind of vehement, diehard opposition

01:11:34.960 | to elitism and the establishments that everyone feels kept down by and everyone feels taken

01:11:40.000 | advantage of by.

01:11:40.800 | And the rise of Trump, the rise of Bolsonaro, the rise of Boris Johnson, and I would argue

01:11:47.680 | even the rise of AOC, Bernie Sanders and Elizabeth Warren, all similarly speak to the crying

01:11:56.000 | voice of the democratic populations that they want to see these establishments taken apart.

01:12:05.360 | They don't feel like they're fair.

01:12:06.960 | They don't feel like they're just.

01:12:08.320 | They don't feel like the institutions that oversee us and are meant to service us are

01:12:12.640 | servicing us.

01:12:13.280 | And so there was this big rise.

01:12:15.920 | The problem is like a normal pendulum would swing back and forth between one side and

01:12:19.600 | the other.

01:12:20.320 | With the rise of populism, you get such a strong push of that pendulum, it can knock

01:12:24.480 | through a wall.

01:12:25.360 | And I think we saw that on January 6th.

01:12:27.280 | And I think it gave a lot of people pause.

01:12:29.360 | We saw the motion of Brexit knocking through a wall, and we saw these kind of very radical

01:12:36.560 | outcomes and then the cost of those outcomes blow up in our face.

01:12:41.840 | And as a result, I think we're seeing a bit of a receding of the tides right now away

01:12:46.560 | from populism during this current electoral cycle, where folks are saying, you know what,

01:12:51.280 | maybe we just need to have some sort of an establishment so I can feel safe and secure,

01:12:55.120 | less than the volatility that I've experienced of late.

01:12:58.480 | Look, I think you look at the economic mess we're in, okay, populist did not cause that,

01:13:02.960 | okay, populist did not cause $10 trillion of money printing.

01:13:06.000 | It was modern monetary theory, and the experts, the Fed who did that.

01:13:09.760 | It wasn't populist, who created the great financial crisis of 2008 that caused the Zerp

01:13:14.480 | and we're still living with all the downstream effects of that.

01:13:17.760 | It was the experts on Wall Street who said they could manage all these derivatives and

01:13:22.240 | the collateralized mortgage obligations and all that stuff that they lost control over.

01:13:27.040 | I would argue that the CDC are the experts, yeah.

01:13:30.480 | The CDC are the experts that caused that.

01:13:32.560 | And on COVID, it was not populist who caused the horrible handling of that pandemic,

01:13:37.840 | even though they were blamed for it.

01:13:38.960 | Remember, we were told it was a pandemic of the unvaccinated, then it turns out the vaccine

01:13:43.120 | doesn't stop it.

01:13:44.160 | It was not populist who caused the reaction to the pandemic.

01:13:47.200 | It was the experts, the CDC, and Fauci, and people like that who shut down our economy,

01:13:52.400 | who caused the learning loss.

01:13:53.920 | It was those experts.

01:13:55.440 | So, Freeberg, listen, you may not like this populist wave that we have in the country,

01:13:58.960 | and I get that, but it's in reaction to something real, which is the failure of this expert class.

01:14:04.560 | And if you want to stop having this populist wave rise up, we need to start having experts

01:14:11.360 | in position of power who actually know what they're doing.

01:14:13.440 | Well, I don't have one way to say that.

01:14:15.360 | Sorry, J. Cal, hang on one second.

01:14:16.400 | I don't have any opposition to the populist wave.

01:14:18.560 | I'm making the observation that the effects of some of the populist movements have started

01:14:24.560 | to become too volatile for people to feel like they should continue forward with that

01:14:28.480 | electoral path.

01:14:29.360 | That was my observation.

01:14:30.720 | Okay, I'm not kind of criticizing the populist movement.

01:14:33.200 | I'm just saying that events like January 6th and the conditions in the UK, for example,

01:14:38.080 | are making people say, "Wait a second, maybe I need to take pause on the extreme."

01:14:42.240 | The bond market basically fired Liz Truss.

01:14:44.400 | I mean, she's not a populist.

01:14:45.840 | And Bolsonaro in Brazil, he actually just lost, and there was this big narrative that

01:14:51.840 | somehow he was going to not relinquish power, and he just announced that he will relinquish

01:14:56.400 | power.

01:14:57.120 | So, some of the stuff that is about how populists pose this great danger, I think, is threat

01:15:02.800 | inflation, and that the threat is magnified by elites who want to stay in power.

