E164: Zuck’s Senate apology, Elon's comp package voided, crony capitalism, Reddit IPO, drone attack

00:00:00.000 | All right, everybody, welcome back to your favorite podcast,

00:00:03.040 | the all in podcast. It's Episode 164. I'm down here in Miami,

00:00:07.840 | with me again, of course, the dictator chairman himself from

00:00:12.400 | off Polly hoppity. And the rain man. Yeah, burn baby, David

00:00:17.680 | Sachs. Unfortunately, we had a little bit of a challenge this

00:00:22.000 | week. We don't know where Friedberg is he somewhere lost

00:00:24.120 | in his Apple Vision pros, but he'll be back next week. As you

00:00:27.600 | guys know, I'm incredibly generous with my friends. So I

00:00:30.880 | sent all the besties the Apple Pro goggles. And so these Apple

00:00:35.960 | Pro goggles are amazing. But you bought me a pair of the Apple

00:00:40.760 | Pro. Yeah, we talked about this. Yeah, you guys actually you were

00:00:44.120 | using them. You just forgot. But Friedberg's been using them.

00:00:47.000 | Nobody can find Friedberg right now. Because apparently, he went

00:00:51.840 | to Uranus. I recorded in all of these sacks. What's happening

00:00:55.720 | inside each of our Apple goggles? A vision? Oh, yeah. And

00:01:01.880 | so but yeah, come on. Here they are. We actually took a picture.

00:01:04.280 | I had not take a picture of you wearing them. Do you want to

00:01:06.640 | have this actually want to see what Chamath was doing in his

00:01:09.000 | goggles? Yeah, let's see. I've recorded it. Yeah, look at that.

00:01:12.920 | See, he imagined that he did leg day.

00:01:16.000 | Oh, he's reveling. He's still reveling in that thirst trap

00:01:22.920 | that he posted in the I know but you see those legs. The Apple

00:01:26.000 | Vision Pro Tim can I look at that? Can I say something funny

00:01:30.000 | about this, which is that my legs are actually darker than my

00:01:34.960 | torso and my upper body. It's the weirdest thing. And so you

00:01:37.880 | have it in reverse. But it is true that my my legs are a

00:01:40.600 | different shade than my my trunk and my arms and my body. Okay.

00:01:43.760 | Well, here's sacks. By the way, sacks. You know, he loves his

00:01:46.720 | goggles. Chamath, do you have any interest in seeing what sacks

00:01:48.760 | was doing with his goggles? Oh my god, I can't imagine. There

00:01:52.480 | it is. He was doing the speed run on DJ. Absolutely getting

00:01:59.040 | into saving private Ryan, right? Yeah, that's you. That's you.

00:02:02.480 | You were speed running, saving private Ryan there. Oh, I got

00:02:05.000 | them too. Yes. I but I didn't record myself. I didn't record

00:02:07.480 | myself. I maybe nicked it. Oh, I was in there. Oh, look, what am

00:02:11.000 | I doing?

00:02:11.600 | Rain Man David Sacks.

00:02:20.440 | We open source it to the fans and they've just gone crazy.

00:02:26.760 | Love you guys.

00:02:27.720 | Wait, you're telling me that they didn't have the third or

00:02:34.120 | fourth investor and Uber up but ringing the bell with them at

00:02:37.240 | the original moment.

00:02:38.000 | I could tell you the backstory. I was invited by TK to come to

00:02:43.280 | the ringing of the bell. TK was disinvited. So he was there on

00:02:48.960 | the floor. It was very awkward. And then they didn't have him go

00:02:52.520 | up and ring the bell or be even there when Darwin rang the bell.

00:02:55.760 | It was because it was controversial. They didn't. They

00:02:58.840 | banned him. It was really, it was really sad. It was super

00:03:02.600 | sad. But anyway, everybody, I hope you're enjoying your

00:03:06.120 | story.

00:03:06.520 | I didn't go because he was like, we're gonna have a party. But

00:03:13.040 | we're not going to be able to ring the bell. And it was just

00:03:15.400 | all like very did you go to the party? I didn't. I should have

00:03:19.120 | regret not going. But it was unclear if there was even going

00:03:21.400 | to be a party or TK was going to go because of all the drama. I

00:03:24.480 | don't know if you remember on CNBC, they were like, TK is in

00:03:26.920 | the building, but he's not on the thing. And that became a big

00:03:29.600 | brouhaha. But yeah, so I missed my window.

00:03:32.680 | I mean, if you hadn't known that this was gonna be the big exit

00:03:36.160 | in your life, really the only one, then you would have made

00:03:39.400 | every effort to attend everything, right?

00:03:42.400 | Absolutely. Absolutely. Yeah. I mean, you're still riding on

00:03:45.160 | that. Yeah. PayPal. I was I was talking to somebody about this

00:03:50.560 | the other day, most people's careers you have, like, you

00:03:54.880 | know, it's not like a smooth up to upward trajectory. There's

00:03:57.680 | like, maybe a few pops that you get. You're lucky, actually, if

00:04:00.960 | you get a few, because most people only have one or maybe

00:04:03.920 | two. Yes. It's like a power law. It's like anything else in

00:04:07.080 | venture, right? Absolutely. I'm sure if you think back on like

00:04:09.680 | the big outcomes in your life, it's not like there's one every

00:04:12.320 | year and like some sort of smooth gradient. It's basically

00:04:15.880 | there's like, one, two or three over the course of your entire

00:04:18.960 | career that you remember, right? Yeah, absolutely. Yeah. I mean,

00:04:22.560 | it's it's good. It's good to consider that. Because you have

00:04:26.520 | to enjoy every sandwich, you have to enjoy every day, what

00:04:30.720 | you're doing, because those pops are out of your control. You

00:04:33.200 | don't know when they're going to happen, how they're going to

00:04:34.920 | manifest. So but you guys didn't get these. You didn't get the

00:04:39.280 | goggles, but these goggles came out this week. I don't know if

00:04:41.480 | you saw it. What I will say is at the poker game, three of the

00:04:43.960 | guys were talking about these goggles. Ah, Sammy woke up at

00:04:49.080 | five in the morning on the first day. He was he got them. And

00:04:52.840 | then Kuhn and robo were telling me that they just like bought

00:04:56.000 | them randomly in the next couple of days. And it was civilians,

00:05:00.440 | there was no like waiting in line, they were able to just

00:05:02.760 | order them as what they Yes, but they're civilians. So just to be

00:05:05.480 | clear, like in Silicon Valley, we're kind of like, whatever,

00:05:10.200 | you know, we've we've played with Oculus for so long. But now

00:05:12.720 | these are out. And there's a bunch of demos going around.

