E146: Did the Fed break the VC model? Plus IPOs, M&A, revaluing unicorns & more

00:00:00.000 | Did you just finish a good cry

00:00:01.440 | because you have this wetness

00:00:02.880 | right here on your eye?

00:00:04.080 | Oh, sorry, I just got out of my

00:00:05.280 | cold plunge in my sauna because

00:00:06.720 | you know, I hit a new record low

00:00:08.000 | weight 169 this week.

00:00:09.520 | What's your temperature on?

00:00:13.200 | I don't want to say it's

00:00:14.000 | embarrassing. It's embarrassing.

00:00:15.680 | I don't want to say no, what is it?

00:00:16.720 | I've been doing like 5658.

00:00:20.320 | That's great. It's okay. I mean,

00:00:22.320 | all these lunatics like I don't

00:00:23.520 | know, they're at 45 degrees 48

00:00:25.360 | degrees. I think it's unnecessary.

00:00:26.800 | You get the same value. I think

00:00:28.080 | if my two year old does 56

00:00:29.920 | it's good. It's really impressive.

00:00:30.880 | I consider an 80 degree pool to be

00:00:33.760 | a cold plunge.

00:00:34.480 | I don't get it unless it's like 85.

00:00:38.000 | That's actually I've been to pool

00:00:41.040 | parties at Saxton's house.

00:00:42.240 | There's no difference between

00:00:44.400 | that. It's a schvitz.

00:00:45.280 | It's a schvitz.

00:00:46.160 | It's a full on schvitz.

00:00:47.680 | It's a schvitz.

00:00:48.320 | If it's not the temperature of

00:00:49.200 | bath water, I don't get it.

00:00:50.240 | I'm going all in.

00:01:08.000 | Yeah, it's a schvitz.

00:01:08.960 | It's crazy.

00:01:09.520 | And then I went in my infrared

00:01:11.600 | sauna. So now I've been going in

00:01:13.360 | you do the cold than the warm.

00:01:15.040 | I think you're supposed to do

00:01:15.840 | warm than cold. No,

00:01:16.720 | they say end on cold.

00:01:18.960 | And so I've been ending on

00:01:20.080 | cold. Yeah, I just do like a

00:01:21.680 | cycle. You do cold, warm, cold.

00:01:23.360 | Cold, warm, cold. Yes.

00:01:25.680 | And what are you doing? Like two

00:01:26.960 | minutes, 10 minutes, two minutes

00:01:28.240 | or what do you do?

00:01:28.880 | Yeah, exactly. Like one or two

00:01:30.480 | minutes cold plunge, four minutes

00:01:32.480 | you warm up, you get back to it

00:01:34.240 | and then you jump back in. Yeah,

00:01:35.440 | it works pretty good. You know,

00:01:36.560 | I have to say my energy level

00:01:38.320 | goes way up.

00:01:39.680 | Have you been tracking your

00:01:40.960 | blood pressure?

00:01:41.840 | I have not, but I have this

00:01:44.400 | executive health coach that I'm

00:01:46.320 | using. And so that's where I got

00:01:48.880 | those ridiculous glasses, the

00:01:50.400 | blue lights in my sleep better.

00:01:51.840 | I got some, I've taken some

00:01:54.000 | supplements. I'm eating

00:01:56.320 | estrogen.

00:01:56.880 | Are you taking more estrogen?

00:02:01.760 | No, estrogen levels are at an

00:02:04.960 | all time high for hanging out

00:02:06.080 | with you guys. It just oozes

00:02:08.240 | onto me. No, it turns out, you

00:02:10.080 | know, even at 52, my testosterone

00:02:11.840 | is very high. So that's what is

00:02:13.280 | your free testosterone? I don't

00:02:14.880 | have the number here, but they

00:02:15.680 | said it's the high end of normal.

00:02:17.760 | So I was like, Should I be

00:02:18.560 | shooting up testosterone? They're

00:02:20.240 | like, No, you're good. You're

00:02:22.080 | good. Just we'll send it over to

00:02:23.600 | freeberg. I said, All right,

00:02:24.720 | great. And you're over to

00:02:25.600 | freeberg. A lot of people take

00:02:27.680 | testosterone in their 50s and

00:02:29.440 | 60s. And I've had a couple of my

00:02:31.440 | friends in their early 60s start

00:02:33.840 | H is it HGH? Human growth? Yeah,

00:02:37.280 | this is I right? Not a good idea.

00:02:39.120 | Seems like a really bad idea that

00:02:40.800 | off menu stuff. I don't think it's

00:02:42.640 | a good idea. I think you got to be

00:02:44.800 | careful with the off menu items.

00:02:46.560 | I think you can get a prescription

00:02:47.760 | for it. Is that right? Yeah, I

00:02:49.520 | know. There's a lot of menu items

00:02:51.200 | available to affluent people with

00:02:54.320 | the right doctors. And I don't

00:02:55.680 | think it's a good idea. I mean,

00:02:56.880 | you guys see Bezos. He's jacked.

00:02:58.480 | I didn't bring up anybody

00:03:00.160 | specifically. He looks great. I

00:03:03.120 | think that's just all weights.

00:03:04.160 | Is he going to be president?

00:03:06.560 | I mean, if you had your choice

00:03:10.720 | right now between Bezos and Bob

00:03:12.880 | Iger, who would you try to find

00:03:14.080 | Biden? I think we know who you'd

00:03:16.320 | pick. I mean, listen, I was

00:03:18.800 | talking to some affluent people

00:03:20.080 | and they everybody's going

00:03:21.920 | to some affluent people. I don't

00:03:24.240 | want to say who but Vivek is now

00:03:27.200 | people are starting to talk the

00:03:28.560 | thing. I think he's hitting the

00:03:29.680 | right chords man. Vivek is about

00:03:31.680 | to pass the sentence he will be

00:03:33.760 | I think if you look at the

00:03:35.200 | polling right now, New Hampshire,

00:03:37.600 | he'll be the clear number two in

00:03:41.280 | about four between four and eight

00:03:43.440 | weeks from now. That's crazy.

00:03:45.680 | That's crazy. And so I think if

00:03:47.200 | he becomes a clear number two,

00:03:48.960 | the the think of this, it's like

00:03:51.440 | then all of a sudden, all these

00:03:53.280 | MAGA supporters are given Trump

00:03:56.560 | and then Trump with some small

00:03:58.720 | feature improvements that are

00:03:59.920 | actually pretty meaningful, right?

00:04:02.320 | And then they're like, well, do I

00:04:03.680 | want the 80 year old Trump or do

00:04:05.920 | I want the 38 year old with like

00:04:08.480 | the super features, you know,

00:04:10.240 | I can forgive all of his other

00:04:12.000 | issues when he tells me that he's

00:04:13.600 | going to cut the government, the

00:04:14.640 | federal government by 75%.

00:04:15.840 | My gosh sold. So you're on so

00:04:19.680 | you're on team Vivek. I want to

00:04:21.040 | continue to gather a little data.

00:04:22.320 | There's no rush to make a

00:04:23.440 | declaration right now. Give me a

00:04:24.880 | little bit of time to mop. Are

00:04:26.160 | you with Vivek? Yes, I am. And

00:04:28.320 | the reason is I would love for it

00:04:30.720 | to be RFK and Biden in a debate

00:04:33.680 | and then Trump and Vivek in a

00:04:35.440 | debate so that I could really

00:04:37.440 | figure out between RFK and Vivek

00:04:39.600 | who I would like to vote for.

00:04:40.960 | But I think it's been pretty

00:04:42.960 | clear that the democrats have

00:04:44.960 | chosen to railroad RFK candidacy.

00:04:47.200 | It's unfortunate because I don't

00:04:48.800 | think we're given a real fair

00:04:50.640 | shake and really being able to

00:04:51.920 | evaluate him. Yeah, even the

00:04:54.560 | detractors like free bird, you

00:04:55.840 | have some pretty significant

00:04:57.360 | things that you dislike about

00:04:58.320 | RFK, which I think are fair.

00:04:59.680 | They're never going to get a

00:05:01.600 | chance to get aired out because

00:05:03.280 | you're never going to get a

00:05:04.240 | chance to be put on a national

00:05:05.680 | platform where there will be

00:05:07.440 | really enough debate. And I

00:05:09.360 | think that's where America loses.

00:05:13.360 | So yeah, in that context, I

00:05:15.440 | would say that Vivek has done

00:05:16.880 | more in the last month to

00:05:18.240 | convince me that he is fiscally

00:05:20.000 | responsible. And that he has

00:05:24.640 | some intuitions that I think RFK

00:05:27.120 | and Trump and a lot of people in

00:05:30.080 | America share, which is just

00:05:31.760 | about the usefulness of the blob.

00:05:34.720 | And you know that there maybe

00:05:38.160 | needs to be a grand experiment

00:05:39.520 | where we deconstruct the blob.

00:05:41.120 | And I'm for that experiment, to

00:05:43.680 | be totally honest with you to

00:05:44.960 | see what happens.

00:05:45.920 | So where you at? He's unhappy.

00:05:49.040 | What I would say, I think it's

00:05:50.000 | too early in the process to say

00:05:51.200 | definitively, okay, this person

00:05:52.720 | has to be the person for me, I'm

00:05:55.040 | viewing candidates as either

00:05:56.080 | being acceptable or unacceptable.

00:05:57.680 | And the vague is acceptable to

00:06:00.560 | me. I think to Santa says to

00:06:02.160 | the ones who are unacceptable to

00:06:04.560 | me are the ones who would

00:06:05.280 | escalate this Ukraine war,

00:06:06.880 | because I think that avoiding

00:06:08.320 | World War Three is, to me, the

00:06:10.240 | central issue of the campaign.

00:06:11.520 | So for me, it's just a litmus

00:06:14.000 | test issue, I can only support

00:06:15.520 | a candidate who would work to

00:06:17.200 | end this war, not one who had

00:06:18.560 | escalated.

00:06:19.520 | Where does our fiscal emergency

00:06:21.120 | set for you in terms of

00:06:22.160 | priorities? So no World War Three

00:06:24.240 | priority one is the fiscal

00:06:25.600 | emergency that we're facing.

00:06:26.880 | Priority two, or is it overstated

00:06:29.200 | by me, do you think or others?

00:06:30.560 | No, I think it's important.

00:06:31.840 | But the problem is, this is that

00:06:33.760 | in order to do something about

00:06:35.360 | that problem, you really need

00:06:38.160 | bipartisan support.

00:06:39.760 | Yeah, because it would be

00:06:40.720 | suicide for one party to try and

00:06:42.400 | do all the heavy lifting without

00:06:43.680 | the support of the other.

00:06:44.400 | And I just don't see in the near

00:06:47.440 | to midterm that you're going to

00:06:48.880 | get that kind of bipartisan

00:06:50.160 | support no matter who is

00:06:51.120 | president, whether it's a

00:06:52.480 | Democrat or Republican.

00:06:53.760 | The only issue that for sure,

00:06:55.920 | the American president has

00:06:58.320 | unilateral discretion over is

00:07:00.320 | our foreign policy.

00:07:01.200 | And so for me, making sure that

00:07:04.480 | the next president pursues a

00:07:05.680 | foreign policy that doesn't

00:07:07.920 | result in the destruction of

00:07:09.200 | the United States, that to me is

00:07:10.480 | the overwhelming issue.

00:07:12.000 | It doesn't mean these other

00:07:13.440 | issues aren't important, but

00:07:14.560 | look at how sad numbers are.

00:07:16.080 | Let me show you this poll for a

00:07:17.040 | second, just so we level set with

00:07:18.400 | the audience.

00:07:18.880 | Poll ending September 18 2023.

00:07:21.600 | For those who are not watching

00:07:22.560 | on YouTube, Trump 39% is that or

00:07:25.200 | 38 then the vague 13% Haley 12%

00:07:29.280 | Christie 11% DeSantis 10%

00:07:31.760 | That is a stunning turn.

00:07:35.360 | Yeah, that's probably because

00:07:36.240 | it's New Hampshire, J. Cal, but

00:07:37.600 | you know, no, I know it's just

00:07:38.800 | but that's a very critical state,

00:07:40.320 | right? I mean,

00:07:40.880 | sex, what do you think about what

00:07:42.240 | Dahlia said on stage about the

00:07:45.200 | need to have a Manhattan project

00:07:47.520 | style effort here that is

00:07:49.200 | bipartisan comes to the center and

00:07:51.520 | tries to resolve this as that scale

00:07:53.920 | of an emergency.

00:07:54.880 | Is that realistic to kind of frame

00:07:57.440 | this as we are in a fiscal

00:07:59.520 | emergency, we have to get a Manhattan

00:08:01.200 | project style effort underway to try

00:08:02.640 | and engineer a solution.

00:08:03.680 | Well, let's back up.

00:08:04.560 | First of all, I think you asked

00:08:05.600 | the right question to him, which is

00:08:08.000 | is our decline a matter of physics,

00:08:09.600 | you know, due to forces we can't

00:08:10.960 | control, or is it something we still

00:08:12.720 | have control over.

00:08:14.000 | And I think that that's a really

00:08:15.920 | good framing.

00:08:17.440 | I think if you're in the bucket that

00:08:18.800 | we can do something about it, I mean,

00:08:20.000 | I believe that we can.

00:08:20.960 | The question is how and I think his

00:08:24.400 | view was that somehow you get all

00:08:25.760 | these elites together and you get

00:08:26.960 | them on the same page.

00:08:27.920 | I don't think that's how

00:08:29.760 | our system works.

00:08:31.600 | I think what happens is you have

00:08:33.360 | elections, people compete against

00:08:34.720 | each other, and then voters decide

00:08:36.240 | who's right.

00:08:37.440 | And so one side has to defeat the

00:08:39.040 | other.

00:08:39.540 | And I think until we get some clarity

00:08:42.560 | from voters on the direction they

00:08:43.920 | want to go, I don't think there's

00:08:45.200 | going to be a resolution.

00:08:46.560 | But to your point, there's no

00:08:47.760 | solution without bipartisan

00:08:49.680 | bipartisanship here.

00:08:50.800 | So what is the path to bipartisanship

00:08:52.960 | when it comes to the fiscal crisis?

00:08:54.560 | I'm not sure.

00:08:55.200 | Wouldn't the obvious thing be if one

00:08:56.800 | party wins with that as part of their

00:08:59.200 | platform, then it becomes part of the

00:09:00.960 | winning platform and the winning

00:09:02.160 | formula.

00:09:02.560 | Are we just saying that's not even

00:09:03.680 | possible because it's too unpopular

00:09:05.600 | to tell people that they don't get

00:09:06.800 | free money?

00:09:07.360 | I think it's political suicide for

00:09:09.120 | one party to engage in deep cuts,

00:09:12.560 | deep government cuts, deep cuts of

00:09:14.560 | programs, especially popular programs.

00:09:16.320 | You probably cut the unpopular ones

00:09:17.920 | at the margins, but it's political

00:09:20.320 | suicide to cut anything important

00:09:22.000 | without having the other party on

00:09:23.200 | board.

00:09:23.520 | There's been a couple of times where

00:09:24.560 | we've been able to have this type of

00:09:26.080 | consensus.

00:09:26.640 | I mean, the one that always gets

00:09:28.480 | mentioned is when Reagan and Tip O'Neill

00:09:31.200 | cut a deal and they were able to

00:09:33.280 | reform entitlements and make some

00:09:35.360 | changes to those programs, and they

00:09:36.640 | kind of did it arm and arm, and that

00:09:39.920 | worked.

00:09:40.480 | And then the other time where it kind

00:09:42.080 | of happened, not through agreement,

00:09:44.560 | but almost through lack of agreement,

00:09:46.000 | was when we had the sequester.

00:09:48.480 | Remember when Obama was president?

00:09:50.080 | And what happened is the Democrats

00:09:52.000 | and the Republicans worked out a deal

00:09:54.560 | where if they couldn't agree, you

00:09:56.640 | would get equal cuts in both military

00:09:59.440 | spending and social spending.

00:10:02.160 | The idea being that Republicans wanted

00:10:03.600 | the military spending, the Democrats

00:10:04.960 | wanted the social spending.

00:10:06.880 | And that's ultimately what happened,

00:10:08.320 | is that they couldn't agree, and so

00:10:10.080 | you got the sequester, and we had some

00:10:11.520 | spending restraint for a short period

00:10:13.440 | of time.

00:10:14.320 | The problem now is that both Republicans

00:10:17.040 | and Democrats want more military

00:10:19.840 | spending.

00:10:20.240 | I don't hear anybody really argue for

00:10:21.760 | cutting military spending, except for

00:10:23.520 | maybe Ro Khanna at our event.

00:10:25.600 | But the Democrats are completely on

00:10:28.000 | board with war now.

00:10:29.200 | And then on the social spending, I don't

00:10:30.640 | think either party really wants to cut

00:10:31.920 | social spending either or do

00:10:33.360 | entitlement reform.

00:10:34.720 | So there is no constituency out there

00:10:37.520 | for reining in the biggest sectors of

00:10:40.080 | government spending.

00:10:41.280 | So I don't see how it's going to happen

00:10:42.960 | no matter who the president is.

00:10:44.960 | Well, the forcing function will be the

00:10:46.400 | debt service costs, which is just

00:10:48.000 | across a trillion dollars a year just to

00:10:49.520 | pay the interest, and it's mounting,

00:10:51.440 | right? 30% of our debt, I think, is

00:10:53.040 | coming up for refinancing in the next 12

00:10:55.680 | months, and that's going to refinance at

00:10:56.880 | a 5% rate, because that's where the

00:10:58.560 | markets are at.

00:10:59.200 | Just like consumers can ignore it,

00:11:00.800 | Friedberg, and put their fingers in

00:11:02.480 | their ears and say, "La la la la la, I

00:11:04.080 | don't have to worry about my payments."

00:11:06.000 | Then the payments show up, and you got

00:11:07.520 | to worry about them. Same thing's going

00:11:08.960 | to happen here in the US, right?

00:11:10.000 | The federal budget will get naturally

00:11:11.440 | constrained at some point here, but

00:11:13.280 | yeah.

00:11:13.840 | As the economist Herb Stein once said,

00:11:15.920 | "If something can't go on forever,

00:11:18.320 | it won't." So I think you're

00:11:20.400 | right, Friedberg, that this will not go on forever.

00:11:21.360 | Is that Yogi Berra?

00:11:22.880 | It's not Yogi Berra, it's Herb Stein, I

00:11:24.640 | think. Yeah, if something can't go on

00:11:25.840 | forever, it won't. I think that

00:11:27.760 | that's where we're headed, is we're going

00:11:29.520 | to have restraint imposed on us from the

00:11:31.840 | outside. It's not going to come from

00:11:33.200 | inside Washington. People stop buying the bonds,

00:11:34.480 | people stop buying treasuries.

