E117: Did Stripe miss its window? Plus: VC market update, AI comes for SaaS, Trump's savvy move

00:00:00.000 | Check out what what time is it over there? Well, we started at

00:00:03.120 | 8am. So now it's 828. It's 828. I'm going to be on the slope

00:00:06.480 | said 11. Yeah. So I'll be out there skiing. I'm in the SECO in

00:00:11.880 | Japan. And just take a quick flight to Sapporo, Sapporo. And

00:00:15.360 | then you drive two hours into the mountains. Yesterday, I cat

00:00:17.680 | skied. There's an abandoned ski by the way, in honor of you, I

00:00:21.440 | grabbed a Sapporo from the fridge today. Very nice. Yeah,

00:00:24.600 | this week's episode brought to you by so they drive the cat

00:00:27.680 | ski up, and then you ski down and it's all fresh track. So

00:00:31.120 | it's literally an abandoned ski resort. You know, during the

00:00:34.400 | financial crisis here, I just asked you what time it was.

00:00:37.920 | That's all I asked you.

00:00:38.840 | It's called small talk. It's called banter. I thought you

00:00:44.040 | might be interested in your besties life, but apparently

00:00:46.600 | not.

00:00:47.100 | Let's get to the show. Everybody wants to hear the

00:01:05.740 | show. A lot of news going on. And I you know, in our industry,

00:01:09.980 | there's been a big discussion about RSUs and stock options,

00:01:13.460 | both the cost of these things. And then there's another issue

00:01:16.980 | of people staying private for too long. If you remember, for

00:01:21.220 | folks listening, Airbnb, Uber famously took over 10 years to

00:01:24.380 | go public. People like Bill Gurley wrote about this, hey,

00:01:27.580 | you should get public. When the window is open, obviously, the

00:01:30.620 | window is closed right now are largely closed stripe. Now

00:01:34.380 | people are speculating they missed their window, they have a

00:01:36.780 | $4 billion tax bill due to cover expiring employee RSUs. Those

00:01:42.900 | are restricted stock units. And at the same time, four square

00:01:46.780 | miles away from a company from the web 2.0 era, this is, you

00:01:50.940 | know, 1015 years ago, when they were very popular check in

00:01:53.860 | software mobile location app, they are going to let their

00:01:58.460 | previous employees stock option grants expire. According to the

00:02:02.260 | information, they issued these options in 2016, seven year

00:02:05.660 | window before expiration, more than 100 form employees will be

00:02:08.020 | impacted. And some of them are the very early team members. And

00:02:12.300 | the stock option problem is becoming acute because hey,

00:02:16.940 | people waited to go public. Basically, what happens is you

00:02:19.820 | grant an RSU, which is effectively w two income when

00:02:25.500 | it's realized with an expiration date. But that expiration date

00:02:31.140 | forces you to be public so that that RSU can be exchanged for

00:02:34.740 | value. And that's like a 10 year window. So then these guys have

00:02:37.900 | to go in and modify that date and push it out by another four

00:02:41.740 | five, six years or whatever. That is a deemed event by the

00:02:46.300 | IRS that then creates withholding tax issues, right? So

00:02:50.060 | you then have to you then have to withhold tax on behalf of the

00:02:53.020 | employees. And so that collective number is the 4

00:02:55.940 | billion that stripe is trying to raise

00:02:57.180 | according to a leaked pitch deck, stripe implied they needed

00:03:00.420 | 2.3 billion in capital by the end of q1 2023. They're working

00:03:04.100 | with Goldman Sachs to raise a few billion at a $55 billion

00:03:07.940 | valuation that's down 42% from the peak of 95 billion to 20.

00:03:11.620 | 21. One wonders if they had gone public what the valuation would

00:03:15.220 | be right now. Can we just say real quick why this matters?

00:03:17.740 | Jacob? Like, yes. So anyway, why does it matter to my Yeah, why

00:03:20.940 | does this? Why does this all matter? Like, why do we care?

00:03:22.900 | Thank you. That's where we're getting to.

00:03:24.020 | I posted a link. This is a 2013 interview that Zuck did with

00:03:30.100 | Michael Arrington of TechCrunch. And if you go all the

00:03:34.580 | way back, the apprehension to go public was one thing that

00:03:41.940 | we really anchor to a lot at Facebook in the early days. And

00:03:45.900 | at the time, I don't know if you guys remember, but there was

00:03:48.220 | these arcane laws around the number of shareholders that you

00:03:52.060 | could have. And I think the issue specifically was that

00:03:55.380 | after 500 shareholders, you have to publicly release your

00:03:59.060 | financials. And so we did all kinds of things to make sure we

00:04:02.740 | never hit the 500 cap. And we tried to push the IPO date as

00:04:06.940 | far out as possible, because we thought that it would keep

00:04:09.700 | people more focused. And then in 2010, or 11, I told this story

00:04:16.300 | a couple times, one of the things that I was advocating for

00:04:19.620 | pretty aggressively was trying to launch a mobile operating

00:04:24.540 | system to compete with iOS and Android. And we had put together

00:04:27.980 | all this work and brought in Intel and AT&T and all these

00:04:30.380 | people. And it came down to the fact that we needed a couple

00:04:32.980 | billion dollars to float this thing. And we didn't have that

00:04:36.700 | money. So the only solution to that would have been to go

00:04:39.100 | public, but it wasn't the right moment in time. And Zach was

00:04:42.260 | uncomfortable with it. A year after going public. One of the

00:04:45.340 | things that he said publicly in this tech crunch thing was, wow,

00:04:47.620 | I should have just gone public sooner. It wasn't nearly the bad

00:04:50.540 | thing that I thought it was going to be. And when you look

00:04:53.100 | subsequently at how much money they've spent in AR and VR,

00:04:56.540 | spending half a quarters of that cash could have given them the

00:05:00.660 | chance to disrupt Android and iOS in 2010 and 11, which in

00:05:05.140 | hindsight is obviously a no brainer bet, right? So even

00:05:09.220 | though I think we at Facebook were the ones to really put this

00:05:12.380 | in the water table about not going public, I think a lot of

00:05:17.100 | startups should have gone back to first principles to really

00:05:19.500 | question whether waiting as long as possible actually makes

00:05:23.340 | sense. So I was curious about the stripe situation. So I asked

00:05:26.460 | my team to do a little bit of work on how would you value this

00:05:30.340 | thing if it were going public. And the interesting thing about

00:05:33.580 | stripe is that it operates in a really transparent middleman

00:05:38.260 | business. So what's interesting about stripe is that so many of

00:05:42.260 | the people in the ecosystem are public. And so what that means

00:05:46.500 | is you can build a pretty accurate mosaic of how well or

00:05:51.180 | not well that business is doing by interpolating all the other

00:05:55.180 | data from all of these other companies that are public and

00:05:57.660 | are forced to report. And so there's like a couple of really

00:06:01.300 | interesting things that jump off this page. And so the first

00:06:04.780 | thing that we did was we looked at what is the future

00:06:06.740 | profitability look like x of growth. And what's interesting

00:06:12.540 | is that you look at companies like visa and MasterCard that

00:06:15.660 | are doing quite well and have done really well for a long

00:06:18.460 | time. But you look at this outlier and IDN and IDN is

00:06:22.780 | probably the most obvious competitor to stripe. And the

00:06:28.060 | thing that is demonstrated here is how incredibly profitable

00:06:33.500 | this business is. And how much operating leverage they have,

00:06:38.460 | which means that their op ex is relatively constrained. Because

00:06:42.500 | it turns out in the x and y axis here, just so people who are

00:06:45.140 | listening can understand the chart.

00:06:46.420 | Sure. So if you take the market cap on the x axis and divided by

00:06:50.420 | their sales estimate, you get a multiple of the enterprise value

00:06:53.620 | to their sales. Got it. And if you look at the 2024 estimated

00:07:00.020 | EBITDA margin that they're forecasting x of their long term

00:07:05.580 | sales caker, what you start to get a sense of is the operating

00:07:09.620 | leverage that this business has. And so all of this basically

00:07:14.220 | nets out to three interesting takeaways. When stripe got

00:07:19.460 | underwritten at $96 billion. It's this data point right here

00:07:23.500 | where you know, you see your stripe previous round,

00:07:25.860 | five x enterprise value to divided by 2024 divided over

00:07:30.620 | their long term, their long term EBITDA exactly by their sales

00:07:33.940 | estimate. And then if you look at the $55 billion valuation,

00:07:37.180 | it's down. So what it looks like is happening is appropriately

00:07:40.540 | so people are doing the right thing, which is they're re

00:07:44.140 | rating the stock right by approximately 5060%. But what's

00:07:50.100 | interesting is not where they are in terms of where they used

00:07:55.060 | to be. But the interesting thing is where they are relative to

00:07:58.340 | their most obvious competitor, Agen. So Nick, please bring up

00:08:01.340 | the next one. So this is where things get really interesting

00:08:03.960 | because we looked at what was odd yen. And what was stripes

00:08:08.380 | GMV per employee a couple of years ago before all hell broke

00:08:14.540 | loose in the private funding markets. And what you see is

00:08:17.620 | they were pretty equivalent businesses. And they had roughly

00:08:20.980 | the same amount of employees. But this crazy thing happened,

00:08:25.380 | which is that if you look at the gray bar, this is the number of

00:08:28.620 | employees that stripe has, it went crazy from a little over

00:08:33.220 | 2000 to almost 8000. So a four x of employees in 24 months, they

00:08:40.220 | had it's 6000 people just pause for a second on that 6000 people

00:08:43.980 | in 24 months and 700 days or so. Right? Three people a day. And

00:08:48.740 | if you do the same calculation for Agen, it shows that they a

00:08:52.500 | little bit less than grew by about 75%. And then if you look

00:08:56.860 | at the growth of GMV, and you impute how productive is each

00:09:00.660 | employee. Basically, this is the the story of what's happened to

00:09:05.780 | stripe and Agen, which is that Agen has found operating

00:09:08.420 | leverage, right? So they've found and maintained incredible

00:09:12.780 | profitability. And stripe has added an enormous number of

00:09:18.220 | employees. Now, the question is why, right? So it turns out that

00:09:22.340 | these guys at the top line are growing roughly the same except

00:09:25.980 | Agen actually takes meaningfully less on a per transaction basis

00:09:31.020 | than stripe does. And the reason is that Agen services these

00:09:34.460 | large head customers, think big, bulky folks that have huge

00:09:39.380 | amounts of transactions. And so as a result, have pricing power.

00:09:42.900 | And stripe has some of those customers as well. In fact, they

00:09:45.380 | just announced that they're going to process a large portion

00:09:48.780 | of Amazon's payment volume. But what's happened at the same time

00:09:52.700 | is that those kinds of deals aren't necessarily that

00:09:57.140 | profitable. And so you have to hire a lot more people to build

00:10:01.740 | a lot more features so that you can generate revenue from the

00:10:04.180 | long tail of customers, all of these SMBs. And this is the tail

00:10:08.060 | of these two companies, which is that stripe has some head

00:10:10.620 | customers, but many, many, many tail customers. Agen has mostly

00:10:15.220 | head customers, fewer tail customers. And so the leverage

00:10:19.020 | in the business is that Agen has most of these employees in

00:10:22.700 | Europe, where the cost of these folks is much, much cheaper, and

00:10:25.380 | they have less than half the number. And so as both of these

00:10:28.860 | companies continue to grow, you have one that has maintained,

00:10:32.660 | and frankly, grazed their long term profit projections, because

00:10:37.740 | they see it in the business, even at lower transaction costs,

00:10:41.740 | and stripe, which is having a little bit more trouble. So I

00:10:44.700 | thought it was a really interesting expose. The

00:10:47.820 | takeaway for me is that if you were sitting inside the company,

00:10:51.140 | and obviously hindsight is 2020. The most profitable thing they

00:10:56.020 | could have done from an enterprise value perspective

00:10:57.980 | would probably have been to go public in 2018 2019. Because

00:11:01.900 | they could have raised max value at max valuation, cleaned out

00:11:06.140 | all these options issues and have a huge balance sheet of

00:11:08.820 | cash with which to do stuff, whether it's acquisitions or

00:11:11.580 | other things. Because the thing that I struggle with is, is

00:11:14.140 | there going to be long term profitability and all of these

00:11:16.340 | tail products? Because if you look in the SAS ecosystem, and

00:11:20.140 | sacks, and the ball to you, there's companies building all

00:11:23.700 | this other stuff. And these point products are probably

00:11:25.380 | pretty good to sack. What do you think about Agen going after the

00:11:29.020 | fat part of the long tail and then stripe going after the long

00:11:32.260 | tail having many more customers?

00:11:33.820 | Well, I think they're both viable strategies. And I mean,

00:11:37.100 | I've actually written about this, I wrote a blog some time

00:11:39.220 | ago called enterprises versus SMBs, who's the better customer

00:11:42.340 | for b2b SAS companies. And I think the sort of old school

00:11:47.500 | traditional view is that enterprises were always the best

00:11:50.460 | customers because they have the biggest budgets, that

00:11:53.060 | translates into the biggest annual contract values, or ACVs.

00:11:56.740 | This provides the highest ROI on sales efforts. So now you can

00:12:00.380 | make a sales driven distribution strategy pencil in the first

00:12:03.380 | place, the prospects are easy to identify, you know, after all,

00:12:06.860 | if you're going after the fortune 500, you can just make a

00:12:09.300 | list of the 500 companies. So I think the traditional gold

00:12:12.660 | standard was sort of the head, like you're saying, Jason, the

00:12:17.620 | enterprises, however, I think in recent years, has become more

00:12:21.500 | popular to pursue the stripe strategy of the sort of more SMB.

00:12:25.540 | Why is that more popular?

00:12:27.260 | Well, because first of all, starts are, the SMBs are more

00:12:30.300 | early adopters. So when you're a startup, it's way easier to

00:12:34.140 | satisfy their standards to satisfy their needs, their needs

00:12:39.180 | are less complicated, you don't have to have sock to compliance

00:12:42.620 | to everything else. If you saw risk taking, right? Yeah, if you

00:12:45.380 | solve an immediate pain for point for them, they'll just buy

00:12:47.700 | it. Okay. Whereas I think enterprises are more late

00:12:50.900 | adopters, they tend to be more skeptical of news. categories.