00:05:14.880 | This one I thought was interesting. I don't know if you

00:05:16.440 | saw this, but watching a basketball game, it actually is

00:05:19.200 | quite compelling to have all the stats on the screen with you.

00:05:21.440 | And you can kind of move them around. I maybe could see

00:05:24.360 | myself doing this. I don't know. Do you think you would do this?

00:05:27.240 | Watching a game maybe?

00:05:28.640 | So are you actually watching the TV through the goggles? Like

00:05:32.360 | what is real world? And what part is augmented? Obviously,

00:05:35.560 | all the stats are augmented reality. Yeah, this is all self

00:05:39.560 | is, is that that's a stream. That's a stream into the

00:05:42.840 | goggles. Yeah, it's not TV. So you know, I think he's just

00:05:46.200 | putting it on the TV there. But you could literally be outside

00:05:49.840 | on your deck, you could be on an airplane and do this. So that's

00:05:52.880 | like, you can see through the goggles, right? Is that the

00:05:54.920 | idea? It's, you can, if you want to, I think you can still see

00:05:58.360 | through the goggles. Yeah, is the idea. Yeah.

00:06:00.360 | You know that you could you can see the fact that you live in a

00:06:03.360 | tattered apartment without a girlfriend dressed poorly.

00:06:07.000 | You can see your sink, you can see the cupboard being bear

00:06:11.880 | bear, you can see the spoiled milk in your refrigerator,

00:06:14.440 | you're half used bong that you use to soothe yourself to sleep

00:06:17.440 | at night, whatever all of these 20 and 30 year olds do to cope.

00:06:20.560 | You'll see all of that while still being in an immersive

00:06:23.640 | environment. It's amazing. Yes.

00:06:24.880 | I mean, it is so dystopian. I just think like, if you take out

00:06:30.560 | your phone, your spouse is like, what are you doing on your

00:06:32.560 | phone? I can you imagine the audacity of being with your

00:06:35.520 | spouse or your family and be like, Hey, guys, I'll be right

00:06:37.840 | back. And you put the goggles on to watch the Knicks game with

00:06:40.440 | the Warriors.

00:06:41.160 | I mean, I think that's a snap divorce. I don't know.

00:06:44.000 | You said very well about the the Oculus one, which is you had to

00:06:49.720 | turn a phrase, which I really liked. But basically, it's like,

00:06:51.760 | you were very quick to try it. And then there was like a period

00:06:56.160 | and then you lost interest. I think that's just going to be

00:06:58.400 | the key thing with this. And the fact that it costs $3500,

00:07:02.440 | they have to get the price down fast enough for average folks to

00:07:05.640 | want and be able to buy it. Right?

00:07:07.920 | Yeah, I call this experience try the try. Oh, my goodbye. You

00:07:12.720 | try it. You're like, Oh, my God, this is incredible. And then

00:07:14.920 | you're like, we put it in your drawer, you never use it again.

00:07:17.080 | Because there's not an application.

00:07:18.880 | It's really a proof of concept. Look, I think it's a great thing

00:07:21.480 | for innovation that they're starting with this, you know,

00:07:24.520 | like you said, expensive headset that maybe is not that

00:07:28.120 | ergonomic, but eventually it'll come down and the form factor

00:07:31.440 | will be glasses or sunglasses. Facebook. I don't know if the

00:07:34.560 | products out yet. But you see their product where the ray

00:07:37.320 | bands? Yeah, it has the AI built into it. And you can ask it

00:07:41.000 | questions. And it will do computer vision and give you

00:07:43.560 | answers based on what it's seeing. It was a phenomenal

00:07:46.920 | demo. I don't know if that's actually real yet. But do you

00:07:50.680 | see that demo?

00:07:51.400 | Yeah, these are the Facebook Ray Ban glasses. And I do think

00:07:55.200 | these are met as smart glasses. They work particularly well

00:07:58.400 | taking pictures and sharing them on Instagram. So they're kind

00:08:01.400 | of single function. He you know, how Zuckerberg is he? He cribbed

00:08:04.640 | what Evan Spiegel did a couple years ago with Snapchat, he put

00:08:08.720 | out a demo that was a little different. The demo was like he

00:08:11.240 | was in his closet. He was wearing this and he had picked

00:08:14.480 | out a shirt or something. And that's like, give me, you know,

00:08:17.600 | tell me what I should match this with. Yeah, what goes with a

00:08:20.120 | gray shirt that I've worn for the last 14 years.

00:08:22.720 | You guys see this thing where they all had to testify in front

00:08:27.600 | of the Senate? We might as well, I guess we'll just jump right to

00:08:30.000 | that. It was like a public flogging. Yeah, once again, a

00:08:33.920 | public, public flogging. We'll just jump to it real quick,

00:08:36.080 | since we didn't want to go too deep on that one. But

00:08:38.360 | Josh Hawley made Zuck turn around and apologize to, to

00:08:42.560 | people in the audience. It was really intense.

00:08:44.760 | So this is the name of this hearing was big tech and online

00:08:47.640 | child sexual exploitation crisis, Zuckerberg, he was

00:08:50.200 | questioned, along with the CEO of tik tok, discord x and snap.