01:15:07.760 | And the truth of the matter is we need accountability for the people in power, and when they set

01:15:12.240 | the wrong policies and decisions, they need to be replaced.

01:15:14.800 | No more no more unaccountability.

01:15:17.680 | Yeah, I mean, I 100% just just my personal belief 100% agree accountability is what's

01:15:22.640 | lacking most across all of these institutions.

01:15:24.960 | 100% agree.

01:15:25.760 | Accountability, maybe competence, and also transparency and accountability.

01:15:30.000 | Like, I think that's what the public wants.

01:15:31.280 | I mean, there's no measured by through you want to hear there's no second Hold on.

01:15:36.480 | There's no way to perfectly react to the pandemic.

01:15:39.360 | But in your mistakes, owning them and explaining them would be much better than trying to obscure

01:15:44.800 | a fight and asking for amnesty.

01:15:46.240 | Chamath, you're not if you want to hear an incredibly interesting interview.

01:15:50.720 | Because it's very thought provoking of a modern progressive, but with a very different mindset,

01:15:58.800 | or sorry, you know, maybe you don't want to call him a progressive, but is the

01:16:02.240 | President of El Salvador, Naib Bukele, and he did this incredible interview with Tucker

01:16:07.600 | Carlson on Fox News.

01:16:08.880 | I encourage everybody to watch it on both sides of the political spectrum.

01:16:12.560 | That man is impressive.

01:16:14.640 | Did we just get an admission that Chamath watches Tucker?

01:16:18.720 | I watched I watched that interview.

01:16:20.240 | You watched the Tucker?

01:16:21.200 | Oh, my Lord.

01:16:22.000 | Jason's head's exploding.

01:16:23.040 | You know, because I try not to be a moment's ignoramus.

01:16:26.640 | It's an entertainer.

01:16:27.520 | I like to watch things on both sides.

01:16:28.960 | But that interview is incredible.

01:16:30.400 | He is unbelievably impressive.

01:16:31.920 | And it's a it double clicks into, you know, the skepticism that smart people like him

01:16:39.120 | the outsider class has with the insider expert class in a nutshell, if you want to see it,

01:16:44.080 | I would encourage you to watch this interview because it's incredible.

01:16:46.560 | Incredible.

01:16:48.160 | Really, really, Jason, the peasants with pitchforks are rising up against this elite

01:16:53.280 | class who've put themselves up, they've set themselves up as Lords, they want exclusive

01:16:58.080 | control over their blue checks.

01:16:59.760 | And we're about to overturn this establishment, because it is corrupt.

01:17:05.280 | And it is incompetent.

01:17:07.760 | It would be great if the people who work for us were confident back on Megan

01:17:11.280 | Kelly owned and were transparent.

01:17:13.120 | You know, I think that's why people are opting out of this is they don't feel

01:17:17.200 | that there's a level of competence in these institutions, nor ownership and

01:17:22.720 | transparency.

01:17:23.520 | And it really is frustrating, whether it's education, or it's health, or, you know,

01:17:29.200 | and any of these topics we've talked about here on the show, let's go to science corner and we

01:17:32.960 | can wrap.

01:17:33.460 | What do you got free Burke for us to mock?

01:17:36.560 | I think we were going to cover the Facebook meta announcement that their AI research team

01:17:43.440 | had generated the physical structure of 617 million proteins from these metagenomic

01:17:50.880 | datasets.

01:17:51.440 | And so remember, alpha fold made this big announcement that they had highly accurate

01:17:56.560 | predictions of protein structure, the three dimensional shape of proteins.

01:18:00.240 | And remember, proteins are kind of the machines of biology that do everything from

01:18:04.000 | catalysis to enzymes where they break stuff down.

01:18:06.720 | And they're like, you know, they have all this structure that allows them to do specific

01:18:10.640 | physical things.

01:18:11.680 | And proteins are coded in DNA, every three letters of DNA codes for an amino acid, a

01:18:16.320 | string of amino acids makes a protein.

01:18:18.640 | And so you know, we have about a million species, where we've sequenced the entire

01:18:24.720 | genome of those species, only about 3000 animals, by the way, including humans, half a

01:18:30.160 | million from bacterial species, and then a bunch of viruses and other stuff, but but

01:18:34.480 | call it about a million species that we've sequenced.