00:11:35.920 | Interest rates just have to go up to a

00:11:37.520 | point that... So what's happening in Japan,

00:11:38.720 | right? I mean, their bond auctions have

00:11:41.280 | been very lukewarm, and supposedly

00:11:45.040 | a lot of the money in Japan is coming

00:11:47.520 | west, looking for opportunities to get

00:11:50.320 | alpha. So we have an example that we can

00:11:52.320 | look to. All right, let's get... we can get

00:11:54.320 | started here. We've got so much to talk

00:11:55.520 | about. I think we got to give some

00:11:56.880 | flowers here. Last year, the Sultan of

00:11:59.680 | Science, the Prince of Panic Attacks,

00:12:01.760 | the Queen of Quinoa was an absolute

00:12:04.000 | terror when I did the All in Summit

00:12:06.240 | 2022. And then this year, he was an

00:12:09.360 | absolute all star and delight. What an

00:12:12.160 | amazing job you did on the content.

00:12:14.000 | People are saying the content at All in

00:12:16.400 | Summit 2023 is the best conference ever

00:12:18.320 | had. Bill Gurley got a four minute

00:12:20.400 | ovation. And that talk is on YouTube.

00:12:23.040 | Elon Musk, star LinkedIn from 40,000 feet.

00:12:28.960 | He crushed it. Toby was fantastic.

00:12:31.280 | Ray Dalio, Larry Summers, Mr. Beast,

00:12:35.040 | Gwyneth Paltrow, the Botes sisters,

00:12:37.280 | which we did a pretty good showing, I

00:12:39.600 | have to say. A great job to Sax and

00:12:42.400 | Friedberg, who held the line with the

00:12:44.720 | Botes sisters in our group chess.

00:12:46.320 | Brian Armstrong. Who am I missing here?

00:12:51.040 | I mean, what an incredible lineup.

00:12:52.720 | The Fusion Panel, Nicole Polk, Rob

00:12:55.840 | Henderson, Jenny Just, Rob Henderson.

00:12:58.000 | I mean, extraordinary. Let me just go

00:13:00.640 | around the horn. Chamath, your what

00:13:05.280 | discussion or moment pick your choice

00:13:09.120 | there for you was the most intellectually

00:13:12.160 | engaging and important at the summit.

00:13:14.800 | You can mention two or three if you

00:13:15.760 | like.

00:13:16.260 | I thought number one were my outfits.

00:13:19.600 | Pretty great. I mean, you did do an

00:13:22.320 | outfit change twice a day. So congrats

00:13:24.960 | on that. I like that.

00:13:25.840 | That's a really good job with that.

00:13:27.600 | I do agree. I agree.

00:13:29.200 | Did you guys get the special shoes from

00:13:31.120 | Laura Piana?

00:13:32.400 | Oh, God, the King's cashmere loafers.

00:13:34.960 | Yeah, those are ridiculous. I'm wearing

00:13:36.320 | them as we speak. Actually, I wore them

00:13:38.480 | there at night. And I can wear them.

00:13:40.400 | Yeah, yeah.

00:13:42.240 | These are the most incredible shoes.

00:13:44.720 | Clouds. They're the most

00:13:45.840 | they made like 10 pairs or something.

00:13:47.920 | And yeah, and we got four special for us.

00:13:50.160 | Yeah, then I get back to the Beverly

00:13:52.160 | Hills hotel, the suite that Friedberg

00:13:55.120 | booked me a beautiful suite. Thank you,

00:13:56.480 | Friedberg. And there is a Laura P

00:13:58.840 | Friedberg shafted me on my room.

00:14:00.480 | What? What? Yeah, I

00:14:02.880 | got to put you by the garage.

00:14:04.400 | No, I got a room that was

00:14:06.000 | well, it's very appropriate that these

00:14:08.640 | rooms exist, but it's handicap accessible,

00:14:10.960 | which totally fine, except the problem is

00:14:13.040 | the the closet and everything is set for

00:14:16.400 | wheelchair height.

00:14:17.520 | Why did you change your room, dude?

00:14:19.280 | And so all my and that's why I thought,

00:14:20.640 | oh, he just fucked me on purpose. He just

00:14:22.080 | tried to control your little passive

00:14:23.680 | aggressive name check. So you guys got

00:14:26.240 | some work to do in the group therapy.

00:14:27.840 | Yeah, I would never do that to you guys.

00:14:30.240 | Don't worry when I when I organize a

00:14:31.680 | summit, I'll make sure these details are

00:14:33.040 | perfect. I fly on to my plane. He has

00:14:35.040 | gluten free Nutella crepes handmade in

00:14:37.360 | the morning and I stick him in a

00:14:38.480 | handicapped accessible room where he

00:14:40.080 | can't even put his bag.

00:14:40.880 | And I can't put my clothes except

00:14:43.600 | without it touching the ground. So then

00:14:44.960 | I had to play them on the bed and then

00:14:46.560 | I had to lay them on the floor.

00:14:47.680 | I'm talking about first world problems.

00:14:49.040 | Yeah, the audience right now is just

00:14:51.280 | triggered by the suffering that you

00:14:53.760 | went through at the Beverly Hills hotel.

00:14:55.120 | My honest reaction was I thought the

00:14:56.640 | content was really inspiring. I guess

00:14:58.640 | it's kind of like I knew what I was

00:15:00.880 | going to get up front with so many of

00:15:02.240 | the folks because I knew them. But then

00:15:04.480 | where I still came away where they

00:15:05.920 | exceeded my expectations. Number one,

00:15:08.480 | probably was Graham Allison. Oh, I could

00:15:11.600 | literally talk to him for eight hours a

00:15:13.520 | day, I feel like and I don't know him

00:15:16.480 | well. So I felt like I was scratching the

00:15:18.560 | surface of the things that he knew. I

00:15:20.800 | could do an entire dinner, I think where

00:15:22.560 | he could just walk through the Cuban

00:15:23.840 | Missile Crisis and I could just sit

00:15:25.120 | there listening. So I thought he was

00:15:27.280 | unbelievably intellectually stimulating

00:15:31.360 | for me. Every time I sit down with Toby,

00:15:34.800 | I'm just like in awe of how smart and

00:15:38.720 | different Toby Lutke is. And so I always

00:15:43.440 | kind of like walk away thinking this is

00:15:46.480 | really one of the very special

00:15:47.760 | entrepreneurs of our generation just in

00:15:49.440 | terms of his mindset. Underrated. I

00:15:52.000 | thought Larry had the line of the summit,

00:15:53.920 | Larry Summers, where he said,

00:15:56.320 | self esteem should come from achievement,

00:16:01.840 | and not the opposite, which is that

00:16:03.360 | achievement should come from self

00:16:04.720 | esteem. And he was talking about

00:16:06.160 | wokeism and sort of like, the entire

00:16:10.320 | philosophy around that stuff right now.

00:16:12.000 | And I thought that that was really

00:16:13.360 | insightful. Those are probably the three

00:16:15.280 | moments I thought girlies obviously

00:16:16.560 | presentation was superb. But again, it's

00:16:19.040 | kind of like saying the obvious because

00:16:20.400 | it was just so masterclass. But the from

00:16:23.280 | what I expected to what I got, those

00:16:24.800 | were the three that I thought were the

00:16:26.000 | most inspiring and net new positive for

00:16:30.160 | me. Fantastic. Saks. Did you have any

00:16:33.200 | moments aside from Gwyneth Paltrow

00:16:35.120 | saying she was your favorite bestie other

00:16:37.440 | than that being the clear number one for

00:16:39.520 | you and crushing soul crushing for us?

00:16:42.160 | Well, we're your favorite. We've heard

00:16:43.680 | that because the zoom issues, we had

00:16:47.120 | technical issues during her interview,

00:16:48.800 | and it got really hard to hear her at

00:16:50.800 | various points. And I don't think you

00:16:52.960 | guys heard that either. Right?

00:16:54.160 | I heard I tried to ignore it. I tried to

00:16:56.640 | block. I couldn't I couldn't hear it. So

00:16:58.320 | I didn't know that. Yeah. Well,

00:17:00.000 | congratulations. We can we keep that up

00:17:02.560 | right here. No, we're not doing victory

00:17:04.080 | laughs on the pod. We talked about this

00:17:05.600 | on the chat. No, I mean, that's awesome.

00:17:07.600 | Go go for it. I want to hear it.

00:17:08.560 | You know, my husband, but we have a

00:17:11.040 | little bonus potential is he thinks I'm

00:17:13.440 | in love with David Sachs. So he's letting

00:17:15.680 | you do it. So it's a fetish.

00:17:17.440 | Oh, my God. She's in love with David

00:17:21.440 | Sachs. That his her husband thinks that

00:17:23.840 | she is a little bonus potential is he

00:17:27.200 | thinks I'm in love with David Sachs. So

00:17:29.360 | he's letting you do it. So it's a fetish.

00:17:31.680 | This is not good. David is incredible.

00:17:36.560 | The husband's jealous. And that's not a

00:17:38.880 | good situation. Reuse. After that, what

00:17:41.520 | did you like sex? Be honest. I want to

00:17:43.680 | also give credit to David Sachs, who

00:17:46.000 | showed up for every talk. And

00:17:50.240 | freeberg said, Jake out an issue. I said,

00:17:53.200 | Well, anything I can help? He said, Oh,

00:17:54.800 | well, actually, the issue is I asked

00:17:57.040 | David Sachs to show up at 845 for the

00:17:58.800 | run through and he he won't respond to

00:18:00.960 | me. Can you can you get in touch with

00:18:02.240 | him? I said, Let me tell you what's

00:18:03.440 | gonna happen with David Sachs. program's

00:18:05.440 | gonna start at nine. He'll be here at

00:18:07.200 | 856. And if you get them on stage for

00:18:10.000 | two out of three talks, you did better

00:18:12.240 | than I did. And free birds team, which

00:18:16.000 | God bless the production work team, they

00:18:17.440 | did an amazing job. These Wolverines are

00:18:19.520 | incredible. Shout out to Laura, Rachel

00:18:23.120 | and everybody on the team there. They did

00:18:24.480 | a fantastic job. And sure enough, sack

00:18:27.360 | shows up at 856 goes on stage and he

00:18:29.840 | crushes it. So great job getting him on

00:18:32.480 | stage. But congrats on showing up for

00:18:34.160 | they wanted me I mean, I asked when's the

00:18:36.080 | first speaker going on stage? Yeah,

00:18:38.560 | actually, it was 10am. Right? 10am. Sorry,

00:18:40.560 | 10am. 10. So I'm like, okay, in my head,

00:18:42.960 | I'm thinking, okay, I'll be there at 959.

00:18:44.560 | And I'm like, what time do you? Yeah. And

00:18:46.960 | then they're like, you were there at 955.

00:18:48.480 | And I was like, 830 for a sound check.

00:18:51.520 | And I'm like,

00:18:52.640 | I'm a staggered out for the sound. What?

00:18:55.600 | I'm sorry, it is Jimmy Page.

00:18:59.600 | Like,

00:19:00.000 | I'm talking about here.

00:19:02.720 | I'm trying to come check. Okay, let's

00:19:04.720 | start. Let's start the show. Can we

00:19:06.320 | anyway? They're very self aggrandizing.

00:19:07.840 | Look, I thought the conference was

00:19:09.760 | amazing. It exceeded my expectations.

00:19:11.440 | Your conference exceeded my expectations

00:19:14.400 | to J Cal, but I think free bird took it

00:19:15.840 | to another level. Yes, he did exceeded my

00:19:18.240 | my already high expectations.

00:19:19.920 | Yeah, you know, highlights. I mean, I

00:19:21.360 | think starting with Ray Dalio as the

00:19:23.200 | first speaker was really interesting.

00:19:25.360 | I think we only got to go for what 3040

00:19:27.520 | minutes with him. I felt like we could

00:19:28.640 | have gone for two hours. You have to

00:19:30.400 | bring it back on the pod and, you know,

00:19:32.800 | drill into that topic more.

00:19:34.800 | Two hours with Dalio would be amazing.

00:19:37.440 | Because I think what's really interesting

00:19:38.880 | is the way that he's looking at the grand

00:19:40.640 | sweep of history, right? He's thinking

00:19:42.240 | about not just a 10 year business cycle

00:19:45.200 | or a 75 year debt cycle. He's looking at

00:19:47.840 | a 250 year empire cycle. I think this is

00:19:51.200 | really interesting that he thinks in that

00:19:52.400 | really big way. I agree. Graham Allison,

00:19:55.520 | really interesting. We could have spent

00:19:56.640 | two hours with him. Larry Summers. These

00:19:59.120 | are all people I think we should bring

00:20:00.080 | back on the pod for a long form

00:20:02.000 | conversation. I agree that Bill Gurley's

00:20:05.440 | talk was one of those great Ted style

00:20:08.480 | talks that I think should go viral. I

00:20:10.240 | think it has, you know, I think 20 million

00:20:12.320 | people should watch that. Yeah. I mean,

00:20:14.160 | the people retweeting it are incredible.

00:20:16.160 | And I was at a dinner party last night.

00:20:17.760 | And everybody was talking about it. So

00:20:19.360 | it's spread into our industry. And it's

00:20:22.160 | starting to tip over into other

00:20:23.280 | industries already. The chess was really

00:20:24.880 | fun. I am a game day player that way.

00:20:26.960 | You know, I brought it and managed to win

00:20:30.320 | the game.

00:20:30.720 | I don't know. There were a lot of great

00:20:35.040 | moments. I'm sure forgetting about things.

00:20:36.480 | I love that. I love that.

00:20:37.680 | Parties were incredible.

00:20:39.680 | The parties were absolutely incredible.

00:20:43.600 | We missed both of you guys at the Grimes

00:20:45.360 | DJ set. That was amazing, by the way.

00:20:47.440 | I think Chamath was there for that.

00:20:48.960 | Weren't you there?

00:20:49.600 | No, I left right at 10 to fly back to

00:20:51.760 | the Bay Area early night. Yeah,

00:20:54.320 | I got it. Yeah, she Grimes. Thank you to

00:20:56.560 | Grimes for doing that for me. A personal

00:20:58.080 | favor. The audience lost their minds.

00:21:00.880 | Santa Monica. She was incredible. She's

00:21:02.320 | such a performer. It's incredible.

00:21:03.680 | Yeah, people were losing their minds.

00:21:05.920 | For you, Freeberg, best moments on stage.

00:21:09.760 | It was just great to be with everyone and

00:21:11.280 | go through it. I mean, honestly, I didn't

00:21:12.880 | source all these speakers you guys did.

00:21:14.560 | And so I don't want to take credit for

00:21:16.320 | that. I think it was what I had hoped.

00:21:18.880 | You know, I went to Ted for 12 years.

00:21:20.720 | I started going to Ted, I think, 2007.

00:21:22.480 | And I felt pretty disappointed over the

00:21:24.720 | last couple of years. And I actually

00:21:26.560 | spoke to the CEO of Ted and said, I'm not

00:21:28.800 | going to go anymore because so much of

00:21:30.880 | this, the talks became kind of social

00:21:34.240 | justice type talk nonsense that I

00:21:37.120 | wouldn't I don't want to use that term

00:21:38.640 | because I do think it's all very well

00:21:40.080 | intentioned. And I think it just became

00:21:42.160 | overwhelming that you would go to Ted

00:21:43.520 | and you would basically feel bad about

00:21:46.160 | yourself. And that it kind of missed the

00:21:49.280 | element of the world is an amazing place,

00:21:52.000 | we should have a great degree of

00:21:53.040 | optimism with technology and where it's

00:21:54.640 | taking us. We should observe the greater

00:21:57.280 | cycle and the bigger perspective of

00:21:58.640 | things that are happening in the world,

00:22:00.320 | not kind of go into a whodunit and

00:22:02.880 | who's to blame and us versus them kind

00:22:04.720 | of mentality, which I think so much of

00:22:06.240 | this stuff turned into at Ted, and I was

00:22:08.640 | really hoping we could capture some of

00:22:09.840 | that. And so I'm really glad we got a lot

00:22:12.320 | of the speakers we did and had a couple

00:22:15.200 | hours to be able to share, you know,

00:22:17.440 | those sorts of perspectives. So it was

00:22:19.440 | fun. I really enjoyed what you did with

00:22:21.760 | the conference in terms of the editorial

00:22:23.600 | direction was great. You leveled it up,

00:22:25.200 | certainly from last year, as Tramont

00:22:26.720 | pointed out correctly. And it had a great

00:22:29.520 | amount of optimism, realism. And we

00:22:32.480 | didn't talk about superfluous virtue

00:22:35.360 | signaling, social justice, woke nonsense

00:22:39.040 | that really is should not be at the top

00:22:41.440 | of the agenda. In my mind, I'm not saying

00:22:43.360 | that these issues are not important to

00:22:45.200 | some people. But I think prioritizing

00:22:48.160 | what's important in the world is what I

00:22:49.920 | got out of the conference, you know, when

00:22:51.440 | you have people on this level, speaking

00:22:54.560 | for for, you know, very long periods, not

00:22:57.200 | long enough, but, you know, that Larry

00:22:59.520 | Summers and you know, Ray Dalio, these

00:23:04.880 | talks, they really gave you a sense of

00:23:07.120 | this is what's important in the world

00:23:08.960 | right now, this is the priority. And I

00:23:11.920 | came away from it so intellectually

00:23:13.360 | stimulated, maybe just say, hey, you know,

00:23:15.760 | I want to travel more, I want to read

00:23:17.200 | more, I want to have more conversations.

00:23:19.520 | And I have been basking in that, like

00:23:22.080 | afterglow. So I just want to say, you

00:23:23.520 | know, once again, what an extraordinary

00:23:26.720 | amount of teamwork, just as the moderator

00:23:29.680 | of our quartet, felt everybody did a

00:23:32.080 | great job moving the ball around. I think

00:23:34.400 | everybody was on their game, everybody,

00:23:36.160 | you know, I'm talking about the three of

00:23:37.040 | you guys. Very focused on just knowing

00:23:40.800 | exactly when to insert a great question.

00:23:42.480 | So I felt like we were playing

00:23:44.080 | basketball, like the Warriors when they

00:23:46.080 | play prime basketball ball move really

00:23:48.400 | well. Great questions, people picking up

00:23:51.200 | on themes, threading beams from one talk

00:23:53.600 | to the other. And it just made me really

00:23:55.440 | excited for next year. So I just want to

00:23:57.440 | say great job to each of you. Thank you.

