E91: SoftBank's $21B+ Vision Fund loss, signals of a bubble, macro picture, Trump raided by FBI

00:00:00.000 | How mad is Sax going to get when he sees my button situation today?

00:00:03.520 | I'm going to join you.

00:00:04.400 | Chamath, how are you doing?

00:00:05.160 | Oh my God.

00:00:06.360 | Look at the collar situation.

00:00:08.500 | Look at the button situation.

00:00:09.780 | Look at that.

00:00:10.920 | Oh, this is fantastic.

00:00:12.600 | Oh, hey, besties.

00:00:13.420 | Just got off the lake.

00:00:15.700 | Where?

00:00:16.160 | The lake?

00:00:16.700 | I just got off the lake, yeah.

00:00:17.880 | I was just on the lake with the boat.

00:00:19.320 | Lake Cuomo?

00:00:19.960 | Where were you?

00:00:20.920 | I was doing a little wakeboarding in Tahoe.

00:00:22.660 | Yeah, I was still wakeboarding.

00:00:23.520 | Me and Sax.

00:00:24.140 | Me and Nat took all five kids and we navigated the entire island of Sardinia.

00:00:29.940 | For eight days.

00:00:30.900 | Amazing.

00:00:31.600 | And by when you say we navigated, you mean the crew navigated and you ate seafood.

00:00:37.280 | Yeah, it took a village.

00:00:38.480 | All right, everybody.

00:00:56.700 | Welcome to episode 91.

00:00:58.380 | Episode 91 of the All-Star.

00:00:59.920 | in podcasts. Yeah, we're still here. Uh lots of news to discuss this week with me of course

00:01:04.440 | to chop it up from his deposition room, uh the war room, the Rain Man himself, David

00:01:09.060 | Sacks. How are you doing brother? Good. Big week for you. They're all big weeks. They're

00:01:14.780 | all big weeks. Yeah, you look tired. Well we're recording pretty early today. It's a

00:01:19.240 | little exhausting. You actually look really tired. What are you talking about? I just

00:01:22.940 | got off the lake. I feel fresh. I was just wakeboarding this morning. I'm like Tahoe.

00:01:26.640 | Oh, okay. Refreshed. I'm refreshed. Uh and of course in front of his uh nine dollar clip

00:01:32.600 | art uh that he blew up on easyprince.org, the Sultan of Science himself, David Friedberg.

00:01:37.520 | How are you sir? Always great to be with you J Cal. Are you working? It boosts my self-esteem

00:01:42.760 | and my morale to be with you every morning that we get to connect over Zoom. Well I'm

00:01:47.320 | glad that your performance has been stratospheric the last three weeks. You're going on a hot

00:01:51.240 | streak. Let's see if you can continue it on episode ninety-one and missing many buttons

00:01:55.540 | this week. Uh.

00:01:56.540 | Uh.

00:01:56.540 | We've got at least a three or four button August going. How are you doing uh dictator

00:02:02.700 | uh from your island, the remote island? Did you uh you you invaded an island? Markets

00:02:08.520 | go up another five percent and one more button comes undone. Oh I love it. So this is twenty

00:02:12.960 | percent up and we could go to twenty-five. That's a bull shirt. Daddy's back. The more

00:02:17.500 | bullish he gets on the market, the more he unbuttons. Daddy's back. So the buttons. Are

00:02:21.040 | the low rise jeans on right now or are you wearing shorts? What are you wearing? Show

00:02:24.300 | us those stick legs. I'm wearing these beautiful linen

00:02:26.440 | shorts. Can you stand up and show us? Yeah, come on. Give us a three sixty. Come on. Let's

00:02:30.560 | see. Let's go down. But these are the most beautiful. Oh inner thigh. That's a little

00:02:36.660 | too much thigh. Yeah. That's like a chicken wing. You guys like this? It looks tight too.

00:02:41.880 | Very tight. Are you? Yeah, those are definitely yours. Are you wearing like a children's size

00:02:45.620 | or something? Is that a junior size? I like, you know, I like the tighter sizes. You do?

00:02:50.340 | I do like the tighter sizes. I think they uh they they fit my body tight. Accentuate all

00:02:55.620 | the little bumps. Yeah. I like the tighter sizes. I think they uh they they fit my body

00:02:56.340 | tight. Accentuate all the little bumps and nodules. Too much information. Alright, let's

00:02:59.940 | start with um there's a lot to talk about this week. I think one of the most interesting

00:03:04.660 | things last week we're talking about it in the group chat uh that doesn't exist. Uh Vision

00:03:11.000 | Fund's $21 billion investment loss for the quarter. Masayoshi-san did a really great

00:03:16.340 | uh YouTube video. I sent it around. Did he get any of you guys watch the video? Yes.

00:03:20.100 | No. Oh okay. It's it's really interesting to watch. We'll put it in the show notes.

00:03:23.980 | It's like a six minute interview he put on his

00:03:26.240 | earnings page, right? Like right when they put out quarterly earnings, he's like, here's

00:03:29.920 | my interview. Yeah, they he you know, he comes to a podium and basically talks about uh the

00:03:34.360 | Vision Fund. Obviously, if people don't know, the Vision Fund one was $100 billion, largest

00:03:38.220 | venture fund ever raised um and SoftBank's current market cap is 66 billion. Here's the

00:03:43.940 | quote from the FT article sunset on Monday that SoftBank would now subject itself to

00:03:48.920 | dramatic cost cutting exercise uh after a $59 billion investment gain at the two Vision

00:03:55.860 | Funds almost completely reversed over the past six months. They were up almost $60 billion

00:04:00.700 | at the peak and it came crashing down. Masa kicked off the presentation showing portraits

00:04:04.780 | of Tokugawa Tokugawa Gawa uh Yasu. This is the uh founding shogun of Japan's uh Tokugawa

00:04:13.820 | Shogunate and uh he ruled Japan for six. I mean, I'm killing this. It's such a long intro.

00:04:19.940 | God, it's so hard. Yeah, I mean, but it was just so great. Let me just play a clip for

00:04:24.620 | you. Here. Here's a 68 second clip and we'll we'll talk about it right after and then we'll

00:04:28.340 | get into what all this means. This is um portrait of Tokugawa Yasu. He actually made a big loss

00:04:35.940 | against Takeda Shingen and came back in the background of that Tokugawa Yasu had to face

00:04:42.680 | Takeda Shingen which is much much larger army than theirs and uh most of the allies actually

00:04:49.860 | said uh this is gonna be the losing battle so that they should not go for it but that's

00:04:54.620 | actually better to stay at the castle however Tokugawa Yasu didn't want to lose his face

00:05:00.940 | so that he get out from the castle had a battle made a complete loss and suffer and came back

00:05:07.520 | and that actually learn lesson he tried to remember and remind his own learnings and

00:05:14.140 | put it into this drawing so since the foundation of SoftBank Group I made a two consecutive

00:05:19.800 | quarters loss so previous quarter and this time quarter. I made a two consecutive quarters

00:05:20.620 | loss so previous quarter and this time quarter. I made a two consecutive quarters loss so

00:05:21.620 | previous quarter and this time quarter. I made a two consecutive quarters loss so previous

00:05:22.620 | quarter and this time quarter. I made a two consecutive quarters loss so previous quarter

00:05:23.620 | quarter consecutively, we made 3 trillion yen lever of the loss. So in total, 6 trillion yen loss

00:05:32.380 | was made in the past six months. So I believe I need to remind that myself.

00:05:38.820 | Pretty spectacular loss. And then he goes on to take some Q&A. And this is the, I guess,

00:05:44.820 | the killer quote. When we were turning out big profits, I became somewhat delirious. And looking

00:05:48.540 | back at myself, I am quite embarrassed and remorseful. You remember, of course, and he

00:05:53.560 | complained a little bit in this whole thing about how there was a giant bubble without ever

00:05:57.840 | recognizing that he kind of created the bubble with a $4 billion check to WeWork at a $47 billion

00:06:03.580 | valuation after a 20 minute meeting with Adam Newman. This chart is pretty incredible. This is

00:06:09.140 | the net income quarterly. Essentially, you can think of SoftBank as like a holding company of

00:06:14.600 | a bunch of different assets, including Alibaba, previously Uber.

00:06:18.460 | And all of this Vision Fund stuff, 97% decrease in terms of deployment of capital. So if you look at

00:06:24.460 | capital deployment as well, nobody ever put this much money to work, especially in privates.

00:06:28.540 | The second chart, if you look in Q1 of 2021, they put 20 billion into work. And then Q1 this year,

00:06:37.660 | they're putting 600 million to work. Just quick reflections on this, what we saw here with

00:06:43.820 | Masayoshi is on deploying $100 billion at the top of the market into and

00:06:48.380 | maybe basically creating the market top. Chamath, are there lessons here or takeaways for you?

00:06:53.500 | I mean, I think that people don't seem to understand that

00:06:57.180 | if you're going to attempt to be great, there are going to be moments where

00:07:03.260 | you look the exact opposite of great. You know, the guy that takes the final shot is the same

00:07:08.620 | guy that can miss the final shot. And here is a guy over his, you know, 50 year career has had

00:07:17.100 | some huge ups and downs. And he's going to be great. And he's going to be great. And he's going to be

00:07:18.300 | great. And he's going to be great. And he's going to be great. And he's going to be great. And he's

00:07:18.460 | going to be great. And he's going to be great. And he's going to be great. And he's going to be great.

00:07:18.540 | This is also the same guy that found a way to rip in 25 or $30 million and made 125 billion off of

00:07:25.980 | Alibaba. That's the same kind of person who has that kind of risk tolerance. He was for seven

00:07:32.060 | minutes or something, the richest person in the world, and then lost 99% of his wealth in the

00:07:36.780 | dotcom bubble. I have enormous respect for a person like this, because I feel like it takes

00:07:42.140 | enormous amounts of courage. I've said this before, most people jibber jabber about investing

00:07:47.660 | and all of this stuff. But I think that's the same kind of person who has that kind of risk tolerance.

00:07:48.220 | And he's going to be great. And he's going to be great. And he's going to be great. And he's going

00:07:48.380 | to be great. And he's going to be great. And he's going to be great. And he's going to be great. And

00:07:48.460 | when push comes to shove, they crumble like little bitches and run into mommy's coattails.

00:07:53.580 | It's hard to put lots of money to work. And this is a guy that's done it. So the same person that

00:07:59.740 | can make 125 billion turns out is the same person that can lose 30 billion. And so one thing is,

00:08:07.420 | I would just keep in mind that this is a resilient guy who seems to land on his feet.