00:12:54.660 | Yeah, I think in addition to that, the SMB sales cycle is

00:12:57.580 | really quick. I mean, I'd say typically one to two months, you

00:13:00.420 | can close a deal, the sale itself is simpler. Like I said,

00:13:04.100 | that's the product requirements are simpler. And the low end of

00:13:06.660 | the market tends to be the most underserved part. So it's great

00:13:10.420 | to play where the incumbents are not that's a traditional

00:13:13.020 | strategy is you go after the low end of the market that's been

00:13:15.860 | kind of overlooked or ignored. And that's kind of what stripe

00:13:18.740 | has done here too, is no one was really serving these these

00:13:21.700 | developers. So I tend to think it's a good strategy too. And

00:13:25.260 | the truth is, it's not one or the other, I think you just have

00:13:27.660 | to pick, you know, which of your battles that you want to fight.

00:13:30.620 | And some starts to go after enterprises, and some will go

00:13:33.180 | after SMBs. And it really goes down, I think, to founder market

00:13:37.420 | fit, I think founders who are better at sales, probably skew

00:13:40.700 | more towards an enterprise got a strategy. Whereas if you're more

00:13:44.140 | of a product founder, you go after SMBs.

00:13:46.380 | Brilliant summary, overtime sacks for a company to thrive

00:13:49.580 | over long periods of time. Do you have to serve as both? Or do

00:13:52.940 | you think you can stay in one of those things and grow

00:13:54.660 | indefinitely?

00:13:55.340 | Well, what I've seen is that if you start the low end of the

00:13:58.660 | market with SMBs, over time, you can move up market because what

00:14:02.100 | happens is that as your product gets more and more sophisticated,

00:14:04.940 | and your company and your ability to execute and deliver

00:14:07.380 | gets more sophisticated, you can start satisfying the needs of

00:14:10.300 | bigger and bigger companies. So you start SMB, then you go mid

00:14:13.300 | market, then you eventually get to enterprises. I think if you

00:14:16.780 | start with enterprises is very hard to go down market because

00:14:20.180 | it's a lot easier to add requirements to your product

00:14:23.220 | than to actually strip complexity of a product that's

00:14:26.460 | actually surprisingly difficult to do. So I think it's I think

00:14:30.300 | either strategy can work either you start the low end and move

00:14:32.580 | up market. That's the classic Clay Christensen innovators

00:14:35.620 | dilemma type thing. Or you you just start the top and you stay

00:14:39.260 | at the top. It makes sense.

00:14:40.180 | It's just I mean, adding 10 people a day over two years,

00:14:43.140 | that's a large number of people to add to a company.

00:14:45.260 | Well, in fairness to stripe, they were very honest about

00:14:47.820 | this. And they were like, we overestimated got confident and

00:14:50.620 | we overhired and they found that all the coordination costs, the

00:14:53.660 | Saksis point became too high. That's exactly what the call is

00:14:56.340 | and said in their memo. So I think that they're trying to

00:14:58.460 | course correct and get back to this. I think the point that I'm

00:15:01.940 | making unemotionally I don't own stripe nor adjunct I don't have

00:15:05.100 | a horse in this race is more that in this market specifically

00:15:09.380 | in these middlemen, highly transparent middlemen markets,

00:15:12.340 | it's very difficult to hide the cheese, meaning the ability to

00:15:16.380 | get to an extremely precise valuation model is pretty easy.

00:15:21.580 | You know, this was half a day's work that we did. And the point

00:15:24.620 | is, all this data is out there. And so it means that if you're

00:15:28.900 | going to go public as a company like this, you have to be quite

00:15:32.660 | thoughtful about how outside and folks will value you because the

00:15:36.260 | terminal buyer is very, very sophisticated and pretty smart

00:15:39.100 | about how to think about spaces like this

00:15:41.300 | freeberg. When you look at this, it kind of dovetails with the

00:15:44.260 | get fit Brad Gerstner, you on Twitter doing more with less

00:15:48.300 | employees. Zuckerberg again says he is getting rid of managers.

00:15:52.740 | He's asking managers to SACS his discussion about, you know, the

00:15:56.660 | layers of management that got added and added, where high

00:15:59.420 | performers would be would have five people put under them 10

00:16:01.860 | people put under them. Is it going to be? Are you impressed

00:16:07.060 | with how quickly the industry is responding to this new

00:16:09.300 | environment? Or are they not responding fast enough?

00:16:13.780 | In terms of headcount revenue, because now we're looking at

00:16:16.380 | revenue per employee. This is a never looked at that. It's been

00:16:19.620 | a decade since we looked at that.

00:16:20.780 | This is a little bit of a different situation where it's

00:16:24.260 | about the scalability of a business. Like when I look at

00:16:29.980 | like the value that a business has created, you start first

00:16:32.940 | with like, can you make a product? Can you sell the

00:16:35.220 | product? Do people want to buy the product? And then you know,

00:16:37.780 | can you make money selling it? And then there's this metric

00:16:40.740 | that a lot of people use, which is LTV to CAC, which is the

00:16:44.340 | lifetime value of acquiring a new customer divided by the cost to

00:16:47.580 | acquire that customer. But I think you can generalize that

00:16:50.380 | ratio to talk about business performance more broadly, which

00:16:54.660 | is, you know, capital deployed, which is typically what CAC is

00:16:58.460 | used in terms of growth on the denominator, and then capital

00:17:02.380 | returned over time, which can be the numerator. And so you can

00:17:06.380 | kind of think about that LTV to CAC ratio, being something more

00:17:10.060 | broadly defined as something like ROIC, or what have you. The

00:17:13.580 | question for the scalability of any business is, does that ratio

00:17:18.180 | whether it's LTV to CAC or ROIC return on invested capital, does

00:17:22.140 | it get bigger or smaller? Does it increase or decrease? Does

00:17:26.860 | that ratio increase or decrease as you get bigger as you spend

00:17:29.780 | more money as you deploy more money? If it's getting smaller,

00:17:32.980 | then mathematically, you can resolve pretty quickly to the

00:17:36.700 | asymptotic valuation that that business will achieve or the

00:17:39.420 | asymptotic revenue that that business will achieve. And

00:17:42.060 | that's a very scary kind of circumstance when a business

00:17:45.460 | that's tracking that metric starts to see that metric

00:17:48.780 | shrink. If that metric is growing, then you have an, you

00:17:52.820 | know, a hyperbolic kind of moment and you can build

00:17:55.700 | platforms and add products and invest very heavily and take

00:17:59.780 | lots of risk and take lots of bets. When it's going the wrong

00:18:02.300 | way. You have two options. Number one is you have to make a

00:18:05.820 | change or pivot in the business to get it to go the other way.

00:18:09.180 | Or number two is you have to take advantage of that moment

00:18:12.660 | before the market finds out about that moment. Because as

00:18:15.220 | soon as the market realizes that that ratio is going the wrong

00:18:17.780 | way, your valuation multiple what you're worth as a multiple

00:18:21.180 | of revenue or profit shrinks dramatically, because then the

00:18:24.340 | market can also see that asymptote and outcome. So I

00:18:27.140 | think it's very often the case that one should, you know, as a

00:18:29.500 | board member as an investor, urge entrepreneurs, CEOs,

00:18:33.180 | founders, managers to think really clearly about that

00:18:36.060 | metric, what's the right way to define the denominator and

00:18:38.900 | define the numerator in our business, and define that ratio

00:18:42.060 | over time. And as soon as it starts tracking the wrong way,

00:18:44.900 | you have a moment, you can either fix it, or you got to go

00:18:48.660 | sell the business or go public and raise capital before the

00:18:52.060 | market catches on and your valuation shrinks. So I think

00:18:54.500 | what you're highlighting, yeah. So when I see what you're

00:18:57.340 | showing in this data, and talking about this, the

00:18:59.780 | shrinking valuation issue for Scripe, it really, I think

00:19:03.420 | highlights this important point, this broad point, which is did

00:19:06.220 | they miss the window? Did they miss the moment where suddenly,

00:19:09.300 | you know, the shrinkage is causing, you know, an

00:19:11.740 | asymptotic outcome for this business that it makes investors

00:19:14.980 | a little bit like, well, I'm not as excited about that, because

00:19:16.980 | it's not there's no, there's no longer as much upside. And it

00:19:20.300 | might be time to kind of devalue the company. And did they miss

00:19:22.860 | the moment to go public raise a bunch of capital, you know, to

00:19:25.940 | go and try new things and hopefully pivot into a way. So I

00:19:29.020 | don't know enough about the business. But that's my broad

00:19:31.300 | kind of assessment of this, this interesting thing about that

00:19:33.820 | space. We talked to one of our friends at our poker game who

00:19:38.060 | runs a large consumer facing business. And I don't know if

00:19:40.860 | you were there for that conversation, off revert, but I

00:19:43.220 | was, you were there. Yeah. And one of the interesting things he

00:19:46.140 | said is, we are at a level of scale where we just bid these

00:19:49.420 | guys against each other. And these things tend to now be loss

00:19:52.780 | leaders for them. Which is to say effectively, that cost

00:19:56.540 | structure becomes really important. So your cac becomes

00:19:59.260 | very important, because your LTVs are capped, right? And the

00:20:02.660 | LTVs are capped, because these companies have enough

00:20:04.940 | negotiating leverage to say, well, if you want my business,

00:20:07.780 | here's the cost of doing this business, which makes a ton of

00:20:11.620 | sense if you're any large purveyor of services that

00:20:14.900 | require payment processing infrastructure. So one of the

00:20:17.700 | interesting dynamics, I think we're learning in this market is

00:20:20.180 | how it's really not a market, right, there are segments, and

00:20:24.180 | there's embedded profitability in each segment. So to your

00:20:26.860 | point, Friedberg, this is the sum of at least three or four

00:20:29.860 | different LTV to cac ratios, right? Right. tail looks very

00:20:34.340 | different, which is why you have to build a ton of features. And

00:20:37.540 | the head just wants pure play. And it's all about cost first.

00:20:40.940 | Because all of these guys want want to pick up every nickel and

00:20:44.660 | dime that's on the floor, because for them, on billions of

00:20:47.380 | transactions is meaningful to them. It's an it's an it's an

00:20:50.180 | EPS miss or, or beat, right for them, which has huge

00:20:53.500 | implications to their stock. This is a market that I think

00:20:55.740 | is going to be really fascinating to uncover and peel

00:20:58.060 | back the layers of over the next few. By the way, we haven't even

00:21:00.380 | talked about what stripe does as a business. I know we have a

00:21:02.340 | diverse audience that doesn't all come from tech. Yeah, so

00:21:05.060 | stripe is will process your transactions, but they were the

00:21:08.940 | first people to make it as simple as putting a snippet of

00:21:11.380 | code into your app. To process a payment, they can be with visa,

00:21:14.660 | MasterCard and those other places, they charge you a

00:21:16.620 | percentage of each transaction. So to trim off point, these

00:21:19.620 | larger answer devs, developers, 510 years ago love this because

00:21:25.220 | they can instantly get payments, right? It's sort of abstracted

00:21:27.460 | the whole thing just the same way cloud computing does right

00:21:29.700 | storage at s3, etc. So you can kind of think about it that way.

00:21:33.260 | But a large well in the system, Chamath, which you said, add

00:21:35.940 | yen has a lot of whales, not a lot of long tail stripe, because

00:21:38.420 | it's developer friendly. And a snippet of code, they have this

00:21:41.780 | huge long tail, anybody can do stripe. In fact, people who are

00:21:44.260 | using things like substack or Patreon, I believe, they can

00:21:47.140 | just drop in their stripe account. So people now,

00:21:49.100 | businesses have one have a stripe account, they just drop

00:21:52.380 | it in there. So for me, that seems like huge potential in the

00:21:55.220 | future, because some of those could be handed give wells in

00:21:57.440 | the system.

00:21:57.940 | And the long tail gives stripe a lot of pricing power, because

00:22:01.060 | there's there's no way for any one of those entities to have

00:22:04.980 | enough leverage to tell stripe, hey, I don't want to pay 2.9%

00:22:08.540 | plus 20 or 30 cents a transaction, right? Whereas if

00:22:12.100 | you go to the head, I think I'd yen is charging like 1.3 or 4%.

00:22:16.620 | So yeah, it's a wholly different market. And the pricing as a

00:22:21.020 | result is totally different.

00:22:22.100 | Yeah. It's interesting to me, sacks that we now are getting

00:22:26.500 | down to, you know, brass tacks here, we're analyzing these

00:22:29.900 | money printing businesses and saying, what is the ultimate

00:22:32.860 | value of this? 1020 years from now, Chamath and I got a front

00:22:36.780 | row seat to that because there's a natural audience to every

00:22:39.420 | single service. For AOL, it was 30 million paid subs a month at

00:22:44.540 | I think the peak was 30 bucks a month people were paying

00:22:47.260 | Chamath. So at the time,

00:22:49.100 | 2499. Yeah.

00:22:50.340 | So, you know, you start looking at those numbers, you know, a

00:22:53.540 | billion dollars a month almost in just and it was a fixed cost

00:22:56.580 | business. But then boom, it just hit a ceiling and competition

00:22:59.620 | emerged emerged in the in the case of broadband. And then that

00:23:04.580 | business just slowly deprecated over time. So sacks, what does

00:23:08.300 | this moment tell you for founders, a lot of the listeners

00:23:11.020 | here and capital allocators, in terms of assessing businesses

00:23:13.980 | for the last and this will pivot into our next story. The last

00:23:16.380 | couple years, you know, if you were a first time fund manager,

00:23:18.420 | you were investing in 19 2019 to 2021 high valuations, those,

00:23:24.140 | those funds, are they ever going to be able to throw a profit?