00:24:00.480 | Back at you. Yeah, back at you. Listen, we

00:24:03.120 | could talk about ourselves all day, but

00:24:05.120 | people hate that. Let's talk about what's

00:24:07.040 | going on in the markets. Yeah, we only

00:24:08.560 | did it for 40 minutes. Perfect.

00:24:10.720 | Okay, yeah, exactly. IPOs and M&A on fire.

00:24:14.160 | We've had a ridiculous week. Six quarters

00:24:17.360 | of down market has suddenly turned into a

00:24:21.040 | bunch of green shoots on the M&A front.

00:24:23.760 | Cisco announced it acquired Splunk for

00:24:27.280 | $20 billion in an all cash deal. If the

00:24:32.080 | notes are correct here, it's about 10% of

00:24:33.760 | Cisco's market value. Somebody did a

00:24:36.480 | trade where they bought a bunch of

00:24:38.160 | options. And so that looked a little

00:24:40.720 | fugazi. Congratulations to Nancy Pelosi

00:24:42.880 | on that trade possibly.

00:24:44.080 | Allegedly, don't forget your favorite

00:24:47.680 | word, allegedly. Allegedly, allegedly,

00:24:50.560 | perhaps I don't know she's good at

00:24:52.000 | trades. So if somebody is going to make

00:24:53.760 | money on that trade, or somebody's going

00:24:55.600 | to jail. So congrats to Scrully, Instacart,

00:24:58.560 | Klaviyo and Arm all IPO in the past week.

00:25:03.360 | And you know, they've fallen back to

00:25:06.160 | earth. Just crazy stat. 21 months since

00:25:10.400 | the last significant venture back

00:25:12.720 | company went public, I'll leave out like

00:25:14.400 | the Middle Eastern food company was a

00:25:16.880 | kava that went public. And then the

00:25:19.280 | vacuum company that went public. But

00:25:21.520 | that's just in the past seven days. So we

00:25:23.120 | talked about this on the program. We

00:25:25.600 | discussed, hey, we'll know when the

00:25:27.360 | markets are back if some of these

00:25:29.360 | companies are forced to walk the plank

00:25:32.080 | slash get public, you know, and fix their

00:25:35.520 | cap tables. And sure enough, it's the

00:25:37.200 | car really kind of represents that most

00:25:38.880 | most of the late stage investors in

00:25:40.960 | Instacart are underwater. The early stage

00:25:43.680 | folks absolutely crushed it. Chamath.

00:25:46.640 | Listen, you're you're a market expert

00:25:49.520 | here. You've taken a lot of companies

00:25:50.880 | public. What do you think the last week

00:25:53.600 | means for the greater technology

00:25:56.160 | industry?

00:25:56.720 | I don't think that this was the great

00:25:59.600 | reopening that we all were hoping for.

00:26:03.920 | I think it's important to understand the

00:26:06.080 | dynamics of bank led traditional IPOs in

00:26:10.160 | America. And the best way to understand

00:26:13.280 | them is to contrast and compare to how

00:26:15.120 | that same company would go public in

00:26:17.680 | Europe or Asia, because it'll explain

00:26:19.760 | what what happened. And I think

00:26:21.200 | unfortunately, what has happened is not

00:26:22.720 | good for the market. So typically, what

00:26:25.040 | happens is when you construct an IPO,

00:26:27.200 | you're selling 15 to 20% of the company.

00:26:31.440 | And when you do that, you go and you

00:26:33.520 | call hedge funds and you call these

00:26:36.240 | mutual funds, but what are called long

00:26:38.000 | only right, meaning they don't short,

00:26:39.680 | they just go along these big mutual fund

00:26:41.280 | companies. And you try to find a handful

00:26:44.080 | of people to anchor the IPO. So they take

00:26:46.640 | a huge piece of that 15 to 20%. And in

00:26:50.960 | Europe and Asia, the securities law says

00:26:53.040 | that when you get such a big allocation,

00:26:55.840 | you have to hold it for six months,

00:26:57.600 | which means you're treated exactly the

00:27:00.240 | same as the employees who are typically

00:27:02.720 | locked up in an IPO for at least six

00:27:05.600 | months. And so what happens is these

00:27:08.080 | firms do all kinds of diligence. And

00:27:11.520 | when they buy something, it's because

00:27:12.960 | they really believe in it. And then they

00:27:14.640 | go long it for you know, what is at least

00:27:17.200 | half a year. So it's a it's a non trivial

00:27:19.200 | amount of time. So that's what happens in

00:27:21.360 | Europe and Asia 15 to 20% of the company

00:27:23.600 | is sold a handful of people anchor and

00:27:26.160 | you're locked up for six months. Now you

00:27:28.400 | need to look at how American IPOs are

00:27:30.080 | done, which is why people have

00:27:31.840 | experimented with direct listings. We've

00:27:34.560 | experimented with SPACs, it's because the

00:27:36.640 | fundamental architecture of IPOs are

00:27:39.760 | broken. They're set up in a dynamic where

00:27:43.200 | it's a heads I win tails, you lose

00:27:45.920 | situation for the bankers that run the

00:27:48.640 | IPO. Now what happened in these three

00:27:51.120 | IPOs? Number one, it was less than 10% of

00:27:54.240 | the float. So highly, highly, highly

00:27:57.280 | concentrated small amount of the of the

00:27:59.680 | company was made available for sale.

00:28:03.280 | Number two, there really weren't anchors.

00:28:06.560 | What happened was the allocation of that

00:28:08.960 | less than 10% was smeared across 50 or 60

00:28:12.960 | different organizations. And then number

00:28:15.120 | three, there was no lockup, which meant

00:28:16.960 | that people could sell right away. And so

00:28:19.920 | what you saw with all of these companies

00:28:21.680 | was the exact same dynamic, which was it

00:28:24.480 | opened, because there was such a small

00:28:26.960 | amount of supply, it traded up. And

00:28:29.440 | the minute that retail, which typically

00:28:31.520 | tends to be late to the game, because

00:28:33.040 | they don't have access to these things,

00:28:34.480 | right? When they started buying, what was

00:28:37.840 | unique this time around is all of the

00:28:39.760 | mutual funds just dumped everything. And

00:28:43.200 | the hedge funds were like, well, we don't

00:28:45.040 | have a real allocation, our friend said

00:28:46.880 | in the group chat, he got a five or $10

00:28:48.960 | million allocation in these IPOs. These

00:28:51.840 | are 20 and $30 billion hedge funds, five

00:28:54.320 | and $10 million allocations don't move

00:28:56.160 | the needle. So the hedge fund sold right

00:28:58.480 | away and got on the sidelines and said, I

00:29:00.320 | don't care about this. The long only

00:29:02.960 | bought just enough to make the stock go

00:29:05.120 | up because of such a small supply, then

00:29:06.800 | when retail stepped in, they just dumped

00:29:08.560 | it all. And so unfortunately, what's

00:29:11.280 | happened is all three IPOs within a few

00:29:14.000 | days have breached their issue price. Now

00:29:16.960 | they're at the same issue price may be

00:29:19.200 | slightly higher. But that is an

00:29:21.440 | unsuccessful dynamic. What could have

00:29:23.440 | been different, the banks could have

00:29:25.520 | forced these companies to sell up to 20%

00:29:29.040 | the banks could have found a few anchor

00:29:31.520 | buyers, the banks could have created a

00:29:34.080 | lockup structure for these anchor buyers,

00:29:35.840 | they did none of it. And so the result is

00:29:38.960 | a lot of downward pressure in a moment

00:29:42.240 | where the overhang of rates has have come

00:29:44.560 | back and are forcing all of us to realize

00:29:47.760 | in we'll talk about it in a second that

00:29:49.360 | these rates are going to be higher for

00:29:50.640 | longer, which completely changes how you

00:29:52.640 | value these tech companies. So net net,

00:29:55.920 | very poor IPO construction by the banks.

00:29:58.880 | And this the grand reopening was a grand

00:30:02.640 | closing, I think.

00:30:03.680 | Okay, so just to put some numbers on that

00:30:05.520 | instacarts float was 6.7%. And clavio's

00:30:08.320 | float 7.6. arms float almost hit the 10%

00:30:11.600 | 9.4, but certainly less than the 20% that

00:30:14.320 | you would expect. So then I guess the

00:30:16.000 | follow up question here, saxes, why did

00:30:19.120 | these companies go out? And do will we see

00:30:23.360 | the the other big ones go out the stripes?

00:30:25.920 | And some of the other backed up inventory?

00:30:28.000 | What's what's the back channel in our

00:30:29.440 | industry about the viability of other

00:30:31.920 | IPOs? Is this going to push a lot more

00:30:33.600 | people out to get liquidity, even at

00:30:35.680 | discounted prices, even with the headwinds

00:30:38.080 | that you're not points out? Or is this

00:30:39.440 | going to have a chilling effect? And

00:30:41.120 | people are going to say, you know what,

00:30:42.080 | let me wait till 2025.

00:30:43.520 | So I think they went out because

00:30:45.600 | investors and others need liquidity. And

00:30:48.480 | there's no point holding on and waiting

00:30:50.240 | for a valuation that's never going to

00:30:51.440 | come back. I mean, so you take instacart,

00:30:53.600 | for example, their last private round was

00:30:55.600 | at 39 billion. What's the market cap now

00:30:58.160 | around nine, nine. So it's great that

00:31:01.520 | they got out. I think that is eight today.

00:31:03.760 | At eight. I mean, look, it's sort of a

00:31:05.920 | green shoot that they got out. But we're

00:31:08.240 | never going back to the valuation levels

00:31:10.560 | that we had a couple years ago during a

00:31:12.880 | giant Zerp created asset bubble. So I

00:31:15.920 | just think there's no reason to wait. And

00:31:17.840 | you look at SoftBank, they needed the

00:31:19.680 | liquidity from the arm IPO. Yeah. So I

00:31:22.320 | think that's why these companies are

00:31:23.360 | going out is we're kind of getting back

00:31:25.120 | to business as usual. Just to broaden out

00:31:27.600 | the question a little bit. What I think

00:31:30.320 | is interesting is that for the past year

00:31:32.560 | or so, we've been in a software recession.

00:31:35.440 | It really started in the first half of

00:31:36.960 | 2022. The markets cratered, especially for

00:31:39.120 | growth stocks. There's a huge correction

00:31:41.520 | of valuations that happened in especially

00:31:44.080 | the first half of 2022. But then about a

00:31:47.600 | year ago, so starting in mid 22 and

00:31:49.920 | continuing through Q2 of this year, you

00:31:53.040 | saw a reduction in growth forecasts,

00:31:56.000 | everybody started forecasting down.

00:31:58.240 | There wasn't a single board meeting that

00:31:59.840 | I was in, in private companies that

00:32:02.560 | wasn't missing their numbers and

00:32:03.600 | reforecasting down. And you saw it in the

00:32:05.680 | public companies as well. I think

00:32:07.040 | German ball sub stack showed that the

00:32:09.520 | average growth forecast for SAS companies

00:32:13.600 | for next 12 months have been cut roughly

00:32:15.840 | in half. So for the last year, year and a

00:32:19.440 | half, we've been in a software recession,

00:32:21.040 | you could say a B2B recession, we saw

00:32:23.920 | companies like Meta, Google, and so on cut

00:32:27.120 | thousands of jobs, tens of thousands of

00:32:30.400 | jobs, you know, get much more efficient.

00:32:33.040 | Yeah, each that meant they were buying a

00:32:34.480 | lot less software on a per seat basis.

00:32:36.160 | So I think we've been through call it a

00:32:39.440 | B2B or enterprise recession. But the

00:32:42.640 | thing that's held up stronger than I

00:32:44.240 | think people might have expected over

00:32:45.680 | the past year has been the consumer.

00:32:47.040 | Consumer spending has kept the economy

00:32:49.920 | afloat. So the B2C part of the economy

00:32:53.120 | has been strong, whereas B2B has been

00:32:54.640 | very weak. What I wonder about next is

00:32:58.000 | whether that's going to flip. I wonder

00:33:00.080 | if the consumer is on their last legs

00:33:03.120 | here, you see credit card debt is at an

00:33:06.160 | all time high interest payments on

00:33:08.480 | credit card debt, all time high

00:33:10.880 | mortgages, the rate now is approaching

00:33:13.040 | 8%. So no one can afford to sell their

00:33:15.600 | house, which has a 3% mortgage, and then

00:33:17.840 | buy a new one at 8%. So real estate

00:33:20.160 | transactions have cratered. The

00:33:22.160 | commercial real estate industry is, you

00:33:25.280 | know, on his last legs, I think they're

00:33:26.720 | starting to throw the keys back to the

00:33:28.080 | bank and start forfeiting buildings

00:33:29.520 | because they can't refi it an attractive

00:33:31.840 | rate. So I just wonder if the consumer

00:33:35.040 | now is about to go through the type of

00:33:36.960 | pain and restructuring of their personal

00:33:39.600 | balance sheets the way that the

00:33:41.680 | enterprise segment of the economy over

00:33:43.360 | the past year,

00:33:44.080 | Freiburg, your thoughts on what we're

00:33:46.560 | seeing here in terms of the IPO window

00:33:50.000 | companies getting out, and the impact

00:33:52.480 | that'll have maybe on how limited

00:33:55.360 | partners look at venture funds that's

00:33:57.680 | been frozen for 18 months, limited

00:33:59.840 | partners, and I'm raising a fund right

00:34:01.760 | now publicly under 506 C so I can talk

00:34:04.400 | about it. And it's going great. But man,

00:34:07.120 | it's a lot of meetings. And I'd say two

00:34:10.080 | thirds of the meetings I'm having,

00:34:11.760 | people are saying we're not adding

00:34:13.200 | managers, we're cutting managers and

00:34:14.960 | we're cutting commitments to managers.

00:34:16.640 | But we'd love to meet, you know, just to

00:34:18.240 | start the relationship, you know. So what

00:34:20.960 | do you think this means overall for the

00:34:23.520 | limited partner GPs and the startup

00:34:26.320 | market?

00:34:28.320 | Start of a turnaround or maybe just

00:34:30.800 | sideways for more?

00:34:31.840 | I guess we should just put the volume in

00:34:34.640 | context. If you

00:34:36.320 | look at the slide, this is from Ernst

00:34:38.880 | and Young,

00:34:39.840 | showing the IPO activity by year. And

00:34:42.960 | this was through June 30.

00:34:44.480 | So if you assume kind of a steady state,

00:34:47.040 | you probably are going to come in at a

00:34:49.280 | volume that's less than 22. And perhaps

00:34:52.160 | even less than going back all the way to

00:34:54.080 | 2019, with less than 1200 IPOs during the

00:34:58.080 | year, compared to the peak of 2400, which

00:35:00.800 | happened in 2021. If you go to the next

00:35:03.280 | slide, and just look at the total dollar

00:35:05.200 | volume raised, so that IPO proceeds,

00:35:08.080 | thus far through June 30 of this year is

00:35:10.160 | just around 60 billion.

00:35:12.480 | Compare that to a total of about 180

00:35:15.520 | billion,

00:35:17.040 | all of last year, 450 billion in 2021.

00:35:22.160 | And the IPOs we're talking about today

00:35:24.960 | Instacart, Clavio,

00:35:28.000 | Arm, in total raised about five and a

00:35:30.560 | half billion dollars.

00:35:32.320 | So you know, that kind of doesn't have a

00:35:35.200 | huge consequence on this dollar volume

00:35:37.440 | for the year. And then if you look at

00:35:39.760 | what's in the pipeline right now, in

00:35:41.520 | terms of what's publicly filed as s ones,

00:35:44.800 | there's basically nothing right now. So I

00:35:48.000 | think everyone's kind of sitting around

00:35:49.280 | waiting to see how these

00:35:50.720 | transactions go before they decide to

00:35:52.480 | put other stuff. I think the big mistake

00:35:55.760 | is that we continue to treat IPOs as

00:35:57.920 | this big yardstick.

00:36:00.480 | The real yardstick for a business is the

00:36:03.200 | performance of the business.

00:36:05.120 | And the valuation you get when you raise

00:36:07.360 | capital at some point in time is largely

00:36:09.520 | driven by market conditions, not

00:36:11.360 | necessarily by the performance of the

00:36:13.040 | business and the value of the business

00:36:14.480 | over time, the market will do its job

00:36:17.280 | and rightly value that company. We've

00:36:19.120 | talked at length about how much value

00:36:21.280 | has accrued as a public company for

00:36:22.960 | Apple, for Microsoft, for Google, 99.9%

00:36:26.400 | of their total market value was realized

00:36:28.880 | post IPO. So that the IPO transaction, I

00:36:32.000 | think it's a little too much weight, and

00:36:34.240 | gets a little too much attention in

00:36:36.320 | terms of determining success or failure

00:36:38.720 | of a business and success or failure of

00:36:40.960 | the investors in that business. So I

00:36:43.120 | really hate this whole thing about does

00:36:44.800 | the IPO price go up on a day it's this

00:36:46.720 | really weirdly engineered thing that

00:36:49.440 | they try and do to drive psychology and

00:36:51.120 | marketing by banks to go out and they

00:36:53.920 | the banks to try and get people to give

00:36:55.920 | them more capital or to give them more

00:36:57.440 | deals in the future. Do you think that

00:36:58.640 | the IPO market would be better served if

00:37:00.720 | banks were forced to be locked? Or the

00:37:03.120 | the allocations were forced to be six

00:37:05.040 | months locked like the employees? Of

00:37:06.720 | course. Maybe longer? What if they were

00:37:10.480 | if they were locked for seven? What do

00:37:12.000 | you think? Well, where would the float

00:37:14.720 | come from on day one? But why do you need

00:37:17.600 | a float? Yeah, I mean, that's, that's a

00:37:20.000 | good point. I, I believe the direct

00:37:21.520 | listing should be the way that you do

00:37:22.720 | this. And then you do a follow on

00:37:24.960 | offering once you're sure. The problem

00:37:26.960 | with the direct listing, as I found as a

00:37:30.960 | seller, because I went through a handful

00:37:33.200 | of direct listings, I went through Slack,

00:37:34.720 | and I went through Coinbase. Coinbase,

00:37:36.320 | right? Yeah. And in the Slack direct

00:37:38.560 | listing, I only sold a small portion on

00:37:42.720 | day one. And it turned out to be a

00:37:45.840 | mistake. And the reason was because the

00:37:48.560 | pricing of a direct listing forces you

00:37:50.560 | to find the absolute highest price at the

00:37:53.360 | open. Now, I we learned that so then

00:37:58.320 | going into the Coinbase IPO, what all

00:38:00.240 | the venture investors did was

00:38:02.320 | distributed, literally the day before and

00:38:05.280 | the day of the direct listing, right, so

00:38:07.360 | that you would get delivered your stock

00:38:09.360 | at the highest price so that you could

00:38:11.520 | sell. I'm not sure that that serves

00:38:14.240 | anybody any better. You know what I mean?