01:18:37.120 | And so, you know, earlier this year, Google's alpha fold project published the 3d

01:18:43.040 | structure of 200 million proteins that they had derived from the whole genome databases

01:18:48.400 | that existed, where we've gone through and figured out what's the full DNA sequence of

01:18:51.840 | all these different species.

01:18:52.800 | Now, when you look at the DNA in the environment around us, you were just to take the DNA

01:18:59.520 | out, it turns out that we have seen very little of that DNA, the vast majority of DNA that

01:19:06.240 | you would find in a teaspoon of soil, for example, we've never classified, it's not

01:19:11.360 | part of a species that we've actually built the whole genome around, we may not even know

01:19:15.200 | what species that DNA is from.

01:19:17.520 | And so when you take a teaspoon of soil, you'll get about 100 billion microorganisms in that

01:19:22.320 | soil from about a million unique species.

01:19:25.120 | But you don't see those species because the way DNA sequencing or shotgun sequencing

01:19:28.640 | works is DNA is chopped up into little 250 base pair likes little 250 strands, and those

01:19:35.440 | 250 letters are read at a time.

01:19:37.760 | And then statistically bioinformatics puts together all of that little DNA segments and

01:19:43.600 | tries to create long strands of DNA to figure out what the genes are, or what the whole

01:19:47.760 | genome is.

01:19:48.880 | And so shotgun sequencing gives us kind of a snapshot of the DNA.

01:19:52.640 | But until we've done the hard work of figuring out the whole genome, we don't know what

01:19:56.640 | species that DNA comes from.

01:19:58.880 | So when you take a sample of soil, or you take a sample of human poop, and you sequence

01:20:03.440 | it, or even a teaspoon of ocean water, and you just sequence the DNA in it, you get all

01:20:08.640 | of these little segments of DNA that we've never seen before.

01:20:11.680 | And you can string them together statistically, because you get lots and lots of copies of

01:20:14.880 | them.

01:20:15.440 | And you can figure out the overlap.

01:20:16.720 | And then you can create these genes.

01:20:18.480 | And a gene is a segment of DNA that codes for a protein.

01:20:21.440 | And those genes make up the metagenome, or the combination of all the genes that we find

01:20:27.040 | in a piece of the environment.

01:20:29.200 | And that metagenome comes from millions of species that we've never seen before.

01:20:34.080 | So what alpha, what they did at meta is they took all of those genes that we pull out of

01:20:38.800 | the soil, or we pull out of the ocean, and they picked a bunch of random samples.

01:20:42.080 | And they then predicted the physical structure of the proteins from just those genes, without

01:20:48.880 | knowing what organism they came from.

01:20:51.200 | And this gives us a whole new universe of proteins that we've never classified before,

01:20:56.400 | or never seen before.

01:20:57.680 | Now, I will just kind of speak a little bit critically about it.

01:21:01.360 | Number one, they didn't do what alpha fold did.

01:21:03.600 | What alpha fold did is they took 3d structures from typically x ray crystallography, then

01:21:08.400 | they took the DNA code, and they built machine learn models to figure out the 3d structure

01:21:12.960 | from the DNA code.

01:21:14.160 | What these guys did at meta is they took the 3d structures and the code, and they basically

01:21:20.640 | did a fill in the blank, they found all the metagenome data out of the samples, and a

01:21:24.960 | lot of it was missing.

01:21:26.240 | And they filled in the missing blanks, using kind of common protein structure that existed

01:21:32.080 | out there in the wild that we already knew from the alpha fold data.

01:21:34.960 | And so they kind of did a fill in the blank.

01:21:36.720 | And as a result, it allowed them to very quickly build these 3d models versus doing the hard

01:21:40.960 | and rigorous work that alpha fold had to do.

01:21:43.040 | So they claim that it was 60 times faster, but it's actually an entirely different technique.

01:21:47.680 | And the second thing is that they represent that only about a third of it is high quality,

01:21:51.520 | meaning only about a third of the proteins that they've created structure for are really

01:21:55.680 | useful or that could be kind of applied in terms of this is the real representation.

01:22:00.640 | Now, why is this interesting and important?

01:22:02.720 | proteins can form the basis of new medicines.