00:23:27.380 | And then people were investing in those based on momentum, logo

00:23:31.740 | chasing. This is now back to, you know, sharpening your

00:23:35.380 | pencils, Bill Gurley style investing. Yeah,

00:23:37.580 | yeah, I mean, we've talked about it before. There's nothing new

00:23:39.460 | here. When you're in a boom, the only three things that matter

00:23:44.540 | are growth, growth and growth. And when you're in a downturn,

00:23:47.620 | the three things that matter are growth, burn and margins. It's

00:23:52.420 | not that growth stops mattering. It's just that people also care

00:23:54.820 | about burn and margins. And, you know, the companies that fare

00:23:59.420 | the worst are the ones that have inefficient growth that basically

00:24:03.940 | have burned a lot of money to grow. They have, you know, lower

00:24:07.460 | negative gross margins, they are burning way too much money, the

00:24:10.820 | burn multiple doesn't make sense, basically, the ratio of

00:24:13.140 | money burnt to net new ARR that they're adding, those companies

00:24:17.460 | get called out when all of a sudden you have regime change,

00:24:20.540 | like we're seeing now

00:24:21.300 | pack is one of the early signs of this. chemop you and I saw

00:24:25.540 | that member aol sending DVDs everywhere and cac became two or

00:24:30.820 | $300 for every AOL subscriber. And then they were playing this

00:24:34.540 | funny accounting game. I don't remember this chemop where they

00:24:36.660 | were saying, Hey, the LTV is like five years for an AOL, they

00:24:40.140 | were looking back at that number, not for the broadband

00:24:42.460 | coming. And so like, we can totally spend $300 on TV ads to

00:24:46.140 | get a dial up customer at 24 a month. And boy, did that whips

00:24:50.580 | on them. So listening to everybody talk here, I'm just

00:24:53.460 | like, wow, keep your eye on the cac folks, the customer

00:24:55.980 | acquisition cost, how much you get you spend to get a new AOL

00:24:58.980 | Netflix or SAS product or a stripe customer is critically

00:25:03.180 | important.

00:25:03.740 | We look really closely at cac payback, you know, how many

00:25:06.300 | months does it take to to pay back the cost of acquiring a

00:25:09.940 | customer? We don't look at that exclusively, though, because you

00:25:13.580 | know, what expenses go into cac is highly dependent on your

00:25:18.220 | accounting

00:25:18.740 | unpack that for a second, because there's the money you

00:25:20.820 | spend on a Facebook ad or a LinkedIn ad or any other great

00:25:23.540 | platform for driving, you know, customers to sign up for it.

00:25:26.860 | Yeah, she's playing. Yeah,

00:25:28.300 | then you spend money on an ad or you spend money on a sales

00:25:30.980 | person, obviously, that goes into cac. But then what about

00:25:33.860 | sales operation headcount? Does that go in? Is that opposite

00:25:38.020 | counter? Is that sales account? Is that customer acquisition or

00:25:40.900 | is it something else? So there's a lot of like subtle accounting

00:25:43.900 | decisions that can have a big impact on with numbers that

00:25:46.300 | number? Well, this is why this is why I've always recommended

00:25:48.980 | just looking at burn multiple. What I really want to know is

00:25:51.220 | how much money is this startup burning in relation to how much

00:25:54.460 | revenue is adding? Just like the ratio of those two things.

00:25:57.180 | Because there's no one hired burned 100. Yeah, so yeah,

00:25:59.860 | there's no one spent $300,000. And we burned $100,000. And then

00:26:06.820 | we added $100,000 in new customers, ARR. So that's one x

00:26:13.380 | so that you have on your chart here burn multiple of one to 1.5

00:26:16.740 | or under one is amazing or great. But if you burn 200,000

00:26:20.860 | and 100,000, yeah,

00:26:22.660 | I warn founders going into this year do not have a burn multiple

00:26:25.660 | greater than two because there's just so many headwinds right now

00:26:29.180 | that what happens is if you end up missing your revenue forecast,

00:26:33.820 | your burn multiples going to look terrible, they could shoot

00:26:35.740 | up to three, four, five and up. So it's better to have some

00:26:39.820 | cushion by going into the year being super efficient on the

00:26:43.100 | converse side, Friedberg, if your lifetime value of a

00:26:47.100 | customer is incorrect, which we're seeing now with people

00:26:50.900 | canceling SAS products or reducing the number of seats, or

00:26:55.780 | in cloud computing, people are now saying, Hey, maybe I should

00:26:58.340 | take myself out of the cloud and host my own servers or some of

00:27:00.820 | my own servers and reducing their cloud bill. Cloud growth

00:27:04.300 | is slowing at Azure, Azure, across the board. Amazon Web

00:27:09.380 | Services, etc. The it's still growing, but it's slowing the

00:27:11.900 | growth. So that LTV if you get that wrong, that can whipsaw you

00:27:15.820 | as well. Yeah,

00:27:16.780 | yeah, I mean, LTV, which is like, what do you make over time

00:27:20.540 | from a customer or however you want to assess it? A market

00:27:25.860 | deployment? It should be on kind of net cash, meaning like, how

00:27:30.620 | much profit do I pull back into my bank accounts at the end of

00:27:33.420 | the day?

00:27:34.180 | After paying third parties and internal people, and we're a lot

00:27:38.780 | of people, I think in models I've seen on, you know, what's

00:27:44.740 | the lifetime value of a customer, they kind of take

00:27:46.780 | either revenue, or just the simplified gross profit number.

00:27:49.780 | But the reality is, if you're scaling the number of engineers

00:27:52.420 | you need, because you have many more customers, and you got

00:27:54.580 | customer service calls, and you know, you've got to do custom

00:27:57.780 | deployments with your customers, all of that kind of adds up to

00:28:01.540 | additional cost. And some of these businesses, you see that

00:28:04.300 | the SAS companies, for example, that all have gotten their

00:28:07.780 | multiples hammered, it's because the kind of microscope has come

00:28:11.740 | out at this point, to some degree, set aside, general

00:28:15.380 | macroeconomic factors that are driving some of the multiple

00:28:17.860 | compression. But as the microscope has come out, it

00:28:20.500 | turns out that the efficiency of the business is not what everyone

00:28:23.540 | hoped and dreamed a SAS business might be, that the efficiency of

00:28:26.700 | the business maybe looks a little bit more like either a

00:28:29.140 | services business, or there's a big kind of scaling hardware

00:28:32.020 | component, that the margin that you actually make for every

00:28:35.300 | dollar of revenue generate, fundamentally is smaller than,

00:28:39.420 | you know, what you think it is, you have to add people to

00:28:43.060 | support and ops and new servers and all the stuff you're

00:28:46.340 | highlighting. And a lot of that's excluded. And then it

00:28:48.660 | doesn't take, you don't realize all that, when you're small, or

00:28:51.820 | when you're medium and growing, you realize that when you're

00:28:53.700 | bigger, when you're bigger, you're like, Oh, wow, how do we

00:28:56.140 | get these costs out? Well, if we cut these costs, customer

00:28:58.420 | quality would decline, customers would churn, all this bad stuff

00:29:01.500 | would happen. So yeah, that LTV number is generally not right.

00:29:04.980 | And that's why I say, it's much more about kind of a true ROIC

00:29:09.020 | calculation, which is how much capital am I deploying. And it's

00:29:12.580 | not just being deployed in marketing dollars, it's being

00:29:15.660 | deployed in other ways. And then how much capital am I making

00:29:17.900 | back net profit over time. And I think that's the right way to

00:29:21.700 | always analyze a business generally, but like,

00:29:24.260 | particularly in businesses where it's easy to obfuscate either

00:29:27.100 | those numbers, and they could seem like it's an extraordinary

00:29:29.340 | number business, you can get hurt when you get bigger, or

00:29:32.700 | when you're scaling. And in a market like this, where you're

00:29:35.220 | trying to go public, it's like, Whoa, that really hurts, you

00:29:38.820 | know, so I think that's a lot of what we're seeing.

00:29:40.380 | Let's talk about the other side of the table. We've been living

00:29:42.780 | through a zero zero interest rate hallucination. Basically,

00:29:47.060 | people were growth, growth, growth, logo, logo, logo,

00:29:51.060 | whatever. When they're making these bets, capital allocators

00:29:54.820 | now we're back to brass tacks. Okay, what's the margin? What's

00:29:57.460 | the lifetime value? And is this actually real? Is there a real

00:30:01.180 | business here? Or is this just a grand hallucination? That

00:30:04.580 | hallucination exists not only on the founder side, but on the

00:30:07.460 | capital allocator side. This week, we had a interesting

00:30:12.180 | semi viral thread on Twitter, somebody named Tyler Tring us.

00:30:18.860 | He's an early stage investor, don't know who that is. But he

00:30:22.220 | did a thread predicting a 16 z just to pick out one firm was a

00:30:27.500 | zero interest rate phenomenon, and an incredible machine to

00:30:30.620 | accumulate a UM assets under management. And so what were your

00:30:34.300 | thoughts just writ large on the capital allocator side of this

00:30:39.660 | grand hallucination of zero interest rates?

00:30:42.100 | I mean, I think it's a little unfair. I think this is written

00:30:45.660 | more just to try to generate views and clicks because, okay,

00:30:50.380 | you have to see the underlying return data to really have a

00:30:54.260 | sense of knowing is it I think it's fair to say a couple of

00:30:58.220 | things that there was probably two and a half or three years of

00:31:01.980 | capital raised in the industry. That's going to get really put

00:31:06.660 | under pressure. And the reason is that there is not a lot of

00:31:11.660 | time diversity in that money, meaning people got it, and they

00:31:15.420 | put it into the ground right away. And one of the principles

00:31:19.820 | of having a more predictable return set of returns over time

00:31:24.420 | is that you leverage time, right? So if you had $100, and

00:31:28.940 | you wanted to have a diversified stream of returns, you're much

00:31:32.780 | better off spending $1 a month for 100 months, versus $10 a

00:31:39.460 | month for 10 months. So just that thing will cause a lot of

00:31:45.460 | impact and headwinds for a lot of the capital in 2021 and 2022.

00:31:49.780 | Then the other thing you have to keep in mind is that over many

00:31:53.980 | cycles where we've had high rates and low rates and medium

00:31:57.020 | rates, our industry typically returns $1 60 for every dollar

00:32:02.940 | it raises. And that's over many cycles. And so if you believe

00:32:06.940 | that we're going to revert to the mean, out of the trillion

00:32:10.980 | dollars we've raised, maybe we'll return 1.6 trillion. Now

00:32:16.420 | that sounds good, except the problem is that 1.6 trillion is

00:32:20.060 | marked at five and a half trillion. So you're gonna have

00:32:24.900 | to give back. There's a lot of pain, you're gonna have to give

00:32:28.020 | back a lot of paper profits in order to get back to that 1.6

00:32:31.300 | and be okay with it. And the question is, what has happened

00:32:34.420 | in decision making in the meantime, meaning how many

00:32:36.620 | people did you hire? How many deals did you do that you

00:32:39.500 | regret? And then how does it change your psychology and how

00:32:44.220 | you treat the next investment that comes over the desk? Can

00:32:47.300 | you separate yourself from these bad losses and not be on tilt

00:32:51.500 | and make a good decision?

00:32:52.500 | So you had a terrible two day session, like Phil Helmuth did

00:32:56.700 | last week losing $350,000. Can you play the next week and not

00:33:01.180 | be on tilt and start to build back your stack and make 30,000

00:33:03.900 | a night for 10 nights or 10 of the next 20 set 15 sessions or

00:33:07.380 | whatever it is? It's actually had a rebuttal or something you

00:33:09.900 | want to add to this?

00:33:10.580 | No, not really a rebuttal. I mean, look, I think if you're

00:33:12.660 | going to be intellectually honest about it, I think that

00:33:15.660 | 2021 is gonna be is gonna likely be not a great vintage for VC.

00:33:20.820 | Why? Because the valuations were just Yeah, the valuations were

00:33:24.060 | just really high. They've come down by what at least 50% on

00:33:28.420 | average, maybe more, more,

00:33:30.180 | maybe 50% now. But you still have more medicine to take. I

00:33:35.180 | think when you look at some of the businesses,

00:33:36.540 | you know, a lot of these companies are growing into their

00:33:37.980 | valuation. Look, I think for any given set of companies for any

00:33:41.780 | portfolio, the most important thing is what's in the

00:33:44.940 | portfolio. So if in 2021, you had the founding of the next

00:33:50.860 | Google or whatever, that effect is going to swamp the effect of

00:33:54.460 | price levels in that year because of the power law. Again,

00:33:57.100 | the number one most important thing is just what's in that

00:33:59.180 | portfolio, what's in that basket. The second most

00:34:01.460 | important thing is the entry prices. And obviously, if the

00:34:05.540 | entry prices are twice as high in a given year than they are in

00:34:09.020 | every other year and twice as high as what the exit multiples

00:34:12.580 | are going to be in 10 years, when that portfolio becomes

00:34:15.500 | liquid, that's gonna hurt the returns. But we won't know which

00:34:19.540 | of these effects predominates until five years from now we see

00:34:23.460 | more, you know,

00:34:24.140 | I mean, when I saw that tweet thread, I thought, maybe this is

00:34:27.300 | an issue for some venture firms, but we're not going to see even

00:34:30.980 | the inklings of it for another five or seven years takes a

00:34:33.820 | while. That's a problem that may manifest itself in year 10. And

00:34:37.500 | between now and then, any firm that it has a good track record

00:34:42.100 | of returning capital, or frankly, has a good brand and

00:34:45.260 | good marks will still raise an inordinate amount of money

00:34:47.740 | because this is an asset class that I still think on the

00:34:50.140 | margins is a more of a must have asset allocation than a on the

00:34:56.460 | margins, I just rather ignore it because you know, it is the

00:34:58.860 | future of how GDP will get created. And so everybody kind

00:35:02.620 | of has to pay attention.