00:38:18.160 | Because then you get a lot of price

00:38:19.440 | volatility, and the price just goes

00:38:22.000 | straight down. So I don't exactly know

00:38:25.040 | what the answer is. I suspect though, that

00:38:26.880 | getting companies to float at least 15

00:38:30.400 | to 20% and doing a better job of

00:38:33.200 | allocation so that you're right, David,

00:38:35.680 | removing the psychology of like, it has

00:38:37.520 | to go up 100% on day one is success is

00:38:42.000 | the thing that actually catches these

00:38:43.360 | companies off guard. Now, we haven't even

00:38:45.440 | talked for a minute about whether any of

00:38:46.960 | us thinks the quality of Instacart and

00:38:50.240 | Clavio and arm are good businesses. And

00:38:52.240 | this is part of it as well. Exactly.

00:38:53.920 | Just spent 15 or 20 minutes debating the

00:38:56.480 | stock price that is completely divorced

00:38:58.240 | from the reality of these businesses. And

00:39:00.720 | that's a bunch of distraction that the

00:39:02.160 | banks create as well that are that is

00:39:03.840 | totally unnecessary. I mean, what do you

00:39:05.280 | guys think about the click on?

00:39:06.960 | Let me just respond to the direct

00:39:09.040 | listing point. I just want to also point

00:39:10.800 | out Spotify went public via direct

00:39:13.440 | listing the stock actually traded up

00:39:15.120 | after the direct listing. It went down a

00:39:17.280 | little bit after but it continued to

00:39:18.560 | trade up, you know, into the 2021 era.

00:39:21.200 | And today it's trading at or above what

00:39:23.200 | it was trading at during the direct

00:39:24.400 | listing. So can I tell you why, though,

00:39:26.480 | the performance of that business

00:39:27.760 | fundamentally drove interest from

00:39:29.840 | investors.

00:39:30.400 | The thing with the Spotify IPO was that

00:39:32.400 | it was still a very new vehicle. And so

00:39:34.640 | that direct listing was we were all

00:39:36.320 | learning as we went along. And at the

00:39:38.400 | end of the day, there was one bank that

00:39:40.080 | kind of not cornered the market, but

00:39:41.840 | really became an expert on it. And they

00:39:43.760 | use Spotify as the example. So by the

00:39:46.400 | time Slack and then Coinbase came along,

00:39:48.640 | the playbook was so tight that everybody

00:39:51.680 | knew how to play the game. So I think a

00:39:54.640 | lot of the Spotify post IPO behavior was

00:39:58.320 | a bunch of people figuring out what a

00:39:59.920 | direct listing meant. By the time that

00:40:01.680 | we actually DL slack, and specifically

00:40:04.160 | when we DL Coinbase, the bank was so

00:40:07.040 | sophisticated in telling us here's

00:40:08.560 | what's going to happen. Here's what you

00:40:10.000 | should do. What do you want to do? And

00:40:11.680 | obviously, we wanted to do the thing

00:40:13.600 | that maximize returns for our LPS. So

00:40:17.280 | I'm not sure that the Spotify example

00:40:19.120 | will ever repeat in a direct listing. I

00:40:20.960 | think that the Slack and Coinbase

00:40:24.080 | particularly will be the example going

00:40:26.560 | forward, you'll top tick day one, and

00:40:28.560 | then the thing will spear down find a

00:40:30.240 | bottom and why does it matter? Why is

00:40:32.240 | isn't it ultimately about finding the

00:40:33.600 | real market value for the company?

00:40:35.120 | It doesn't matter that the price goes

00:40:37.680 | down or goes up that ultimately the

00:40:39.360 | buyers that want to pay a certain price

00:40:40.800 | will step in and buy and the folks that

00:40:42.640 | want to sell because they think the

00:40:43.680 | price is higher than their mark will

00:40:44.880 | want to say I agree with you. I do think

00:40:46.720 | that it's really about business

00:40:48.640 | fundamentals, but there's a lot of

00:40:50.080 | people that get caught up in the price

00:40:53.600 | as what the quality of the businesses

00:40:55.920 | that those people are maybe not the

00:40:57.520 | most sophisticated people in the world,

00:40:59.120 | but they make a lot of noise for not

00:41:00.880 | knowing what's going on. And so they can

00:41:03.280 | be a real distraction to a CEO trying to

00:41:05.200 | run a business.

00:41:06.000 | I remember in 2008 I think I've told you

00:41:09.200 | guys this story. It was like November of

00:41:10.960 | 2008 Expedia was trading down to seven

00:41:14.000 | bucks and I saw Dara at some event in

00:41:16.640 | March. Yeah, March and he said, Hey, our

00:41:18.960 | stocks at seven bucks. I can't believe

00:41:20.480 | it. I mean, like everyone should be

00:41:22.000 | buying our stock. And that was well off

00:41:24.240 | of the price that it had been trading at

00:41:25.760 | in 03, 04, 05. And sure enough, if you

00:41:31.760 | had bought that stock, you know, you

00:41:33.280 | would have made 15x from there to where

00:41:36.480 | we sit today and even more if you sold

00:41:38.080 | at the top tech in 2021. So, you know,

00:41:40.960 | these yeah, that's a that's a good chart.

00:41:42.720 | So look at where Expedia was in March of

00:41:45.200 | 09 was right around seven bucks. And I

00:41:48.560 | think that that was for me like the

00:41:50.560 | first example where I really understood

00:41:53.200 | that the price where the market trades a

00:41:56.000 | stock shouldn't matter as much as the

00:41:58.320 | fundamental value of the business if

00:41:59.760 | you're willing to be a long term holder

00:42:01.280 | if you're willing to say you know what

00:42:02.400 | you're willing to do the work and you

00:42:03.840 | have to do the work. Yeah, most people

00:42:05.520 | are not willing to do the work. They want

00:42:07.120 | to look at a price and then they want to

00:42:09.600 | imbue all of their own psychological

00:42:12.640 | desires into it versus what are the

00:42:15.040 | actual ones and zeros of a spreadsheet

00:42:16.960 | tell you? Yeah, but I'm like a pure

00:42:18.640 | efficient market guy. I feel like that,

00:42:20.160 | you know, whatever shares should be

00:42:22.320 | people want to sell, they should be able

00:42:23.360 | to sell whatever people want to buy

00:42:24.640 | should buy the market. And if the stock

00:42:26.320 | gets too cheap, there's plenty of

00:42:28.160 | capital out there to step in and buy the

00:42:29.600 | stock if they think that it's too cheap

00:42:31.200 | and the market will find itself. So

00:42:32.880 | let's do the underwriting of Instacart

00:42:34.480 | then where any of you guys investors in

00:42:36.240 | Instacart? No, for any. I am in a fund

00:42:39.200 | that's an Instacart from the seed round.

00:42:42.960 | So I will do I think very well because of

00:42:45.920 | that. Let's bleep that out. Thank you.

00:42:48.160 | That's that will be a that'll be a

00:42:52.080 | yum yum for J Cal. But let's just talk

00:42:54.720 | about revenue.

00:42:55.360 | When it trickles down all the way to you

00:42:58.560 | as an LP, what's the real multiple?

00:43:00.320 | I guess, you know, if you take out the

00:43:03.600 | carry 25 or 30% less than what looks like

00:43:08.080 | to be the whole fund first. So yeah,

00:43:11.920 | that funds been paid back many times over

00:43:13.600 | already. So that you know what the

00:43:15.200 | multiple is on that fund for you? Yeah,

00:43:16.720 | it'll it was 8 million invested. And

00:43:20.960 | that's their investment. That's not your

00:43:23.440 | investment. Yeah, what if you look at

00:43:26.160 | your investment, what my understanding

00:43:27.840 | is that investment is going to be 200 x

00:43:30.880 | 100 or 200 x somewhere somewhere in that

00:43:32.960 | range. I will report back but I think the

00:43:35.200 | seed round investors are gonna be hold

00:43:36.640 | on. So you're saying 8 million will

00:43:38.800 | become 1.6 billion. I think it's over a

00:43:41.840 | billion. We can actually have a chart

00:43:43.120 | here. Let's take a look at let's assume

00:43:44.960 | it's a billion 1.6 seems a little high.

00:43:46.560 | Let's say a billion. But let's say the

00:43:49.200 | fund was what 5600 million. So for the

00:43:52.800 | LP, it's like a two x. I'm just saying

00:43:56.320 | that yeah, for the fund, it was 100 x,

00:43:58.400 | but for the LP, it's a two x. I think

00:44:00.560 | that's a big difference, right funds

00:44:01.840 | already in the black. So mitigating

00:44:04.000 | factors. Okay, so it's two extra turns

00:44:06.080 | of your investment. Meaning if it was a

00:44:09.120 | four x Jason, he's saying that it'll

00:44:10.640 | become a success. Yeah. Yeah, something

00:44:13.360 | like that. Yeah, I mean, it's a good

00:44:14.720 | fund. I'm not disparaging it. But I just

00:44:16.640 | try to set things and put things in

00:44:18.240 | proportion. I think I think at this

00:44:20.400 | point, that funds at 21 x right now.

00:44:22.240 | Something in that range. So it's a

00:44:24.960 | pretty great fund in terms of total to

00:44:28.480 | 23 x, something to that effect. Yes.

00:44:30.880 | It's going to be pretty amazing. What

00:44:33.280 | else was in there? I think that was

00:44:35.920 | instant gram and WhatsApp were also in

00:44:41.760 | the fund either before it or with it. So

00:44:43.440 | they were pretty good fun. There were

00:44:45.360 | two funds. I would say which firm this

00:44:47.840 | is. But 12 and 24 x, I believe is the

00:44:52.240 | last time I checked in. What's up was a

00:44:53.840 | monster. That was a really well,

00:44:55.920 | everybody learned from WhatsApp. And,

00:44:58.080 | you know, shout out to the Sequoia team,

00:45:00.480 | W only I think and they did every round

00:45:04.320 | Jim gets to them. Yeah, they did every

00:45:07.040 | round. So it was an internal round for I

00:45:09.360 | think four rounds in a row. So they just

00:45:11.520 | made preemptive offers. The reason

00:45:13.600 | WhatsApp was a home run is because it's

00:45:15.520 | also capital efficient. Yes, burn that

00:45:18.240 | much. They didn't raise that much. So

00:45:20.480 | there's very little dilution. Yeah, for

00:45:22.480 | everybody. I mean, and I think that's

00:45:25.360 | the big lesson. card is how many

00:45:26.880 | billions do they have to raise? Let's

00:45:28.400 | pull up this chart here. This is super

00:45:31.120 | telling to pull up, you know, who made

00:45:33.040 | money and I think this shows you what

00:45:34.800 | happens in a ZURP environment when

00:45:36.640 | people do not look at entry price. The

00:45:39.120 | series C underwater, no, no, seriously,

00:45:41.360 | not underwater. Everybody from F on is

00:45:44.720 | kind of underwater. And everybody from

00:45:47.680 | the series C is underwater compared to

00:45:50.160 | the S&P 500 to your point free free

00:45:52.160 | bars broke even and then everybody who

00:45:54.640 | invested in 2020 and 2021 actually lost

00:45:57.120 | money. General catalyst, DST, D1, TRO,

00:46:01.360 | Fidelity, all the late stage folks, even

00:46:03.360 | Sequoia was in that late stage at series

00:46:05.120 | I in 2021, when it was worth 39 billion.

00:46:07.840 | So but that whole environment not only

00:46:10.960 | was it bad for all the late stage

00:46:12.320 | investors who invested at too high a

00:46:14.160 | price, I would argue that it was bad for

00:46:17.440 | the companies and even their early stage

00:46:19.040 | investors because these companies got so

00:46:20.800 | inefficient.

00:46:21.360 | The dilution is ridiculous. Yeah.

00:46:24.000 | dilution was ridiculous. I also think you

00:46:26.800 | have to think about this in the context

00:46:28.720 | of what your alternative returns are. I

00:46:31.920 | think that we always look at these

00:46:34.080 | numbers and we think we try to make

00:46:35.920 | judgments but if you put yourself into

00:46:37.760 | the mindset of an investor, it's actually

00:46:41.280 | the alternative of what you could have

00:46:43.200 | gotten and it's the spread between the

00:46:45.360 | two that's really important. So Nick,

00:46:46.960 | you want to just throw up this image that

00:46:48.400 | I just sent you. This is an example that

00:46:50.320 | I saw an axios I thought that this

00:46:52.080 | visualization by the way, I want to try

00:46:54.160 | to use this visualization in the future.

00:46:56.000 | Because it tries to really it just

00:46:58.240 | paints a very clear picture. Let's let's

00:47:00.560 | sports picture shows is essentially and

00:47:03.680 | this uses Instacart as an example, but

00:47:05.520 | you could use it for any company, but it

00:47:07.120 | just basically shows you at every point

00:47:09.040 | in which you could have invested money

00:47:10.480 | in Instacart. What would the equivalent

00:47:13.120 | return have been had you just invested

00:47:14.800 | that same amount of money in the S&P 500.

00:47:16.960 | And the difference between that is what

00:47:19.280 | you would call the alpha, right? Because

00:47:22.160 | the S&P 500 is the beta meaning it is

00:47:25.680 | what the market's going to do, it'll be

00:47:27.280 | up 10%, it'll be down 4%, whatever. And so

00:47:30.400 | by owning the market, you get that. If you

00:47:34.000 | decide to not own the market and make an

00:47:35.760 | explicit decision like owning Instacart,

00:47:38.240 | then you get a different return stream.

00:47:39.760 | And if you compare the two, you know how

00:47:41.280 | much better or worse you would have been.

00:47:43.280 | So what this chart shows, for example, is

00:47:45.200 | the series F investor in 2018. If you had

00:47:49.040 | taken $1 and put it into Instacart would

00:47:50.960 | have gotten 13%. But if you had put $1 into

00:47:54.160 | the S&P 500, you would have gotten 68%.

00:47:56.720 | In the series C in 2015, had you invested

00:48:00.880 | $1 in Instacart, you would have made 153%.

00:48:03.680 | But the S&P would have returned 121. The

00:48:07.840 | difference means that the series C

00:48:09.920 | investor generated about 32% alpha. Now

00:48:16.080 | then the decision you have to make is

00:48:17.680 | that 32% of incremental gain over the last

00:48:22.560 | seven years or eight years, was it worth

00:48:26.880 | it? You're not liquid. And because you

00:48:29.840 | have to then solve for illiquidity and

00:48:32.080 | other things. And this is the math that I

00:48:33.920 | think all of the LPs will be engaged in,

00:48:36.000 | they'll be doing these calculations. It

00:48:38.400 | just goes back to what Saksis point said,

00:48:40.160 | which is, our business, frankly, did very

00:48:43.680 | well in moments where we had zero interest

00:48:45.600 | rates. Our business now when prevailing

00:48:50.160 | rates are at five or 6%. And you can own

00:48:53.760 | those things or you can own structured

00:48:55.920 | credit for 11 to 13%. Our business,

00:48:58.320 | unfortunately, does not look so good. And

00:49:00.400 | when people do the calculations on what

00:49:02.320 | the true alpha of venture capital is,

00:49:04.240 | they're going to come back with answers

00:49:05.680 | like this, which is it's not that great.

00:49:08.400 | And I do think it will impact how limited

00:49:12.000 | partners have an appetite to give all of

00:49:14.560 | us or you guys folks that are that are

00:49:16.560 | accepting LP checks, more money, because

00:49:19.920 | the alternative universe is more liquid.

00:49:22.560 | It's less volatile. And it has roughly

00:49:26.720 | the same amount of return,

00:49:27.680 | I can tell you what they're saying,

00:49:29.040 | because I'm doing about a dozen LP

00:49:31.760 | meetings a week. And I've got 50 more on

00:49:34.000 | the calendar to the end of the year. So

00:49:35.360 | I'm going to hit 100 of these meetings.

00:49:37.200 | They're really saying two things. One,

00:49:38.640 | we want to go earlier, we don't want to

00:49:40.000 | go later. As that chart proves, they're

00:49:42.640 | suddenly fascinated with the seed and

00:49:44.160 | series a rounds. And they're looking for

00:49:47.200 | distinctly different strategies. They're

00:49:50.880 | looking for some sort of edge. So the

00:49:53.280 | first two questions are how early are you

00:49:55.520 | getting in and securing a 10% position in

00:49:57.520 | this company? And then what's your edge?

00:49:59.920 | And literally the start of my pitch deck

00:50:02.080 | now, when I walk people through it is, I

00:50:04.560 | have two podcasts, one of them gets 50

00:50:06.960 | million listens a year, the other one

00:50:08.240 | gets over 50 million listens a year,

00:50:10.240 | those 100 million listens result in 20,000

00:50:12.400 | applications, I have larger deal flow

00:50:14.240 | than anybody, with the only exception

00:50:16.640 | being Y Combinator. And that resonates

00:50:18.800 | with folks. But if you're somebody who's

00:50:21.040 | got a new fund, and you're like, what's

00:50:23.120 | your what's your edge? I go to, you know,

00:50:26.560 | some demo days, that's not an edge. You

00:50:29.040 | have to have a massive competitive edge

00:50:31.440 | and a differentiated you have to be

00:50:33.520 | differentiated in some very credible,

00:50:36.560 | believable way. And they're telling me

00:50:38.000 | the same thing. They're cutting two funds

00:50:40.080 | out of their 20. And then they're cutting

00:50:41.840 | their commitments to the weaker ones of

00:50:44.000 | the other 18. I have a question for all

00:50:45.680 | of you guys. You had a wonderful question,

00:50:47.040 | which we never touched guys, what do you

00:50:48.400 | guys think about the arm business model

00:50:51.040 | or the clavio business model? You guys

00:50:53.840 | had a chance to look at any of those

00:50:55.040 | companies and think about that? Let me

00:50:56.880 | take the facts and then you guys respond.

00:50:58.320 | The revenue is up 15% year over year 716

00:51:02.000 | million ad revenues 206 million. That's

00:51:04.640 | on pace to make up 28% of their revenue.

00:51:07.520 | This is just the last quarter I'm

00:51:08.960 | talking about it right here and to June

00:51:10.320 | 30 net income 114 million. They have

00:51:13.040 | 600,000 instacart shoppers. Those are

00:51:15.200 | like the drivers to give them like

00:51:17.440 | door dashers or Uber drivers 7.7 million

00:51:20.000 | monthly active orders. The red flags is

00:51:22.080 | that their gross transaction volume,

00:51:24.320 | which is the value of all of the

00:51:26.080 | groceries in the in the bags is flat,

00:51:28.480 | but ad revenue is growing. This means ad

00:51:30.560 | revenue is just a massively larger

00:51:33.040 | percentage of the total revenue. They

00:51:34.960 | think they can, you know, they're on

00:51:36.000 | track for 800 million in ad revenue. So

00:51:37.680 | this is starting to look not like a

00:51:39.360 | e commerce business, but more like a

00:51:41.760 | an advertising business. Your thoughts,

00:51:44.320 | free burger socks on the actual car

00:51:46.960 | business.