01:22:05.280 | So you know, we can find proteins in the soil, genomes in the soil and proteins in the soil

01:22:10.400 | that can kill certain fungal pathogens that can kill bacteria, and those can be turned

01:22:14.800 | into fungicides, they can be turned into antibiotics, we can find proteins that bind to specific

01:22:20.240 | things, we can find proteins that fix nitrogen from the atmosphere.

01:22:23.760 | And those proteins can be turned into new types of fertilizer.

01:22:26.560 | So you know, searching through this universe of proteins that exists in the metagenome

01:22:32.160 | will allow us to find new molecules to do new and interesting things with in the applied

01:22:37.280 | engineering world.

01:22:38.080 | And I will say like, this is what would the output of these be is what everybody's going

01:22:41.920 | to be thinking?

01:22:42.480 | And antibiotics fertilizers.

01:22:44.400 | I mean, the idea of the metagenome is rather than start with the species and then take

01:22:48.400 | the genes out of it, just go get the genes.

01:22:50.800 | The genes are already there.

01:22:51.760 | They're in this, they're in the ocean, they're in the soil.

01:22:53.760 | And there's millions of genes, hundreds of millions, billions of genes that we've never

01:22:57.040 | seen before.

01:22:57.760 | Therefore, there's billions of proteins.

01:22:59.520 | Now we could randomly create proteins.

01:23:01.760 | But the number of proteins that could exist is more than the number of atoms in the universe.

01:23:05.760 | Because remember, there's 20 amino acids.

01:23:07.760 | So 20 to the 200th power 20 to the 300th power 20 to the 1000th power, meaning how many different

01:23:13.200 | combinations of amino acids can you make?

01:23:15.200 | That's more than there are atoms in the universe.

01:23:16.960 | So the best place to start is what evolution has already given us all the proteins that

01:23:22.000 | exist in the environment.

01:23:23.120 | So let's go find those proteins in the environment.

01:23:25.520 | And then let's figure out what do we think they can be used for?

01:23:27.680 | Can they be used in industrial applications in medicine?

01:23:30.560 | Can they be doing them in material science?

01:23:32.880 | You're saying correct material science.

01:23:34.560 | And so you know, a lot of drug discovery, mines proteins, it tries to find proteins

01:23:40.160 | and figure out what can these proteins be used for.

01:23:42.960 | And now we have all these new data sets of proteins that are being generated from these

01:23:46.960 | metagenomes.

01:23:47.680 | And so it's amazing.

01:23:49.440 | I mean, you know, look at the world around you look everywhere up and down on the walls

01:23:53.200 | on the ground below you.

01:23:54.720 | There are billions of species of organisms that we've never classified before that are

01:23:59.120 | making billions of unique proteins that we've never classified before.

01:24:02.960 | And any one of them could unlock an amazing commercial opportunity for industry.

01:24:08.160 | So and for medicine and for human health, and so on.

01:24:10.800 | That's what's really exciting about this ability to kind of mine the metagenome.

01:24:14.320 | Silly question for you, or maybe not silly.

01:24:16.640 | We have gotten the precursors to DNA for meteorites.

01:24:21.680 | If I understand correctly, what do they call them?

01:24:25.120 | Nucleobases,

01:24:25.920 | nucleic acids?

01:24:26.800 | Yeah.

01:24:27.860 | Yeah.

01:24:30.480 | I mean, etc, like things that exist in DNA that are precursors, we've never had DNA from

01:24:37.920 | space, obviously, but we could at some point start to find DNA out there in space.

01:24:42.160 | And this could have an even crazier impact on what we built here.

01:24:45.040 | Is that the next card to turn over after we know what's here?

01:24:49.920 | No, I wouldn't say so.

01:24:50.960 | Like, I think, look, if there's DNA that's coming to us from meteorites, call it a couple

01:24:55.360 | hundred genes, you could pick up a piece of soil and find over a billion genes in that

01:25:00.640 | piece of soil.

01:25:01.760 | Right.

01:25:02.000 | So we have far more to mine here on Earth.

01:25:04.880 | And the low cost of DNA sequencing and shotgun sequencing, coupled with bioinformatics, where

01:25:09.440 | we take all that.

01:25:10.160 | So just to give you guys a sense, when you take a teaspoon of soil, and you get the DNA

01:25:13.920 | out and you read the DNA out of it, sequence the DNA, that's potentially 10s of gigabytes

01:25:18.880 | of data.

01:25:19.840 | And then you could do that millions of times over.