00:35:03.740 | Imagine if in 2021, the you know, the next great mega

00:35:08.940 | outcomes in AI were created, right, because those founders

00:35:11.980 | were just slightly ahead of the curve, you know, they were like

00:35:13.860 | a couple years ahead of the curve. If those create, you

00:35:17.940 | know, the next, whatever trillion dollar companies,

00:35:20.540 | Apple,

00:35:22.060 | then the fact that price levels were to x, what they should have

00:35:24.740 | been won't matter. Yeah, what will really matter is the

00:35:26.660 | distribution, there'll be a bunch of bad portfolios, there'll

00:35:29.020 | be some really incredible ones. And that's the way it always is

00:35:31.580 | with venture.

00:35:32.300 | The thing to keep in mind is in 21 and 22 rates were still

00:35:35.340 | effectively too low. And I think we did this analysis, Nick, you

00:35:38.540 | can throw up that thing, but it's not correlated with big

00:35:42.780 | outcomes, those vintage years. 2023 is the is the first vintage

00:35:47.260 | year where we're actually starting to see high enough

00:35:49.620 | rates that have historically generated that kind of return.

00:35:53.340 | And so I do agree with you, David, I just think it's shifted

00:35:56.460 | out by a couple years 2324 25. Those can be some real power law

00:36:01.300 | years, I think, because we're going to have just based on what

00:36:04.420 | the Fed is saying, five and a half percent interest rates for

00:36:08.300 | the foreseeable future, which is, it's a huge, huge number,

00:36:11.980 | there is that's a huge,

00:36:12.940 | I'll tell you what that is. You know what it is, though,

00:36:15.540 | Chamath, I think to build on your point, and freeberg, I'll

00:36:18.180 | bring you in on after this, it creates an environment in which

00:36:22.020 | discipline on all sides of the table, boards, management teams,

00:36:25.700 | investors, rank and file, everybody has to be focused.

00:36:29.660 | Everybody has to have sharpened swords. And that little bit of

00:36:33.580 | headwind is and the the ability to raise capital being harder is

00:36:38.180 | building more reserve and more resilience and grit in this set

00:36:41.620 | of founders. It's kind of like parenting, in a way like if you

00:36:44.820 | are too permissive, you give too many options. Kids aren't

00:36:48.060 | disciplined. And now this group of entrepreneurs I'm seeing who

00:36:51.180 | haven't given up, my lord, are they becoming animals in terms

00:36:55.580 | of like pure samurai, in terms of how they're running these

00:36:58.740 | businesses, anything that's not efficient projects that were the

00:37:02.180 | third or fourth most important project, cut, cut, cut. Now it's

00:37:04.860 | taking them 18 months, freeberg to maybe get discipline. But

00:37:08.660 | maybe you could speak to the next three years and the

00:37:11.060 | opportunity for investing in this cohort, because man, that

00:37:15.020 | last cohort is going to be really, really challenged. And

00:37:18.420 | they'll probably do 6% returns, just like your money market

00:37:23.300 | account can do right now five or six or what bonds can do. But

00:37:26.620 | this next group, man, we're seeing dogged entrepreneurs who

00:37:29.500 | are focused on reality, and there is no hallucination now

00:37:33.300 | that this is going to be easy. There is no grand illusion here.

00:37:36.300 | What are you seeing in the market?

00:37:38.460 | If the market average return in venture in early stage investing

00:37:42.900 | is going to be 6%. Remember, it's it's not evenly

00:37:46.580 | distributed. So you know, 80% of funds could end up having net

00:37:52.340 | negative, real returns, and 20% make money and then those

00:37:57.060 | there'll be a very few that will make real money. And you know,

00:38:00.260 | that's the nature of having, you know, a very kind of low average

00:38:05.180 | return on the industry is there may be a lot of wipeouts on the

00:38:09.140 | investor class. Folks that have only had one or two funds and

00:38:12.820 | then just got blown up in the cycle. I think that there's two

00:38:16.500 | groups of companies out there. One is companies that obviously

00:38:19.420 | have been funded and are doing stuff and are active businesses.

00:38:22.860 | And they've raised money in the past. And that's where there's

00:38:25.580 | going to be really ugly times. I've mentioned this in the past,

00:38:29.100 | but I do think that there's a significant number of these

00:38:30.740 | companies that if they were to be truly valued on first

00:38:33.780 | principles in private markets today, they'll get valued as at

00:38:37.700 | a value that's less than their preferred equity, which means

00:38:41.740 | that there's a difficult restructuring needed in the

00:38:43.580 | company. And not everyone's going to be willing to embrace

00:38:46.220 | that. So that's what's going to trigger a lot of the wipeouts in

00:38:48.820 | the market. It's not like the businesses are valueless. It's

00:38:51.260 | that the capital structure makes it difficult to refund them to

00:38:54.900 | fund them and continue their operations. Now for all the new

00:38:57.540 | businesses, as you highlight, man, there's so much

00:39:00.220 | extraordinary leverage out there. You know, left and right. I

00:39:05.020 | think we talked about this maybe a year ago, that there was a big

00:39:07.460 | bubble coming in AI. But I mean, left and right in nearly every

00:39:10.860 | market every segment, you won't see a pitch deck that doesn't

00:39:14.380 | have those two letters in it. Right? I mean, I'm sure you guys

00:39:17.980 | find it does feel it is. It is hard not to feel like you're a

00:39:26.100 | little bit of a lemming if you buy into the AI stuff. But I

00:39:28.820 | will say that the use cases we're seeing are really

00:39:31.260 | incredible. Totally. I didn't feel this way with the last

00:39:35.100 | couple of waves, like the whole web three thing never totally

00:39:37.460 | made sense. And crypto always felt a little bit speculative,

00:39:40.660 | like kind of unsure. But the AI thing seems like it's going to

00:39:43.380 | deliver real value. And I'm seeing like already three major

00:39:47.500 | enterprise use cases. Number one is just auto summaries, like

00:39:51.660 | being able to summarize very quickly 1000 articles or a

00:39:56.140 | meeting, you know, spinning out a like a summary of what just

00:39:58.540 | happened in a meeting. And it could break it down between a

00:40:01.100 | recap and action items. It just does all the work for you.

00:40:03.860 | Second thing is like in app customer service, kind of like a

00:40:08.980 | co pilot, but there's no reason to contact customer support

00:40:11.220 | anymore. Because you can just ask the AI inside the app. And

00:40:14.780 | like, why would you ever get it right?

00:40:16.780 | And they'll be faster, right? That's like a power user.

00:40:19.460 | narrow sacks. Yeah, they'll get it right.

00:40:21.660 | It's like a power user who's sitting next to you as your co

00:40:24.340 | pilot and is making you much more effective in the app. And

00:40:27.780 | then the third thing we're already seeing is auto complete

00:40:30.940 | for everything. I mean, it is like bonkers how you know how

00:40:34.220 | you get like little type has suggestions in email. Yeah, it's

00:40:37.300 | like two or three words. The AI is gonna be able to do type

00:40:40.740 | ahead for any content type,

00:40:43.180 | paragraphs, to do lists, tables. It's so

00:40:47.540 | it's bonkers. You see it in Google, you see it in Google

00:40:50.420 | Sheets. Now, like if you type, you know, equal sum, it's like,

00:40:53.420 | oh, here's what the seven most likely things to happen next

00:40:56.780 | are, in which case, it's kind of like you use the chest.com app.

00:41:00.180 | I don't know if you've used it with like the heads up display,

00:41:02.220 | where it's showing you the different moves. And this is a

00:41:04.700 | book move versus this is not a book. Let me make a prediction.

00:41:07.900 | All of the things that you guys said, I think are incredible

00:41:11.180 | consumer surplus business opportunities, which means that

00:41:13.940 | the ultimate winner is us. And we're going to become sad for

00:41:18.820 | the visa consumer, not the consumer, incredibly,

00:41:21.540 | incredibly productive, and more leveraged in how we spend our

00:41:25.860 | time, which will allow us to do all kinds of other interesting

00:41:28.500 | things with all the time that we save. That I think is almost

00:41:31.540 | now a certainty. The problem with consumer surplus businesses

00:41:36.300 | is oftentimes, there is no money made in the funding of them. And

00:41:40.460 | really, where the money is made is in enabling it. So for

00:41:43.780 | example, so far, what I would say is there's very little money

00:41:47.380 | that has been made in AI. There's been an enormous amount

00:41:50.660 | of money that's been made by Nvidia. And the reason is

00:41:54.740 | because they are the pick and shovel provider in the into the

00:41:57.940 | industry. And so as that's an example, AMD, I think can also

00:42:03.060 | benefit. So the silicon players seem pretty obvious here. Maybe

00:42:06.980 | some of the cloud players, the problem is the cloud players are

00:42:09.900 | trapped inside of other big companies with many other

00:42:11.780 | business models. But I just want to put out there that I think

00:42:14.460 | David, you're right that the consumer 100% wins. But

00:42:19.860 | economically, it's not clear to me that there is a winner that

00:42:23.700 | is venture fundable. Well, hold on a second. Yeah, the Levi's

00:42:28.140 | Strauss is of the world right in the gold rush. The people that

00:42:31.300 | made the picks and shovels and the jeans are sure to make

00:42:33.700 | money. Yeah. And the people that pan for gold is much more

00:42:37.540 | speculative and harder to see right now. Yeah, I just

00:42:40.300 | disagree with that. So well, I think, I think you have a point

00:42:43.420 | that so I mentioned three use cases, I think are killer use

00:42:46.500 | cases that we're already seeing demos of today. And when you

00:42:49.540 | look at them, you're like, okay, this has real applicability. I

00:42:52.860 | mean, the AI is going to be, it's going to powerfully change

00:42:55.700 | our work lives. I'm just focused on enterprise. So now I don't

00:42:59.580 | know who benefits economically from that, that functionality

00:43:02.340 | that I mentioned, I think is likely to be pretty

00:43:04.660 | commoditized pretty soon. But it's going to be incorporated

00:43:08.820 | into lots of different apps in ways that are hard to predict

00:43:11.500 | right now. I think that this AI revolution is going to do for

00:43:15.980 | SAS what mobile did for, you know, a lot of the web 1.0

00:43:20.300 | companies, where, like, for a lot of these web one companies,

00:43:24.220 | they were either disrupted by mobile, or they're turbocharged

00:43:27.020 | by mobile. So you think about Facebook, it successfully made

00:43:30.060 | the transition. And mobile made its business so much better,

00:43:32.700 | because people are just using it a lot more on their mobile

00:43:34.820 | devices. There are a lot of other businesses that just kind

00:43:37.340 | of fell by the wayside, because they just couldn't make the

00:43:40.060 | adaptation from desktop to mobile computing. I think AI is

00:43:44.340 | going to be like that for SAS, where there's gonna be a lot of

00:43:46.620 | SAS products or just

00:43:47.500 | I think you're 100% right.

00:43:49.180 | Yeah, you're 100%. If you can incorporate the AI into your

00:43:52.340 | SAS product, put in a co pilot, put in auto complete and all

00:43:56.900 | sorts of other forms of value that we're just scratching the

00:43:59.220 | surface of, you're going to be able to deliver so much more

00:44:01.460 | business value. But if you're not able to do that, and

00:44:04.060 | somebody else can, then you're gonna get disrupted.

00:44:06.340 | Look at some of these enterprise spaces, like, take something

00:44:09.300 | like APM, right, like application performance

00:44:11.140 | management, that's an entire ecosystem of enterprise

00:44:13.900 | companies, it's probably 10 15 $20 billion of collective

00:44:16.860 | market cap. And I'm just gonna say something not to not defend

00:44:21.260 | anybody, but like that can mostly be automated by AI. Those

00:44:25.780 | are simple heuristics that can be embedded in a way that's

00:44:28.260 | completely novel, where this code library just gets dropped

00:44:31.700 | in, and all of this stuff happens relatively auto

00:44:34.180 | magically now. So there are all kinds of other sectors to your

00:44:37.300 | point that get crushed, then the question is, who provides that

00:44:40.980 | layer now for free in their existing SAS toolkit or their

00:44:44.540 | product that now all of a sudden, captures more value as a

00:44:47.700 | result, and they can sell it for pennies, because it's

00:44:50.940 | incremental to them in terms of their margin in revenue.

00:44:53.180 | I think you're right, hardware wins. I think cloud wins big.

00:44:56.900 | Because if you keep adding to these, you know, models, and

00:45:01.540 | once 10 20% better, people are going to be willing to pay for

00:45:04.020 | that. But then when you think about consumers, whether they're

00:45:05.860 | enterprise or actual consumers, I believe tomato stuff is going

00:45:08.940 | to provide so much value that people are going to take their

00:45:11.540 | wallets out and be more than willing to spend for it. It's

00:45:14.380 | more valuable than Netflix. I disagree. Okay, I'm gonna take

00:45:17.660 | this side. But imagine you take your videos of you learning to

00:45:20.700 | ski, and you put it into an AI coach. And it's like, here's how

00:45:23.820 | to edit your straws on it. Here's how to be a better

00:45:26.620 | skier. This is going to blow people's minds. And you'll be

00:45:29.300 | more than willing to spend 25 bucks a month. I disagree with

00:45:31.980 | that. And the reason is because we've spent now two decades, and

00:45:35.580 | that's a lot of muscle memory to unwind of people that have been

00:45:39.900 | consistently given more for less. And I think that we

00:45:43.420 | shouldn't underestimate the expectations we've all

00:45:46.780 | collectively created by building software tools that have that

00:45:50.660 | inherent deflationary aspect to them. And so I just think that

00:45:53.900 | it's going to, it's a very high, high bar, I still think there

00:45:56.820 | are subscription services to be built. I don't disagree with you

00:45:58.940 | there, Jason, I just think that in general, though, the de facto

00:46:01.700 | business model that we've created in tech is more for

00:46:04.140 | less. And we've used technology to give us operating leverage to

00:46:08.020 | create margin structures that other companies couldn't copy.

00:46:11.060 | And I still don't. And I think that AI accelerates that not

00:46:14.340 | changes it.