00:51:47.520 | Amazon, by the way, has a dynamic to now

00:51:49.520 | have you seen the chart showing

00:51:51.440 | advertising on Amazon compared to the

00:51:53.280 | entire internet?

00:51:54.400 | Yes, it's huge. And also, Uber's blown

00:51:57.440 | past a billion, I believe. Here's what

00:51:59.040 | we know, we know that advertising

00:52:00.800 | multiples, broadly speaking, have

00:52:02.640 | contracted. Right. So I think that the

00:52:04.800 | market in general, doesn't love that

00:52:07.760 | revenue quality, because it's too

00:52:10.320 | levered to interest rates in the

00:52:12.160 | economy. So when the economy does well,

00:52:14.160 | more companies advertise when the

00:52:15.600 | economy doesn't do well, companies

00:52:17.600 | advertise less. That's number one. And

00:52:21.120 | number two, the ones that can

00:52:22.240 | systematically drive advertising more

00:52:23.920 | broadly, the Facebook's and the Google's

00:52:26.160 | of the world tend to get an increasing

00:52:27.680 | share. So advertising as a revenue

00:52:30.080 | stream, I think is, is good and

00:52:31.680 | complimentary. Unfortunately, the

00:52:33.760 | markets don't necessarily love it. And

00:52:36.240 | then the second thing, generally

00:52:37.440 | speaking for these businesses that

00:52:39.440 | drive huge GTVs, gross transaction

00:52:41.760 | values is, I think most people when they

00:52:44.720 | try to find what they're worth, are very

00:52:47.360 | sensitive to the take rate. And what

00:52:50.080 | they typically do is they assume a

00:52:52.560 | falling take rate, which means what

00:52:54.720 | percentage of the transaction can you

00:52:56.160 | get. And the reason why most people do

00:52:58.080 | that is that history has shown that

00:53:00.640 | these kinds of businesses cannot defend

00:53:03.840 | take rate for a very long period of

00:53:05.840 | time. Whether it's for competitive

00:53:08.320 | pressure, or whether it's because their

00:53:10.320 | suppliers actually develop more pricing

00:53:12.400 | power, take rate tends to decay. So said

00:53:16.560 | in you know, in grocery land, I think

00:53:18.160 | it's because Walmart and Amazon will

00:53:23.760 | try to do it for much, much cheaper and

00:53:25.840 | will try to find or charge, just be more

00:53:29.760 | aggressive in how much they they want to

00:53:32.880 | keep, which means it's less that you can

00:53:34.480 | maybe necessarily pass through. I don't

00:53:36.320 | know the instacart business at all. But

00:53:37.840 | if I were starting to look at it, that's

00:53:39.440 | where I would focus is, what are the

00:53:41.360 | assumptions on take rate. And if the

00:53:43.760 | take rate is going up, and it would be a

00:53:45.920 | little bit of a head scratcher, I think

00:53:47.440 | that you have to model the health of the

00:53:49.920 | business with a declining growth share.

00:53:52.400 | I can actually build on that pretty

00:53:53.920 | easily. Having spent a long time in the

00:53:55.760 | market, I think if this was very

00:53:58.000 | profitable advertising Chamath, it would

00:54:00.320 | get a 25 x multiple on earnings. Let's

00:54:04.240 | take that 800 million, you put it at 400

00:54:07.040 | million in profits, like if the other

00:54:08.400 | business didn't exist, so you have 400

00:54:10.080 | million in profits of advertising times

00:54:12.000 | that by 20, you get a billion. That's

00:54:15.360 | exactly their market cap. So perhaps what

00:54:18.720 | you're saying is exactly what the market

00:54:21.520 | is, is actually penciling out Google,

00:54:24.160 | which obviously has a lot of other

00:54:25.200 | companies, like Google has 28 x p, and

00:54:29.440 | Facebook is crushed at like 35 p. But

00:54:32.560 | these are much different scale, and scale

00:54:35.280 | matters. This is not one or 2 billion in

00:54:38.640 | you know, a little extra revenue on top

00:54:41.040 | of your business. That's the entirety 90

00:54:43.280 | 95% of that. I think what's working in

00:54:45.680 | favor of Instacart is that if you

00:54:47.040 | compare it to probably Uber and DoorDash,

00:54:49.520 | or Airbnb, at least, Airbnb dash, I'm

00:54:53.200 | pretty cheap. Now I think of all the

00:54:54.880 | three businesses dash probably has the

00:54:56.640 | biggest upside. Quite just like again,

00:54:59.200 | arm's length. I don't I don't know in

00:55:00.720 | any of these three stocks. I'm just

00:55:01.840 | saying business model quality dash seems

00:55:04.480 | infinitely scalable. Airbnb, I think

00:55:08.560 | probably has long term issues with take

00:55:11.920 | because of this exact reason, because

00:55:13.920 | just competitive dynamics and pressure,

00:55:16.000 | regulatory capture. You're seeing that in

00:55:18.080 | New York for Airbnb. And then the

00:55:20.320 | question is, what is the business

00:55:22.880 | outside the United States look like for

00:55:24.240 | Instacart? I don't know. But if I had to

00:55:28.480 | figure out what to pay for, that's how I

00:55:30.320 | would kind of try to break the problem

00:55:31.920 | down. Saks, any of your thoughts on the

00:55:33.920 | actual business here? Or do you want to

00:55:35.280 | jump over to Clavia? Yeah, I think

00:55:37.440 | Clavia is the really interesting one,

00:55:39.120 | at least from my standpoint, because a

00:55:41.600 | software business. I think Jason Lemkin

00:55:44.080 | had the take here. He said that Clavia

00:55:46.880 | is IPL be the ultimate yardstick for

00:55:48.560 | SAS and 23 and 24. Top growth, top

00:55:51.520 | margins, top founders going to cruise

00:55:53.360 | past a billion in ARR, whatever multiple

00:55:56.400 | they end up trading at you home is

00:55:57.680 | certainly worth less. I think it's

00:55:59.440 | trading at about 12 times for revenue.

00:56:02.160 | So just AR last quarter, they did 165

00:56:07.680 | billion. I started 65 million. Sorry.

00:56:09.680 | Yeah, so they're at 650 million in ARR

00:56:12.240 | growing 56%. That's amazing. So you're

00:56:16.080 | over you 51% of your so you know,

00:56:18.480 | project that for they're probably gonna

00:56:20.000 | be at a billion and ARR next year. 119%

00:56:24.160 | NRR, which is very good, especially

00:56:26.160 | considering that is folks, it's not

00:56:29.680 | revenue retention. It's the way to think

00:56:31.440 | about that is if you just look at your

00:56:33.040 | existing customers, going into next year,

00:56:36.400 | what percent of that subscription base

00:56:38.480 | is going to be there. And if it was 80%

00:56:42.720 | of would be 20% of your customers are

00:56:45.040 | turning away. If it's 119%, it means you

00:56:47.920 | have expansion from your customer base.

00:56:50.240 | In other words, your customers are buying

00:56:52.480 | more. And there will be some who churn,

00:56:55.280 | but the ones who are expanding more than

00:56:56.720 | make up for that. And then they've been

00:56:58.240 | very capital efficient. Apparently,

00:57:00.000 | they've only burned 15 million today.

00:57:01.760 | That does not mean they've only raised

00:57:03.200 | 15 million. They've raised several 100

00:57:05.600 | million in various growth rounds, but

00:57:07.840 | they've still got that money in the bank.

00:57:09.280 | So I assume they raised it as a cushion

00:57:12.320 | in case they missed their forecast or

00:57:13.680 | something like that. Yeah, it seems like

00:57:15.600 | a pretty strong business. But I think

00:57:17.360 | his point is right is that they're kind

00:57:19.920 | of the ceiling, you know. So I think

00:57:23.440 | founders still have maybe unrealistic

00:57:25.040 | expectations from the days when

00:57:27.120 | SAS businesses were being valued 100

00:57:28.800 | times ARR. Have you had this

00:57:30.400 | conversation, Sax, with folks coming in

00:57:32.640 | for funding who have great businesses,

00:57:34.880 | or let's call them good to great

00:57:36.160 | businesses, somewhere in that zone,

00:57:37.440 | there's seven, eight, nine businesses,

00:57:39.520 | but their valuations are way off. And do

00:57:42.240 | you do you bring up, hey, here's what

00:57:43.920 | your your company would be worth

00:57:45.280 | publicly. This is what your last round

00:57:47.280 | is. And then trying to negotiate in

00:57:49.120 | between those two numbers, because it

00:57:51.120 | does seem like founders are bringing

00:57:53.920 | that up proactively in some meetings

00:57:55.840 | with me, they're actually aware of

00:57:57.280 | public comps now. And they're kind of

00:57:59.840 | admitting, hey, I get it kind of

00:58:03.200 | situation. Yeah, I think founder

00:58:04.720 | expectations have adjusted on this.

00:58:06.400 | Yeah, which is healthy. Yeah, when

00:58:08.560 | you're in a hot market, there's

00:58:09.840 | definitely a lot of sharing among

00:58:12.720 | founders of what's happening and where

00:58:15.040 | valuations are at. And I think the same

00:58:16.640 | thing is probably happening in the

00:58:17.600 | down market as well. So yeah, I think

00:58:19.520 | everyone's getting more realistic.

00:58:20.800 | Yeah, just to finish on Clavio, I just

00:58:22.240 | want to give a shout out to Toby looky.

00:58:23.680 | The best thing that I saw about that

00:58:26.160 | was that Shopify actually owns like 11%

00:58:29.040 | of this company, which I think like if

00:58:31.600 | you look at the corporations, again,

00:58:34.240 | just doing an incredible job of

00:58:35.680 | building an ecosystem, not only does

00:58:37.360 | Toby support these companies, but

00:58:38.800 | Shopify ends up owning a huge non

00:58:40.640 | trivial portion, I think Shopify owns

00:58:42.240 | like 11 or 12% of Clavio. And then I

00:58:45.840 | think with the sale of the Flexport

00:58:48.960 | deliver back to Flexport, they own 13

00:58:50.720 | or 14% of it. I suspect they probably

00:58:53.920 | own a non trivial share of stripe. I

00:58:56.800 | say it's incredible, right? If you do

00:58:59.200 | some of the parts on Shopify, their

00:59:01.760 | cash and cash and then cash equivalents

00:59:03.680 | are only valued at like two or 3

00:59:05.040 | billion. So I feel like there's a ton of

00:59:06.480 | upside there just for free. Again, I

00:59:07.840 | don't own it. I haven't done the work.

00:59:08.960 | But I'm just saying seems like seems

00:59:10.720 | like it's great.

00:59:11.920 | He's a great. Yeah. So I think that

00:59:14.080 | brings up a really interesting point,

00:59:15.280 | which is the only vulnerability or

00:59:18.080 | negative I think about Clavio's

00:59:19.840 | business is the fact that 70% of it is

00:59:22.720 | on Shopify. So that's a platform

00:59:25.600 | dependency. And whenever 70% of your

00:59:28.160 | business is on one platform, you always

00:59:29.760 | have to be afraid of getting the rug

00:59:30.800 | pulled out from under you. By the way,

00:59:32.560 | that was PayPal's problem back in the

00:59:34.320 | day, 20 years ago, 70% of our business

00:59:36.880 | was on eBay. eBay had a competitor,

00:59:39.280 | we're constantly worried that they were

00:59:40.800 | going to pull the rug out from under us.

00:59:42.720 | If we could have made a business deal

00:59:43.920 | with eBay, we would never have had to

00:59:45.440 | sell the company, it would have been

00:59:46.640 | ideal. I think Clavio was really smart,

00:59:49.360 | creating alignment with Shopify, by

00:59:51.680 | letting them invest, giving them equity,

00:59:53.840 | doing a rev share agreement. And they

00:59:55.840 | would be smart to continue that rev

00:59:57.920 | share agreement into the future to take

01:00:00.240 | this risk off the table. Because

01:00:02.240 | investors do not like existential risk,

01:00:04.000 | you can have a perfect business. But if

01:00:05.920 | there's some hard to quantify risk of

01:00:08.000 | the whole thing, basically getting rug

01:00:09.360 | pulled, then how do you discount that?

01:00:11.600 | David, as an investor, you look at that

01:00:13.360 | and you're like, okay, I then price this

01:00:15.360 | company as a function of Shopify.

01:00:18.880 | That's a good point. I mean, 70% of the

01:00:20.480 | business is Shopify. The way I would look

01:00:22.320 | at it is, I would price it as a SaaS

01:00:24.880 | business, because Shopify is more of a

01:00:26.240 | transact, well, they're a transactional

01:00:27.920 | slash SaaS business. Clavio is a pure

01:00:30.880 | SaaS business, I'd price as a SaaS

01:00:32.560 | business, but I would have to create some

01:00:34.640 | sort of discount for the chance that,

01:00:38.320 | you know, that the

01:00:39.040 | rug pull discount. Well, Shopify adds the

01:00:40.960 | features.

01:00:41.520 | How do you figure that out? That's a

01:00:42.960 | really complicated thing to figure out.

01:00:44.800 | Hey, I agree.

01:00:45.360 | But I think that Clavio mitigates the

01:00:47.600 | risk to the extent they do this, like,

01:00:48.880 | rough share agreement.

01:00:49.680 | It's a really savvy move for people who

01:00:51.440 | have insights into the market to own

01:00:53.920 | pieces of emerging companies and lock in

01:00:55.920 | that partnership. This was Emil, Michael,

01:00:58.400 | shout out at Uber, and Travis did this

01:01:01.120 | with all of the grabs, DDs, etc. And then

01:01:04.400 | Dara just slowly sold those positions,

01:01:06.880 | and they were incredible cash

01:01:09.440 | accretive to that stock and to running

01:01:11.440 | that business. Let's talk about Airtable

01:01:13.760 | for a second. This also trended on

01:01:16.480 | Twitter with a tweet storm. If you don't

01:01:18.320 | know what Airtable is, it's kind of like...

01:01:20.640 | What is it?

01:01:21.520 | It's like Excel meets a database, and

01:01:23.200 | it's more programmable. So if you wanted

01:01:25.680 | to have a bunch of data...

01:01:26.320 | Who uses it?

01:01:26.960 | A lot of small businesses use it,

01:01:29.680 | medium-sized businesses, and they use it

01:01:32.000 | to, let's say, instead of hiring somebody

01:01:34.880 | to build a database system, or...

01:01:37.600 | It's like Google Sheets on steroids.

01:01:39.120 | It's actually a really good product.

01:01:40.240 | And I've seen it used... It's a really sick

01:01:41.440 | product. Yeah.

01:01:42.080 | I've seen it used like 10 different ways.

01:01:44.000 | Some people use it for tracking product

01:01:46.640 | feature requests and, you know, task lists.

01:01:50.160 | Some people use it for contact database.

01:01:52.160 | Some people use it for complex project

01:01:54.240 | management. It's super extensible,

01:01:55.840 | super easy to use, and a great

01:01:57.920 | collaborative tool.

01:01:58.800 | Yeah, think about it. It's like a

01:02:01.040 | spreadsheet for words instead of numbers.

01:02:03.280 | Yeah. Yeah. But you could also do numbers.

01:02:05.040 | So with a lot of great features that you

01:02:06.880 | can do really dynamic things within the

01:02:08.800 | spreadsheet. It's pretty powerful.

01:02:09.360 | Do you guys believe in this Swiss Army

01:02:11.760 | Knife approach of building these kinds

01:02:13.520 | of things, or do you believe that it's

01:02:15.040 | just cheaper and simpler to build best-in-class

01:02:18.000 | versions of each of those use cases,

01:02:19.440 | Friedberg, that you just mentioned?

01:02:20.240 | Well, I think it allows certain businesses

01:02:22.000 | to have a very specific, tunable version

01:02:25.840 | of what they need from, call it a project

01:02:27.600 | management tool. So if you use a

01:02:28.880 | traditional project management tool,

01:02:30.400 | it may be too overbuilt, or it may be too

01:02:33.760 | specific, whereas this tool allows you

01:02:35.440 | to build something unique for your

01:02:36.640 | platform. So that's where I've seen a

01:02:38.240 | lot of teams use it instead of other

01:02:39.920 | tools like JIRA, or whatever for

01:02:41.840 | tracking.

01:02:42.560 | Well, this is the point. I just wonder

01:02:44.080 | that you get these small, non-scalable

01:02:47.920 | use cases, because then if a company is

01:02:50.080 | successful, don't they then just migrate

01:02:53.440 | to JIRA, for example?

01:02:54.480 | No, I view it a lot like spreadsheets.

01:02:56.240 | Basically, the reason people use

01:02:57.920 | spreadsheets for so many different

01:02:59.280 | things is because everyone's got their

01:03:00.640 | own representation of data and

01:03:02.640 | utilization of a spreadsheet. And I

01:03:04.000 | think this is just an extension of that.

01:03:05.600 | It's a cult. Think about it as a more

01:03:07.120 | feature-rich spreadsheet tool.

01:03:08.560 | I actually think that Jamal's question

01:03:10.160 | is an excellent one. I tweeted many

01:03:12.320 | years ago that the way I saw Excel was

01:03:16.560 | the long tail of use cases that hadn't

01:03:18.560 | moved into a dedicated SaaS app yet.

01:03:20.640 | That's interesting.

01:03:21.280 | Yeah.

01:03:21.840 | And that the way that if you wanted to

01:03:23.520 | be a SaaS founder, you're trying to come

01:03:24.720 | up with ideas, find some really

01:03:27.760 | complicated Excel spreadsheet that's

01:03:30.000 | used across many different businesses,

01:03:32.160 | and just figure out if you can move that

01:03:33.440 | into a SaaS app. So for example, think

01:03:34.960 | about Carta. Before Carta, people just

01:03:38.000 | use a spreadsheet for the cap table.

01:03:39.680 | And every company had a cap table

01:03:42.400 | spreadsheet.

01:03:42.880 | Totally.

01:03:43.840 | But they just move that into a specific

01:03:45.360 | SaaS app. So I think there's a lot of

01:03:47.120 | that. And so...

01:03:48.320 | And all a spreadsheet is, it's a visual

01:03:50.160 | representation of a database with some

01:03:51.760 | relational logic that you build into the

01:03:53.840 | cells of the spreadsheet.