00:08:11.820 | And the second thing that nobody talks about is how smart Saudi Arabia and Abu Dhabi were

00:08:18.140 | in how they structured the investment into the vision fund because half more than half

00:08:21.580 | their investment is in preferred equity, which is effectively debt that pays a coupon.

00:08:25.820 | And you see it now where SoftBank, by the way, who has been pretty smart in how they've managed

00:08:32.300 | their Alibaba position, have been using these derivatives and forward swaps to be able to

00:08:36.860 | sell and manage their liquidity. So it turns out that, you know, even if the vision fund

00:08:41.740 | breaks even Saudi Arabia and Abu Dhabi will have made money, because I think they can't pay to

00:08:48.060 | 6% coupon on, you know, $50 billion is a lot of money over six, seven, eight, nine years. It's a

00:08:54.860 | lot. SoftBank has found a way to sell down 25% of Alibaba, which is no trivial feat for half a

00:09:02.060 | trillion dollar company. And this guy gets to keep swinging. And if he you know, hits it one more

00:09:08.220 | time, he'll end up with half a trillion. This chart is pretty great. Sax, if you look at this,

00:09:12.620 | this is the gain and loss on investments at the vision fund. You can see the first vision fund

00:09:16.940 | racing up. Sax, you're the first one to do that. You're the first one to do that. You're the first

00:09:17.980 | one to do that. You're the first one to do that. You're the first one to do that. Then coming down,

00:09:19.020 | I think after that summer of IPOs that we had in the Airbnb, Uber days, and then a huge peak run

00:09:27.100 | up in 2021. And then come in crashing down. Apparently he wasn't selling any portion of this

00:09:33.020 | that to me was a big lesson of like, maybe pairing some of these winners if it sold 10 or 20% on the

00:09:37.500 | way up. This could look like a completely different outcome. But I agree with each

00:09:42.460 | month he swung for the fences and there was downside protection built in for the LPS into

00:09:47.900 | some of these sacks. What are your thoughts? Any lessons here in terms of the impact on our overall

00:09:52.060 | ecosystem or that you can take as a capital allocator yourself?

00:09:55.260 | Well, Jason, I think Masa did something you could never do, which is admit a mistake.

00:10:01.900 | Oh, here we go. Wow. Personal quick.

00:10:05.420 | Well, when I have my first mistake, I'm certainly willing to admit it. I'm waiting.

00:10:11.420 | Imagine that you ran 100 billion for sovereigns instead of 100,000 for doctors and dentists.

00:10:17.820 | You can kind of put yourself in Masa's position.

00:10:21.020 | Oh, I love sacks in the morning. Sacks in the morning is like a hot cup of coffee.

00:10:25.900 | Don't wake sacks up early, man. That's a big lesson here. You make sacks go to a 9:00 AM,

00:10:29.980 | he's coming in early. It's like a bear has been hibernating and you poke him.

00:10:32.940 | Wow.

00:10:34.540 | You know, look, I think that SoftBank obviously made some decisions that were,

00:10:38.300 | you know, they were sort of peak decisions. They were a little bit bubbly. They didn't take

00:10:43.580 | chips off the table when they probably should have. It's easy to fall into these bubbles because,

00:10:47.740 | you know, the psychology of it is so powerful. And as, you know, Bill Gurley's pointed out,

00:10:52.460 | these bull markets are more like a sawtooth, which is they gradually go up for 9, 10, 11, 12 years.

00:10:58.780 | And then when they end, they just, you know, it's like an elevator going down. So,

00:11:02.780 | you know, if the market had continued for another couple of years, Masa probably would

00:11:06.620 | have made a lot of money. But in any event, look, he took responsibility for the losses.

00:11:11.500 | This was a very, you know, sort of culturally Japanese speech. I mean,

00:11:17.660 | he didn't commit seppuku at the end, but it was kind of the-

00:11:21.660 | He was heading that direction. They might have had to move the camera off.

00:11:24.540 | Oh my God, what is he doing with that sword?

00:11:27.100 | It was the verbal equivalent, basically. And look, he took responsibility. What else can you do?

00:11:32.060 | Now, one thing I would quibble about is the idea that SoftBank caused this bubble. You know,

00:11:38.780 | it wasn't just SoftBank. We had tons of new money.

00:11:41.180 | Tiger comes to mind. Yeah.

00:11:42.620 | Tiger had huge funds. They were deploying very quickly, but there was a lot of so-called tours

00:11:47.580 | money, basically money from crossover funds. Investors who are not primarily VCs came into

00:11:52.540 | the ecosystem over the last few years, and a lot of that was driven by sovereigns and by liquidity.

00:11:58.140 | So, you know, you can't forget that we had $10 trillion of liquidity pumped into the system over

00:12:04.300 | the last couple of years, and many billions of that found its way into the tech ecosystem.

00:12:09.180 | And fundamentally, you know, VC is not that scalable. There was an attempt

00:12:13.820 | to make it scalable. There was an attempt to push more money

00:12:17.500 | into VC based on- Why isn't it scalable?

00:12:20.220 | Why isn't it scalable? Because people have tried, right? This is not the first time.

00:12:23.500 | It's a craft business. I mean, that's why we- What does it mean?

00:12:26.300 | It is scalable. It's just that if you try to scale it, your returns will go to zero.

00:12:30.620 | Explain what that means. Yeah.

00:12:32.140 | Well, it's kind of the same thing, right? Like, I want to just critique the strategy

00:12:35.660 | for a second because, you know, we're talking about as if market conditions caused these

00:12:40.220 | massive write downs, and that is the only reason that these funds have suffered. But, you know, if

00:12:46.940 | you read-

00:12:47.420 | Yeah.

00:12:47.580 | A lot of the stories of Masa's investments in a number of these companies, and the full list

00:12:52.860 | is available and how much he invested. There are many, many stories, and I've heard many of them

00:12:56.860 | personally from CEOs that have met with Masa and raised money from him. You go into Masa,

00:13:01.660 | you tell some- The bigger the story you tell, the more excited he gets, the more of the world you

00:13:05.340 | can capture. And you go in and you're raising $100 million, he's like, "I'll invest $400 million."

00:13:09.980 | You say you're raising $25 million, he's like, "I want to give you $150 million." And his motivation

00:13:16.540 | was always-

00:13:17.340 | Yeah.

00:13:17.500 | "I want to give you more capital so you can go capture the market."

00:13:20.220 | And the problem in that model is that by giving you so much money, capital becomes your primary

00:13:26.380 | asset as a business. And capital needs to be the fuel that enables your assets as a business

00:13:32.140 | to accelerate. But as soon as capital itself becomes your primary asset, the business is

00:13:37.180 | doomed to fail. And that's a really key point. If you- Let's say- And let me be very specific

00:13:42.300 | about what I mean. Let's say you have a direct-to-consumer business that requires online

00:13:46.620 | marketing.

00:13:47.260 | Yeah.

00:13:47.660 | And your business grows well, you spend $100 to acquire a customer. Suddenly someone says,

00:13:52.460 | "Here's a billion dollars to spend on acquiring customers." As soon as you have to start deploying

00:13:56.140 | a billion dollars, your cost of acquisition goes up, the number of customers per dollar spent goes

00:14:00.620 | down, and the business itself starts to look upside down and fail. And that's what happened

00:14:04.940 | with a number of these businesses that Masa put in, and he put oversized checks in.

00:14:08.940 | WeWork is a really well-documented example in terms of what happened.

00:14:12.220 | When they started to accelerate their growth beyond the natural course of the business because

00:14:16.540 | of the amount of capital.

00:14:17.180 | Yeah.

00:14:17.420 | That they took, it really started to hurt the fundamental profitability and unit economics

00:14:21.420 | of the core assets of the business. And this strategy theoretically can work to a degree,

00:14:28.140 | but Masa took it to a level that had not been seen before. I think I highlighted for you guys,

00:14:32.220 | like back in 2011, I think when Andreessen Horowitz, they pitched me on this idea. I was

00:14:37.900 | trying to raise $25 million in my company. Mark was like, "We'll give you $40 million. You can

00:14:42.300 | accelerate your growth." And he's like, "We want you to go capture the market." And Peter Thiel

00:14:45.500 | always used these terms, "Go capture the market."

00:14:47.100 | And blitzscaling, Reid Hoffman.

00:14:49.580 | And blitzscaling, yeah. Reid Hoffman with blitzscaling. And the motivation is,

00:14:53.500 | "Look, we'll give you more money because the core asset of the business works,

00:14:57.660 | the core assets of the business work. So the money should be more fuel for the fire."

00:15:01.260 | The problem is if you overindulge, if you put too much money in and the asset cannot handle that

00:15:06.700 | much capital, the whole thing collapses. And there's so many documented examples of this in his

00:15:11.740 | portfolio. And I think that the strategy is worth highlighting that there are some issues with that

00:15:16.540 | strategy.

00:15:17.020 | There's a lot of technology across all these business categories. It doesn't always work.

00:15:19.660 | Right.

00:15:19.900 | The core issue here, I think, is, and then I'll go to you, Saxon, then Jamath. The core issue here

00:15:24.300 | that you're describing is exactly correct. And it really is up to the founder to decide what they're

00:15:27.820 | going to do with that capital. The WeWork example is so instructive because they were buying

00:15:31.820 | undermarket buildings in the Tenderloin and then marking them up to Class A office space and getting

00:15:38.860 | those prices. Once they got the masa money, he started buying Class A and offering it at Class B

00:15:44.060 | prices and flipped the whole business upside down.

00:15:45.900 | Right.

00:15:46.140 | The rate at which you can deploy

00:15:46.940 | capital does not flex. Right. And so in all businesses, understanding the rate at which you

00:15:52.060 | can deploy capital to grow is critical to understand how much capital you can raise.

00:15:57.100 | And then if you raise too much money and you flex beyond what the natural condition of the

00:16:01.420 | business is in terms of capital deployment, the economics fall apart and the business itself looks

00:16:05.980 | terrible. And eventually you will have a write down.

00:16:08.220 | And the distraction on the founder is the key. I mean, look at what Adam Neumann,

00:16:11.820 | he was easily distracted. He started buying surf machines and companies and starting kindergarten.

00:16:16.060 | Because you can now.

00:16:16.860 | Naturally deploy that much capital. So you find unnatural ways to deploy.