00:46:14.980 | I think it's going to be the opposite. If you look at

00:46:18.540 | Netflix, if you look at Disney, they've been raising prices,

00:46:21.220 | providing more value, I think that this is going to provide so

00:46:24.060 | much value, that the incremental 10 bucks a month, five bucks a

00:46:27.020 | month per employee is going to pay off so much that this could

00:46:30.660 | be a slack, or like some presentation software, there are

00:46:33.660 | a lot of people who are making PowerPoint, AI PowerPoints, where

00:46:37.620 | it makes you a new deck, or a figma with AI, these things are

00:46:40.980 | going to be so powerful, people are like, it's totally worth an

00:46:43.180 | extra 100 bucks a month, because I can get rid of another

00:46:45.060 | employee, this one employee can now do the work of three, fuck

00:46:48.340 | it, man, I'll give you $1,000. A really good a model if you just

00:46:52.100 | added the LTV of that software company is gonna make more

00:46:54.980 | money. I'm just saying it's deflationary. That's

00:46:56.940 | deflationary. Okay, it's deflationary on the entire

00:46:59.500 | economy. But that software company that figures out how you

00:47:02.180 | can fire two accountants and keep one and make them as good

00:47:05.540 | as you know, three. Yeah, you're not going to be able to charge

00:47:08.580 | for software, right? You're selling consumer surplus. Okay,

00:47:11.540 | I think we're in agreement. Freeberg. So then assignments,

00:47:13.780 | you want to chime in on this? You still with us? So then

00:47:18.140 | assignments,

00:47:18.580 | all technology drives prices down.

00:47:20.700 | Well, technology is about doing more with less, right? It's

00:47:24.500 | about doing more with less and the AI helps you do so much more

00:47:27.340 | with the same amount of time or less time.

00:47:29.740 | I think your whole point about Disney and Netflix, etc, is

00:47:32.460 | because they aren't, you know, innovating on either side. And

00:47:36.660 | so in order to drive earnings growth, they're having to raise

00:47:38.820 | prices. But that doesn't speak to the benefit of technology.

00:47:42.300 | They're innovating massively, they're adding massive features

00:47:45.180 | to their products and massive new shows. I mean, I think

00:47:48.500 | there's pricing power in this AI thing. That's just my belief. I

00:47:51.380 | could be

00:47:51.660 | thought about leverage. Yeah. I mean, look, I think I think your

00:47:54.220 | point like, so my general rule of thumb, thumb on technology is

00:47:59.180 | the technology creator, the technology company should

00:48:03.820 | generally be capturing about one third of the value that they

00:48:06.340 | deliver to the customer.

00:48:07.340 | unpack that. Why? What do you come up with? And so,

00:48:09.700 | I mean, it just kind of where I'm giving example. Yeah. Yeah.

00:48:13.300 | So like, let's say that you, as a food delivery company, you have

00:48:20.500 | to pay a human 10 bucks to deliver food from you. Now,

00:48:23.180 | let's say I run a robot, my amortized cost of running that

00:48:25.940 | robot is two bucks. So it's eight bucks cheaper, or call it

00:48:30.100 | $1. So it's $9 cheaper, I should charge you four bucks. You know,

00:48:35.500 | because four bucks is super competitive with the existing

00:48:37.860 | market. And it'll keep me competitive against the other

00:48:40.540 | automation companies that are going to start to emerge. It's

00:48:43.540 | just kind of how market dynamics end up working out. If you

00:48:46.100 | charge too much, you're going to invite people to come in and

00:48:48.740 | compete with you. If your commodity technology

00:48:50.940 | commoditizes, remember all technology commoditizes over

00:48:53.220 | time. And if you don't charge enough, you're not going to make

00:48:58.180 | enough money to be able to reinvest in scaling your

00:49:00.340 | business and doing more kind of interesting things as a

00:49:03.540 | platform. So you know, generally AI provides more leverage to

00:49:06.940 | taxes point, if I can build an application, I don't know if you

00:49:09.500 | guys have seen these incredible UI apps that are built in AI

00:49:12.380 | now, where I can say, with a prompt, hey, make me talked

00:49:15.580 | about it two weeks ago, yeah, right, make me a dog walking app

00:49:18.260 | interface. And it builds like the three steps of the dog

00:49:20.260 | walking app, and gives you a bunch of options. And you can

00:49:22.380 | pick the one you want, I would typically have to pay a design

00:49:25.460 | firm $50,000 to do that work for me. So if it'd be AI is doing it

00:49:29.620 | automatically, you know, I should be paying, let's say

00:49:32.700 | $15,000 for that product for that capability, the margin on

00:49:36.780 | that is 100% trifecta margins, right, whatever it is very low.

00:49:40.260 | And the margin on that's 100%. Whereas the margin on paying

00:49:42.900 | people to do design work as a design firm is very, you know,

00:49:46.220 | not not a great margin, you're having to pay

00:49:47.820 | I figured it out. You know why we're having, we're working it

00:49:50.620 | out in our heads right now, one group of us is talking about

00:49:53.460 | comparing AI software and AI services to the existing

00:49:57.660 | software stack. And on the other side of the discussion, we're

00:50:00.220 | comparing it to the humans who are currently doing that work.

00:50:03.100 | Imagine the 6% that two brokers get, you know, doing the sale of

00:50:07.620 | a million dollar home and that 60,000 and AI could negotiate

00:50:11.220 | that and find you a better home and sell your home for the

00:50:13.380 | optimal price. For less than that 60,000, what would you be

00:50:17.340 | willing to pay for that? Right? And the same thing with the

00:50:19.300 | designer of the logo?

00:50:20.340 | I don't think that's how it's going to play out exactly J. Cal

00:50:22.940 | because to completely eliminate a job function, you have to do

00:50:26.700 | you know, 100% of it. And you have to, you know, 100% of the

00:50:30.260 | job function, as but as well as are better than the human,

00:50:33.780 | whereas, I think as opposed to a model where you still have the

00:50:37.260 | human in the loop, but they're much more productive, because

00:50:39.820 | they're working with an AI, they're augmented, they're

00:50:42.100 | that's more than Iron Man, Iron Man, like model. So I think

00:50:46.620 | that's more effective. Yeah. So I think if there's a job

00:50:49.700 | reduction, it would be more the case where they've got a team of

00:50:53.100 | five accountants, and they go to two or three, because now they're

00:50:57.100 | just much more productive. I don't think they go to zero.

00:51:00.740 | That's my sense. Anyway,

00:51:01.780 | I look at outsourcing as a possible corollary to this.

00:51:05.220 | Remember, when you move the accountants to Manila, where

00:51:07.980 | their knowledge workers there and it knocked out half the

00:51:10.020 | price, two thirds of the price, whatever it was, this just feels

00:51:12.980 | like that on steroids to me,

00:51:15.500 | if you have a business model, like, you know, Infosys, or

00:51:18.300 | Tata, or one of these things that's levered to utilization

00:51:21.100 | rate, this is the most obvious way to basically add many

00:51:25.300 | potentially percentage points, if not 10s of percentage points

00:51:29.420 | of utilization to your business, that's all money, free money for

00:51:32.180 | you, right? Because now you'll have fewer people, there'll be

00:51:35.420 | more utilized, and they'll have more leverage because they'll be

00:51:38.060 | using a bot or some AI agent to help them write code, write unit

00:51:43.180 | tests, all that typical stuff that right now you outsource.

00:51:45.580 | And even if you pay a marginal cost, you add the labor

00:51:49.660 | arbitrage to technology arbitrage. Now, all of a sudden,

00:51:51.700 | these businesses look really, really interesting.

00:51:53.820 | Yeah, I think customer support definitely gets revolutionized,

00:51:58.860 | right? Because the initial no brainer, you know, the first

00:52:03.740 | line of defense is going to be the AI using, you know, text to

00:52:08.620 | voice, and it can choose what language it wants to output to

00:52:12.420 | what accent. So you'll never know that you're you'll think

00:52:15.420 | you're talking to someone locally.

00:52:16.940 | Literally, you'll be in 50 languages with the right answer.

00:52:21.460 | And you don't need to build up that entire group. I mean, this

00:52:25.420 | I think we're underestimating in some ways. Yeah, but I think

00:52:28.380 | that's what's going to happen here.

00:52:29.460 | But my point is, I think that a lot of that customer support

00:52:32.620 | inquiries just go away, because the help the assistant gets

00:52:35.700 | built into the tool directly. So you never get to the point of

00:52:38.940 | inquiry. Yeah, like, why do you, you know, if you can just ask

00:52:42.860 | it,

00:52:43.180 | people do that right now on YouTube, if you just type the

00:52:45.940 | question into YouTube, and you find the video that takes five

00:52:49.180 | minutes, but you're saying this gonna take 15 seconds, because

00:52:51.820 | it's gonna be right there.

00:52:52.740 | I think what Zack said before is hugely important. When you think

00:52:56.140 | AI touches non technology businesses, what he said is the

00:52:59.020 | boundary condition, which I think is right, I think he

00:53:00.860 | nailed this, which is the boundary condition for AI to

00:53:04.300 | replace a human is where the threshold error rate of that AI

00:53:08.620 | is the same or less than the human, right? If you look at

00:53:12.540 | very complicated markets, where does regulatory capture rear its

00:53:17.340 | ugly head, it's in allowing humans to be error prone, and

00:53:20.460 | you can't do anything about it, take healthcare. If you go into

00:53:23.700 | a hospital, there's a certain error rate in every surgery,

00:53:26.940 | right? There's a certain error rate in the things that happen.

00:53:29.780 | But there's probably a whole bunch of ways in which that

00:53:32.860 | entire infrastructure can be made much, much better with AI,

00:53:35.580 | right, a robot that does laser guided precision surgery,

00:53:40.100 | characterizing tumors 100 with 100% accuracy. So you always get

00:53:44.740 | 100% of the cancer out when you go and get surgeries done. All

00:53:48.100 | these things are possible now. And all of a sudden, you take

00:53:51.900 | these error rates that can be high as as high as 20 or 30%. So

00:53:55.140 | for example, breast cancer surgeries, the dirty secret of

00:53:57.980 | our healthcare industry is that has a 30% error rate, you know,

00:54:01.420 | that can and should go to zero. And now all of a sudden, so

00:54:05.220 | these highly regulated markets, I think can become much, much

00:54:08.700 | more efficient and, and leveraged and at pass that

00:54:12.860 | consumer surplus on to people. In that case, it's healthfulness,

00:54:16.340 | which I think is a big deal. I didn't my interesting. I did my

00:54:21.220 | new vo scan. Yeah, incredible. I mean, I got all the videos, I

00:54:24.940 | got all the loops. I went to the one down on El Camino Real. It

00:54:28.780 | was like going to a spa in and out, no big deal. But I got the

00:54:31.660 | results. And it's like, Oh, here, here's a tiny of little

00:54:33.580 | things that are not worth cutting your body open to look

00:54:37.260 | at. But just so you know, your knee, your shoulder, your

00:54:39.620 | kidney, there's a little polyp here, there's a little polyp

00:54:41.420 | here, whatever, there's a little growth here. But let's see in

00:54:44.220 | two or three years, just monitor it. And I'm like, Oh, my God,

00:54:46.700 | I'm so grateful. This thing gets down to like 500 bucks, which

00:54:50.700 | it obviously will or 1000 bucks, and everybody's doing it. And

00:54:52.980 | then all that data is in there. And then the AI is looking at

00:54:56.100 | it, like you're saying, I mean, the early detection, was the AI

00:55:00.340 | able to tell the doctor how full of shit you are? No, you know,

00:55:04.460 | you're not supposed to eat for four hours. So they, they didn't

00:55:07.700 | get an accurate reading on BS.

00:55:10.540 | There's your cold oven, everybody.

00:55:13.980 | Yeah, I, here's a really important clip for founders.

00:55:19.340 | Play the Steve Jobs clip.

00:55:20.460 | This is super important when looking at web three versus AI

00:55:25.140 | to Sax's point, you've got to start with the customer

00:55:28.780 | experience and work backwards to the technology. You can't start

00:55:34.020 | with the technology and try to figure out where you're going to

00:55:37.820 | try to sell it. And I've made this mistake probably more than

00:55:40.260 | anybody else in this room. And I've got the scar tissue to

00:55:43.460 | prove it. And I know that it's the case. And as we have tried

00:55:48.020 | to come up with a strategy, and a vision for Apple. It started

00:55:58.100 | with what incredible benefits can we give to the customer?

00:56:03.580 | Where can we take the customer? Not, not starting with, let's

00:56:09.260 | sit down with the engineers and and figure out what awesome

00:56:13.500 | technology we have. And then how are we going to market that?

00:56:17.020 | Um, and I think that's the right path to take.

00:56:21.820 | Can I ask you guys a question? I sometimes I go down these rabbit

00:56:25.700 | holes. I'll watch hours and hours of Steve Jobs clips. What

00:56:29.380 | do you think makes him so calm? Doesn't he just strike you as

00:56:36.340 | incredibly just like calm and like comfortable with himself

00:56:40.900 | and just aware I know what it is. What is it was so much

00:56:44.780 | better and aesthetically building product than anybody

00:56:49.700 | else? He when you think of that PC era of no taste, beige boxes,

00:56:54.740 | and everybody having no style, and just no swagger. He was

00:56:59.900 | studying, you know, German design, Buddhism, tripping on

00:57:04.740 | acid, and like just understanding the universe at a

00:57:08.100 | level that Gates and the other contemporaries weren't, they

00:57:11.580 | just weren't as transcendent in understanding product design as

00:57:16.900 | he was. So it was like when you were saying you were playing

00:57:19.780 | poker with a bunch of four year olds or something. That's the

00:57:22.540 | analogy. He's just on such a different level that he's

00:57:25.340 | watching people make, you know, as 400. And, you know, IBM, PS,

00:57:31.660 | whatever, like, just garbage computers, garbage operating

00:57:35.100 | systems. And it's just like,

00:57:36.060 | the thing is, like, if you look at any era, just the way that he

00:57:39.180 | communicates, there's just a level of calm. I don't know how

00:57:43.500 | to describe it. So you understand what I'm trying to

00:57:44.940 | say? Like he he just seems like he just sees through all the

00:57:47.620 | noise. Like he's seen through the matrix, like he's unplugged

00:57:50.060 | himself.