01:25:22.160 | And then you statistically can find genes, and then statistically estimate what they

01:25:26.160 | physically look like, what those proteins look like.

01:25:28.720 | And then you can start to build models around which ones do we want to try and use for drug

01:25:32.160 | applications?

01:25:32.960 | Which ones do we want it?

01:25:33.840 | So there's so much work to do.

01:25:35.600 | Just in terms of what we have here on Earth, and the tools are getting so cheap and so

01:25:40.640 | available.

01:25:41.040 | There are labs that are all over the world starting to kind of spring up to do this work.

01:25:44.640 | It's super exciting.

01:25:45.360 | Jonathan, any thoughts?

01:25:47.040 | It's kind of, you know, just to put two ideas together.

01:25:51.280 | I've said before, like the two big investable themes that I'm orienting my organization

01:25:56.400 | around is this.

01:25:57.040 | One is that the marginal cost of energy goes to zero.

01:26:00.720 | And the second is that the marginal cost of compute goes to zero.

01:26:03.440 | And the second one is really about shifting compute to more parallelism on GPUs and ASICs

01:26:08.560 | and FPGAs.

01:26:09.760 | But that's why all of this stuff is possible.

01:26:12.240 | The fact that, you know, Meta can do this and Google can do AlphaFold is largely because

01:26:18.080 | the cost of all of this stuff is, you know, trivial for these kinds of companies.

01:26:22.160 | So it's really exciting.

01:26:23.200 | It's going to move science, in my opinion, out of this in vivo in vitro experimentation

01:26:29.600 | model into silica.

01:26:31.040 | And so those who can actually build learning machines will solve some of the most important

01:26:36.240 | biological problems.

01:26:37.280 | So I, I'm a real believer in this stuff.

01:26:39.280 | I think it's super exciting.

01:26:40.640 | When do you think this stuff actually hits Friedberg, our life?

01:26:44.560 | That's always when people talk about these discoveries.

01:26:47.120 | Yeah, a lot of people don't realize it, but so many molecules that are used in agriculture,

01:26:52.080 | like fungicides to kill fungus in the fields, those are derived from this sort of work.

01:26:57.200 | A lot of antibiotics, a lot of medicines are already derived from mining genomes, finding

01:27:02.880 | new proteins and seeing what those proteins can do.

01:27:05.760 | Because these proteins didn't evolve in the environment randomly.

01:27:08.800 | They evolved to do something.

01:27:10.320 | And in many cases, we can take that thing that they do and then harness it into a product.

01:27:15.120 | And that's what's so exciting.

01:27:16.160 | And this this affects everything material science.

01:27:18.240 | You know, agriculture, human health.

01:27:21.200 | It's, it's a food, it's really profound.

01:27:24.240 | Awesome.

01:27:25.760 | All right, everybody, there you have it.

01:27:27.120 | That's another all in podcast in the can.

01:27:29.680 | Oh, by the way, so many, so many of freeberg stands were afraid, Jay cal that you and I

01:27:34.000 | were going to make some joke.

01:27:35.280 | And we didn't know we didn't.

01:27:36.640 | And so for all these stands, I just I hope you guys can exhale.

01:27:39.920 | Take a deep breath, man.

01:27:41.920 | Have some, you know, eggless mayo and enjoy your weekend.

01:27:45.280 | Enjoy your week.

01:27:47.280 | Bye bye, everybody.

01:27:48.000 | See you next time.

01:27:48.480 | Love you besties.

01:27:49.120 | Love you guys.

01:27:49.600 | You guys, love you besties.

01:27:51.840 | We'll let your winners ride.

01:27:53.840 | Rain Man David Saks.

01:27:56.840 | And instead, we open sourced it to the fans and they've just gone crazy with it.

01:28:02.840 | Love you besties.

01:28:03.840 | Queen of Kinwam.

01:28:05.840 | Besties are gone.

01:28:13.840 | That's my dog taking a notice in your driveway, Saks.

01:28:19.840 | Oh man.

01:28:21.840 | We should all just get a room and just have one big huge orgy because they're all just useless.

01:28:25.840 | It's like this sexual tension that we just need to release somehow.

01:28:28.840 | Wet your beef.

01:28:32.840 | Wet your beef.

01:28:34.840 | We need to get merch.

01:28:36.840 | Besties are gone.

01:28:37.840 | I'm going all in.

01:28:39.840 | I'm going all in.

01:28:47.840 | you

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