00:16:19.660 | Let me build on that point. I think there was a belief on the part of SoftBank that they did

00:16:23.100 | publicly espouse, which is that they could be the kingmaker.

00:16:25.900 | Totally.

00:16:26.700 | And in fact, you know, we had some startups that were in competitive markets and SoftBank would

00:16:31.100 | basically announce that we're going to be anointing, we're going to be picking a winner,

00:16:34.380 | anointing a winner and writing them a huge check. And everyone kind of had to play along because if

00:16:38.780 | your competitor got that $100 or $500 million check, then you would be presumably way behind.

00:16:45.100 | So there was this belief that they were going to be anointed. So there was this belief that they

00:16:46.780 | could be a kingmaker and make the difference. And I think that what we saw is that for whatever

00:16:51.340 | reason, partly because of the dynamics that Freiburg's talking about, that that strategy

00:16:55.660 | just didn't really work that well. And what it really goes down to is that VCs can be helpful,

00:17:01.340 | but they don't ultimately cause the winning companies to be the winner.

00:17:06.860 | So this idea that you could be a kingmaker, I think was a little bit flawed.

00:17:11.100 | And I think one way that Tiger actually improved on this model was that they never tried to

00:17:16.700 | be a kingmaker. They actually went the other direction, which is, we're going to own less

00:17:20.860 | of your company. They tried to be passive, non-dilutive capital. And they would do high

00:17:26.300 | price rounds with reasonably sized checks. But they didn't try to go for 25%, 30% ownership

00:17:32.300 | at a late stage. And founders did like that model better. Now, as it turned out, they both had the

00:17:37.660 | market timing wrong. But I think this kingmaker aspect was a problem. One other aspect of that is

00:17:46.620 | that they were not really a kingmaker. And I don't want to beat up on SoftBank too much. I'll

00:17:48.460 | say something nice about them in a second. But I think one of the mistakes they made is you'd

00:17:52.940 | see them writing multi hundred million dollar checks into companies that were at a very,

00:17:57.900 | very early stage.

00:17:59.100 | Pre-product market fit.

00:18:00.380 | Pre-product market. Companies, frankly, that we thought were like seed investments.

00:18:03.820 | Brandless was the perfect example. It was a company that made soaps and dishwashers and cereal,

00:18:08.940 | but they had no brand on it. It was like Uniqlo of this. And they gave them, I think,

00:18:13.180 | $200 million. And I was like, this is a seed stage company. It makes no sense.

00:18:15.820 | Right. Right.

00:18:16.540 | Right. I mean, look, they wrote like $500 million seed checks into robotics companies effectively.

00:18:21.340 | And it's because the SoftBank had a thesis. And I think sometimes, again, this goes back to

00:18:28.140 | kingmaker, if you're a VC and you think you're the one with the thesis and you're the one who's going

00:18:33.900 | to make the difference, it's actually a seductive fallacy to fall into. It's the founder who has the

00:18:39.340 | thesis. And you can only do so much to help and you can't really force it. And so I think they

00:18:45.100 | ended up making some kind of a big mistake.

00:18:46.460 | Yeah.

00:18:46.940 | And they ended up cutting some really big checks into some companies that were really risky.

00:18:50.220 | And the way that we do growth investing is that it's milestone-based. The size of the

00:18:57.420 | check is proportional to the amount of proof that the company has.

00:19:01.420 | Right.

00:19:01.980 | And look, the nice thing I'll say about SoftBank is recently, we've actually done some SaaS deals

00:19:05.580 | with them that I think are some really good deals. And they've written checks that I think are

00:19:09.820 | appropriate to the size of the company and the amount of proof they have. And they've been really

00:19:13.980 | easy to work with. And I look forward to doing more deals with them.

00:19:16.380 | But I think it would behoove them to do more deals like that, where again,

00:19:21.180 | check size is related to proof.

00:19:22.620 | I think that SoftBank, in hindsight, made one critical, critical error and only one.

00:19:29.260 | And everything else was sort of a fait accompli with that one error,

00:19:34.460 | which is that in their fund documents, they made this a 10-year fund.

00:19:38.700 | Now, let me explain why is that an error. That is the status quo for all these funds. And

00:19:46.300 | the more nuanced part of that decision to make it a 10-year fund is that your investment period

00:19:50.940 | is only five years. So you're only allowed to put the money in for the first five.

00:19:55.340 | And then you have to basically manage the portfolio because there's an expectation that you

00:20:00.140 | raise a new fund. So if all of a sudden you have $100 billion in a five-year investing life, the

00:20:05.980 | math says, "Oh my gosh. Okay. Well, I need to put 20 billion out per year." And then you try to look

00:20:11.420 | for, I don't know, let's say 50 companies a year, while the mean check size now, all of a sudden,

00:20:16.220 | it balloons to 400 million. That was the error. You see afterwards, the very, very smart private

00:20:24.780 | equity folks who saw that that was the error fixed it. So Blackstone, Silver Lake, when they came on

00:20:32.380 | the heels of SoftBank, what they did was they raised funds with a 15 and 20-year life. And what

00:20:38.460 | that allows them to do and what it would have allowed Masa to do in this situation was just

00:20:43.660 | slow it way, way down. Robert Leonard

00:20:46.140 | Pace yourself.

00:20:46.700 | Adam Draper And do fewer deals with much more capital,

00:20:50.460 | and then be patient and say, "I'm going to have a 10-year investing life."

00:20:53.340 | And I think that that would have saved them. And they would have looked incredible right now

00:20:58.060 | because they would be the kingmaker in a moment where there is no money flowing into venture

00:21:02.300 | and early-stage tech. So in my opinion, I think it was just that it was such an ambitious feat

00:21:07.500 | that when it came time to execute, whoever was really in charge of those details

00:21:11.660 | kind of fucked it up. And they should have realized the math didn't work

00:21:16.620 | for a five-year fund life. And they should have made it a 10-year investment life,

00:21:21.900 | which would have put a 20-year fund life on the thing. And I think they would have been fun.

00:21:24.700 | Robert Leonard Yeah. I mean, if you look at it as 60 months,

00:21:26.700 | maybe you take out August and the holidays, you got basically 50 months to deploy 100 billion.

00:21:31.260 | It's 2 billion a month. 500 billion a week. I mean, how do you even process that many deals?

00:21:36.460 | It's impossible.

00:21:37.100 | Adam Draper The quality of the diligence

00:21:38.540 | by necessity has to go to zero.

00:21:41.100 | Robert Leonard Yeah. It was a crazy strategy.

00:21:43.900 | Adam Draper If you can breathe, you get money.

00:21:45.820 | Robert Leonard Yeah. If you can breathe, you get money.

00:21:45.980 | Adam Draper If you can get a meeting, you get the money.

00:21:47.980 | Robert Leonard Basically, I mean,

00:21:49.420 | and if they had just, I'll say there was one-

00:21:52.940 | Adam Draper Sorry, Jason, one last thing.

00:21:54.060 | Robert Leonard You go ahead.

00:21:54.460 | Jason Wong No. And it forces you to have a team that is so

00:21:58.620 | broad and large and diffuse. That is not this game. This is another thing I would love for us to talk

00:22:04.860 | about.

00:22:05.020 | Adam Draper Correct. Correct.

00:22:05.900 | Robert Leonard Investing has never, will never,

00:22:09.340 | and is not ever a team sport. Okay?

00:22:14.300 | Jason Wong Explain.

00:22:15.020 | Robert Leonard It is like basketball.

00:22:15.900 | Adam Draper You can be on a team, but you are Steph Curry,

00:22:19.500 | or you are not Steph Curry. You are Draymond Green, or you're not Draymond Green. You are LeBron James,

00:22:24.540 | or you're not. There are J.R. Smiths on a team. There are Tristan Thompsons on a team.

00:22:28.940 | Jason Wong E.

00:22:29.580 | And you come together, and the team can win a championship,

00:22:32.380 | but there are these exceptional individuals.

00:22:36.300 | Adam Draper Yes.

00:22:36.940 | Robert Leonard And the firms that have really done well

00:22:39.820 | consistently over decades embrace that philosophy. Benchmark, Sequoia, you know,

00:22:45.820 | these guys don't try to create this team-oriented, glad-handing approach,

00:22:50.300 | but they also don't allow the teams to get so diffused that there are 500 people running

00:22:54.300 | around ripping money in because you basically then return the beta of the market. And if the

00:22:58.780 | market doesn't look good in that vintage, then all of your returns look pretty crappy.

00:23:03.340 | Jason Wong The lesson for me in all of this is,

00:23:05.100 | I think, we talk about riding your winners on the show. That came from, just so people understand,

00:23:09.340 | when we said ride your winners, and it's famously in the opening song here, what we were talking

00:23:14.300 | about was like, don't sell your winners. Don't sell your winners. Don't sell your winners. Don't sell

00:23:15.740 | your entire position, like when Sequoia sold their entire Apple position or other people have done.

00:23:20.380 | But pairing your position would have changed this whole story. If he had paired 10%,

00:23:23.900 | 20% of some of these names that were breaking out along the way.

00:23:25.820 | Ben Chklovski I disagree with that, too.

00:23:26.940 | Jason Wong I think that's insane.

00:23:27.500 | Ben Chklovski Oh, why? Go ahead.

00:23:28.860 | Jason Wong That's the dumbest idea in the world.

00:23:30.460 | Ben Chklovski I think the opposite. He would have had it up.

00:23:32.620 | Jason Wong A year ago, Sequoia just put out an entire

00:23:35.580 | document and a roadmap for becoming an evergreen fund. And I read that document.

00:23:41.580 | And what I thought to myself is, all of this looks incredible unless the market goes down.

00:23:45.660 | Jason Wong And then the market went down.

00:23:47.020 | Ben Chklovski And then the market went way,

00:23:48.940 | way down. Why? Because their whole thesis is we're going to park and hold money. Well, okay.

00:23:53.020 | But they also allowed a revolving liquidity mechanism for their LPs.

00:23:57.420 | Jason Wong Every year.

00:23:58.140 | Ben Chklovski You're a cancer foundation,

00:23:59.820 | and you want to fund cancer research, and you expect Sequoia to give you back money.

00:24:03.580 | You fill out a form, and Sequoia basically fronts you the money. Well, excuse me,

00:24:09.180 | but you can see how all of a sudden this can very quickly get out of control,

00:24:12.540 | because then where does Sequoia get that money? They'll have to borrow it.