01:03:54.960 | And this pattern of breaking apart a

01:03:58.400 | major product was the playbook for

01:04:00.560 | Craigslist. People looked at Craigslist

01:04:02.080 | and said, "Oh, there's couch surfing.

01:04:03.920 | Make that Airbnb. Oh, there's a ride

01:04:06.560 | sharing. I'm going to LA. I have two

01:04:08.480 | extra seats." That became like Uber.

01:04:11.040 | So people, this playbook has existed.

01:04:12.560 | There's a great visual of that too, where

01:04:13.920 | every category on Craigslist became

01:04:16.400 | its own dedicated marketplace.

01:04:17.200 | Like five startups. Yeah, yeah.

01:04:18.800 | Onlyfans.

01:04:19.360 | Oh, TaskRabbit was one.

01:04:20.000 | Well, you know, so everybody uses

01:04:23.040 | Freeberg. Everybody uses Craigslist for

01:04:24.560 | something different. It's interesting

01:04:25.680 | that it comes to you. That's the one that

01:04:27.040 | comes first.

01:04:27.440 | Craigslist was a huge dating product

01:04:29.120 | before dating apps came out.

01:04:30.160 | It was. Casual encounters or missed...

01:04:32.240 | What was it called?

01:04:32.880 | Missed connections.

01:04:34.160 | Missed connections.

01:04:35.040 | Missed connections was hilarious to read.

01:04:36.720 | It was like me, you, the number four train.

01:04:39.360 | I think the point, though, the question

01:04:40.720 | that I was asking is exactly this, which

01:04:42.800 | is, you have these beefed up workflow

01:04:47.760 | things that happen in Excel, but then

01:04:51.200 | eventually you go to these systems of

01:04:53.600 | record that are purpose-built to solve

01:04:56.160 | the use case, and if the use case is

01:04:58.320 | important enough, it just seems like

01:04:59.840 | that's what's happened. I don't have a

01:05:01.040 | view because I've never used the

01:05:02.080 | product, but I wonder whether part of

01:05:04.160 | this valuation reset doesn't reflect

01:05:06.160 | that dynamic.

01:05:07.200 | It is a dynamic. The two companies or

01:05:11.440 | yeah, two or three companies that

01:05:12.560 | represent it best is there's a product

01:05:14.400 | called Coda, which is part wiki, part

01:05:17.840 | air table, part database, and it's

01:05:19.600 | programmable and Notion. And now people

01:05:22.960 | are making templates in Notion, and then

01:05:25.600 | they're adding things like project

01:05:28.160 | management. So I asked my team to do

01:05:30.320 | project management for events, and they

01:05:33.040 | tried Basecamp, they were looking at

01:05:35.040 | Asana, and then somebody was like, you

01:05:37.040 | know what, I just added it to Notion,

01:05:38.880 | it's good enough. It's not as good as

01:05:40.720 | those other two products, but it's good

01:05:42.080 | enough. And we don't have to, and the

01:05:43.920 | reason they want to do is not because

01:05:45.120 | we're cheap, I don't want to spend money

01:05:46.160 | on another SaaS product. We don't want

01:05:47.760 | to have to teach everybody a new SaaS

01:05:49.120 | product. We don't have to want to do the

01:05:50.720 | logins for that. So I think it is a

01:05:53.520 | natural tension and people are doing

01:05:54.960 | both Chamathville. Some people like the

01:05:57.440 | best of breed, but you're also seeing it,

01:06:00.000 | I don't know if you saw this past week,

01:06:01.760 | Slack added, I think during Dreamforce,

01:06:03.680 | the ability to give you an AI summary of

01:06:05.920 | everything you missed, and then Zoom

01:06:07.520 | added AI summaries of calls. So that

01:06:10.960 | feature that I guess Otter and some

01:06:13.840 | other people were doing, that feature is

01:06:15.840 | now built into Zoom, you get a transcript

01:06:18.320 | from Zoom for free, and now you get a

01:06:20.480 | summary of the call for free. That is

01:06:22.960 | work that was done by somebody on the

01:06:25.600 | meeting, right? Somebody was responsible

01:06:26.960 | for being the note taker. Sometimes

01:06:28.720 | somebody was, so those are jobs that are

01:06:30.560 | gone. And I think it speaks to the bigger

01:06:32.560 | economy. I had the CEO of Kayak on this

01:06:34.640 | week and startups this week, it'll come

01:06:36.160 | out next week. He's really great. And I

01:06:37.920 | asked him about hiring and the size of

01:06:39.680 | the company said, I'm not hiring anybody

01:06:41.040 | in the next year or two. Because all my

01:06:43.280 | developers are 30 or 40% better. I got

01:06:45.120 | junior developers that are acting like

01:06:46.560 | senior developers. I got senior

01:06:47.760 | developers who are turning into 10x

01:06:49.360 | developers, we're not hiring, we're just

01:06:51.040 | going to have increased margin.

01:06:52.240 | So what happened to Airtable?

01:06:54.000 | Airtable had a massive valuation. Here's

01:06:57.200 | the tweet storm. That somebody from CB

01:07:00.000 | Insights, this guy Anand, who I think I

01:07:02.560 | follow him.

01:07:03.120 | Oh, so did something happen or nothing?

01:07:05.040 | Well, they're most recently valued at

01:07:06.480 | 11.7 billion in December, their 2021

01:07:09.040 | series app. His thesis, not only is

01:07:11.360 | Airtable worth less than 11.7 billion,

01:07:13.680 | it's likely worth less than the 1.4

01:07:16.720 | billion in funding it has raised to

01:07:18.960 | free birds been bringing this point up

01:07:21.200 | over and over about the overfunding and

01:07:22.880 | cash in is less than the valuation.

01:07:24.480 | Most Yeah, most of these unicorns are

01:07:26.400 | worth less than their total press stack.

01:07:28.720 | This is a good example. I've just been

01:07:30.400 | through this this week I went I saw it

01:07:32.080 | as a company I was an investor in that I

01:07:33.440 | saw this happen.

01:07:34.080 | Airtable on track to do their big

01:07:36.720 | problem is I mean, they're doing over 100

01:07:38.880 | million of ARR. It's a it's a great

01:07:41.200 | product and 150 million of ARR. That's no

01:07:44.400 | small feat. The problem is the growth

01:07:46.320 | rate, I think it's only 15%.

01:07:47.920 | What do you do with the founders, Saks?

01:07:49.200 | Because this was my point earlier, is in

01:07:51.360 | these circumstances, it's still a good

01:07:53.120 | business, investors are going to want to

01:07:54.800 | own these shares at some price, someone

01:07:56.960 | will buy new shares at some price. But

01:07:58.880 | to do this transaction, given that the

01:08:00.640 | preference in the company, which is

01:08:02.400 | effectively debt is greater than the

01:08:03.920 | value of the company, the founders and

01:08:05.760 | the employees get their ownership stakes

01:08:07.440 | wiped out. So if you want, I think

01:08:09.280 | they're only hope, I think their only

01:08:11.360 | hope is to go public because that wipes

01:08:13.040 | out the press stack and everyone

01:08:14.320 | basically just owns their percentage of

01:08:15.520 | the company. If they don't go public.

01:08:17.600 | And if a private investor do that, why

01:08:20.160 | would a preferred investor allow that to

01:08:21.840 | happen?

01:08:22.560 | Well, this is going to be the huge

01:08:23.760 | tension on the board is that if you're a

01:08:25.760 | common holder, or if you're one of the

01:08:27.600 | early investors, the company, you want to

01:08:29.440 | go public. If you're a late stage

01:08:30.960 | investor, you don't want to give up

01:08:32.160 | your preference.

01:08:33.120 | But those late stage people Saks did not

01:08:35.360 | have blocker rights in many cases,

01:08:37.440 | because the market market was so hot,

01:08:39.120 | they just put the money in without.

01:08:41.040 | Yeah, I mean, unless they had a ratchet

01:08:42.640 | into the IPO, but yeah,

01:08:43.760 | yeah, but in many cases, but that's not a

01:08:45.120 | universal truth, right? In almost in the

01:08:48.240 | majority of these cases, the preferred

01:08:50.720 | shareholders do have significant

01:08:52.080 | representation on the board, they do have

01:08:54.160 | the ability to influence whether or not

01:08:55.360 | the company is going to go public. And

01:08:56.480 | there's likely some middle ground that

01:08:58.240 | every company ends up having to meet at,

01:09:00.240 | which is we're going to recap the

01:09:01.440 | company in a way that we're going to

01:09:02.560 | give some shares, newly issued shares,

01:09:04.800 | the founders, what we saw in our dash

01:09:06.960 | door, they got dragged along after

01:09:09.120 | Yeah, that indoor dash, I think they all

01:09:10.880 | just got dragged out, they didn't have a

01:09:12.400 | choice. The my understanding of some of

01:09:14.160 | these late rounds during peak Zerp

01:09:16.160 | 2020 21 from talking to Bill Gurley was

01:09:19.760 | people did not negotiate those rights,

01:09:21.360 | those rights, the blocker rights weren't

01:09:23.040 | available. And if the majority of common

01:09:24.640 | says we're going public, you're going

01:09:25.840 | public. And that's the that's the end of

01:09:27.760 | the story. Here's here's the punchline to

01:09:29.600 | the air table. If you look at the Ford

01:09:32.880 | price to sales multiple 78 x for an

01:09:35.680 | $11.7 billion valuation at 150 million

01:09:38.400 | ARR, and you compare it to the trailing

01:09:41.040 | price to sales multiples in the project

01:09:44.880 | management space Mondays at 12 x plus

01:09:47.600 | Asana 6.6 x and smart sheets at just

01:09:50.880 | around eight x. So it's a challenge.

01:09:53.040 | Yeah, well, to freeberg's point, one of

01:09:55.520 | the downsides of taking all this

01:09:58.160 | excessive capital at these ridiculous

01:09:59.920 | valuations is that it produces a dynamic

01:10:02.400 | in your boardroom, where your board

01:10:04.800 | members are at war with each other. The

01:10:06.640 | late stage investors are gonna be at war

01:10:07.920 | with the early stage investors and the

01:10:09.600 | founders. And who knows who comes out on

01:10:12.000 | top of that. I don't know if you guys

01:10:14.800 | have but I've got like so many anecdotes

01:10:16.960 | over the last couple of months on this

01:10:18.400 | exact scenario playing out. We'll take

01:10:20.240 | us through an amalgamation of those, you

01:10:23.120 | know, without talking about specific

01:10:24.240 | ones, but you know, you can make

01:10:25.600 | your own automation, what is the dynamic

01:10:27.840 | and how does it work itself out

01:10:29.200 | investor invested a multi billion dollar

01:10:30.720 | valuation, the company is now worth 20%

01:10:34.000 | of that valuation. And the investors have

01:10:36.880 | more money in the company than it is

01:10:38.480 | worth. And the company needs more cash.

01:10:41.200 | They can't go public at this rate,

01:10:43.120 | because the markets are shut down, no

01:10:44.480 | one's going to buy new shares, they

01:10:45.440 | can't raise cash by going public. So

01:10:47.600 | they have to raise cash in the private

01:10:49.280 | markets. So then the tough question is,

01:10:51.440 | okay, what's the value of the company,

01:10:53.200 | in almost all of these cases, the CEO has

01:10:55.600 | been replaced. Or there was some

01:10:58.880 | professional CEO. So there's a new

01:11:00.320 | option pool created equal to 10 to 15%

01:11:02.720 | of the company, new options are issued,

01:11:04.880 | and around is done at a significant

01:11:06.720 | discount. And there's a huge recap and a

01:11:08.400 | pay to play. And all this other sort of

01:11:10.240 | stuff starts to play out that the

01:11:12.000 | original founders in the company get

01:11:13.520 | wiped out most of the management team

01:11:15.200 | leaves, because their options are now

01:11:16.960 | worthless. And the investors who

01:11:19.120 | historically have been totally passive

01:11:20.880 | late stage investors have had to step in

01:11:23.360 | and try and take action and rebuilding

01:11:24.800 | a management team, which guess what

01:11:26.000 | they're not necessarily good at. And so

01:11:28.160 | it ends up becoming this really nasty

01:11:29.920 | unwinding of the business, because

01:11:31.600 | everyone thinks, oh, well, I deserve to

01:11:33.360 | get a fair deal, because I put money in

01:11:35.520 | and I have a preference in this company.

01:11:37.200 | founders don't want to see their

01:11:38.400 | ownership go down from 20% to 2%.

01:11:40.320 | They're like, why would I keep working

01:11:42.080 | for 2%? I'm fully vested. I'm going to

01:11:44.480 | leave the management teams like, wait a

01:11:45.840 | second, I'm getting offers left and

01:11:46.960 | right to go join other companies. And so

01:11:48.880 | it's a real kind of nasty unwinding. And

01:11:50.960 | I think that's the scary scenario that's

01:11:52.480 | likely going to play out and not all but

01:11:54.480 | a good chunk of these companies that are

01:11:56.240 | there are still businesses, they have

01:11:57.680 | decent value to their business. But they

01:11:59.680 | just raise too much capital relative to

01:12:01.360 | the valuation of the business today.

01:12:02.720 | If you looked at it on a blank piece of

01:12:04.400 | paper, these businesses look incredible

01:12:06.640 | at whatever the true valuation is today.

01:12:09.680 | But if you have the psychological

01:12:11.920 | hindsight bias of what the price was two

01:12:14.560 | years ago, you just can't see that.

01:12:17.360 | You can't get it totally can't get it.

01:12:19.040 | By the way, I will say the structure,

01:12:20.640 | there's like legacy structure in the cap

01:12:23.200 | table from Yeah, yeah, meaning there's

01:12:25.600 | like this prep stack. I will say that the

01:12:27.600 | terms are so crazy good for the recap,

01:12:30.800 | that investors are clawing their way into

01:12:33.600 | the recap round. Well, that means I get

01:12:36.240 | the nature markets are healing. That's

01:12:38.160 | means we're in the endgame. Right?

01:12:39.680 | That's part of what's happening. Part of

01:12:41.520 | what's happening is it's totally

01:12:43.440 | predatory. It's totally predatory.

01:12:45.200 | What I've seen is when you're going to

01:12:48.400 | be able to go public again, I think that

01:12:50.400 | when there's a recap, and the founder is

01:12:53.040 | still running the company, there's a

01:12:54.160 | chance of it being fair. But when they

01:12:55.840 | bring in a new CEO, who then does a recap,

01:12:58.880 | Oh, yeah, they don't care.

01:13:00.240 | They don't care. They don't care.

01:13:01.200 | Exactly. And all these recaps turn into

01:13:05.440 | a disaster.

01:13:06.000 | Yeah, well, it's recap, or you're going

01:13:09.280 | to go out of business. So I mean, this is

01:13:11.360 | a force and function and everybody party

01:13:13.520 | too hard. I think it's time for

01:13:15.600 | everybody's favorite part of the show,

01:13:17.920 | which is to give Chamath his flowers.

01:13:23.520 | Here we go. Chamath, the Fed spoke this

01:13:27.760 | week. And it's time for Chamath to take

01:13:36.080 | his victory lap. Here he goes, everybody.

01:13:40.720 | Chamath, this is Vangelis, yes.

01:13:44.000 | Vangelis doing chariots of fire. This

01:13:46.720 | week, the Fed said to quote Chamath,

01:13:51.280 | Well, this is about having connections

01:13:57.280 | to the deep state for longer.

01:13:59.920 | There he is, there's Chamath leading the

01:14:01.680 | pack. I sent my talking points from six

01:14:04.560 | months ago to our friend, Deep State

01:14:09.440 | sent the note and Deep State sent it to

01:14:12.320 | the Fed and the Fed just cut and pasted

01:14:14.400 | it into the press.

01:14:16.000 | We'll stay higher for longer.

01:14:18.800 | Are we going to get a copyright on this?

01:14:20.400 | We're going to get a copyright on this.

01:14:21.280 | We don't care. Who cares?

01:14:22.240 | I don't think anyone understands what it

01:14:23.760 | is that Chamath said that he's taking

01:14:24.880 | the victory lap on. Why don't you set

01:14:26.000 | that up, J.K.L.?

01:14:26.720 | That rates will stay higher for longer.

01:14:29.840 | And now he takes his victory lap.

01:14:33.840 | All right, enough of this shenanigans.

01:14:35.280 | Chamath said rates will stay higher for

01:14:37.840 | longer. The Fed said rates will stay

01:14:39.840 | higher for longer. The end.

01:14:41.040 | Congratulations, Chamath. You got it right.

01:14:42.560 | Thanks. Okay.

01:14:44.400 | Well, let's actually talk about-

01:14:45.440 | Every week we're going to give our

01:14:46.400 | chariots a fire.

01:14:47.360 | Oh, look, Chamath is receiving a medal.

01:14:50.080 | Here he is.

01:14:50.640 | Chamath can give himself a medal in the

01:14:52.720 | group chat.

01:14:53.280 | This is Obama.

01:14:56.160 | This is when Obama, who is Obama giving

01:14:58.240 | the medal to? What's the real picture

01:14:59.840 | here? It's Obama.

01:15:01.200 | Is he giving it to Biden?

01:15:01.920 | Giving the medal to Obama?

01:15:02.800 | To Biden.

01:15:03.360 | I think he's giving it to Biden.

01:15:05.280 | Obama's giving it to himself.

01:15:05.840 | Biden thought it was so-

01:15:07.280 | Oh, Chamath giving a medal to Chamath.

01:15:10.640 | So I think what happened this week is

01:15:13.600 | actually pretty important because I think

01:15:16.880 | the markets were really trying to force

01:15:19.040 | Jerome Powell to start the cutting cycle.

01:15:22.400 | And now they had to move the date at which

01:15:26.880 | they could expect cuts out by a year.

01:15:30.240 | And I think that we're only starting to

01:15:33.840 | see the reverberations of that.

01:15:35.520 | You're going to have to reprice a lot of

01:15:38.480 | risk assets.

01:15:39.680 | So if you put it all together, oil is

01:15:44.640 | creeping back up.

01:15:45.520 | So commodity prices essentially are

01:15:48.800 | trending up.

01:15:49.520 | I don't think that's going to have a big

01:15:52.880 | impact on inflation because of the way

01:15:54.800 | that owner equivalent rents and core CPI

01:15:58.880 | is calculated because it's calculated on

01:16:00.560 | this six-month lag, this dumb nonsense of

01:16:03.600 | just how arcane our system works, but

01:16:05.520 | that's going to spike down.

01:16:07.920 | So basically, the Fed's like saying, we

01:16:10.400 | know all of this is happening, we're

01:16:11.680 | sitting on our hands.