00:57:50.460 | Sax is not impressed. Okay, there you have it.

00:57:53.620 | No, I'm very impressed with Steve Jobs. I think he

00:57:56.380 | understood product development better than anybody else. Yeah.

00:57:58.740 | Clearly, that's it. I mean, my favorite Steve Jobs passage is

00:58:04.420 | the one where he describes the john scully disease. Do you

00:58:07.140 | guys remember this?

00:58:07.860 | Yeah, no. Oh, here it is. You know, one of the things that

00:58:13.700 | really hurt Apple was after I left john scully got a very

00:58:16.940 | serious disease. It's the disease of thinking that a

00:58:20.220 | really great idea is 90% of the work. And if you just tell all

00:58:23.740 | these other people, here's this great idea, then of course, you

00:58:27.020 | can go off and make it happen. And the problem with that is

00:58:29.780 | that there's just a tremendous amount of craftsmanship in

00:58:33.460 | between a great idea and a great product. Yeah. So true.

00:58:38.420 | Yeah, I mean, I tell people it's like a rugby scrum. You go, you

00:58:42.780 | know, you got to get a whole team to get the ball down the

00:58:44.540 | field. It's not like one person put the ball down the field.

00:58:48.820 | You know, they kind of maybe suggested a play. But once

00:58:51.500 | you're on the field, everything changes. And everyone's involved

00:58:54.820 | in getting it down the field.

00:58:55.700 | That quotes where the name for craft ventures come from.

00:58:58.500 | Oh, really? Oh, little known fact. Yeah. I didn't know that.

00:59:01.540 | Yeah. Section 230. We talked about last week. The Gonzalez

00:59:06.660 | versus Google case, the justices heard oral arguments and

00:59:09.260 | plaintiffs seem to fare poorly, quote from SCOTUS blog, Justice

00:59:14.260 | Elena Hagan suggests that even if section 230 is not well

00:59:18.900 | suited to address the current needs of today's internet, such

00:59:21.660 | as such a task was best left as we predicted last week, I think

00:59:26.380 | sex you did best left to Congress rather than the Supreme

00:59:29.860 | Court. Quote, these are not like the nine greatest experts on the

00:59:34.620 | internet. Kagan observes actually, that's

00:59:37.060 | yeah, I mean, this is just, I think, really a quick update to

00:59:40.820 | what we talked about last week, the justice heard oral

00:59:43.700 | arguments, they seem to be very skeptical of the plaintiffs

00:59:46.580 | arguments. Even Justice Thomas, who has written the most

00:59:51.300 | skeptically in recent years about the broad immunity that

00:59:54.620 | tech companies enjoy under section 230, seem surprisingly

00:59:58.140 | sympathetic to the theory that the Ninth Circuit Court ruled on,

01:00:03.300 | which is that section 230 protects recommendations, as

01:00:06.900 | long as the providers algorithm treats content on its website

01:00:09.580 | similarly. So even the justice who I think was most likely to

01:00:15.500 | reign in 230 seem to be more comfortable with what the

01:00:19.180 | defendant, which was Google was saying. So it looks to me like

01:00:23.140 | Google and big tech are going to win this one.

01:00:25.180 | Any thoughts? No, not really. I think I want to know what you

01:00:30.100 | guys think about Trump showing up with Big Macs and water in

01:00:32.700 | East Palestine. I mean, he is a genius. He beat Buddha judge to

01:00:37.300 | East Palestine. Yeah, that was unbelievably pull up my tweet. I

01:00:42.900 | think this is the power we because Trump has been out of

01:00:46.700 | the public discourse. He's a media. He is a media savant.

01:00:50.620 | Literally Biden is in Ukraine, saber rattling over air sirens

01:00:56.220 | that may or may not be true. They were fake. Who cares?

01:01:01.180 | Well, no, no, I think it doesn't matter. No, it doesn't matter.

01:01:03.780 | No, we don't know. So we do we do actually. Okay, because

01:01:09.620 | hold on a second. I don't need to be there because Jake Sullivan

01:01:14.500 | just paid a press conference. And he was asked by a CBS News

01:01:17.460 | reporter if the US gave the Russians any kind of heads up

01:01:20.580 | the president was going to be in Kiev. And what Sullivan said,

01:01:24.060 | and I quote is we did notify the Russians that President Biden

01:01:27.740 | will be traveling to Kiev. We did so some hours before his

01:01:30.740 | departure for de confliction purposes. You know what deep

01:01:34.500 | confliction is, right? It's when the US tries to avoid an

01:01:39.140 | accidental conflict. And you know, Putin's not crazy enough

01:01:42.660 | to try and assassinate Biden. So the Russians were not attacking

01:01:45.820 | Kiev that day. In fact, they haven't attacked Kiev as far as

01:01:48.660 | I know, for weeks. So these air raid sirens were basically just

01:01:51.860 | pure theater. But the amazing thing is, if you don't know if

01:01:55.420 | you don't know that Biden orchestrated is my point people

01:01:58.420 | on your side. Come on, Jason. But that doesn't mean Biden

01:02:02.380 | press the button. So don't don't also take it to the other

01:02:05.220 | stream. Either. Who knows who went who why the siren went off,

01:02:10.020 | but put it aside. This was a joint event between the Biden

01:02:13.540 | administration and the Zelensky team. They organized it the

01:02:17.020 | whole thing was choreographed. How did how did that red carpet

01:02:19.500 | get there? Jason? Was that an accident to? Okay, let's put

01:02:23.620 | that aside. Like this is accidental. I mean, how can I

01:02:26.420 | give you your GOP? Let me give you your GOP win. Donald Trump

01:02:30.460 | is a savant. And he went to America to the place that we

01:02:35.420 | were reporting on the under reported story. People in East

01:02:39.700 | Palestine are being ignored. And he goes there to help the people

01:02:45.260 | of America. I give you all credit. Your guy, Saks did the

01:02:49.980 | most amazing media move in history. He went to middle

01:02:53.460 | America where people are suffering as opposed to a war

01:02:55.580 | that nobody wants to be in and spend all that money on we won't

01:02:58.380 | spend money. But we will go spend billions in Ukraine go.

01:03:05.020 | All right. I don't know what this reminded me of. And you may

01:03:07.620 | think this is a weird connection. But it reminded me

01:03:09.620 | of the ending to the movie, boys in the hood. Do you remember

01:03:12.900 | what happens at the end of that movie? No, I haven't seen it in

01:03:15.260 | years ago. Okay, it was 30 years old. But ice cube, you know,

01:03:18.300 | plays this character doughboy and his brother gets killed. And

01:03:21.740 | at the very end of the movie, he gives this speech to Cuba

01:03:25.060 | Gooding Jr. where he says, you know, I turned on the TV. And

01:03:28.820 | there was all this shit about violence in a foreign land. And

01:03:31.460 | there was nothing on my brother getting killed all this stuff

01:03:33.820 | about what's happening in foreign countries, nothing about

01:03:36.340 | what's happening here. And then I think the most memorable line

01:03:38.900 | was, either they don't know, don't show, or they don't care

01:03:42.580 | what's going on in the hood. Right. So what's going on here

01:03:46.460 | is the people of East Palestine, Ohio are being engulfed in a

01:03:50.580 | plume of carcinogens and toxins. And Biden is off right pursuing

01:03:55.420 | this crusade in eastern Ukraine. And it's not just him. I'll

01:03:59.540 | dish out to Mitch McConnell as well. Mitch McConnell was

01:04:02.180 | neocons of our neocons. Yeah, McConnell was on TV saying that

01:04:06.500 | the number one priority of the United States right now is

01:04:09.180 | defeating Russia in Ukraine. It's not helping the people of

01:04:14.020 | Ohio. It is not securing the border. It is not solving crime

01:04:17.700 | in our cities. It is not making our schools better. It's running

01:04:20.740 | off and basically supporting this war in Ukraine. So both

01:04:24.020 | these oxygen areas Biden and McConnell both they either don't

01:04:28.260 | know, don't show or they don't care what is happening United

01:04:31.780 | States of America. He's a genius. But it's not even

01:04:34.220 | genius. I mean, it's so obvious that you go there. It's so

01:04:36.860 | obvious. Nobody wants to be in a forever. Go there and Biden

01:04:40.460 | didn't go there. It's not it's not genius. It's obvious. Go

01:04:43.740 | there. Where's the Sanders? He should

01:04:46.740 | he hasn't. Make a trip. I think the most senior Democratic

01:04:50.100 | person that went over there was Josh Shapiro, who's the governor

01:04:53.100 | of Pennsylvania, he got there before Buddha judge.

01:04:55.500 | What is going on? And I mean, and this it's it's a never

01:04:59.300 | ending war. And so, you know, this is if nobody wants to fight

01:05:04.100 | a never ending war. This is, this is what got Bush in

01:05:07.220 | trouble, right? Like this was the big critique is like, we're

01:05:09.500 | spending all this money over in the Middle East on these

01:05:11.820 | conflicts.

01:05:13.460 | Well, you're talking about Bush senior. Yeah. So let's let's

01:05:15.740 | contrast with Bush senior, I think actually, it's a good

01:05:17.940 | analogy. So the with Bush senior Bush, actually, this is 1991. He

01:05:22.580 | won the Iraq war, that was actually a stunning foreign

01:05:25.420 | policy success. Because he actually didn't go too far. He

01:05:28.540 | didn't go all the way on the road to Baghdad, the way that

01:05:30.500 | his son, George W. Bush would creating an epic disaster. So

01:05:34.380 | Bush 41 delivered a victory there. And he still lost

01:05:38.820 | election. Why? Because he seemed out of touch. He wasn't focused

01:05:42.220 | on domestic problems. The American people want an American

01:05:46.180 | president to focus on American problems. And even if Biden

01:05:49.940 | delivers some sort of victory in Ukraine, if he ignores these

01:05:52.900 | festering problems at home, that he is, I think, vulnerable for

01:05:57.900 | this reelection. But I think the truth of the matter is that this

01:06:00.820 | war is going to turn out much worse than the Iraq war did in

01:06:04.620 | 1991. Because in 91, we showed restraint, and we knew what our

01:06:09.020 | vital interest was. And we kept our objectives limited. And we

01:06:12.500 | kept the timetable very short. What is Biden doing here, Biden

01:06:16.380 | won't tell us what the objective is, it's just whatever the

01:06:18.860 | Ukrainians want. He won't tell us what the timetable is. It's

01:06:21.740 | basically for as long as it takes. And then meanwhile, this

01:06:25.140 | week, you had Kamala Harris go to the Munich summit, declaring

01:06:28.580 | that the Russians are guilty of crimes against humanity, which

01:06:31.900 | that's something that we could have assessed after the war.

01:06:34.900 | Think about the incentives, you're now giving the Russian

01:06:37.060 | leadership before we said that we just wanted them to leave.

01:06:39.660 | When you accuse them of war crimes, it implies that we're

01:06:42.740 | gonna go chasing them all the way to Moscow, they're not gonna

01:06:45.340 | want to end this war, when they can be put on trial at the Hague.

01:06:48.620 | I mean, this is highly inflammatory. So, you know, this

01:06:52.300 | thing is not going in the right direction.

01:06:53.620 | Yeah, that was the thing I didn't like about Biden speech

01:06:56.380 | over there is just, he's escalating, escalating,

01:06:58.780 | escalating, hey, that we have to stop Putin. I mean, which you do

01:07:01.940 | he didn't invade another country, he didn't cause three

01:07:05.140 | or 400,000 Russians have died, according to reports over 100,000

01:07:09.180 | Ukrainians have died, according to votes, neither side is given

01:07:11.940 | the accurate number because they don't want to demoralize their

01:07:14.740 | constituents. But the amount of suffering going on here is

01:07:18.700 | extraordinary. And I think it should be the West who is going

01:07:21.300 | send Macron, send somebody from Germany, send some, you know,

01:07:26.260 | group of people to then go to Ukraine and work this out. But

01:07:30.540 | you don't need to go in there saber rattling, it was too much

01:07:33.300 | saber rattling for me, it is not enough escalation. We need

01:07:37.460 | de escalation in these situations, not saber.

01:07:40.140 | I agree with you, Jason, but, but Biden has really painted

01:07:43.780 | himself into a corner here. Because before the war, he

01:07:47.340 | refused to take NATO expansion off the table, he refused to

01:07:50.220 | recognize the Russian interest in Crimea. And we gave no

01:07:53.340 | support to the Minsk Accords, which would have given some

01:07:55.420 | limited autonomy to the Russian speakers in the Donbass area. If

01:07:58.580 | we had just done those three things, there would have been no

01:08:00.460 | war, Biden refused to do that he refuses to take expansion off

01:08:04.220 | the table even today. So he has nothing to compromise with he is

01:08:07.740 | dug in. And the problem we have now is that it's a loose loose

01:08:12.700 | scenario. If the Ukrainians keep doing poorly, because right now

01:08:17.260 | it looks like they're on the back foot. What is the United

01:08:19.580 | States going to do? We're going to let them lose this war? Or

01:08:22.140 | are we going to keep giving them more aid and step in? It looks

01:08:24.260 | to me like Biden now is invested his whole presidency in this,

01:08:27.460 | and he can't just let them lose, which means more escalation from

01:08:30.220 | us. And on the Russian side, if the Russians lose, then they

01:08:34.580 | have an incentive to use nuclear weapons to rescue the

01:08:36.940 | situation. So it seems to me that both scenarios here are

01:08:42.020 | really bad. And we don't really have a good way out of this.

01:08:45.460 | We're looking for some sort of magical Goldilocks scenario

01:08:48.860 | where the Russians sort of lose but not enough to use nukes. You

01:08:52.980 | know, the administration has not given us a clear picture of what

01:08:57.020 | victory looks like here, that's actually reasonably achievable

01:09:00.940 | in a reasonable timeframe at a reasonable cost.