00:24:15.020 | Jason Wong Or a liquid

00:24:15.580 | aid. Ben Chklovski

00:24:15.820 | Some positions.

00:24:16.300 | Jason Wong But the whole point is to not liquidate positions. This is what they said.

00:24:19.420 | Ben Chklovski Yeah.

00:24:19.820 | Jason Wong So my point is, I really think,

00:24:21.500 | and David said this before, I think a VC's job is to be a VC. It's hard enough to do that job well.

00:24:26.700 | And if you think that you're going to cascade across all asset classes and do better than the

00:24:32.220 | market, it's an extremely high bar that creates tremendous pressure and forces you to bring things

00:24:39.180 | on like debt and all of these leverage lines, which when markets go up will work in your favor,

00:24:45.340 | but

00:24:45.500 | can very quickly turn against you.

00:24:47.180 | Ben Chklovski I disagree completely,

00:24:48.540 | because when if you look at when you're in a private company, and you're you own some private

00:24:52.140 | shares, you know, the revenue, you know, the velocity, you know, the management team, you have

00:24:55.580 | more insights than everybody, you got a massive information edge, because it's all based on

00:24:58.700 | insider information before it's public. And pairing your positions in privates can be amazing,

00:25:04.540 | because you have some overvalued company because someone like Masa or Tiger comes along and over

00:25:08.860 | values it. So for venture funds, I think when you start hitting these 50 100x pairing 10% pairing 20

00:25:14.140 | percent along the way, you're going to be able to get a lot of value out of it. And then you're going

00:25:15.420 | to be able to get a lot of value out of it. And then you're going to be able to get a lot of value

00:25:16.300 | out of it. And then you're going to be able to get a lot of value out of it. And then you're going to

00:25:16.540 | get a lot of value out of it. And then you're going to get a lot of value out of it. And then you're

00:25:16.700 | going to get a lot of value out of it. And then you're going to get a lot of value out of it. And

00:25:16.860 | these private names, especially, would have been brilliant, you're saying don't distribute and

00:25:20.780 | just hold on and use data and give people give your LPS of all liquidity. No, no, no, no, no, no,

00:25:25.820 | I'm saying if you have the opportunity to sell in secondary, you should pair your position in your

00:25:31.980 | winners. Two or three times. I'm not saying that this would be a different position.

00:25:37.740 | No, but like you're using soft, you're using Apple and Sequoia as an example,

00:25:42.460 | you do remember the trajectory of Apple basically went to a $4 billion market cap

00:25:47.100 | for years languishing. I mean, the idea that Sequoia would have held those shares because

00:25:51.900 | they had some proprietary views ludicrous. Why is it ludicrous? What if they just had a philosophy?

00:25:57.260 | That company was on death's doorstep. You can see the YouTube videos when Steve Jobs came back,

00:26:02.380 | he said, we may not make it. Yes, but Chamath that in that that is part of the

00:26:07.660 | opportunity. But putting that aside, that's exactly what Sequoia is doing is they're saying

00:26:11.260 | we want to hold the legendary companies, the legendary brands with the great founders.

00:26:15.420 | That's all easy in hindsight. How do you do it today?

00:26:19.020 | Well, is Unity a legendary company? Or should you have distributed at $165 a share?

00:26:25.500 | Well, I'm saying

00:26:26.620 | That's an extremely hard question.

00:26:27.900 | And I'm saying you can mitigate that question by pairing your position 10 20%.

00:26:32.620 | So you have the best of both worlds. So Axe, what do you think?

00:26:34.540 | Well, I think it's it's hard to pare down a position while the

00:26:37.580 | company is still private because the companies don't don't want you to buy and large. But

00:26:43.580 | but once they do become public, then the question is when you distribute and we talked about this,

00:26:48.700 | I think it sounds like SoftBank was sitting on quite a few large public positions

00:26:52.860 | and could have distributed I'm not fully familiar with their structure. But given

00:26:56.860 | that they had all this debt, seems like you'd want to pay off all the debt as soon as you could.

00:27:02.460 | And missing the chance to do that.

00:27:05.980 | They had a preferred coupon that

00:27:07.500 | they had to pay PIF and an idea every year, I think it's like three or $4 billion. It's well,

00:27:12.620 | it's documented, but that's the 6% that they that they were owed on their $50 billion.

00:27:17.100 | But did they pay it off?

00:27:19.580 | The

00:27:20.540 | way they have to pay it every year.

00:27:22.060 | Yeah, they did it. I mean, look, I would just say these bubble it's easy,

00:27:25.660 | you know, hindsight is 2020. It's really easy to point out these mistakes after the markets cratered.

00:27:31.180 | You know, my experience with these bubbles, whether you go back to 1999, or 2021, is when you're in

00:27:37.420 | them, they're very powerful psychologically, you know, everyone's talking about how everything's

00:27:41.580 | going up. And we I think actually had some really good commentary on the show about back in November

00:27:46.540 | about how it could be the peak, how it could be all liquidity fueled. We didn't know for sure. But

00:27:52.300 | there were some pretty good predictions on this pod. But by and large, it's it's pretty hard to

00:27:57.180 | know whether you're you know, whether there are grounding metric that you use,

00:28:02.140 | I'll open up to freeberg and then everybody else went to know that the market is

00:28:07.100 | overheated. Freeberg is or something you look at and go, okay, we've disconnected from reality,

00:28:11.500 | price to earnings price to sales. Some valuation metrics are the things you look for. So you know

00:28:18.460 | that this is overheated, and maybe it is time to pair positions. What would have you learned over

00:28:23.020 | now, our third collective down market valuation trophy hunting, I would say is a pretty good

00:28:30.860 | indicator of things being things being explain what that is in a heated market.

00:28:36.780 | Like if the

00:28:37.740 | the businesses, the CEO, the founder, the venture firms, everyone is all about how

00:28:47.500 | much you can mark up your investment, as opposed to talking about the quality of the business and

00:28:53.020 | the quality of the earnings. And then you revert back, as we just recently did to now people

00:28:58.620 | talking about, okay, how strong are the gross margins of this business? How effectively can

00:29:04.060 | they deploy capital? What's the return on invested capital?

00:29:06.460 | And then you revert back, as we just recently did to now people talking about how effectively can they deploy capital?

00:29:07.340 | key metrics around the fundamentals of the business versus the value that the market is willing to pay

00:29:13.500 | for the business. And the more heated the market gets, the more everyone focuses on terms like

00:29:19.260 | unicorn, deca corn, you know, and that becomes the key metric as opposed to saying this business is

00:29:25.260 | so good. For every dollar they spend, they make $3 in gross profit in 12 months. That's what

00:29:32.380 | fundamentally says that's a high quality growth, you know,

00:29:36.140 | you know, valuable business over time, as opposed to here's what the market is telling me it's worth

00:29:41.660 | today. And if the market is telling you it's worth that much today, and you're and that's what you

00:29:47.260 | focus on, you inevitably end up in these kind of bubbly moments where you miss out on focusing on

00:29:53.020 | core value creation, which will actually pay off much, much more over time.

00:29:57.100 | Jim, if you pointed out another signal,

00:29:59.900 | hey, when smart people who have the largest amount of capital in the markets are clearing positions,

00:30:05.820 | maybe that's a signal of a top. And then I think is a really good insight by freebird when the

00:30:11.580 | conversation the narrative is about the valuation and the status and vanity metrics as opposed to

00:30:16.300 | the quality of the earnings. Hey, that's a really good indicator we're in a bubble, maybe you should

00:30:19.340 | start clearing positions. What are indications for you that we're either in a bubble or the market is

00:30:24.140 | undervalued? Because we're really talking about this timing, right? Timing is very important.

00:30:28.780 | It's not possible. This is why I think that you have to define what game you want to play before

00:30:35.500 | you start playing the game. Okay.

00:30:37.580 | This is why I think it's kind of nonsensical. For example, I believe that at best, I am an equity

00:30:49.820 | investor in technology companies or things that have a technology bias because I can generally

00:30:56.940 | understand them maybe a few seconds faster than everybody else, which allows me to make a decision

00:31:04.140 | a little bit quicker. Okay.

00:31:05.180 | But if all of a sudden I started investing in debt, you should expect that I'll lose my money

00:31:10.540 | because I don't know what I'm doing. And that's not the game where I have any advantage.

00:31:15.580 | So I think the most important thing to do is to not try to do all of this crazy stuff because this

00:31:21.660 | is what happens in moments where either things are very, very good or things are very, very bad.

00:31:27.740 | People try to create all these stupid rules. And the rule, the only rule is there are no rules. So I

00:31:34.860 | don't know. I just think it's like stick to your knitting. If you're a product builder, build

00:31:38.780 | products. If you're an early stage investor, just do that. It's hard enough to do any one of those

00:31:44.860 | things really, really, really well. But this idea that you're going to come up with some mosaic in a

00:31:50.860 | system, I think it's just highly suspect. And I think the market returns have showed that everybody

00:31:56.300 | that tries has failed except for maybe one or two. It's just not going to work. What's the point?

00:32:01.500 | So I don't know. If you're an early stage investor, make good deals and then give

00:32:04.540 | the shares and book the win. That's what I do. Yeah, that's my philosophy.

00:32:08.220 | Sax, what are your thoughts? There's a couple of metrics that I'll

00:32:11.580 | be looking at from now on that I wasn't paying a huge amount of attention to before.

00:32:16.380 | One is the price to ARR of the median public SaaS company.

00:32:21.820 | And so like Brad Gerstner has these great charts where you saw that historically that number was

00:32:29.900 | around six. The median SaaS company was trading at about six times their next 12 months revenue.

00:32:34.220 | And it went all the way to 15 during this sort of COVID bubble in 2021. And for the high-growth

00:32:41.100 | SaaS companies, which are the ones growing 40% instead of 20%, it went from like eight to 35.

00:32:47.340 | So I'll definitely be looking at that. And what you're looking for is just how off the historical

00:32:53.660 | mean are we, positively or negatively, because these public valuations are the exit comps for

00:32:59.420 | the private markets. And those valuations do eventually trickle down. And so,

00:33:03.900 | if there is a bubble in the public markets, it will trickle down to the private markets. So

00:33:08.140 | that would be one metric. I mean, again, it's not something that affects me daily,

00:33:12.380 | but it's something I'd want to periodically keep tabs on.