01:16:12.880 | But the problem is that if you add another

01:16:15.360 | 100 basis points to your discount rate

01:16:18.560 | for an unprofitable SaaS company, my gosh,

01:16:22.640 | guys, you're taking like another turn and

01:16:26.000 | a half of market cap out of the business.

01:16:28.240 | Like if you thought it was worth eight

01:16:30.080 | times, it's now worth six and a half,

01:16:32.240 | six times.

01:16:32.960 | So unfortunately, that's going to hurt

01:16:38.160 | everything that's not the top seven tech

01:16:40.240 | companies.

01:16:40.800 | And everything else is just going to just

01:16:46.080 | kind of meander along for a much longer

01:16:48.560 | time.

01:16:48.880 | So it's really good for the magnificent

01:16:51.440 | seven.

01:16:51.760 | I think it's really bad for everything

01:16:54.160 | else.

01:16:54.660 | And we're going to be in a holding

01:16:56.960 | pattern for a while.

01:16:58.080 | Crude oil is at, let's see, $89 a barrel.

01:17:04.720 | Yeah, it's, it's, you know, I told

01:17:06.800 | remember, remember this conversation, I

01:17:08.400 | told my CEOs, guys, let's get enough cash

01:17:11.280 | to last through the middle of 25.

01:17:13.600 | Sure.

01:17:13.920 | Remember, I was pretty clear about that

01:17:15.440 | to folks, I mean, get to get to default

01:17:18.720 | alive.

01:17:19.040 | But if you can't, please have enough

01:17:20.880 | money to the mid of 25.

01:17:22.320 | I think that that was wrong.

01:17:23.760 | I think now you got to be q1 of 26.

01:17:28.480 | And maybe even mid 26.

01:17:30.560 | So now I have to go back to all these

01:17:32.400 | CEOs and redo an entire justification for

01:17:36.480 | why they need to cut even more people,

01:17:38.400 | cut even more expense, cut more burn.

01:17:41.360 | I don't know where we're going to find

01:17:43.600 | another year of burn in most of these

01:17:46.320 | businesses.

01:17:46.880 | So I was wrong by at least a year, Jason,

01:17:49.520 | because of this.

01:17:50.240 | I think I got the words right.

01:17:51.520 | But I got the timing wrong.

01:17:52.640 | Yeah, just to just to further translate

01:17:54.560 | this.

01:17:54.800 | Okay, so the markets right now are

01:17:56.960 | definitely taking a bath.

01:17:58.000 | The growth stocks are off significantly.

01:18:00.960 | Expect them to be off more.

01:18:02.560 | Yeah.

01:18:02.720 | And the reason is because the market

01:18:04.560 | had started to price in rate cuts next

01:18:06.480 | year.

01:18:06.720 | And now the Fed is saying that because

01:18:08.560 | inflation ticked up a little bit,

01:18:10.560 | it's not coming down as much.

01:18:12.320 | We have higher energy prices.

01:18:14.160 | We may not get those rate cuts.

01:18:16.480 | I think the Fed still maintains that

01:18:18.320 | we'll get 50 basis points of rate cuts

01:18:20.400 | next year.

01:18:21.120 | But the market was pricing in more.

01:18:22.640 | And I think people are starting to

01:18:23.600 | wonder if we'll even get the 50.

01:18:26.640 | So as a result of that,

01:18:28.000 | interest rates are going to stay higher

01:18:29.360 | longer, which means that risk capital

01:18:31.920 | will be less available.

01:18:33.280 | So valuations are going to go down,

01:18:35.360 | or at least they're not going to be

01:18:36.400 | racing back up like they used to

01:18:38.640 | when I was saying mid 25.

01:18:40.080 | Saks, that was because the forward

01:18:42.560 | curve started showing cuts in early 23.

01:18:45.040 | You know what I mean?

01:18:46.960 | So I was like, okay, let's assume

01:18:48.480 | they're wrong by 18 months.

01:18:50.080 | It turns out that that initial data

01:18:51.600 | point in early 22.

01:18:52.720 | My God, we were wrong by three years.

01:18:56.560 | It's not a year and a half.

01:18:59.040 | Right.

01:18:59.280 | Brutal.

01:19:00.000 | And I think the X factor here is that

01:19:02.080 | we're running almost $2 trillion

01:19:04.480 | deficits in peacetime.

01:19:07.360 | Well, I mean, we're not in a direct war.

01:19:09.120 | We're in a proxy war, but in relative

01:19:10.560 | peacetime and in a relatively

01:19:13.760 | decent economy.

01:19:14.720 | So what happens if either of those

01:19:18.960 | things change and what happens to

01:19:22.000 | long-term rates as all of these debt

01:19:25.040 | issuances have to get raised, as the

01:19:27.760 | Fed has to keep selling more treasuries

01:19:29.840 | to fund our deficit and debt at these

01:19:31.920 | higher rates, do long-term rates keep

01:19:33.840 | going up based on the debt financing

01:19:35.600 | needs of the federal government.

01:19:36.880 | And then this is again, where, you know,

01:19:38.960 | we made a huge mistake by politicizing

01:19:41.360 | this idea of raising money beyond 30

01:19:45.120 | years, we made that mistake under the

01:19:46.560 | Trump presidency, because people

01:19:47.840 | reacted to Trump saying it, but it was

01:19:50.240 | the smartest thing we could have done

01:19:53.600 | to give our kids and our grandkids a

01:19:55.920 | reasonable economy.

01:19:57.040 | And Freeberg has been right all along

01:19:59.760 | about just like our spending is just

01:20:01.360 | going up and up and up.

01:20:02.400 | And now short-term rates are really high.

01:20:06.000 | Maybe we'll have enough political will

01:20:09.280 | to just get out of the Fed's way.

01:20:12.160 | And the Fed can actually look at raising

01:20:14.080 | in durations past 30 years.

01:20:15.520 | Because if you believe that we're going

01:20:18.000 | to start an aggressive cutting cycle at

01:20:19.920 | some point, and you believe we'll get

01:20:22.640 | back to like a 2% terminal rate, you

01:20:24.800 | could theoretically justify 50 60 year

01:20:27.680 | bonds at much lower than the 30 year,

01:20:30.960 | but I don't see it happening.

01:20:32.720 | Here's a really good way to look at this.

01:20:36.400 | There are prediction markets.

01:20:37.680 | This one call she is when I use k lsh I

01:20:40.720 | chances of a rate cut by May of 2024 29%

01:20:47.920 | chance and these are people actually

01:20:49.200 | making bets on these things.

01:20:50.720 | And so it has gotten pushed out.

01:20:53.040 | And I guess 74% chance by the fourth

01:20:56.800 | quarter, third fourth quarter of next

01:20:58.640 | year, people think there'll be a rate cut.

01:21:00.080 | So we're a year away from a rate cut.

01:21:02.000 | Everybody needs to just take that off

01:21:03.920 | the table, which means the translation

01:21:06.320 | for founders for GPS is performance has

01:21:09.760 | to go up.

01:21:10.720 | You got to beat 567% or whatever people

01:21:15.280 | are going to get on those other

01:21:16.320 | instruments.

01:21:16.800 | Corporate debt, you know, 10 11 12%.

01:21:19.600 | You got a really hard bogey to beat here.

01:21:21.760 | The alternative to that statement is

01:21:23.280 | that total capital has to go down in

01:21:26.160 | order for the capital remaining to have

01:21:29.440 | its return multiple increased given that

01:21:32.000 | there's a generally set number of

01:21:35.760 | companies that are going to generally

01:21:37.200 | create a certain amount of value over

01:21:38.880 | the next couple of years.

01:21:40.000 | And the way to create that value is so

01:21:42.080 | if that's true, well, I'm saying if

01:21:43.440 | there's a bunch of startups that are

01:21:44.480 | going to make $100 billion of market

01:21:46.080 | value over the next five to seven years,

01:21:48.640 | you need to have less capital going into

01:21:50.560 | those companies in order for that capital

01:21:52.160 | generate a higher return,

01:21:53.280 | which on your day to day basis means

01:21:55.360 | what freebird explain on a day to day

01:21:57.280 | basis on a day to day basis, it means

01:21:58.800 | there's gonna be less companies that

01:21:59.760 | are going to get funded, but more

01:22:00.640 | importantly, there's gonna be less LP

01:22:01.840 | money going into venture.

01:22:02.880 | And there's going to be less capital

01:22:04.800 | available to fund startups in aggregate,

01:22:07.280 | by a significant amount on a daily basis,

01:22:09.680 | you need to do more with less as a

01:22:11.920 | founder, you need to delight customers

01:22:13.920 | with less resources, spend less money on

01:22:15.680 | marketing, send less money on teams and

01:22:17.840 | get to profitability, you've got to be

01:22:19.440 | a stronger founder. I'm seeing it across

01:22:22.160 | the board in the seed stage to three,

01:22:24.000 | four founders, raising 250 to a million

01:22:26.960 | instead of raising three to five.

01:22:29.040 | I gotta be honest, you go, I thought it

01:22:30.640 | was much easier to kind of say the sky

01:22:34.640 | was falling this time last year.

01:22:37.120 | Right now.

01:22:38.960 | And I think that people are a little bit

01:22:41.440 | again, exhausted about hearing this

01:22:43.040 | message constantly of like cup more.

01:22:44.800 | It's like, I think that they're exhausted.

01:22:48.160 | And I see a lot of founders that are

01:22:50.720 | exhausted and giving up. There's a lot

01:22:52.960 | of giving up. They're like, they're like,

01:22:54.320 | I can't cut anymore. And now I do think

01:22:57.040 | we have to go back to them and say, if

01:22:59.360 | we're doing our jobs, right. Okay, even

01:23:02.400 | okay, look, our now our strategic view

01:23:06.320 | was right. But the timescale of our

01:23:09.280 | analysis was wrong. And I think now you

01:23:12.160 | got to plan to mid 26. I don't even know

01:23:14.800 | where to start, to be honest with that.

01:23:17.280 | Actually, that what I'm seeing is people

01:23:19.120 | are merging companies and m&a is picking

01:23:21.200 | up because hey, you got two companies

01:23:22.960 | doing 5 million each, but they're

01:23:25.280 | burning 2 million each year, cut half

01:23:27.680 | the team, put one team with the other.

01:23:29.440 | And I think you're going to just see

01:23:30.480 | some of that portfolio consolidation

01:23:32.800 | happen. Go ahead, sex.

01:23:33.680 | I think one way to put it is that we've

01:23:37.040 | had a regime change. Those are the words

01:23:38.800 | that we've been using for a while. And

01:23:40.160 | specifically, we've gone from a regime

01:23:42.480 | of capital abundance to a regime of

01:23:44.480 | capital scarcity. And I think a lot of

01:23:46.960 | people are holding out hope that there's

01:23:48.320 | gonna be a quick bounce back. Because

01:23:50.560 | we'd cut these interest rates and

01:23:51.920 | capital would start flowing again, in a

01:23:54.080 | big way. And I think that the Fed here

01:23:57.520 | has dumped a bucket of cold water on the

01:24:00.320 | markets basically saying we're not

01:24:01.760 | bouncing back to capital abundance

01:24:04.080 | anytime soon, we're going to be in this

01:24:05.920 | environment of more capital scarcity.

01:24:08.880 | And that's what I think this founders

01:24:10.160 | and VCs I have to take into account is

01:24:12.240 | this shift could be permanent, or it

01:24:15.280 | could last a while.

01:24:16.560 | Could last 5-10 years. Sure.

01:24:17.680 | We're seeing a lot of

01:24:19.280 | question I have is just what do you guys

01:24:20.880 | think is gonna happen to the consumer?

01:24:22.160 | Because I actually think that even

01:24:24.320 | though founders in many cases could cut

01:24:26.080 | more, and they could have acted faster, I

01:24:27.600 | actually think that the b2b economy has

01:24:30.240 | kind of taken its licks. I mean, for the

01:24:32.480 | last year, we've been in this software

01:24:34.880 | recession, companies have been sharpening

01:24:36.960 | their pencils, they've been cutting costs

01:24:38.960 | and getting more efficient. Yes, you

01:24:40.640 | could say maybe they haven't done

01:24:41.440 | enough, but the consumer has still been

01:24:43.280 | strong. But what is the consumer going to

01:24:45.280 | do now that credit card rates and

01:24:47.680 | interest payments are at all time highs,

01:24:49.520 | they're going to cancel their house?

01:24:51.360 | No, here's what they're gonna do.

01:24:52.560 | They're gonna skip an iPhone cycle,

01:24:54.400 | instead of going from, you know, 13 to

01:24:56.960 | 14 or 14 to 15, they're gonna go 13 to

01:24:59.200 | 1614 to 17. They'll just skip which I did

01:25:02.480 | for the first time. I don't need to skip

01:25:04.640 | it. But I was just like, this 13 is good

01:25:06.640 | enough. They're gonna skip upgrading

01:25:08.400 | their car, you're going to keep your car

01:25:10.000 | for an extra two or three years. And if

01:25:12.240 | you were thinking about moving your

01:25:13.440 | house, you're gonna say, you know what,

01:25:14.720 | I'm going to make this house work. We're

01:25:16.320 | going to put two of the kids in a room.

01:25:18.000 | 100% right. That's that is that is I

01:25:20.240 | think that's very, I think that's very

01:25:22.320 | well said. And, and the other side of it

01:25:24.640 | is that some of these industries where

01:25:26.960 | you have these large ticket purchases

01:25:28.720 | that drive consumer consumption, their

01:25:31.360 | backs are against the wall, look at the

01:25:33.120 | automakers that deals that's that the

01:25:35.760 | unions have proposed to the automakers

01:25:37.600 | will cause them from, I thought I saw

01:25:40.400 | an out and then analysis of Ford, where

01:25:43.280 | Ford would go. If you just did a pro

01:25:45.600 | forma and went back the last couple

01:25:46.960 | years, they would have gone from like,

01:25:48.800 | you know, 30 billion of profits to minus

01:25:51.440 | 17 billion of losses. So that's a $47

01:25:54.000 | billion swing in the Ford P&L. The only

01:25:56.640 | way they overcome that is with more

01:25:58.160 | expensive cars, which Jason to your

01:26:00.000 | point means that those cars are not

01:26:01.600 | going to get sold. I do think that

01:26:03.600 | you're going to just have a little bit

01:26:05.200 | of belt tightening in the in the

01:26:06.560 | consumer.

01:26:07.200 | I think this is interesting. I think

01:26:08.480 | you're trying to you're right that at

01:26:09.840 | the same time that the auto companies

01:26:12.640 | are facing what you'd expect to be

01:26:14.720 | reduced demand because no one can

01:26:15.920 | afford a car payment at these higher

01:26:17.920 | interest rates. The unions are going on

01:26:20.160 | strike demanding Oh, I think this is

01:26:22.960 | existential higher wages. Yeah, for a

01:26:25.200 | four day work week. How does this work

01:26:27.120 | work week, I think that the the labor

01:26:29.440 | deal is an existential risk to the

01:26:32.720 | unionized auto industry in America. And

01:26:34.720 | I'm not opining on whether this deal

01:26:37.280 | should or should not happen. I'm just

01:26:38.800 | making an observation if the deal as

01:26:41.040 | announced happens and you sensitize

01:26:46.160 | Stellantis GM and Ford's P&L to these

01:26:49.440 | new terms and then you compare that

01:26:52.320 | against non unionized highly automated

01:26:55.520 | organizations like Tesla and Rivian.

01:26:58.800 | It's going to be very difficult for the

01:27:00.240 | established auto industry to survive.

01:27:02.080 | Right. And then if you'd layer on top of

01:27:04.400 | it, seven, eight, 9% consumer lending

01:27:07.840 | rates for new cars, forget about it. And

01:27:10.560 | yet the Fed forecast at the same meaning

01:27:13.440 | they were being hawkish about rates.

01:27:15.680 | They also said that they were expecting

01:27:18.000 | unemployment next year to be 4.1% down

01:27:20.560 | from their previous expectation of 4.5%.

01:27:22.800 | And they forecast that economic growth

01:27:24.880 | would be higher. So I just don't

01:27:26.720 | understand how these countervailing

01:27:28.320 | forces aren't going to create so much

01:27:31.040 | stress in the economy that something

01:27:32.400 | breaks. And these idiot unions, honestly,

01:27:36.640 | their timing is so dumb, whether it's

01:27:38.240 | the ones you know, in Hollywood, or this

01:27:40.480 | car strike while they're shutting down

01:27:43.520 | it's great for Tesla. I mean, it's

01:27:45.120 | giving Tesla the entire US auto market.

01:27:47.280 | Yeah, Tesla is lowering the price when I

01:27:49.760 | bought my Model Y long range, I think I

01:27:52.400 | paid 72 for it. The old price on this

01:27:55.360 | chart says 66. That car is now 53. That's

01:28:00.240 | down 20% of 13,000. I'll say the Model Y

01:28:03.520 | long range, I think is the greatest

01:28:05.040 | vehicle ever made. I paid 57. I think for

01:28:08.640 | my Model Y long range. Oh, no, no, I

01:28:11.520 | think I'm sorry, I paid 57. I paid this

01:28:13.840 | price for the Model Y performance. The

01:28:16.480 | best car and yeah, that'll be a $40,000

01:28:19.280 | car in the next three years.

01:28:20.400 | Well, you know, and I looked at it and I

01:28:22.320 | speaking of austerity measures, I was

01:28:24.400 | like, I have a Model X, do I get another

01:28:26.960 | Model X, I think I'll just go with the

01:28:28.160 | Model Y. Because the Model X is 50% more

01:28:31.200 | and I just prefer the model.

01:28:32.560 | I think I think this labor deal is going

01:28:34.240 | to put tremendous pressure on these

01:28:36.160 | established auto OEMs.

01:28:38.080 | China is now the world's largest

01:28:40.240 | exporter from what I understand that

01:28:41.520 | just happened. They work I looked it up

01:28:44.080 | 58 to 64 hours a week factory workers.

01:28:47.360 | The US factory workers want to work 32

01:28:50.320 | hours a week, they want a four day work

01:28:51.840 | week. I mean, I don't understand the

01:28:54.240 | timing of these unions. I mean, they're

01:28:56.000 | just going to move these factories to

01:28:57.760 | Mexico or

01:28:58.880 | I think it's reasonable for the unions

01:29:00.800 | to ask for as much as possible on behalf

01:29:02.880 | of their members. That's like, obvious and

01:29:06.400 | good because meaning if you're

01:29:07.760 | collecting fees from those folks, and

01:29:09.520 | you're doing a good job on their behalf,

01:29:11.440 | your job is to ask for as much as

01:29:13.600 | possible. I get that.