00:08:55.440 | But obviously, this is all around. Kids online safety, and

00:09:01.120 | also section 230, which I think the senators are, this is one of

00:09:05.800 | the few bipartisan moments, I think they're honing in on it.

00:09:09.080 | Yeah, they realize this is kind of like a way to take a run at

00:09:12.800 | this. They're taking a run at it for sure. They realize it's a

00:09:15.280 | winning ticket. But let's just play the clip. And then I'll get

00:09:17.840 | your thoughts, Saxon and Jamal.

00:09:19.400 | Let me ask you this. There's families of victims here today.

00:09:21.800 | Have you apologized to the victims? I would you like to do

00:09:26.240 | so now? Well, they're here. You're on national television.

00:09:29.280 | Would you like now to apologize to the victims who have been

00:09:32.400 | harmed by your product? Show them the pictures. Would you

00:09:35.440 | like to apologize for what you've done to these good

00:09:37.720 | people?

00:09:38.240 | I'm sorry, everything that you've all gone through. Terrible.

00:09:44.840 | No one should have to go through the things that your families

00:09:47.720 | have have suffered. And this is why we invest so much and are

00:09:51.640 | going to continue doing industry leading efforts to make sure

00:09:56.000 | that no one has to go through the types of things that your

00:09:59.320 | families have had to suffer.

00:10:00.560 | Excellent, powerful moment. And for Zuckerberg to get up and

00:10:05.120 | actually face the parents, he turned around, he faced the

00:10:07.560 | present very dramatic moment. And he apologized, Ned, you

00:10:11.240 | respect him for for doing that. And that was like a powerful

00:10:16.000 | moment as well. And where does this all wind up?

00:10:17.880 | This was a kangaroo court. I mean, this was basically all

00:10:21.080 | theatrics. This is basically bipartisan moral panic, where

00:10:24.800 | all these senators are basically grandstanding. And these are the

00:10:27.680 | same types of accusations that we've been hearing for years.

00:10:30.080 | Remember, this goes back to the whole Frances Hogan claims,

00:10:32.720 | where she says that Facebook wasn't doing enough to prevent

00:10:35.720 | various kinds of online harms. And I think that we're going to

00:10:40.720 | regret where this all leads, because where it's going to

00:10:42.680 | lead if they do repeal section 230 is towards greater

00:10:45.640 | censorship, all these companies are going to spend even more

00:10:49.400 | resources restricting what we can say and hear online, which

00:10:54.800 | is not the right direction. Listen, do some harms occur

00:10:59.160 | online? Yes. Do I believe that Facebook is taking substantial

00:11:02.640 | measures to stop them? Yes. I mean, but edge cases are always

00:11:05.680 | going to get through. When you're operating at that kind of

00:11:09.280 | scale, there are going to be these edge cases of kids who got

00:11:12.800 | harassed or content that shouldn't have getting through.

00:11:17.240 | It's just part of the fact that the internet operates a gigantic

00:11:20.560 | scale. And these harms have always been out there. I think

00:11:23.640 | that these companies do their best to try and stop them. But

00:11:26.520 | they're always going to get through and you can't make every

00:11:29.880 | aspect of our society perfectly safe and harm free. Somehow we

00:11:34.320 | have this expectation that we can eliminate 100% of every harm

00:11:38.480 | that occurs. And I do think that these online companies have been

00:11:41.320 | unfairly picked on in a sense. I mean, if you're going to talk

00:11:44.320 | about these types of harms, why aren't you targeting the music

00:11:47.680 | industry for all their incendiary lyrics that basically

00:11:50.800 | encourage all sorts of violent or sexist behavior? Why don't

00:11:54.920 | you target the advertising industry for creating

00:11:57.320 | unrealistic body image expectations? Why don't you

00:12:01.200 | target the Kardashians for setting unrealistic expectations

00:12:05.560 | around image? And you could go on down the list? I mean, why

00:12:09.680 | don't you target Hollywood for releasing a show like euphoria,

00:12:13.000 | which is a hit? It seems to me that the problem in our culture

00:12:16.600 | is not coming from the edge cases is coming from the

00:12:19.360 | mainstream entertainment that is fully allowed and is popular

00:12:23.760 | and is our hit shows and hit records and hit products. I

00:12:27.120 | mean, that's where the toxic pollution is coming from in our

00:12:30.640 | culture. So to turn around and now blame the online companies

00:12:33.880 | for creating all of this, I think is just anything basically

00:12:36.400 | they're being scapegoated. I mean, again, this is a moral

00:12:39.240 | panic.

00:12:39.640 | Chama, do you think it's a moral panic? Or, you know, there have

00:12:42.640 | been statistics and studies done about what is viral on social

00:12:48.080 | media, the algorithms targeting users, the addictive nature of

00:12:51.400 | it, you spoke earlier about the addictive nature of just

00:12:53.520 | gamification on watches, social media is a little bit different

00:12:56.720 | than music, and some of these other things, because they have

00:12:59.960 | these algorithms to increase watch time and engagement. So I

00:13:03.120 | think that's what the other side would say. What do you say?

00:13:05.200 | What do you say? Come on, where do you stand on this?

00:13:06.840 | Let me just give a coda to a couple things that Zack said. It

00:13:10.520 | is true that we've taken turns attacking other forms of media

00:13:14.640 | when they were ascending in their popularity. So in the

00:13:16.880 | 1990s, if you guys remember, the politicians and their censorship

00:13:21.880 | attempts around gangster rap, and NWA and to life crew and

00:13:26.760 | certain songs,

00:13:27.840 | Al Gore's wife, right? What was her name?

00:13:29.640 | Tipper Gore.

00:13:30.360 | tirade against rap lyrics.

00:13:33.120 | What was the NWA song, you know, the police, that whole thing

00:13:36.880 | just set off a huge fear about people potentially, David, be

00:13:41.120 | motivated to kill cops or something, right?