00:33:15.340 | The other is just interest rate policy. I mean, I've never spent so much time in my entire career

00:33:20.380 | looking at inflation and interest rates that I have this year because who knew how much this

00:33:26.540 | stuff was affecting us? I thought I was a micro investor. I thought I was just picking companies

00:33:32.620 | on a micro level. Right.

00:33:33.580 | It turns out we were all massively impacted by macroeconomic policy. And it got so we didn't

00:33:40.940 | even notice it. The zero interest rate policy, the ZERP, along with the quantitative easing,

00:33:45.740 | these were supposed to be exceptional measures that started back in 2008, but we stopped

00:33:51.100 | noticing them. They continued for years and years and years. They continued until last year. And,

00:33:56.940 | again, we just stopped noticing because we got used to it. We kind of got hooked on drugs.

00:34:01.180 | So the market did.

00:34:02.700 | Jay Haynes:

00:34:03.260 | So I'm just going to have to pay a little bit more attention to what the Fed is doing now.

00:34:07.980 | And if you go all the way back to the dot-com bubble, what's interesting is that the Fed

00:34:13.020 | fund rate back in 1999 wasn't low. It was like 4%. It wasn't like it was even today.

00:34:20.940 | And we still had a bubble. But what popped the bubble was that interest rates went from 4% to 6%

00:34:25.340 | from 1999 to 2000. That's what popped the bubble. So I don't know if,

00:34:32.940 | we'll ever have a situation again like we had over the last few years with the ZERP.

00:34:36.780 | But, I mean, probably looking for that next time is fighting the last battle instead of the next

00:34:42.460 | one. But you do probably have to be a little bit more aware of monetary policy and what the Fed is

00:34:47.820 | doing.

00:34:48.060 | Adam Chapnick:

00:34:48.860 | Yeah, this chart, Exhibit 6 from the Vision Fund benchmarking against peer funds that Shamath just

00:34:54.300 | put into the group chat is absolutely spectacular. It puts Sequoia Insight and SoftBank, large funds,

00:35:01.980 | Jay Haynes: Yeah.

00:35:03.420 | Adam Chapnick: against each other. Fund size, $100 billion for SoftBank, $8 billion for Sequoia,

00:35:07.420 | $6.3 billion for Insight. And to Shamath's point earlier, the pace is really crazy. 130 deals.

00:35:14.300 | Jay Haynes: Three and a half deals per month, but then the average check size is $620 million.

00:35:19.100 | Adam Chapnick: Versus $130 and $70. And the deals per month, $3.5 versus $0.6 versus $4.2. So Insight

00:35:27.340 | going pretty fast with small checks. SoftBank going very fast with-

00:35:30.860 | Jay Haynes: I think the Sequoia data here-

00:35:32.140 | Adam Chapnick: Huge checks.

00:35:32.700 | Jay Haynes: ... is really, Sequoia has the benefit of being able to backtest

00:35:37.100 | against 40 years of returns. And so if essentially what they're saying is there's really no more than

00:35:43.100 | five or six companies a year that are worth investing in, that's a really big signal that's

00:35:47.260 | worth thinking about. And so five or six companies, maybe they can absorb even $600 million

00:35:53.900 | each, it still puts you at three and a half, $4 billion. Doesn't put you at 20, which is what you

00:35:59.740 | need to put a hundred into the ground and- Adam Chapnick:

00:36:01.820 | $2 billion a month. I mean, my Lord, it's like Brewster's millions or something. It's like some

00:36:06.380 | crazy premise. Jay Haynes:

00:36:07.740 | I think in fairness to SoftBank, again, these are the same guys that invested in Yahoo. They invested

00:36:14.780 | in all of these dot-com companies and brought them into Japan, including great businesses like Cisco.

00:36:19.980 | These guys have been big time serial winners. I think the tactical mistake was not having a

00:36:27.100 | 10-year investment life. Adam Chapnick:

00:36:28.700 | And we could be sitting here next year, Alibaba could double in value.

00:36:31.660 | Jay Haynes: A couple of their other positions could recover 50%.

00:36:35.020 | Adam Chapnick: Probably not.

00:36:35.980 | Jay Haynes: Okay. But we could be sitting there and they could have closed the gap

00:36:39.420 | massively. Anything's possible. I think actually a good jump off point here,

00:36:44.380 | great discussion, gentlemen. Do we want to talk about the markets? We got the inflation print,

00:36:51.420 | Sachs. I guess, depending on what political party you're in, it's either 8.5% or zero,

00:36:57.420 | 0% month over month. If you're a Democrat, if you're a Republican, it's 8.5%.

00:37:01.340 | Jay Haynes: 8.5% in our polarized times.

00:37:04.300 | But what does this tell us, Sachs, just at least about maybe inflation is tipped over and we're

00:37:11.500 | going to be flat for a little bit. That obviously caused the market to rip a little bit. And we had

00:37:14.860 | this incredible jobs report. We're now at 3.5% unemployment and twice as many jobs as we

00:37:24.300 | predicted. It's pretty extraordinary what happened in the last 30 days to these prints.

00:37:29.100 | Sachs:

00:37:29.580 | Yeah. Look, I think that, over the last 30 days, we've had a lot of jobs that have been

00:37:31.180 | cut off. And I think that's a good thing. I think that's a good thing. I think that's a good thing.

00:37:31.260 | Overall, the economic data is mixed, but we got a couple of good data points in the last month.

00:37:37.100 | So inflation did decrease from 9.1% to 8.5%. Inflation was, until now, measured on a year

00:37:46.300 | over year basis, not a month over month basis. But since we got the first good month over month

00:37:51.260 | reading, all of a sudden now, it's been redefined to be on a month over month basis. Just this is

00:37:55.580 | the same thing that happened with the definition of recession, where recession used to mean two

00:38:01.020 | quarters of negative GDP growth. Of course, that happened. And so all of a sudden, the definition

00:38:07.100 | became unknowable. We have to defer to this economic board that won't render a decision

00:38:12.540 | until next year. By the way, if that were true, how could we ever contemporaneously talk about

00:38:17.340 | a recession? If you had to wait until this economics board declares recession a year from

00:38:22.700 | now, the press could never have ever reported on a recession.

00:38:24.700 | I, for one, am shocked. Yeah, I'm shocked. Politicians are spinning.

00:38:27.100 | So look, the politics of this are obvious, which is they keep redefining terms,

00:38:30.860 | rather than admit that there's any bad data at all.

00:38:34.700 | That's mixed. Now, look, I don't think the data is

00:38:36.780 | catastrophic. I don't think it's in anyone's interest to catastrophize the data. But there's

00:38:43.180 | a lot of negative data out here. I mean, look, inflation is still very high, 8.5%. If you had

00:38:48.380 | told any of us that in August, that inflation would still be 8.5% at the beginning of this year,

00:38:54.060 | we would have said that is horrible. Because remember, the investment banks

00:38:57.100 | were all saying it's going to come down to 3% by the end of the year.

00:39:00.700 | So inflation is still high. The jobs picture is good. We're technically in a recession.

00:39:06.620 | If I were to predict, I think what's going to happen now, I think, you know, look for a double

00:39:10.780 | dip. I wouldn't be surprised at all if in Q3 or Q4, we're back to positive GDP growth. But I don't

00:39:17.180 | think we're necessarily out of the woods because I think there's a pretty good chance that next year,

00:39:22.700 | these rate hikes really kick in. It takes six to nine months for them to ripple through the

00:39:28.220 | economy. So if you look at the construction industry,

00:39:30.540 | the construction industry has just been devastated. New housing starts, you talk to the

00:39:35.020 | builders, they tell you that the construction industry has just been clobbered by these rate

00:39:39.820 | hikes. The inventories are piling up. And the affordability of there's a chart today about

00:39:45.100 | the affordability of home prices at a 40 year low. And so the construction industry, it's really the

00:39:51.420 | bellwether when a recession starts, they're the ones who are first impacted. But it's probably

00:39:56.540 | going to take six to nine months. Because the loans are so expensive.

00:40:00.380 | And cost of capital is expensive. Right? projects.

00:40:03.420 | Yeah. So look, I if I take, I think we're in a shallow technical recession right now,

00:40:09.100 | I bet that we probably bounce out of it in Q3 or Q4. But I think there's a significant risk that

00:40:14.060 | we're back in. We're back in it next year. Just my guess.

00:40:17.420 | Freiburg, we've been talking about consumer credit a whole bunch,

00:40:20.540 | buy now pay later. Household debt now totals more than 16 trillion credit card balances,

00:40:26.140 | make up 890 billion of that obviously, student loans, mortgages, other things

00:40:30.220 | are in there. And the number of credit cards is now at a massive high 550 million of them issued

00:40:37.820 | here in the United States. We added a massive amount of debt, it's still lower, the credit

00:40:44.380 | card debt, just to be clear, is still lower than the pre pandemic level of 930 billion.

00:40:50.460 | But consumers seem to be taking out credit, I guess to deal with inflation or to enjoy

00:40:55.420 | their lives, because they're not stopping their spending. And we see that in some of the

00:41:00.060 | stocks and the earnings reports that are coming out as well. So what's your what's your take on

00:41:03.660 | this, you know, conflicting data we have? Or is or have you made some sense of it? And what is your

00:41:08.620 | prediction of q4? Sorry, are you asking what my take is on the consumer credit?

00:41:13.180 | Well, basically, the overall macro situation here, we've got consumer credit,

00:41:16.220 | you know, people taking on a lot of debt, while jobs look great,

00:41:20.540 | while inflation is still high. What does that look like? You know, as we go into q4,

00:41:25.820 | and next year, what is this telling you? Is there some signaling you can take from this?

00:41:29.900 | I mean, Sachs said shallow recession thinks we might double dip, I'm kind of getting to your

00:41:35.820 | prediction of q4. I mean, this is a little repetitive. I mean, I've said this, I first

00:41:39.740 | said it in May at the all in summit, and I said it again on the show twice. Great, which is I think

00:41:44.940 | that the definition of a recession of negative GDP growth when you're coming off of inflated GDP is,

00:41:50.940 | you know, it's not a binary catch all term. I mean, the fact is, we had inflated assets and

00:41:59.740 | as a result of inflated assets, we had inflated earnings, and we had inflated valuation,

00:42:03.500 | we inflated income. And, you know, now, the capital is coming out and things are going to go

00:42:09.020 | down inevitably. But I don't think that this should be deemed that there's something fundamentally

00:42:14.380 | negative about the US economy. The biggest risk I still see is this rising consumer credit balance,

00:42:20.380 | particularly in a rising rate environment. People are taking on more debt. If you look at the New

00:42:24.460 | York Fed here, I'll just give you the latest. This is the health and safety of the United

00:42:29.580 | States. This is the household debt and credit report they put out household debt rises to

00:42:33.740 | $16 trillion in the growth in housing and non housing balances. And so there are variable

00:42:38.860 | rate loans in there in the auto, home and credit card markets. Those variable rates mean that as

00:42:45.500 | interest rates climb, the amount to service existing debt will go up each month.