01:29:16.000 | Where I see the breakdown is that it

01:29:18.240 | just doesn't seem like there's enough

01:29:19.840 | numeracy between them and the companies

01:29:22.880 | that they're negotiating against to

01:29:24.720 | really sit down and look at what the

01:29:26.080 | impact of this is because you may get a

01:29:28.960 | short term labor deal that you can

01:29:31.280 | celebrate. But it may actually destroy

01:29:34.000 | that union members pension.

01:29:35.520 | Yes, it may destroy the company.

01:29:37.360 | And this is my concern is that then that

01:29:39.520 | has to get bailed out by by the US

01:29:41.600 | taxpayer. And once it happens in one

01:29:44.320 | industry, it's going to be very difficult

01:29:46.320 | to actually not do it in other

01:29:47.920 | industries. And the thing that needs to

01:29:50.720 | be understood is the risk that it puts on

01:29:52.960 | those kinds of tail outcomes. And I think

01:29:55.120 | that that's not well discussed. Nobody in

01:29:57.920 | the media is really talking about it.

01:29:59.280 | They make it a moral issue of like, what

01:30:03.040 | is the CEO pay versus what is the ratio

01:30:06.320 | of the CEO? And yeah, sure. That's an

01:30:08.960 | important issue at some level. But if you

01:30:11.440 | if for example, like you have US senators

01:30:13.360 | blathering on about how they'll wear a

01:30:15.360 | suit not look like a homeless bum. If

01:30:17.760 | this deal happens in that and it's like,

01:30:19.200 | well, that's not what you should be

01:30:20.320 | saying. What you should be saying is, my

01:30:22.160 | team has done a financial analysis. And

01:30:24.160 | here's what it shows. Right? They're not

01:30:28.240 | saying that this is crazy.

01:30:29.760 | What you're saying is that the

01:30:31.040 | negotiation and also the political

01:30:33.520 | dimension of this have become

01:30:36.000 | completely untethered from economic

01:30:37.600 | realities.

01:30:38.160 | Yes, they are negotiating in the review

01:30:41.120 | mirror, they basically talked about

01:30:42.720 | whatever billions of dollars in profits

01:30:44.640 | the companies previously had during the

01:30:46.160 | ZURP environment during the heyday. And

01:30:48.720 | yeah, it's just timings off,

01:30:50.800 | just added to the list of latent

01:30:52.160 | problems in this economy. It just feels

01:30:54.000 | to me like something is about to break.

01:30:55.360 | But who knows?

01:30:57.200 | I mean, if the zero point sacks you, you

01:30:59.600 | keep bringing up like what happens with

01:31:00.960 | the consumer, I think they just slow

01:31:03.040 | their role, you know, staycation,

01:31:05.600 | instead of your

01:31:06.320 | number, Larry Summer said at the summit,

01:31:09.600 | he said that soft landings are like

01:31:11.920 | second marriages, the triumph of hope

01:31:14.480 | over experience. Yes, meaning everyone's

01:31:17.200 | talking about a soft landing, everyone's

01:31:18.640 | banking on a soft landing. But soft

01:31:20.480 | landings are actually exceedingly rare.

01:31:22.160 | When you have very fast rate tightening

01:31:25.680 | cycles, it generally has a very

01:31:27.840 | predictable effect on the economy.

01:31:29.200 | There's a lag, but the effect is very

01:31:31.200 | predictable, which is a causes recessions.

01:31:32.960 | And then I would already been in a

01:31:35.360 | b2b to recession, we're starting to come

01:31:37.440 | out of that. But I think the consumer

01:31:38.960 | hasn't been hit yet. And maybe that has

01:31:40.560 | to do with all the stimulus they push

01:31:42.880 | through. Yeah. And that created some

01:31:45.200 | amount of

01:31:45.920 | cushion for the consumer. But I just

01:31:49.680 | wonder if that cushions run out now,

01:31:51.600 | we're about to enter a new phase.

01:31:54.080 | And it would what all of these

01:31:55.520 | strikes you if you overplay your hand

01:31:58.160 | Chamath is automation. So this happened

01:32:00.800 | in New York, just over 10 years ago, the

01:32:02.800 | fast food workers wanted, you know, I

01:32:04.960 | think it was 1520 bucks an hour. Okay,

01:32:07.040 | seems reasonable. And they replaced

01:32:08.480 | every cashier, you go to McDonald's. Now

01:32:10.720 | you're ordering on the app, or you're

01:32:12.400 | ordering on a kiosk in space. And we

01:32:16.400 | have an investment in a company called

01:32:18.960 | Hello meter. But this company does is

01:32:21.200 | pretty simple. They just study what's

01:32:22.800 | going on inside fast restaurants. And

01:32:25.600 | then they just increase the speed at

01:32:28.320 | which people are getting served. And

01:32:30.400 | they're crushing it. Why? People can't

01:32:33.200 | hire people. There's not enough

01:32:34.320 | immigrants in the country anymore. We

01:32:35.920 | have an anti immigration thing going on

01:32:38.000 | here. So unemployment is too low. And the

01:32:41.040 | the salaries are too high. It's not

01:32:43.280 | working. A lot of restaurants are

01:32:44.880 | breaking because a 30 or $40 dishwasher

01:32:47.760 | is the difference between a company, you

01:32:49.200 | know, a restaurant being profitable or

01:32:51.040 | not. All right, listen, there's

01:32:52.480 | apparently some potential major

01:32:54.240 | breakthrough in autoimmune disease

01:32:56.400 | treatment with this new inverse vaccine.

01:33:00.000 | Let's go to our science correspondence.

01:33:03.200 | The Sultan of science himself for

01:33:04.720 | science corner.

01:33:05.360 | The taxes turns his camera.

01:33:09.280 | Wow. He's going to take a dump. He'll be

01:33:15.200 | back. He's back. I'm here. I'm here. Jeez,

01:33:17.920 | you wouldn't even let me get away with

01:33:19.120 | that. We were zoom shaming you do not

01:33:24.400 | leave. You can learn something.

01:33:26.720 | Saks. My super got I just had my super

01:33:33.280 | got chocolate. Oh, so good. I just got my

01:33:35.760 | super gut protein and the weight loss

01:33:37.920 | continues. Health. My gut so good.

01:33:42.240 | There was a paper published in the

01:33:44.560 | journal nature this week, which I

01:33:46.080 | thought was worth highlighting sex,

01:33:48.080 | you're going to be quizzed afterwards on

01:33:50.000 | exactly what I say during this, this and

01:33:52.880 | the implications for it. We've all heard

01:33:54.640 | of and know folks that have

01:33:56.080 | autoimmune conditions and some of us may

01:33:58.160 | suffer from them. An autoimmune

01:34:00.160 | condition is when our immune system

01:34:01.680 | mounts an attack against a protein that

01:34:04.720 | exists in our body that is natively part

01:34:06.800 | of our body, our immune system kind of

01:34:08.480 | mistakes that protein for being a foreign

01:34:10.400 | antigen. So the term antigen refers to

01:34:12.960 | proteins that the immune system views as

01:34:15.440 | invading and it needs to go in and

01:34:16.640 | attack. So when the immune system messes

01:34:18.320 | up, and it sees a protein in our body as

01:34:21.040 | being a foreign antigen and starts

01:34:22.480 | attacking it, you get these autoimmune

01:34:23.920 | conditions and autoimmune conditions

01:34:25.920 | as you know, are very debilitating

01:34:27.520 | cost on the health system on people's

01:34:29.920 | lives. The top 10 autoimmune diseases

01:34:31.760 | is like lupus, rheumatoid arthritis,

01:34:34.320 | even type one diabetes, multiple

01:34:36.800 | sclerosis, irritable bowel, show

01:34:39.120 | grins, Hashimoto's thyroiditis, these

01:34:40.880 | are all pretty in different ways

01:34:43.680 | damaging diseases. So this team at

01:34:46.960 | University of Chicago in 2019 published

01:34:49.360 | a paper where they actually took an

01:34:51.840 | antigen and glycosylated it. So

01:34:55.280 | basically attached some sugar molecules

01:34:56.960 | and carbohydrate molecules to it

01:34:58.320 | and presented it in the liver. So they

01:35:01.200 | put it into the blood and it showed up

01:35:02.720 | in the liver. And they were able to

01:35:04.960 | cause type one diabetes to not develop

01:35:07.280 | in an animal model that was supposed to

01:35:08.720 | get type one diabetes. So they did an

01:35:10.400 | extension of that work and the team has

01:35:12.080 | gotten broader and they just published

01:35:13.760 | this week, a much more substantive paper

01:35:16.640 | that highlights a pretty incredible

01:35:19.040 | technique that may potentially address

01:35:23.920 | a long list of autoimmune conditions.

01:35:26.640 | So they take the antigen, the protein

01:35:29.120 | that is using sorry, in the type one

01:35:32.000 | example, are you saying like the beta

01:35:33.360 | cells didn't get destroyed? Like it

01:35:35.200 | just stopped? It just stopped everything

01:35:37.040 | on the time. Yeah. So the immune system

01:35:39.120 | has a bunch of ways for self regulating.

01:35:41.600 | There are T cells in our body called T

01:35:43.440 | reg cells or regulatory T cells. Their

01:35:45.920 | job is to go find the T cells and the

01:35:48.480 | antibodies that are attacking our own

01:35:50.640 | protein. That's their job. And when they

01:35:52.560 | don't do their job, the antibodies and

01:35:54.880 | the T cells go and attack our own body.

01:35:57.440 | So T reg cells kind of when they're

01:35:59.040 | turned off, they're not doing their job.

01:36:00.560 | So it turns out that when a protein is

01:36:05.280 | presented in the liver in this this

01:36:06.960 | particular part of the liver, the immune

01:36:09.520 | system recognizes that protein as being a

01:36:12.720 | safe protein. And there's a regulatory

01:36:15.120 | process that gets kicked off that causes

01:36:16.960 | the immune system to start to see that

01:36:19.200 | protein as being safe, it should not be

01:36:21.360 | attacked. And T reg cells start to

01:36:23.600 | develop and other systems start to

01:36:25.360 | develop that tell the whole immune

01:36:26.640 | system, stop attacking this protein. This

01:36:29.520 | is a safe protein. This is our body.

01:36:31.680 | This is like friendly fire, right? Like

01:36:34.400 | do not like friendly fire, do not attack

01:36:36.240 | this protein. So what they did is they

01:36:38.480 | took several antigens, proteins, and

01:36:41.680 | glycosylated them, meaning they put some,

01:36:43.520 | you know, molecules on them, put them in

01:36:45.360 | the in the blood just with an IV hook up,

01:36:47.920 | they go into the liver. And once they're

01:36:49.440 | in the liver, the immune system sees them

01:36:50.880 | and is like, Whoa, these are totally safe

01:36:52.880 | now. And they found by analyzing all the

01:36:55.520 | different T cells, the regulatory pathway

01:36:57.760 | that emerged that caused the body to

01:36:59.920 | stop attacking that protein. And they

01:37:02.080 | were able to end Ms using this induced

01:37:06.080 | system in animals. So basically, we have

01:37:07.920 | a known model for making multiple

01:37:10.320 | sclerosis show up in animals. And they

01:37:12.720 | were able to stop Ms in the animals by

01:37:15.360 | taking this particular protein that they

01:37:16.880 | use for Ms and they put it in the in the

01:37:18.480 | liver. IV, they did the same with an egg

01:37:21.760 | allergy. And they did the same with

01:37:23.040 | several other antigens. This represents

01:37:25.120 | a very novel and seemingly super

01:37:29.360 | impactful and powerful way to think

01:37:31.680 | about eliminating autoimmune disease

01:37:33.680 | going forward is that we can take the

01:37:35.760 | antigen and we now know the antigen or

01:37:38.400 | the protein that causes almost all of

01:37:40.160 | these autoimmune conditions from

01:37:41.680 | thyroiditis to lupus to RA to Ms. And we

01:37:45.520 | can take that protein glycosylated, put

01:37:47.520 | it in an IV ends up in our liver gets

01:37:49.760 | presented and our immune system realizes

01:37:51.680 | I shouldn't be attacking this anymore

01:37:53.360 | and resolves it. So it opens up a whole

01:37:56.160 | new category of therapeutic pathways for

01:37:59.520 | addressing all autoimmune conditions.

01:38:01.360 | It's a totally new modality. It's a very

01:38:03.920 | interesting approach. It'll be studied

01:38:05.280 | more deeply. Folks will take this paper

01:38:08.080 | and try and start to develop very

01:38:09.600 | specific therapeutics for very specific

01:38:12.480 | autoimmune conditions using this

01:38:13.760 | approach. And hopefully over the next

01:38:15.360 | couple of years, we see some of these

01:38:16.640 | things have success gain traction and go

01:38:18.800 | to market.

01:38:19.360 | These autoimmune diseases are typically

01:38:21.440 | some combination of genetic and

01:38:23.200 | environmental. So this is not attacking

01:38:25.680 | them on that basis. It's attacking them

01:38:27.680 | in a different modality.

01:38:28.880 | You know, there's two ways that we

01:38:29.920 | address autoimmune conditions today. The

01:38:31.760 | first one is by presenting the antigen

01:38:34.480 | to the immune system before you develop

01:38:36.640 | autoimmunity. This is like, you know,

01:38:37.760 | when they give little bits of peanuts to

01:38:39.040 | kids, and that's how you present prevent

01:38:41.280 | peanut allergies. In most autoimmune

01:38:43.040 | conditions, we're past that point, the

01:38:45.040 | immune system has already developed T

01:38:47.440 | cells and antibodies to go and attack.

01:38:48.800 | So that doesn't work. The second way is

01:38:50.720 | immune suppression. And that's terrible.

01:38:52.320 | Globally suppressing meaning on the

01:38:54.640 | whole body turning off the immune system

01:38:56.640 | is not healthy in a lot of ways. And

01:38:58.000 | that's the current, you know, kind of

01:38:59.840 | best in class way to address autoimmune

01:39:01.360 | conditions. So this is a new approach,

01:39:03.120 | which is we can actually re regulate the

01:39:05.760 | immune system to not attack itself to

01:39:08.080 | not attack our own proteins by

01:39:09.840 | introducing that protein with a with

01:39:12.000 | what's called glycosylation, getting it

01:39:14.000 | into the liver, and boom, this magic

01:39:15.760 | starts to happen. And we'll see what the

01:39:18.880 | side effects are as they start to try

01:39:20.480 | this on humans, we see, we'll see what

01:39:22.720 | conditions are more effective than

01:39:23.920 | others. Sorry for the stupid basic

01:39:25.840 | question. But how is the how is it

01:39:28.800 | different when we put these into say,

01:39:30.160 | like, you said these were monkeys or

01:39:32.080 | chimpanzees? So how are their anuses

01:39:34.320 | different than your anus?

01:39:35.360 | What? Sorry. Anyway, let's keep going

01:39:39.920 | here. Great science corner.

01:39:41.280 | I'm laughing at how contorted that

01:39:44.400 | you go you punch it up. You and I do

01:39:46.800 | these workshops. I'm just chopping.

01:39:48.880 | Yeah, we work on work on punching it

01:39:51.600 | up. We'll try to get a better you're in

01:39:52.960 | show. Anyway, it's super cool. autoimmune

01:39:55.520 | conditions, new worlds getting better.

01:39:58.720 | The term refers to refers to an approach

01:40:01.600 | to a therapeutic and this modality is a

01:40:03.600 | new modality. So it's a super exciting

01:40:06.080 | new kind of universe to be explored now

01:40:08.640 | on how we might be able to treat

01:40:09.840 | autoimmune conditions ranging from

01:40:11.120 | let me okay let me try hold on.

01:40:12.560 | Yeah, good.

01:40:12.880 | Freeberg.

01:40:13.520 | Hey, Saks you're lost on the science

01:40:15.280 | one.

01:40:15.520 | Freeberg what part of the body do you

01:40:17.600 | think is going to be most impacted by

01:40:19.520 | these discoveries?

01:40:20.240 | No. The immune system.

01:40:23.520 | No, no, no, that's not good. Okay.

01:40:25.360 | Come on. Let me try. Let me try.

01:40:26.480 | You guys are just so dumb about science.

01:40:30.480 | Okay. All right, here we go. Okay,

01:40:33.360 | here we go. Freeberg I thought the only

01:40:35.040 | solution to Ms was fecal

01:40:38.080 | transplantation through Uranus.

01:40:40.480 | Yeah. Okay, there we go. There's your

01:40:41.760 | winner. There's your way. Good.

01:40:43.360 | Legal transfer, because you kind of did

01:40:45.680 | a little misdirection there with the

01:40:48.000 | fecal transplant. And then we came

01:40:49.600 | through Uranus. That would be the way to

01:40:52.160 | to get that done. We're going to wrap

01:40:54.080 | here. Thanks to everybody who came.

01:40:56.400 | Brian Armstrong also did a great job.

01:40:58.160 | Elon did a great job. Thanks to

01:41:00.560 | everybody who showed up for us. And if

01:41:02.000 | you want to watch all the talks, all the

01:41:03.840 | talks are being released exclusively on

01:41:06.320 | YouTube and x. So go to x and look at

01:41:09.440 | the all in podcast, Twitter handle, and

01:41:13.040 | type all in podcast on YouTube and you

01:41:14.640 | get to see all these talks available now

01:41:17.040 | and Ray from the unofficial all in

01:41:20.080 | podcast meetups is doing 150th meetup

01:41:24.000 | for the fans in all different cities

01:41:25.440 | around the world. So just do a Google

01:41:26.800 | search for that for the Sultan of

01:41:28.720 | science and the world's greatest

01:41:31.280 | conference producer, the dictator in the

01:41:33.600 | arena, making it happen. And for when it

01:41:37.440 | paltrums favorite bestie, David Sachs,

01:41:41.280 | I'm the most generous moderator. See you

01:41:42.720 | next time. Bye bye.

01:41:44.880 | Let your winners ride.

01:41:47.680 | Rain man David Sachs.

01:41:52.000 | And it said we open source it to the

01:41:53.760 | fans and they've just gone crazy with it.

01:41:56.080 | Love you. Queen of Kinhwa.

01:42:04.880 | Besties are gone.

01:42:07.520 | That's my dog taking a notice in your

01:42:09.200 | driveway.

01:42:12.560 | Oh man. My avatar will meet me at

01:42:14.880 | Winston. We should all just get a room

01:42:16.400 | and just have one big huge orgy because

01:42:18.160 | they're all just useless. It's like this

01:42:19.680 | like sexual tension that they just need

01:42:21.280 | to release somehow.

01:42:23.360 | What are the beat? What are the beat?

01:42:28.720 | We need to get merch.

01:42:30.320 | [Music]

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