01:09:04.260 | What do we think? freeberg of Xi Jinping, making overtures and

01:09:08.980 | hey, maybe we should work towards peace. If you follow

01:09:11.740 | the money, he wants cheap oil. He wants this thing to end and

01:09:14.660 | he wants the West to be buying goods from China. The West wants

01:09:18.500 | to sell a bunch of armaments. The military industrial com

01:09:21.940 | complex is absolutely in delight of replenishing all of these

01:09:26.500 | weapons. Perhaps a little cynical to follow the money

01:09:29.260 | concept. But what was your take on the chessboard of Xi Jinping

01:09:33.660 | is going to visit Putin before Biden does. And he wants to

01:09:38.940 | build bridges and we want to say Brattle. What are your thoughts?

01:09:41.820 | If anything,

01:09:43.220 | he getting like, I mean, China buys energy from Russia today,

01:09:48.020 | they buy oil on sale at a very cheap price. So if I'm trying to

01:09:52.500 | want this to last longer, don't I? Like, why would I want to end

01:09:55.380 | this and then have Russia's markets open up? Because if

01:09:57.860 | their markets open up the markets normalize to market

01:10:00.980 | prices, right now they're getting a discount. So I think

01:10:04.300 | yeah, they certainly don't want things to escalate. The question

01:10:07.700 | is how quickly do they want them to de escalate? So I'm China,

01:10:11.340 | I'm kind of probably playing a little bit of a, you know,

01:10:14.780 | middle line here. I just I obviously don't want to see a

01:10:18.460 | big hot war. China's got its own domestic problems right now that

01:10:20.900 | seem pretty significant. And existential and having access to

01:10:24.420 | cheap energy seems like a benefit. Obviously, if there's

01:10:29.100 | significant conflict and escalation of conflict, that

01:10:31.220 | would be very bad from an economic perspective for China.

01:10:33.740 | So they're probably somewhere in the middle, like a slow

01:10:36.820 | resolution, let's say, I don't know. I mean, this is pure

01:10:39.620 | speculation. This is just me.

01:10:40.740 | sacks or Chamath Europe isn't going to buy Putin's oil anytime

01:10:44.700 | soon, right? They're now going to

01:10:46.020 | nobody's able to sell it to China, he's able to sell to

01:10:48.300 | India and the rest of the world. There was actually an article in

01:10:50.300 | today's New York Times about how the West may be unified about

01:10:54.620 | Ukraine, but the rest of the world is not the article was

01:10:57.740 | saying something that cricks the worst set for a while, which is

01:11:00.020 | we actually don't have the whole world with us at all. The BRICS

01:11:03.060 | countries are not with us the emerging world, the whole

01:11:05.580 | southern hemisphere basically is not with us. They would like the

01:11:08.660 | US to play a more constructive role in finding a peace deal.

01:11:11.180 | Not like you said, Jason, saber rattling or escalating. So the

01:11:14.460 | rest of the world is not happy with us. And this is why the

01:11:17.020 | Russian sanctions have not been effective. I think the Russian

01:11:19.820 | economies had like a three to 4% hit. It is not the collapse that

01:11:23.420 | was predicted, because there are enough other countries willing

01:11:26.020 | to do business with them.

01:11:26.860 | Would this have happened to Martha Trump was president? And

01:11:29.140 | how would Trump have handled it? Do you think just game theory

01:11:32.340 | here? I'm just curious. Because Trump almost won, right? I mean,

01:11:34.980 | if Trump had won, what would this look like? Would Putin have

01:11:36.900 | gone in there if Trump was president? And how would Trump

01:11:39.740 | have handled it? Because Trump seems to think I would have just

01:11:42.580 | told him don't do this, and they wouldn't have done it.

01:11:44.140 | I mean, this is the most obvious compliment I can give him. I

01:11:47.540 | think that he is exceptionally pragmatic on being anti war. And

01:11:54.420 | I think that that is one of the most positive characteristics

01:11:59.500 | that he showed he was really the only president I think in modern

01:12:02.740 | history, right? So actually, that hasn't gotten us embroiled

01:12:05.500 | in a new war.

01:12:06.660 | Yeah, it is the best part of him. Yeah.

01:12:08.940 | He's been incredibly, incredibly consistent. So I suspect that

01:12:11.900 | there would have been some kind of a deal. I know that sounds so

01:12:16.420 | ridiculous to say, but there would have been a deal.

01:12:18.340 | He's actually a great he's a dealmaker. He's a Jason. He gave

01:12:22.940 | a statement North Korea. He went to North Korea and met with

01:12:26.700 | he'll shake hands with anybody. Exactly.

01:12:28.700 | He would have fired all of the deep state blob that started to

01:12:32.700 | position anything towards a conflict. So I think he would

01:12:36.860 | have shut the door so ferociously on Ukraine and NATO

01:12:40.580 | and anybody that crossed that line, he would have tarred and

01:12:43.820 | feathered publicly. And I think the end result would have been

01:12:47.060 | that Putin could have found an off ramp well before he invaded

01:12:50.660 | probably totally, yes, I agree.

01:12:53.420 | And blame Germany for all this, right? He called it.

01:12:56.620 | Well, Trump very early asked the question, why are we spending

01:13:01.380 | all this money to defend Germany when Germany has this big

01:13:04.380 | pipeline deal with Russia doesn't seem like they need our

01:13:06.940 | protection, they should just pay for it themselves. But I think

01:13:09.500 | there's a separate point that your mouth just made that is a

01:13:11.540 | really good point, which is Trump's instinctual resistance

01:13:16.700 | to what the deep state wants. And he actually said it this

01:13:19.180 | week, he gave a two minute televised statement that was all

01:13:23.180 | over Twitter, where he basically made the argument that listen,

01:13:26.140 | the reason why we're in this war is because the military

01:13:29.060 | industrial complex and the foreign policy establishment,

01:13:32.140 | they basically courted this conflict and they are working at

01:13:35.860 | odds with the interest of the American people. It's actually

01:13:38.540 | a fairly radical critique, I don't think a major presidential

01:13:41.940 | candidate has run against the military industrial complex the

01:13:45.100 | way that he is now positioning himself. And let me tell you

01:13:48.140 | this, you know, I've said it before, he's not my preferred

01:13:50.380 | candidate. But if this war spirals out of control, either,

01:13:55.020 | you know, it turns into a even bigger conflict that draws us in

01:13:59.580 | or it turns into a big recession, because I don't think

01:14:03.100 | we've seen the last of the supply shocks from this war. If

01:14:07.580 | we get a recession that Trump can, I think, lay at the feet of

01:14:12.700 | this war, he's positioning himself to take advantage, this

01:14:15.780 | could be a silver bullet for him. I don't think he has any

01:14:18.140 | other way of winning. But, you know, if this turns into a big

01:14:21.060 | mess, Trump is

01:14:22.780 | positioning, you have your tinfoil hat there. Put it on for

01:14:26.820 | a second. I want to talk to tinfoil sacks, tinfoil hat

01:14:29.620 | sacks. Let's put them the tinfoil hats on here. Do you

01:14:32.340 | think Putin is escalating this as a way to position Trump to

01:14:39.740 | where Putin says he could say this during the election? Like,

01:14:42.420 | listen, you know, I would love to talk to Trump. And what if

01:14:44.980 | Trump goes and talks to Putin? Or does a phone call with him?

01:14:48.100 | Because I know that's against the rules, right?

01:14:49.980 | So wait, so so your theory is that Putin is going to

01:14:52.980 | escalate this?

01:14:53.340 | It's the tinfoil hat sacks theory.

01:14:54.260 | Okay, so so your theory is that Putin's escalating this into

01:14:59.180 | potentially a nuclear war to get Trump reelected. That's your

01:15:01.860 | theory. And I'm the

01:15:03.220 | Tim, I'm just tinfoil hatting it. The reason that this has

01:15:07.660 | occurred. No, no, now that this has occurred, not that he did.

01:15:11.060 | He did.

01:15:11.460 | You're the one in tinfoil hat territory,

01:15:15.820 | tinfoil hat corner at the end.

01:15:17.820 | Putin, the reason why

01:15:19.660 | he started the war for it that he would end the war to give

01:15:22.620 | Trump a win.

01:15:23.460 | How's he gonna end the war for Trump? What are you talking

01:15:26.700 | about? During the election? He's he does a call with Trump. And

01:15:30.780 | he says, you know, I talked to Trump about this. And I'd love

01:15:33.540 | to do some negotiations with Trump. I've always had

01:15:36.460 | appreciation for his ability to help negotiate things I would

01:15:39.500 | love I would feel better about negotiating with Trump, who

01:15:42.540 | hasn't saber rattled and told everybody in the world that I

01:15:45.300 | have to be that there isn't regime change. So

01:15:48.420 | I know, it's really interesting how you come up with these

01:15:50.140 | conspiracy theories, and then attribute them to me and call me

01:15:52.780 | the tinfoil hat guy. But listen, I know it's a joke. I know.

01:15:56.940 | You just said this is a silver bullet.

01:15:59.180 | No, it's a silver bullet. It's rails. Yeah, if this war is off

01:16:02.900 | the rails, and the economy goes off the rails, because of this

01:16:05.380 | war, he Trump right now is positioning himself to take

01:16:08.220 | advantage of that fact. And DeSantis is to play right into

01:16:11.140 | his hands as a pacifist, critical things about the war

01:16:13.620 | skeptical, I would say things about the war this week. So it's

01:16:15.980 | not just Trump. But look, the thing you have to understand

01:16:17.980 | about this war is existential for Putin. It's existential at

01:16:21.660 | this. Yes, he cannot back off.

01:16:23.500 | It's extra. And it's extra curricular for us.

01:16:26.460 | Yeah, yeah. And that's why Obama said back in 2014, that the

01:16:31.820 | Russians have escalatory dominance, they will always

01:16:34.900 | climb the escalatory ladder all the way up to nukes if they have

01:16:37.260 | to. And the sooner we recognize that fact, the better off we're

01:16:39.620 | going to be.

01:16:40.140 | I think the good news is that we are speech that he did, where he

01:16:43.660 | kind of see the speech. Was it good? We just talked about it.

01:16:47.500 | It was it was two minutes. It was fabulous. Saks just

01:16:50.420 | mentioned it.

01:16:50.940 | The crazy thing is, it sounded a lot like we'll be talking on

01:16:53.500 | this podcast, which is he talked about all these generals that

01:16:56.300 | retire Victoria Newland. He called up Victoria Newland by

01:16:59.260 | name by name by name. He he really did.

01:17:02.140 | Because I didn't say this because I'm on a different time

01:17:05.340 | zone. And it was it must have broken when I was asleep or

01:17:07.820 | school. It's a two minute video in which he like I said, he

01:17:10.820 | attacked the military industrial complex and foreign policy

01:17:12.940 | establishment for creating this war. And he mentioned Victoria

01:17:15.460 | Newland by name. Let me tell you something. Newland is going to

01:17:18.260 | be it's going to be a very popular message. But yes, it's

01:17:21.060 | very popular. Newland is the Fauci of this situation. Okay.

01:17:25.220 | The same way that Fauci was supposed to be protecting us

01:17:28.180 | go viruses, and then fun. Function research. Victoria

01:17:33.500 | Newland was a label. Let me tell you something. Victoria Newland

01:17:36.460 | misinformation. Victoria Newland was supposed to be our

01:17:40.140 | chief diplomat with respect to Russia and Eastern Europe. And

01:17:43.700 | what did she do instead? She ginned up this conflict. How

01:17:47.700 | he ended up. We backed an insurrection in Ukraine in 2014.

01:17:52.780 | Jason, if you didn't like the insurrection of January six, let

01:17:55.380 | me tell you, you aren't going to like the insurrection that she

01:17:57.580 | staged in Ukraine. Because they brought in these Ukrainian far

01:18:01.500 | right nationalists as the muscle. And that is what we also

01:18:04.740 | bring. He bring big max. Did he bring big max with him? Did you

01:18:10.220 | say he brought big max to his power stride? He brought fast

01:18:15.260 | food to them? Yeah, no, you're not. But you're ignoring what

01:18:18.060 | SAC said. But no, no, I got it. I am not disagreeing with him. I

01:18:21.340 | think if you want to understand the roots of this conflict,

01:18:24.580 | nobody wants to be in a forever war. Yeah. But just be explained

01:18:28.900 | why he mentioned Victoria Newland. He mentioned her

01:18:31.740 | because she was the State Department official who was

01:18:35.100 | responsible for backing this insurrection of a democratically

01:18:38.900 | elected leader in Ukraine in 2014. named Yanukovych. Okay,

01:18:43.900 | Yanukovych was trying to was doing a balancing act between

01:18:48.020 | Ukrainian nationalists and Russia. And it was a very

01:18:51.140 | delicate balancing act. And we basically toppled him. And ever

01:18:55.260 | since then, the relations with the Russians over Ukraine have

01:18:58.100 | been headed south. If you're wondering why Putin sees

01:19:01.340 | Crimea, it was in direct retaliation for the coup that we

01:19:04.140 | backed in Ukraine in 2014. This is the origin of the conflict.

01:19:08.620 | And, you know, if you want to understand where this comes

01:19:12.620 | from, you have to go back to this. And the fact that Trump's

01:19:14.740 | willing to talk about is pretty incredible.

01:19:16.500 | I think that the good news for us is I think that heading into

01:19:20.500 | June and the debt fiasco that's looming, I think we're going to

01:19:25.500 | and I think this will help a lot, get distracted with

01:19:28.380 | domestic issues in the sense that it'll take some heat off of

01:19:31.940 | escalating all of this foreign adventurism. You know, this is

01:19:38.140 | such a scene like this is such a scene from wag the dog. Every

01:19:43.500 | time there's something inside the United States that we should

01:19:47.420 | really focus on. We have this wag the dog moment where we get

01:19:51.020 | distracted by some adventurism abroad, and we forget and we

01:19:55.020 | lose sight. So we have this East Palestine thing right now. In

01:19:58.820 | June, we're gonna have to come back to terms with this debt

01:20:00.780 | ceiling issue, which is a huge one, how we're going to resolve

01:20:03.660 | it. It's not clear. Just this week, the Federal Reserve

01:20:08.540 | basically said, Hey, folks, we're taking rates to five and

01:20:11.260 | a half plus, and they're going to stay there. That seems like

01:20:14.460 | no news. People just seem to digest it and move on. It's

01:20:18.740 | really incredible how we just find we're like, what is it

01:20:23.060 | Jason, the dog that chased the bumper and caught the car or

01:20:26.380 | whatever.