00:42:50.140 | And the amount of debt that's being taken on is also going up each month.

00:42:54.860 | And so the key economic question is does the income gain that's

00:42:59.420 | being experienced or the asset value gain that's being experienced outpace the increase in monthly

00:43:06.460 | debt service needed for a large number of consumers? Student loans are also in here,

00:43:10.220 | by the way. And so when you put that all together, it's a very technical question,

00:43:15.180 | which is technically where do you start to see defaults rise? And when you have defaults rise,

00:43:19.740 | then the money that's owed and the services that are the service payments that are owed

00:43:23.260 | on that debt, trickles through the economy because bonds start to default, equity start

00:43:29.260 | to decline and so on. So this is why I can speak at a high level from a macro point of view,

00:43:35.820 | that the rate at which debt is going up and consumer credit is going up and the rate at

00:43:41.100 | which rates are climbing that affect the revolving and variable rate debt that consumers hold

00:43:47.980 | could outpace the income and the asset value gain, particularly when equities are down,

00:43:53.100 | 401ks are down, housing prices are down. And so there's a tipping point. And

00:43:59.100 | when that starts to happen, then you start to really hit an economic crunch. And I've mentioned

00:44:04.460 | this multiple times now that it's the thing, you know, I would kind of watch most closely,

00:44:08.460 | while there are core elements of the current economy that looks strong,

00:44:12.940 | there are real concerns around whether consumers can keep up with their debt payments

00:44:18.780 | in the months and quarters ahead. Yeah. Chamath, are you following this consumer

00:44:23.260 | credit surge? And do you think that this could be a black swan type event? This could be, you know,

00:44:28.940 | a major headline? Well, it's no black swan because it's right here in front of us. So,

00:44:31.820 | you know, okay. Yeah, yeah. I would say like a massive contagion where there's massive number

00:44:36.700 | of defaults creating a black swan contagion like event. But yes, so it's, it's not it's maybe hidden

00:44:41.580 | in plain sight. What do you think Chamath? Is this important data or impacting your view on things?

00:44:46.060 | Yeah, I think it's important. It's part of a mosaic. And I don't I don't really know. Look,

00:44:52.780 | what are we trying to get from this discussion? I don't understand like, like, are we trying to

00:44:58.300 | predict what's going to happen? Are we trying to predict what's going to happen? Are we trying to

00:44:58.780 | predict what's going to happen? I mean, I think David basically said it best, like, if you actually

00:45:05.420 | just take a step back and stop overlaying what we want to happen, look, the reality is all four of

00:45:11.820 | us want things to go up. And we like it when there's money in the system and everything's flush.

00:45:17.260 | But if we had said last year that we would open an envelope, and you know, we would show these

00:45:23.100 | inflation prints, we would be shocked and we would have been scared. And quite honestly, you know, in

00:45:28.300 | the process, we would have been scared. And quite honestly, you know, in the process,

00:45:28.620 | in November, when I started selling, I would have sold even more violently than I sold. And

00:45:35.500 | all I can say is I saved my ass in November of last year, looking at what's happened in the last

00:45:40.380 | six, eight months. So I don't know, I just think that if you look at the CPI print,

00:45:46.620 | and you look at the components, we were saved, because energy basically fell off a cliff.

00:45:53.980 | And for whatever reason, a bunch of people decided not to travel.

00:45:58.460 | And, you know, we didn't import as much oil, and we were able to keep costs contained.

00:46:03.340 | And that kept CPI from being really out of control.

00:46:06.060 | But again, we're in the summer where we don't have the pressure on energy that we're going to have in

00:46:12.700 | October, November this year. So I really don't know. I mean, I just think that there is like,

00:46:18.620 | Freeberg has his pet issue, I have my pet issue, Sachs has his pet issue,

00:46:23.100 | you ask 100 economists, they'll have their own pet issue, housing, affordability, whatever it is, the

00:46:28.300 | point is, we have 100 whack-a-mole problems. And the question is, which mousetrap sets off the rest

00:46:36.140 | of the mousetraps? I have no idea. And so, you know, I just think that right now things are a

00:46:44.380 | little bit too calm. And that makes me feel very unsettled.

00:46:48.780 | Another shoe might drop. I mean, the point of the conversation is to try to understand and make

00:46:52.540 | better decisions in capital allocation, company formation, and placing bets in the next year. So

00:46:58.140 | that's the point of the discussion.

00:46:59.100 | We now have the spectacle of the president saying he's going to pass an inflation reduction act

00:47:07.180 | to solve a 0% inflation problem to get us out of a recession that he says doesn't exist.

00:47:13.980 | You guys know this, but the politics and the political commentary on this are absurd.

00:47:18.460 | I think what we're describing here is simply more honest, which is to say that the data is mixed,

00:47:24.220 | and we don't exactly know what's going to happen.

00:47:27.980 | The thing that I think is encouraging is when you look at this jobs data,

00:47:30.700 | and you look at the debt that consumers are putting on, my theory is, and I could be wrong,

00:47:37.740 | that people want to keep spending. They want to keep living their lives. They're taking on a

00:47:41.980 | little bit of debt to deal with inflation and to keep spending, but they're also going back

00:47:45.260 | to work. And I'm seeing that anecdotally, a lot more people going back to work, and the numbers

00:47:49.020 | show that. That feels to me, and I said this on previous episodes, that that feels like a possible,

00:47:53.420 | you know, very helpful path out here. And I think you brought it up, Sax, as well, which is, hey, if we

00:47:57.820 | have increased participation, that's great, increases monetary velocity, increases participation

00:48:02.860 | in the economy. That's a possible path out. Do you feel like that's still holding strong?

00:48:07.820 | Even in secular decline on that trend for 25 years. So maybe on the margins, a few folks

00:48:14.380 | run out of stimulus and decide to go and get a job. But I don't think, again, it's kind of like,

00:48:21.100 | you know, when you're at the blackjack table in Vegas, and somebody's clapping.

00:48:27.660 | Clapping is not a strategy. I feel like all the, like, what we're talking about right now is

00:48:31.500 | clapping as a strategy. Maybe this can happen. Maybe that can happen. You know what? Maybe it'll

00:48:36.140 | start raining gold fucking coins that we can use and just not have to worry about.

00:48:40.380 | Yeah, I mean, J. Cal, I feel like the last 15 minutes have been, like, not a good conversation.

00:48:45.420 | I think it's totally repetitive.

00:48:46.220 | Well, I think it's a great conversation.

00:48:47.340 | No, listen, I think it's totally repetitive. It's totally repetitive, J. Cal, because,

00:48:51.260 | look, the structure of the problem, I think, is very well defined, which is we have an inflation

00:48:56.780 | problem. Great. It went down from 9.1 to 8.5%. It's still really high. 2% to 3% would be normal.

00:49:03.180 | Okay. So that's half the problem is how fast is inflation going to go back down to normal

00:49:08.540 | based on interest rate cuts? The other side of the problem is-

00:49:11.580 | Increases.

00:49:12.060 | Is, sorry, interest rate increases, not cuts. The other side of the problem is

00:49:15.820 | how much will the economy be hurt by these rising rates? And those are the two variables. And we see

00:49:21.900 | that there is a slowdown. There's still a lot of jobs being filled, which is good. But there is, on

00:49:26.620 | a question, an economic slowdown. And those are the two sides of this equation. And we just need

00:49:32.060 | to see some economic data. It's going to play out over the next several months.

00:49:34.940 | You've been asking the same question for three fucking weeks.

00:49:38.300 | If you guys don't want to talk about the new data, that's fine.

00:49:40.140 | Hey, who cares? It's like we just-

00:49:41.660 | None of us care. None of us care.

00:49:43.820 | None of us, we don't have an opinion other than we don't know. How many ways can we say we don't know,

00:49:47.900 | J. Cal?

00:49:48.300 | I don't want to talk about inflation or recession or jobs or any of that shit anymore,

00:49:51.660 | unless there's something really for us all to say, like something news come out, like some fucking

00:49:55.740 | economic report. Well, I mean, the job load-

00:49:56.460 | That report was really important. I mean, that was a massive print, but okay.

00:49:59.900 | It's not. It's not that-

00:50:00.380 | Oh yeah, twice as many jobs-

00:50:01.660 | It is. Twice as many jobs.

00:50:02.780 | But it's on the track of what we've already said.

00:50:03.740 | It's one data point. It's one data point.

00:50:05.900 | It's on the track.

00:50:06.620 | And you know what? There were some bad jobs reports before that print.

00:50:09.820 | I think we should stop doing the recession inflation chat every week. It honestly is

00:50:13.900 | repetitive.

00:50:14.220 | You have a better job moderating. Can you not dial it in?

00:50:17.660 | You guys, no, you guys asked to talk about it. You guys put some of these things on the docket.

00:50:20.780 | No, I don't want to talk about it anymore. I think we should cut that shit.

00:50:22.940 | Let's move on. What do you want to move on to next?

00:50:25.180 | I think SoftBank was a great chat. I think, you know, that was a good talk. We should do

00:50:28.220 | that kind of shit. We should talk about-

00:50:29.260 | I want to know what you guys think about the Sequoia Evergreen Fund. Tell me what you guys

00:50:33.020 | think about that. Come on, geniuses.

00:50:34.620 | The Sequoia, like when they restructured? Are you joking?

00:50:37.820 | I love when these two go silent.

00:50:41.260 | No, no. I always didn't want to interrupt anybody.

00:50:44.220 | I don't understand what you're saying.

00:50:45.180 | I don't understand why you guys are trying so hard to avoid the obvious news of this week.

00:50:50.540 | Was there something else in the news this week?

00:50:52.140 | Sacks, if Trump actually

00:50:54.940 | had some material in Mar-a-Lago that was related to the nuclear program, and, you know, there was

00:51:03.500 | an attempt to try and recover those documents through normal means, and they were not recoverable,

00:51:09.420 | what would your course have been if you were the director of the FBI or the president of the US

00:51:13.260 | in that condition? Because I think that seems to be the party line of what's going on here.