00:13:43.080 | In the 80s, there was a trial Judas Priest went on trial,

00:13:46.520 | right? Because if you played one of their records backwards,

00:13:49.480 | supposedly promoted devil worship, devil worship. And I

00:13:52.520 | don't know who's playing records backwards. But if you did, then

00:13:55.360 | it promoted devil worship. I think a kid committed suicide

00:13:58.360 | and say, basically prosecuted Judas Priest for it.

00:14:00.800 | So that's comment number one, which is, this is not new. And

00:14:05.960 | the reason why social media is in the crosshairs is because

00:14:08.600 | instead of having this really diverse ecosystem of many small

00:14:15.120 | players, you have three or four folks. And so it's easier to

00:14:18.800 | bring them up on stage and sort of pillory them. Second is I

00:14:22.120 | actually thought that Zuck had a lot of moral clarity, because

00:14:24.240 | it's like, that's a tough position to be in. And the fact

00:14:27.120 | that he had the courage to turn around and actually apologize to

00:14:29.440 | those people shows he's trying to do the right thing. But the

00:14:32.360 | reality is, and sacks is right. If you apply a very, very small

00:14:36.800 | error rate to an incredibly large number, so they have a

00:14:40.160 | network of three and a half billion people monthly, right,

00:14:42.760 | or daily, or whatever thing is, even if you say that there's

00:14:46.400 | one 10th of 1% of an error rate, meaning things that are

00:14:51.440 | unintended, well, that's 3 million unintended consequences,

00:14:55.480 | right? That's a lot of unintended consequences. And so

00:14:59.120 | there's this massive law of large numbers at play. So what

00:15:02.520 | what do we do, I guess, is the question. And I think that there

00:15:07.440 | is enough knowledge that we have to know that the ability for a

00:15:14.640 | 35 year old to use certain products today is very different

00:15:20.240 | than the ability for a 12 year old to use that same product

00:15:23.240 | because of where they are physiologically. Right. I think

00:15:26.400 | we all know that to be scientifically true, on the

00:15:29.160 | dimension of many products. And I think what we need to decide

00:15:31.840 | as a society is whether software and electronic products fall

00:15:36.400 | into that categorization. And if so, what does it mean? So in the

00:15:39.720 | case of China, they mandate top down what products can be used,

00:15:44.400 | and how many hours you can use it for video games are referring

00:15:49.040 | to you. Yeah. And David's right, which is that if we go there,

00:15:52.560 | and we rewrite the law, then there's going to be a different

00:15:56.400 | set of unintended consequences that's going to create, I think,

00:15:59.400 | a much poorer business landscape, frankly, to innovate

00:16:05.040 | and a bunch of other things.

00:16:06.080 | And building on your comments, there's clearly an age at which

00:16:09.640 | kids can shouldn't be on these systems and an age where, you

00:16:14.320 | know, maybe with some guidance, they can. Yeah, you want to add

00:16:17.880 | something? Yeah.

00:16:18.520 | And then I think the third thing is around the section 230 thing

00:16:21.840 | itself. I think that sacks, I'll give you a slightly different

00:16:26.000 | take. I don't think that the section 230 rewrite is going to

00:16:30.520 | be broad and sweeping. What I noticed from a bipartisan

00:16:34.520 | perspective, by both the Democrats and the Republicans is

00:16:37.880 | that the one single narrow issue that they all seem to align on

00:16:43.280 | is not necessarily about all of the different rules around

00:16:49.320 | censorship, but that the lack of liability for these folks should

00:16:55.080 | be relieved. And I think that if you were to write a narrow

00:16:58.960 | amendment to section 230, that said that these social media

00:17:02.680 | companies or other organizations that had certain characteristics

00:17:05.520 | were more liable where today they have no liability. I'm not

00:17:09.360 | saying that it's right. But my read of the temperature in that

00:17:13.160 | room was that that is the very narrow change in section 230

00:17:18.200 | that I think they all seem to want to make. And so that seems

00:17:21.600 | like a very likely thing that will happen in the next two or

00:17:24.560 | three years

00:17:25.080 | unpack that for the audience who might not know how they would do

00:17:28.560 | that section 230 says, if you're a publisher, you're a common

00:17:31.600 | carrier, you're not responsible for people post on your your

00:17:34.800 | system, blog, web host, or social media company, but where

00:17:38.880 | the social media companies move from being just a common

00:17:41.880 | carrier, you know, like paper might be or a website hosting

00:17:46.000 | company like WordPress, or Squarespace is when they flip

00:17:50.080 | over and they have an algorithm, and then they start picking and

00:17:52.920 | choosing. So once you start doing editorial, like the New

00:17:55.280 | York Times, and you have editors, then you're liable. If

00:17:58.200 | you're CNN, you're liable. If you're Fox, as we saw in the

00:18:00.680 | Dominion case, that's where the liability comes in. So I guess

00:18:03.600 | the question to you, sex is, you know, at the end of the day, now

00:18:07.000 | that we've seen these things at scale, is there not an argument

00:18:10.160 | that when you start editorializing through an

00:18:12.320 | algorithm, and you start promoting certain content, that

00:18:15.240 | you have some level of responsibility, like Fox News,

00:18:17.760 | CNN, or the New York Times has, where would you stand on that

00:18:20.800 | issue, some liability, if you're picking winners and losers in

00:18:23.920 | terms of what gets promoted in the system?