01:20:26.820 | Yeah, you caught the bumper.

01:20:29.020 | We got plenty of big problems here in the United States,

01:20:31.580 | plenty of big problems. And I don't know that wag the dog

01:20:33.940 | works anymore. Because I think the American people want, like

01:20:36.740 | I said, they want an American president to focus first and

01:20:38.900 | foremost on American problems. And even remember, Bush senior

01:20:42.180 | 91 won that war and still lost reelection still lost. So I

01:20:46.060 | don't think wagging the dog works anymore. It works for some

01:20:48.380 | short period of time, especially while the media are portraying

01:20:51.460 | this point, the air raid theater, that's eventually the

01:20:55.420 | people smart enough,

01:20:56.260 | you're so right. So that issue, think about Bush, Bush came off

01:20:59.700 | of the Persian Gulf War with like a 91 or 2% approval

01:21:03.380 | rating. I mean, we've never seen anything like it. But he

01:21:07.020 | violated a simple tenet of his domestic policy, which is read

01:21:09.980 | my lips, no new taxes, boom, lost. And it was not even close

01:21:14.460 | in the end. So I think you're right. I think people really

01:21:18.460 | care about the economy. Go Nikki Haley and do how much do how

01:21:23.460 | much debt do we want to go into over foreign wars? The only

01:21:26.900 | thing I ever liked about Trump was his policy of not starting

01:21:30.500 | wars and not getting into them. And Americans want to focus on

01:21:35.220 | I'm a balance sheet voter right now I'm voting based on who is

01:21:38.380 | going to be fiscally responsible, I mean, freeburger

01:21:41.580 | in the same boat here, I think

01:21:42.620 | we've got to be real careful in how we handle China, because you

01:21:44.980 | had Blinken on all the Sunday shows, basically denouncing

01:21:47.620 | them expressing outrage, that they might support the Russians

01:21:50.820 | acting shock shock that they could do that. We don't even

01:21:53.620 | have the ability anymore to understand that other countries

01:21:57.100 | do things in their own interest. And we can't accept that. And

01:22:01.300 | instead, we act as if foreign policy should be conducted

01:22:04.660 | according to this morality play that we've created. And if you

01:22:07.660 | don't do what we think is right, then we're gonna express all

01:22:10.860 | this outrage and condemnation at you. And somehow that's going to

01:22:13.300 | get you to violate your own interests. That's not the way

01:22:15.500 | the world works. And what we're doing right now, what we're

01:22:18.180 | doing right now is pushing China and Russia together into a new

01:22:22.580 | axis block. This is very foolish, very foolish, even

01:22:26.460 | during the Cold War. Okay, we work to keep Russia and China

01:22:30.820 | apart. And whatever you think of those regimes today, they were

01:22:34.820 | much worse back then. Remember, the Soviets, you had a Stalinist

01:22:38.380 | regime, the Chinese had Mao, those were the two of the three

01:22:41.500 | biggest mass murderers of the 20th century. And Nixon and

01:22:45.220 | Kissinger still went to China and shook Mao's hand and toasted

01:22:48.780 | him because it's important to keep China and the Soviet Union

01:22:52.580 | divided. And what are we doing today, we are basically pushing

01:22:55.740 | them together. With all this condemnation and outrage, it is

01:22:59.140 | not a smart strategy. Can't disagree. We need to be building

01:23:02.700 | bridges with India. That's a key key relationship. And China. I

01:23:06.620 | don't know why we're not figuring out what we have. Yeah,

01:23:09.140 | this is poisoning our relationship with India. India

01:23:11.700 | is the biggest democracy in the world. And our relations with

01:23:14.540 | them have gone south since this war, because they have a

01:23:17.540 | friendship with Russia that goes around. I would rather see Biden

01:23:20.700 | go to India and start building some bridges there. Yeah, I

01:23:23.460 | agree. I can't disagree. JK, how's your fundraising going for

01:23:26.700 | lunch on four? Thanks for asking. Great question. You

01:23:30.700 | know, we're doing that public 506 C public fundraising thing.

01:23:33.540 | And so I did a bunch of webinars and without doing a single in

01:23:37.100 | person meeting $51 million in requests came in, just, you know,

01:23:42.780 | to a type form, basically a form online. And now we're going to

01:23:46.020 | be starting in the next month after I get back from Japan,

01:23:49.300 | actually meeting with the, you know, big LPs in the world, and

01:23:52.380 | I want to make a trip to the Middle East and just go all

01:23:54.700 | around the world and meet all the big funds. So thanks for

01:23:56.820 | asking. Yeah, I think it's gonna change everything. Yeah.

01:23:58.620 | That's awesome. Can you imagine $52 million in commitments

01:24:04.020 | before actually doing the actual tour? That's awesome. Just out

01:24:07.140 | of the gate. And my last one was 44. And so I think this 506 C

01:24:10.580 | like I can be public about the fact that we're raising a fund.

01:24:13.260 | And so it's just absolutely amazing.

01:24:14.620 | Well, congrats. And I have one question for you.

01:24:16.420 | Yes, go ahead.

01:24:18.100 | Can you be replaced with an AI?

01:24:19.780 | The world's greatest moderator? I mean, it's not gonna make

01:24:22.500 | great jokes. Not for not for now. And oh, you know what, I

01:24:25.260 | had an interesting point about management fees in these funds.

01:24:27.660 | Just to circle back. Did you know, this is what I heard that

01:24:32.140 | benchmark during that worst vintage, you know, after I think

01:24:36.220 | the great financial crisis, or maybe it was the dot com was

01:24:38.340 | either of those. They took their management fees, because that

01:24:42.420 | fund was so you know, challenged. They deployed the

01:24:45.700 | management fees into primary investing, or I'm sorry, into

01:24:50.260 | follow on investing on their winners to regain the results.

01:24:53.940 | Can you imagine in this market, a VC who deployed capital in

01:24:57.980 | 2020 2021? Saying, you know what, we've got these management

01:25:01.940 | fees millions of dollars in the future, to pay for managing

01:25:04.900 | these instead of taking that money. I'm going to put that

01:25:08.380 | into your into the companies for my launch fund three tomorrow. I

01:25:12.140 | had a couple of opportunities. And I was like, you know what,

01:25:14.460 | I'm going to take some of the management fees and invest in

01:25:17.140 | some of those existing companies to try to goose the returns for

01:25:20.180 | my LPS. And so we're at 104% or 103% invested in the capital,

01:25:26.100 | just by just taking a couple 100 grand off of the management

01:25:29.220 | fees. And I'm like, well, this is a really interesting

01:25:30.740 | strategy. Like, why am I playing for the management fees? Or am

01:25:32.860 | I playing for the Mike, I'm paying for the Mike, right? I

01:25:36.180 | mean, you should be.

01:25:37.140 | Jason, by the way, it's not true that the AI can't tell jokes.

01:25:40.380 | Our friend, Billy tweeted how the AI told a joke in this the

01:25:46.420 | style of Jerry Seinfeld. Then he asked it to tell a joke in the

01:25:49.300 | style of Dave Chappelle and it refused. So the AI can tell a

01:25:52.180 | joke if it wants to. It's racist, but no only clean jokes.

01:25:55.980 | Oh, I see. It doesn't work blue.

01:25:58.900 | I guess I don't think every I don't think Dave Chappelle has to

01:26:03.900 | be blue. But it would not tell a joke about Dave.

01:26:07.900 | Wow. I mean, we got to get Sam. He's an iconoclastic. Like he

01:26:14.740 | would be Sam would be in the are all in 52.

01:26:19.020 | Well, by the way, actually, he's got a shot there. After our

01:26:22.140 | last episode, in which we were raising concerns about the AI

01:26:26.220 | bias, they published a blog post saying that the day after if

01:26:30.540 | bias has occurred, it is a bug, not a feature and they are

01:26:33.420 | trying to be even handed. So I'm glad they have that smart

01:26:37.180 | announced that and that's their standard. And we're going to

01:26:39.140 | hold them to that standard. But I'm glad

01:26:40.900 | well, they have to be public. Like this. Yeah, yeah. I mean, I

01:26:44.020 | read the blog post. It seemed reasonable. It's great. They're

01:26:47.100 | addressing it. And I also think they're now doing embedded

01:26:50.980 | citations. So somebody tweeted at me after we had the whole

01:26:53.220 | discussion about credit. And when they were doing facts,

01:26:56.620 | they're now saying, and they haven't made an announcement

01:26:59.700 | about this yet. But they were saying, according to this

01:27:03.580 | source, the following according to this source, so they're

01:27:06.420 | starting to source in the copy that's being written. So that's

01:27:09.300 | a big step. And then I was talking to Adam D'Angelo, about

01:27:13.420 | PO, which is an amazing app, you should try it. I think it's the

01:27:15.780 | best one out there right now of all the chats. Po is an app

01:27:19.220 | based on the core data set. And I asked a questions about the

01:27:22.140 | trip to Japan and the SECO and this and that. And it was

01:27:24.620 | extraordinary how well done the answer was with bullets. And

01:27:28.140 | then I asked him online, Hey, what about citations back to the

01:27:30.420 | original core questions? And he said, Yes, we're going to be

01:27:33.020 | adding that. So then I was thinking, wow, if you add to the

01:27:36.340 | core corpus, and then they link back to your answer. That's

01:27:40.180 | awesome for me as a person who's answered hundreds of questions

01:27:43.380 | on core to build my reputation. So I think Cora is, for me, I

01:27:47.580 | think Cora is the could be the Google I think Cora's got a

01:27:50.380 | better data set. And if they play that right, I think they

01:27:53.260 | could be better than chat GPT. And they said you have to say

01:27:57.260 | Po is based on the core data set data set, Po, it will answer

01:28:01.700 | questions like the best answers on core is that we're so you're

01:28:06.420 | we're saying, yeah, that's kind of interesting is using Cora as

01:28:10.260 | the primary data set. I'm sure it's using the rest of the web

01:28:12.620 | to and Wikipedia and everything. I think I don't know why they're

01:28:15.700 | calling it Po I think they should just do Cora chat bot or

01:28:18.100 | whatever. Yeah, but just try it. It's called Po download it. You

01:28:21.220 | can use it today. You want to know why I'm excited about that?

01:28:23.380 | Because you got a little tasty. Please. I got a little slice of

01:28:25.780 | Cora. Oh, good for you. Well, I mean, Cora was always like, are

01:28:28.580 | they ever gonna make money? Or are they just going to build

01:28:31.100 | this incredible data set and do nothing with it? Yeah. What did

01:28:33.980 | I say? I said, I said, AI is gonna be to the to basically

01:28:38.300 | SAS what mobile was to have one. Oh, you'll either get

01:28:41.180 | disrupted or get turbocharged by it. It's gonna be I think Cora

01:28:44.380 | is the number one player in AI going forward. I know that

01:28:47.820 | sounds crazy. But the fact that and I think Reddit also has this

01:28:51.980 | insane potential if Reddit had a chatbot because think about how

01:28:54.860 | many times people do a search and YouTube is the other one

01:28:57.300 | where they say, what's the best sci fi movie of the year or

01:29:00.580 | which directors make the best screenplays or whatever. And

01:29:03.180 | then they put the word Reddit at the end where they put the word

01:29:05.020 | core at the end, where they put the word YouTube at the end to

01:29:08.260 | just narrow down the corpus of where to find the answer. Go

01:29:10.740 | ahead, I've worked with you. I've known D'Angelo for 17

01:29:13.740 | years now. SmartCat. He was the CTO of Facebook when I worked

01:29:17.940 | there. The single smartest and best single smartest person I

01:29:22.780 | worked with. And then separately, one of the most

01:29:26.300 | absolute genuinely best human beings in the world. Can we get

01:29:29.340 | him out? He does. He doesn't. Is he not a good public speaker or

01:29:31.940 | something? Because I never hear him talk. I'd like to get him at

01:29:34.900 | all and summit me. Angela is just so superb on every

01:29:37.580 | dimension. We should get him on actually, just because I didn't

01:29:40.180 | know he was working in AI. He has a lot of interesting

01:29:42.380 | thoughts about, you know, social networking platforms, and

01:29:46.060 | and he's on the board of opening. Okay, that's really,

01:29:48.620 | oh, get him on the pod, or maybe you own summit. 2023. All right,

01:29:52.300 | everybody.

01:29:52.700 | He'll definitely make the anti establishment list.

01:29:54.460 | Definitely anti establishment. Yeah. Okay. So for the Sultan of

01:29:57.820 | sneaking out, he left and the dictator. And what do you want

01:30:03.860 | to be referred to now? passages, the peace passages,

01:30:07.940 | peacemaking? You are the saxophist. I'm the world's

01:30:12.620 | undisputed greatest moderator on the number one podcast in the

01:30:17.500 | world for now until the AI replaces you. Yeah, I trained the

01:30:20.540 | AI to replace your sacks. Ukraine, UK, UK, and Biden,

01:30:23.460 | Biden, Biden. No, Nikki Haley, no, stop making Nikki Haley

01:30:26.700 | happen. The end. The data set has been done. All right,

01:30:29.980 | everybody. See you next time.

01:30:36.180 | Rain Man David

01:30:37.220 | we open source it to the fans and they've just gone crazy.

01:30:43.980 | Love you.

01:30:44.980 | besties are gone.

01:31:03.900 | We should all just get a room and just have one big huge orgy

01:31:06.580 | because they're all like this like sexual tension that they

01:31:09.540 | just need to release.

01:31:10.340 | I'm going all in. I'm going all in.

01:31:28.420 | (spooky music)

01:31:29.480 | you

E117: Did Stripe miss its window? Plus: VC market update, AI comes for SaaS, Trump's savvy move

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