00:51:16.380 | Well, you know-

00:51:18.380 | The Democratic kind of spin on what's going on here. But like, you know,

00:51:22.300 | honestly, in that circumstance, what do you think would have been a pretty good thing?

00:51:24.700 | I think it would have been appropriate. So there's some sort of confidential material related to our

00:51:27.500 | nuclear program, or nuclear weapons, something there in those materials that were attempted to

00:51:33.020 | be recovered, or were taken without approval, and then they try to recover it. For, you know,

00:51:37.740 | assume there's no nefarious intent, what would be the right kind of course here?

00:51:41.820 | Well, so I don't know exactly what's going on. I just think that you can't necessarily give the F,

00:51:50.300 | sadly, I don't think you can necessarily give the FBI the benefit of the doubt here in light of their history.

00:51:54.460 | But let's back up. I mean, first, you had this raid on Mar-a-Lago where you got

00:51:58.700 | 30 FBI agents. They're not wearing suits with holstered sidearms. They're carrying

00:52:03.340 | AR-15s, you know, weapons of war, fingers just outside the trigger guard. They're wearing body

00:52:08.540 | armor. It looks like a paramilitary raid on Mar-a-Lago. It's utterly unprecedented.

00:52:13.180 | And you look at tweets by Andrew Cuomo, for example, or Andrew Yang. I mean,

00:52:19.500 | these guys actually turn out to be pretty, I think, intellectually honest Democrats on this point.

00:52:24.220 | Saying this is unprecedented and it's really going to, here, I want to read this by Andrew Yang.

00:52:28.380 | Why don't you answer Freeberg's question?

00:52:31.420 | I'm getting there. I know you're going to cut me off, so I'd like to just read these tweets.

00:52:36.140 | So maybe you, because, you know, maybe you'll give more credence to Andrew Yang. He said,

00:52:40.140 | "I'm no Trump fan. I want him as far away from the White House as possible. But a fundamental part of

00:52:44.380 | his appeal has been that it's him against a corrupt government establishment. This raid strengthens

00:52:48.940 | that case for millions of Americans who will see this as unjust persecution." You have Andrew Cuomo

00:52:53.980 | saying, "DOJ must immediately explain the reason for its raid. It must be more than a search for

00:52:57.740 | inconsequential archives or be viewed as a political tactic and undermine any future credible

00:53:02.220 | investigation and legitimacy of January 6th investigations." And let me read one other tweet

00:53:07.900 | by Elon that's not directly about this, but he tweeted this on July 11th, so a month ago. And

00:53:13.740 | he said, "I don't hate the man, but it's time for Trump to hang up his hat and sail at the sunset."

00:53:18.540 | That was the part that was widely reported. But he also said, "Dem should also call off the attack.

00:53:23.740 | Don't make it so that Trump's only way to survive is to regain the presidency." I think there was

00:53:28.300 | a lot of wisdom in that. And you know, I'm old enough to remember when the case for Biden getting

00:53:34.380 | elected is we have to move past this partisan warfare, this extreme rancor and derangement.

00:53:42.540 | And we were told that the media, you know, all these people who had TDS, that their psychosis

00:53:48.060 | was due to Trump. And if we could just move past Trump, this, all this sort of partisan warfare,

00:53:53.500 | would end. And now, and I was certainly hoping that would be true. And now, sadly, it seems like

00:53:59.500 | we're right back in this thing, where we're right back with the media being obsessed with TDS,

00:54:06.140 | portraying this narrative that somehow he's a traitor. And what does this whole thing hang on?

00:54:10.700 | Just these two words, nuclear documents. Well, listen, until they actually produce those documents,

00:54:16.380 | I'm going to suspend judgment. Because the FBI, the last time they did this, remember, they manufactured a falsified

00:54:23.260 | warrant to the FISA court for this type of investigation. They have that history. So I'm

00:54:31.020 | just going to suspend judgment on what's going on here until they actually produce the documents

00:54:36.380 | they're talking about. Can I ask, right now this stinks. Do you honestly question the integrity of

00:54:41.980 | leadership and agents of the FBI? Are you serious? Like you don't think? Yeah. All right. Let me read

00:54:48.620 | you this tweet from Michael Burry. I don't want to hear the tweet. I want to hear your point. Well,

00:54:53.020 | I agree with what Michael Burry is saying. So I think sometimes there's a lot of thoughtful

00:54:56.940 | commentary about this. And what Burry says is J. Edgar Hoover led the FBI for five decades,

00:55:02.060 | denied the mafia existed, fought the civil rights movement, shielded the KKK. Multiple

00:55:06.940 | presidents acknowledged fear of him. So what he's saying is that the FBI, since its inception,

00:55:11.660 | has political origins and basically meddled politically in the affairs of the country.

00:55:18.460 | Then he says the FBI lied to the FISA court. This is back in 2016. Totally

00:55:22.780 | true. Altered emails, leaked lies to the press to get Trump. Nothing shocking. So,

00:55:28.140 | Freeberg, listen, I don't know whether the FBI is telling the truth, but are you honestly going to

00:55:32.460 | say that the FBI's leadership has never been political, that has never harbored or pursued

00:55:37.740 | their own agenda, and that it's never had a desire to go after Trump? I'm not making an opinion.

00:55:42.540 | Hold on a second. We saw the text messages from Comey, Strzok, Page, McCabe.

00:55:48.780 | I mean, these guys basically took it upon themselves when Trump was elected,

00:55:52.540 | to be the quote unquote insurance policy. Yeah.

00:55:55.100 | And an FBI lawyer pled guilty to falsifying documents to seek a warrant from the FISA court.

00:56:03.500 | So I just think anything's possible here. And now I'm not saying the FBI is lying about this.

00:56:09.180 | I don't know. But the idea that the FBI is automatically entitled

00:56:13.100 | to the benefit of the doubt in light of their proven history of basically

00:56:17.260 | pursuing Trump like Ahab pursued the white whale. I mean, these guys have

00:56:22.300 | have been after him. I'm just going to zoom out for a second. The reason I'm interrogating

00:56:25.900 | Sachs on this is like, it's just so telling to me that a guy like like you, Sachs, in your position

00:56:31.740 | are actually questioning the integrity of like the highest justice authority and institution in the

00:56:39.660 | United States really says a lot about kind of the state of the US citizenry, the state of our

00:56:47.580 | society today. I think it speaks a lot to... It's at least a third of Americans. I know. It's incredible.

00:56:52.060 | It's incredible. And what Ray Dalio said in his book about how during these periods when the

00:56:56.860 | empires begin their decline, and you know, when you're challenged with kind of the economic

00:57:01.900 | conditions that the US is challenged by printing lots of money, lots of debt, very hard to service

00:57:06.300 | all that debt. And we have a ton of obligations over the next decade or two that are going to be

00:57:10.380 | very hard to meet given our economic growth and inflation conditions right now, that you start

00:57:15.980 | to see these sorts of behaviors historically. It's happened six times in the last 500 years where large

00:57:21.820 | empires like the United States or large, you know, economic powerhouses like the United States start

00:57:26.860 | to decline, that the civil war begins, that the institutions get challenged by a minority and then

00:57:33.660 | a majority of the citizenry. And it really starts to crumble and challenge the integrity of the

00:57:39.820 | institution and its ability to hold itself together. I'm not... Hold on a second. I'm not

00:57:44.060 | challenging... Hold on a second. I'm not... Well, you're questioning the integrity. You're questioning

00:57:47.820 | the integrity of the Department of Justice, right? Listen, I... By the way, I'm not arguing. I'm just pointing out

00:57:51.580 | like it's an incredible condition for us to find ourselves in. Yeah, but I... But my questioning did

00:57:57.420 | not create that condition. This lack of trust is earned. It's earned by the FBI in light of behaviors

00:58:04.460 | they took just a few years ago. Now, listen, I'm not defending Trump per se. I don't know what he did

00:58:10.860 | or didn't do, okay? But I think that you can't just accept at face value without further proof these

00:58:21.340 | leaked... What are basically leaked comments by the FBI. Yeah. I mean, look, I'm not... Listen, I'm not a naive

00:58:27.820 | child. I mean, the fact of the matter is that power can be corrupt and power corrupts, okay? And we have

00:58:34.300 | seen that the FBI from its earliest days did engage in corruption and more recently against Trump

00:58:40.540 | himself had a vendetta against Trump. So, I'm simply... So, hold on. So, all I'm doing is

00:58:45.820 | I'm not going to automatically accept at face value what they're saying until

00:58:51.100 | I see some proof. Now, I'm not saying that they're wrong or they're lying about this.

00:58:54.940 | I'm simply saying I'm not going to accept it at face value. Yeah, and remember, Trump was elected

00:59:00.380 | on the platform that there is this deep state, that there is institutional corruption,

00:59:06.380 | that there is malaise and lethargy in these institutions of the government that are funded

00:59:11.500 | on the order of trillions of dollars a year, and that that's what he was intended to, you know,

00:59:16.300 | to go and blow up and repair. And there's a very strong and potentially

00:59:20.860 | close to majority percentage of voting Americans that feel that there is this core deep state

00:59:26.140 | corruption, institutional lethargy that is challenging our ability to give everyone the

00:59:31.820 | freedom and liberties that they deserve. Freebird, these agencies are supposed to

00:59:35.260 | be nonpartisan. They're not supposed to have a horse in the race. And what we saw is that when

00:59:39.660 | Trump was in office and these texts came out, clearly the top levels of the FBI, these top

00:59:46.140 | agents, I'm not talking about the rank and file, I'm not talking about the field agents, I understand

00:59:50.620 | that a lot of them are law and order types who vote Republican, I get it. But I'm talking about

00:59:54.220 | the leadership, the highly political leadership in Washington. And it was pretty clear that they

00:59:58.060 | had a horse in the race. They did not like Trump and they were out to get Trump. And, you know,

01:00:03.580 | again, Trump is not my preferred candidate for 2024. But what the FBI has done with this raid,

01:00:10.540 | quite frankly, I think has polarized the outcomes. They are basically going to send Trump to the big

01:00:14.940 | house or the White House. I mean, because now the Republicans have rallied around Trump. I think he

01:00:20.380 | is going to be very, very hard to beat for as the nominee in 2024, unless the FBI comes up with

01:00:27.180 | ironclad evidence to show that he did something significantly wrong.