00:18:26.320 | Well, apparently, I'm the last person in America who thinks

00:18:29.520 | that section 230 was a good idea and a visionary piece of

00:18:32.160 | legislation that actually enabled the creation of user

00:18:35.800 | generated content platforms. Just to kind of slightly modify

00:18:39.240 | your description of how it works, I would analogize it to a

00:18:42.440 | newsstand, where there's magazines on the newsstand,

00:18:45.160 | their publishers, and then there's the newsstand itself,

00:18:47.360 | which the distributor, if a magazine engages in defamation,

00:18:53.400 | they're liable for it. But the newsstand is not the newsstand

00:18:56.920 | can't be sued. So the question is, when you have these massive

00:18:59.960 | user generated content platforms, are they operating as

00:19:03.080 | a publisher or as a distributor? And I think what section 230

00:19:06.600 | make clear is look, if you don't write the content, if the

00:19:09.560 | content is generated by users, your distributor, and that is, I

00:19:14.320 | believe, the better analogy to make for these huge UGC

00:19:18.200 | platforms. Now, at the same time, what section 230 said, is

00:19:22.400 | that if you take good Samaritan actions to reduce things like

00:19:26.680 | sex and violence on your platforms, then we won't make

00:19:29.480 | you liable. Because what happens in a lot of cases is that you

00:19:33.080 | can waive your protection legally by basically getting

00:19:37.080 | involved. And so the legislation didn't want to deter these

00:19:40.720 | platforms for taking again, good Samaritan steps. I think it's a

00:19:44.520 | pretty good combination of legislation. And that's what you

00:19:47.920 | see right now is that Zuckerberg doesn't want to let these edge

00:19:50.760 | cases through, I actually believe that they are taking

00:19:53.320 | huge efforts at scale,

00:19:55.400 | they have 40,000 people to give him some credit. There's 40,000

00:19:58.440 | people moderating stuff. That's

00:19:59.600 | these are edge cases that get through. And by the way, you

00:20:02.120 | have to wonder where were the parents when all this stuff

00:20:05.000 | happened? I mean, they're acting like they're victims in the

00:20:07.440 | audience. And I'm sorry for their particular cases. But at

00:20:10.080 | the end of the day, we do need the parents to step up here. If

00:20:13.160 | we want to have social media at scale at all, the parents have

00:20:16.160 | to play a more active role. But in any event, to go back to

00:20:18.360 | section 230. I just think that Republicans in particular are

00:20:22.000 | going to really regret getting rid of section 230. Because it's

00:20:26.760 | only going to lead to more censorship.

00:20:28.200 | I think what they're going to do, if I had to bet is that

00:20:31.040 | they're going to write a very narrow amendment to that law.

00:20:36.040 | And during some budget process or some other thing where you

00:20:39.920 | have a big Christmas tree bill, this will get in there. And I

00:20:43.560 | think it will have bipartisan support that effectively removes

00:20:47.200 | the liability protection that these companies have. I

00:20:50.800 | have a small change. That's the entirety of section 230.

00:20:54.040 | I think like these companies will not be able to use that

00:20:57.760 | that's a massive change. Listen, there are plaintiffs lawyers,

00:21:00.640 | the the plaintiffs lawyers bar, you know, the trial lawyers bar

00:21:04.640 | is salivating over the possibility that would happen.

00:21:08.200 | That's why this is going to happen. You know, wait, this is

00:21:10.560 | how America

00:21:11.080 | injury or they have personal injury lawsuits, lawsuits lined

00:21:15.240 | up in every jurisdiction United States. And here's the thing is

00:21:18.120 | because Facebook and all these other sites operate, you know,

00:21:22.480 | across the entire nation and across the entire world, they

00:21:26.520 | can be sued in every single jurisdiction. If you allow these

00:21:30.280 | types of lawsuits,

00:21:31.120 | okay, Chamath, you go, then I'm gonna get my position and move

00:21:34.280 | on. I'm going to say this in as unopinionated as a way as

00:21:37.080 | possible, whether we like it or not. There's an element of

00:21:41.360 | American capitalism that takes companies through seasons. And

00:21:46.840 | there are seasons where you're growing. And then there are

00:21:49.400 | seasons where you're over earning. And then there are

00:21:51.920 | seasons where if it is possible, the machinery, if you see that

00:21:56.880 | you are being you are over earning for a long time, the

00:22:00.320 | machinery of the economy comes and kind of pulls you back down

00:22:03.520 | to earth.

00:22:04.080 | You've won too much. And you're perceived as too powerful. Yeah.

00:22:07.880 | And I'm not saying this. Whether or not it's right. I'm just

00:22:11.720 | saying that if you look back in history, these chapters have

00:22:15.240 | been written umpteen times. And I and I think David, what you

00:22:19.120 | said is the absolute single most important thing if you had to

00:22:23.120 | figure out where this was going to go, is exactly that the

00:22:27.920 | plaintiff's lawyers, the class action lawsuits, the amount of

00:22:31.960 | money that they think they can extract. And they compare it to

00:22:37.160 | the amount of money that they were able to extract in two

00:22:39.920 | different kinds of cases. One was tobacco. And then the second

00:22:44.840 | was pharma. And I think that they look at this class of app.

00:22:50.320 | And the lack of empathy or the lack of popularity that the

00:22:54.320 | leaders of these companies have in Washington as a reason why

00:22:59.240 | they will probably be able to get this done to create this

00:23:02.440 | again, I'm not saying I think that's good. I'm saying that I

00:23:05.680 | think it's likely. And I think when that does happen, you will

00:23:09.320 | see a replay. Again, it'll be slightly different in terms of

00:23:12.440 | how it plays out. But exactly the kinds of plaintiff's lawsuits

00:23:15.880 | that we saw in pharma, and in tobacco, and I think it's going

00:23:19.320 | to play out here. And David, you're right, that hearing to

00:23:22.480 | me, was a setup for that.

00:23:24.240 | Yeah. And if you if you look at this through that lens, there

00:23:28.360 | will be some sort of negotiation. And it might be age

00:23:32.400 | because when you look at this, really what Americans are upset

00:23:35.560 | about is the impact this is having on kids. We have a limit

00:23:38.400 | for the age of smoking, vaping, etc. And when these things

00:23:41.400 | happen, I think an easy concession that Zuckerberg and

00:23:44.480 | others will make is hey, these products will be for 16 years

00:23:47.040 | old and up. That's my that's the age I think it's appropriate

00:23:50.720 | 15 or 16 seems to be

00:23:52.400 | well, he also said, by the way, Jason, to your point, Lindsey

00:23:55.400 | Graham was the one that brought this up. And Lindsey Graham made

00:23:57.920 | the connection to tobacco and also to firearms. Yeah. And then

00:24:01.320 | mark at some point in there basically said, Well, listen,

00:24:03.760 | like, let's look at Apple and Google, we should expect them to

00:24:07.680 | do the actual age verification on us.

00:24:09.720 | Right, because they have the devices and they have credit

00:24:12.520 | cards, etc. That's actually a very reasonable thing for

00:24:15.400 | Americans to come to you. I think that breaks down a little

00:24:17.360 | bit sacks in your argument. And listen, there's no perfect

00:24:20.040 | analogies here. But if there was a repeated offense of a magazine

00:24:24.680 | on a newsstand, for example, if there was some magazine that had

00:24:28.720 | underage, you know, an adult magazine that underage kids in

00:24:31.840 | it, and people knew that and a newsstand continued to publish

00:24:35.600 | it, they would have liability for trafficking in child

00:24:38.320 | pornography or whatever it happens to be. And so the

00:24:41.480 | newsstand does get some liability. So there's again, no

00:24:43.760 | perfect analogies here. But I think

00:24:46.040 | Facebook and all these other sites are trying to remove the

00:24:48.280 | child porn or whatever. I don't think much that gets through at

00:24:50.480 | all. You know, I think maybe you have a better argument. And

00:24:54.600 | there is the argument that people make is that because of

00:24:57.000 | the feed, they're making editorial judgments. And that's

00:24:59.320 | publishing, not distributing. However, my counter arguments to

00:25:01.880 | that is that the feed just gives you more what you want. I mean,

00:25:04.480 | it just looks at what you're clicking on what you're viewing

00:25:06.440 | the time you're spending, and they just give you more of that.

00:25:08.320 | I don't think it's editorializing. Now, back to

00:25:11.320 | Jamal's point about this is the way things are headed, that may

00:25:14.120 | well be right, but I think we're gonna regret it. I mean, first

00:25:17.200 | of all, the Democrats interest that one of their biggest

00:25:19.720 | donors is the trial lawyers bar, and they generally will support

00:25:23.680 | any legislation that opens up the causes of actions. And

00:25:27.240 | that's where this is headed. And what's going to happen is if

00:25:30.200 | they get rid of Section 230, is that every time there's an

00:25:33.600 | alleged harm that occurs every time a kid gets bullied or beat

00:25:38.480 | up in school, every time something goes wrong in their

00:25:41.480 | life, they're going to try and in it on social media and try and

00:25:45.240 | show that they imbibe something on social media that led them

00:25:49.040 | down this dark path. And these types of companies are going to

00:25:52.960 | get sued in every jurisdiction in America. Recently, we've seen

00:25:56.920 | huge judgments related to defamation, where if you have,

00:26:01.440 | say, a red politically red defendant in a blue

00:26:05.400 | jurisdiction, huge awards, I think we could probably see the

00:26:08.400 | opposite as well, that basically, you'll start seeing

00:26:10.680 | blue defendants taken on in red jurisdictions, we've seen

00:26:14.160 | completely disproportionate judgments in again, around

00:26:17.600 | defamation, disproportionate relative to the harm that

00:26:20.200 | actually took place, you're going to see that on steroids,

00:26:23.160 | if we get rid of Section 230. Now, historically was the job

00:26:26.440 | of Republicans to oppose Democrats on this stuff, because

00:26:30.320 | they knew that Democrats were shilling for the plaintiff's

00:26:33.000 | bar. Republicans have not done that, because they're so mad at

00:26:37.240 | these social media companies for censorship. So remember, when I

00:26:39.800 | talked about Good Samaritan liability, these companies

00:26:43.240 | created content moderation, to basically try and remove the

00:26:47.680 | violent material, the pornographic material, the

00:26:50.400 | sexual material, the harassment material. But in the process of

00:26:54.920 | doing that, they started making political judgments, and they

00:26:58.280 | started engaging in political censorship. And that has made

00:27:01.560 | the Republicans so angry that they have now turned against

00:27:04.720 | these companies, and they are willing to remove Section 230.

00:27:07.440 | My point is, I think Republicans at the end, they are going to

00:27:10.000 | regret that because if you remove Section 230, it's going

00:27:13.200 | to open up this flood of litigation, maybe a free for

00:27:15.640 | all, it'll be a free for all. And what's going to happen is

00:27:18.600 | that these companies, just driven by simple corporate risk

00:27:23.120 | aversion, are going to clamp down even more. I mean, the

00:27:26.120 | content moderation is going to be even stricter. And because

00:27:29.840 | the content moderators, these companies basically are liberals,

00:27:32.920 | if you empower them to take down even more content, they're going

00:27:36.280 | to take down Republican stuff even more. Very, it'll be very

00:27:40.320 | easy for the plaintiffs to target that type of content,

00:27:43.520 | they'll say that, oh, that, you know, all of that Republican or

00:27:47.640 | conservative content that influence people in a very

00:27:49.840 | negative direction that created all of these harms, there'll be

00:27:52.680 | lawsuits targeting that sort of content, and Facebook and others

00:27:56.960 | will respond in the economically rational way, which is to shut

00:27:59.960 | it down completely. So I think senators like Josh Hawley

00:28:02.760 | are not going to get what they want.

00:28:04.120 | They're not thinking straight. Yeah, come on, it's gonna back

00:28:06.160 | fight. Yeah, it's gonna backfire.