01:00:31.020 | I care less about who did what and what was done wrong. I care more about the fact that this

01:00:35.020 | conflict is escalating, and it's creating a real condition of continuing polarization. And it

01:00:40.940 | really is the conditioning that you know, Biden had some historians in the White House, there was

01:00:45.820 | a report on this last week. And these historians spoke about how the conditions in the United States

01:00:50.140 | are just as they were right before the Civil War. And, and that there's real concern.

01:00:55.020 | I've heard how that?

01:00:55.980 | Yeah, well, I mean, you know, they can go read the anecdotal reporting that was done on this thing.

01:01:02.060 | But that was the general theme of the conversation. And, you know, it really,

01:01:06.700 | it really kind of concerns me more that this level of discourse is escalating to a point of,

01:01:13.180 | you know, there's corruption, this person is a criminal, and that sort of discussion happens.

01:01:20.540 | You know, in more dire circumstances, and more economic circumstances than has ever been seen,

01:01:27.340 | you know, the US is the largest economy in history. And we're now having these sorts of

01:01:31.500 | conversations that typically lead to some degree of conflict. And it's really concerning.

01:01:35.020 | Well, I just think, listen, I think that Trump was out of office,

01:01:39.260 | we were told that this partisan rancor would stop once he was out.

01:01:42.780 | And it's, you know, they're pulling him back in. And all I can say is that when the I think we know

01:01:49.660 | that Trump is out of office, we're going to have to take a look at the next step. And I think that's

01:01:52.300 | going to be a very important step for the United States. And I think that's going to be a very,

01:01:54.060 | very important step for the United States. And I think that's what we need to do. And I think that's

01:01:57.340 | going to be a very important step for the United States. And I think that's going to be a very,

01:01:59.100 | very important step for the United States. And I think that's going to be a very, very important step.

01:02:00.940 | And I'm suspending judgment, what I'm saying is though that when all the information comes out,

01:02:05.180 | there better be a very significant there there.

01:02:07.900 | No, no, no, we've made that impossible, too, because he Trump came out and he basically said,

01:02:12.140 | Hey, listen, if you if these guys find something, it was planted. And now you're gonna have at least

01:02:17.900 | a, you know, 10 or 15% of the population that believes, okay, this was planted, it wasn't

01:02:22.380 | actually there. And, you know, so whatever the outcome is, will not be good, nobody will be

01:02:28.380 | satisfied. And both both of the extremes in the United States will be even more angry,

01:02:35.260 | they're inflamed. Yeah.

01:02:36.220 | Well, that's what I'm saying.

01:02:38.300 | The inflammatory index has now has now skyrocketed. Yeah.

01:02:41.660 | By the way, this is why I think at some level,

01:02:43.900 | maybe the lack of faith in these institutions is well deserved.

01:02:47.660 | Because where is the, the, you know, the prudence of all of this, like, where is the

01:02:54.220 | circumspect, thoughtful, methodical thinking about all of the different outcomes that could be

01:03:02.060 | possible, so that you exhaust every option, and this is the only option left. And then even then,

01:03:09.340 | if Merrick Garland was open to basically saying unseal the warrant, why didn't you do it before

01:03:16.140 | and say, we're going to have to do this.

01:03:17.420 | Yeah, I mean, I think that's the thing. I think that's the thing. I think that's the thing.

01:03:18.380 | I think that's the thing. I think that's the thing. I think that's the thing.

01:03:19.340 | I think that's the thing. I think that's the thing. I think that's the thing.

01:03:21.260 | There's all kinds of things you could have done.

01:03:23.340 | Oh, clearly, they did keep the hold on a second to keep the temperature of this thing

01:03:27.500 | way, way down. And that's what

01:03:29.740 | to your point, Shamath, they could have let Trump's lawyers watch them

01:03:32.940 | do the search so that nobody could claim anything about anything being planted.

01:03:37.900 | Yeah. So they didn't let that happen either.

01:03:39.340 | Inflammatory index is spiking. I think that's my key takeaway on all of this.

01:03:43.180 | I care less about what Trump did and what the DOJ did.

01:03:47.180 | You're right. And you know, when you're more concerned about where this takes us,

01:03:50.700 | because the next step, regardless of where it takes us, you know where it takes us. When you're

01:03:54.700 | on tilt at the poker table, what do you do? You cannot think properly. That's right. And so when

01:03:59.580 | everyone's out right now, when people are so inflamed with emotion, they start to make very

01:04:04.540 | poor decisions. I don't know whether the DOJ and main justice made a poor decision or not.

01:04:09.740 | I think this is where we have to hold our breath and hope they didn't.

01:04:12.700 | I don't know whether the White House knew anything or not. But the

01:04:16.940 | whole point of all of this is that we pulled this guy right back in to the main stage.

01:04:24.540 | Absolutely. I mean, like I said, you've polarized the outcomes.

01:04:27.900 | You're either going to basically send this guy to jail or you're going to send him to the White

01:04:31.420 | House. No, I think there's very likely a middle path where nothing happens, but it will further

01:04:37.900 | erode what Freiburg says, which is it's just a little bit less trust in the DOJ.

01:04:42.620 | Institutional integrity is eroding. And when institutional integrity erodes,

01:04:46.700 | the fabric of what keeps everything working starts to fall apart. And I'm not saying this

01:04:52.540 | is some cataclysmic civil war happening. Just to be clear, I'm not saying there's

01:04:55.660 | some cataclysmic civil war happening next year, but it's an unfortunate decline in everyone's

01:05:01.180 | faith and the stability of the institutions that we all rely on to support and service us,

01:05:06.380 | because the inflammatory index is going to go up and everyone's going to be criticizing everything.

01:05:09.820 | And that's a nasty place to be.

01:05:10.700 | This is why I think we really have to ask, was this really necessary?

01:05:13.820 | I mean, why did the DOJ and the FBI think this was necessary?

01:05:16.460 | I think the judges were just sitting there.

01:05:19.020 | I think that's a reasonable question. If these things were actually sitting in a box with a lock

01:05:24.540 | that they changed, there must have been something more that was so grievous

01:05:28.780 | where you had to do something like this. Now, by the way, David, I just want to…

01:05:32.700 | I read, so I don't know if it's true or not. I think maybe it was in Barry Weiss's

01:05:36.700 | sub-stack or Matt Taibbi's sub-stack. These folks weren't armed to the teeth. They came in

01:05:40.700 | jeans and shorts and t-shirts. In fact, main justice told them, do it as low as possible.

01:05:45.180 | No, I've seen the photos.

01:05:46.220 | No, no, you saw the photos outside. I'm saying the people inside were there for six or seven hours

01:05:52.060 | and only a few people knew about it.

01:05:53.580 | They were there for nine hours. They basically told Trump's people they couldn't be there.

01:05:57.740 | They had to leave. They told them to turn the cameras off. And they had like highly militarized

01:06:02.540 | guys. There were something like 40 people and something like 30 of them were heavily armed.

01:06:07.020 | The optics were terrible.

01:06:08.380 | If there was some confidential nuclear material

01:06:11.260 | in Mar-a-Lago and through normal means of communication, they had asked several times to

01:06:15.980 | have it returned and identified this for him. And he had refused, which I think is a very reasonable

01:06:20.380 | conditioning for what may have happened here. And then they said, okay, we got to go get it.

01:06:25.820 | There's no choice. This is like super confidential nuclear material. We got to get this stuff.

01:06:30.140 | The only way to get it is to serve a warrant and go in there and get it.

01:06:33.100 | Under those circumstances, do you think that this would have been kind of inappropriate?

01:06:39.100 | Assume all other kind of communication means were exhausted. What would you have done if

01:06:43.580 | you were president?

01:06:44.220 | Listen, I think there is information.

01:06:45.740 | I think there is information that could still come out to convince me that this

01:06:48.460 | raid was warranted. I just haven't seen that information yet. And I think the optics of it

01:06:53.980 | were terrible. I liked the point I was making. I don't know why it wouldn't have been good enough

01:06:58.300 | to send in the FBI agents with holstered sidearms, you know, not AR-15 weapons of war, you know,

01:07:05.500 | where the fingers were just outside the trigger guard. It looked like a paramilitary raid.

01:07:09.580 | So whoever was thinking about the political ramifications of this clearly didn't do a

01:07:12.860 | very good job. I also don't know.

01:07:14.540 | Even through the optics. Yeah.

01:07:15.500 | Yeah. I also don't know why you wouldn't give the courtesy to a former president of the United

01:07:20.380 | States to give them either more of a heads up or to let his lawyers attend so that just for their

01:07:27.740 | own protection. So they can't be accused of planning anything that would have been smart.

01:07:31.900 | And I don't know why they would have said to Trump's people that they couldn't record it.

01:07:36.300 | And I don't know why there's been reports that the FBI went through Melania's closet. I mean,

01:07:40.780 | seriously, they're like going through Melania's clothes. It's just weird. It's weird. So there's

01:07:45.260 | a lot about this that we don't know. I'm not conclusively rendering judgment about it because

01:07:50.940 | there are things that absolutely could come out to convince me that it was warranted,

01:07:55.100 | but I haven't heard them yet.

01:07:56.300 | Okay, everybody, we'll see you on the next episode of the All In podcast. Love you, besties.

01:08:00.780 | We'll let your winners ride.

01:08:03.660 | Rain Man, David Sacks.

01:08:06.540 | And instead, we open source it to the fans and they've just gone crazy with it.

01:08:13.260 | Love you, besties.

01:08:14.140 | I'm the queen of Kimmel.

01:08:15.020 | I'm the queen of Kimmel.

01:08:15.740 | I'm going all in.

01:08:17.020 | What your winners ride.

01:08:18.620 | What your winners ride.

01:08:20.700 | What your winners ride.

01:08:22.700 | Besties are gone.

01:08:24.700 | That's my dog taking a notice in your driveway.

01:08:26.700 | Wait, no, no.

01:08:28.700 | Oh, man.

01:08:30.700 | My ambitash will meet me at what it's called.

01:08:32.700 | We should all just get a room and just have one big huge orgy because they're all just useless.

01:08:36.700 | It's like this sexual tension that they just need to release somehow.

01:08:40.700 | Wet your feet.

01:08:42.700 | Wet your feet.

01:08:44.780 | Wet your feet.

01:08:46.380 | We need to get merchies.

01:08:47.740 | I'm going all in.

01:08:49.900 | I'm going all in.

01:08:59.340 | you

E91: SoftBank's $21B+ Vision Fund loss, signals of a bubble, macro picture, Trump raided by FBI

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