00:28:07.000 | The reason why this is going to happen, if it does happen, and

00:28:12.120 | you want it to try to be probabilistic about it, is

00:28:14.880 | because when you look back at the tobacco settlement, the

00:28:17.280 | original settlement in today's dollars is about $370 billion.

00:28:20.600 | If you if you were the trial lawyers, and you're looking at a

00:28:25.120 | combination of Facebook and tick tock, and all of the all of

00:28:29.920 | that money, I suspect that they probably think that the

00:28:34.520 | potential that they can extract from these companies is going to

00:28:38.760 | be multiples of that number. And then as a result, their fees

00:28:43.040 | will be between 20 and 50% of that. So you're talking about

00:28:47.320 | hundreds of billions of dollars of revenue potential that will

00:28:55.720 | motivate I think these folks to get the law changed. And then

00:29:03.880 | the byproduct will not be framed in terms of dollars. It's these

00:29:08.080 | are highly kinetic issues when you're talking about sexual

00:29:11.040 | exploitation and young people and mental health and suicide

00:29:15.120 | and bullying. These are very kinetic issues, right. And so

00:29:18.160 | bringing these to jury trials all across the United States. I

00:29:22.360 | think that they probably think that they're on the right side

00:29:26.000 | of history and winning those things. So yeah, you know, again,

00:29:28.920 | I'm not saying it's highly emotional. And I'm highly

00:29:32.080 | emotional. I mean, listen, it's gonna win. It's gonna win. You

00:29:35.760 | bring a case of say, teen suicide, okay. Horrible that it

00:29:40.800 | happens. But there's gonna every time something like that

00:29:44.080 | happens, there's going to be a huge temptation. I'm sure

00:29:46.600 | there'll be trial lawyers who specialize in this, to bring a

00:29:49.480 | case against Facebook or some other social media company. And

00:29:53.000 | they're going to scour through these accounts and try to point

00:29:56.960 | to examples that could have led to this result. And the truth of

00:30:01.720 | the matter is that maybe social media contributed a little bit.

00:30:04.880 | What about popular culture and popular entertainment? What

00:30:07.480 | about all the messages? I'm not debating? I'm just I'm pointing

00:30:11.000 | out what's gonna happen. What about all the messages they

00:30:13.640 | received? Not not through the edge cases I got through on

00:30:16.920 | social media, but through the mainstream entertainment. I

00:30:19.280 | mean, all the shows are watching on television, all the music

00:30:21.480 | they're listening to the things that happened in their schools

00:30:24.040 | and day to day conversations with other kids. But you can't

00:30:26.960 | really sue any of those other things. But you can sue social

00:30:30.200 | media.

00:30:30.560 | The crazy thing about all of this is that all of these

00:30:34.000 | lawsuits are funded, in part by these hedge funds who will do

00:30:37.520 | litigation finance. And part of putting together a well

00:30:42.120 | performing litigation finance fund is underwriting the

00:30:44.600 | probability of success. And I think when you flow through the

00:30:47.840 | probabilities, and you apply it to these companies, largely

00:30:51.840 | because of their profitability and their ability to over earn

00:30:55.880 | and generate profits, I suspect that Wall Street is probably

00:31:00.840 | already involved if and if not, they'll probably get involved in

00:31:04.320 | due course. But it's it's an unfortunate thing, David, I

00:31:08.360 | agree, because this is sort of like, hey, the rules on the

00:31:11.600 | field were x, and folks operated by those and they are clear they

00:31:15.400 | are trying to do their best. But again, this is where

00:31:17.800 | capitalism, the part of capitalism that can be awkward

00:31:20.240 | and uncomfortable is when industries over earned for long

00:31:24.240 | periods of time, other folks say I'm going to compete away those

00:31:27.280 | returns somehow, and I want a share of those profits. And I

00:31:29.840 | think that that's going to be the large motivator. And it's

00:31:32.880 | just going to result in I think these things changing and a

00:31:35.480 | plethora of lawsuits.

00:31:36.640 | And at the end of the day, this is about children and protecting

00:31:40.600 | children. So the obvious solution here is society has to

00:31:43.800 | come up with a number.

00:31:44.640 | Well, sadly, I think that is, you know,

00:31:47.920 | hold on, let me finish my thought here. The The key thing

00:31:50.800 | is, there's some age in which we all agree, it's reasonable for

00:31:53.560 | kids to be using social media. And there's a certain age when

00:31:55.880 | we think it's not reasonable. And back to capitalism, I think

00:31:58.880 | a very good point you made from off, these companies are going

00:32:01.600 | to have to say, well, if we lose the 12 to 15 year olds, is that

00:32:05.400 | better for society and better for our business. And we just

00:32:08.720 | all agree that social media should start at 15 or 16. And

00:32:12.080 | then the handset manufacturers and the and the social sites all

00:32:15.920 | have you have to get permission from your parents to use them

00:32:18.000 | period, full stop. And that's it. And

00:32:19.680 | that may be where this all winds up, I think. And then also

00:32:22.400 | explaining the algorithms, I think is the next thing that's

00:32:24.840 | going to happen, people are going to have to disclose how

00:32:26.760 | these algorithms work.

00:32:27.760 | I think you're making a very good point, which is that is the

00:32:30.160 | right conversation to have. My point was that instead of having

00:32:33.320 | that conversation, which is more societal, it involves David's

00:32:37.160 | right parental responsibility. What is our role? Absolutely.

00:32:39.960 | But being actively involved. And by the way, the trends around

00:32:43.840 | family formation, and the fact that there's way more single

00:32:46.880 | parent families make this problem even harder, because now

00:32:49.680 | there's only one person to check in and not two people to check

00:32:52.360 | in. So all these things societally build on itself,

00:32:55.480 | Jason, that is the absolute right conversation to have. My

00:32:59.000 | point is, that's not going to be why the rules need to get

00:33:03.080 | rewritten, the rules will get rewritten, because there's an

00:33:05.560 | economic argument by a different sector of the economy, in this

00:33:08.720 | case, the trial lawyers and other folks that say there's a

00:33:11.320 | trillion dollars to be had, if we get this law change, they are

00:33:14.560 | motivated enough to do that. Yeah,

00:33:16.280 | a parasitic sector. So there is a bill right now working its way

00:33:19.520 | through the California Assembly that would go to Gavin Newsom

00:33:22.720 | that would prohibit the use of social media by under 16 year

00:33:26.160 | olds. So that is actually happening. Yeah, I agree with

00:33:30.360 | you, that's a better debate to have than changing section 230

00:33:33.280 | in a way that's going to lead to more censorship, by the way,

00:33:35.120 | just just on that point. I think republicans need to understand

00:33:38.720 | this in particular is that the anger towards these companies

00:33:42.680 | is bipartisan, the the outrage is bipartisan, the moral panic

00:33:46.280 | is bipartisan, you saw it on in that hearing, you couldn't

00:33:48.960 | really tell the difference between Republicans and

00:33:50.680 | Democrats. Okay, so full display, I wouldn't be surprised

00:33:54.240 | if they agreed like Jamal said, on some sort of change to

00:33:58.480 | section 230. But here's the catch, is that Republicans,

00:34:01.600 | Democrats have fundamentally different objectives,

00:34:04.360 | fundamentally, Democrats want there to be more censorship,

00:34:07.240 | they say this all the time, we want you taking down more

00:34:09.360 | content, not less, Republicans want there to be less

00:34:11.960 | censorship. Okay. So if they agree on the same piece of

00:34:15.560 | legislation, only one of them can be right. Okay. And the

00:34:19.720 | question is, who's gonna be right, my guess is that if

00:34:22.280 | Democrats and Republicans agree on a section 230 modification,

00:34:25.680 | the Democrats know what they're doing. And the Republicans,

00:34:28.200 | generally being the stupid party who get outsmarted all the time

00:34:30.840 | by Democrats are going to agree to something that they later

00:34:33.240 | regret. So at the end of the day, I don't think that

00:34:36.840 | bipartisan legislation should be possible. The anger is

00:34:40.080 | bipartisan, but the objectives are not. And if something gets

00:34:43.400 | through, it's gonna be because Republicans make a huge mistake.

00:34:45.880 | And just to give a tangible example of this, okay, take the

00:34:49.520 | Second Amendment. Okay. Do you think that in this world where

00:34:53.200 | there's no section 230, that Republicans are still gonna be

00:34:55.960 | out of conversations online about say, gun enthusiasm? No

00:35:00.400 | way. Because every time some harm happens, every time there's a

00:35:04.480 | shooting of some kind, a plain lawsuit, yeah, a plaintiff's

00:35:07.800 | lawyer is gonna sue, not the person who posted the content,

00:35:11.280 | talking about how much they love their guns. And, you know, look,

00:35:14.760 | it could be totally innocuous. Okay. It could be a forum on

00:35:18.880 | Facebook or Reddit, where people are just having conversations

00:35:22.720 | about gun reviews, or gun reviews. Yeah, it could be

00:35:25.720 | totally innocuous conversations. Okay. People having the right

00:35:29.360 | kind of conversations about guns, okay. But you know, that

00:35:33.480 | every one of those websites that hosts those conversations will

00:35:37.760 | be targeted in relation to any harm that occurs in the real

00:35:41.280 | world. And very soon, Reddit and Facebook and all the rest will

00:35:45.080 | feel compelled to ban any conversation related to even

00:35:49.320 | Second Amendment rights. Okay. This is where it will lead if

00:35:53.560 | Republicans get rid of section 230. You will be the ones

00:35:56.400 | targeted, not liberals.

00:35:58.360 | All right. Great discussion. You know, it's important to have

00:36:01.600 | the right discussion. And this reminds me of the abortion

00:36:03.960 | discussion where nobody would ever talk about the number of

00:36:05.960 | weeks. Like, that's at the core of the issue. If we could agree

00:36:08.760 | on the number of weeks, we can agree on the age here, you know,

00:36:11.560 | for for kids to, to use these things, maybe we can move

00:36:14.200 | forward. Let's move forward on the docket here. We got so much

00:36:17.000 | to talk about. And I think the number one story of the week was

00:36:21.520 | Ilan's pay package and this ruling that occurred in

00:36:25.200 | Delaware. Let me just see this up here. Many of you probably

00:36:28.680 | know about this already. But in 2018, Tesla's board approved a

00:36:32.600 | performance based compensation package for Ilan was approved by

00:36:36.400 | 73% of shareholders. Ilan and his brother Kimball would have

00:36:41.120 | put that at 80%. But they were excluded. Obviously, this is

00:36:43.760 | lower than maybe some other support levels. According to

00:36:47.960 | Reuters, you typically see 95% for a executive compensation

00:36:52.760 | packet. But this one was very unique. It was all stock,

00:36:55.360 | there's no cash bonus, no salary, 12 tranches of stock was

00:36:58.520 | very creative in how this was put together because Ilan got

00:37:01.160 | nothing if he doubled the value of Tesla. But then if he, you

00:37:06.400 | know, increase the value of the top line revenue, and the market

00:37:10.360 | cap increased by $50 billion, he got 1% more of the outstanding

00:37:14.480 | shares, which is an amazing help for shareholders, obviously,

00:37:18.120 | because the market capital, the company went up 50 billion. The

00:37:21.600 | initial plan was only worth about 2.6 billion. But since

00:37:25.280 | Tesla crushed it from 2018 to 2023, we'll throw up a chart

00:37:28.360 | here. So the great runs in the history of capitalism, how

00:37:31.800 | revenue and sales grew at this company. So it made it the

00:37:35.360 | largest comp package in the history of public markets. And

00:37:37.880 | if you compare Tesla to Apple, the second highest increasing

00:37:41.280 | stock price during that same time period, Apple went up 345%.

00:37:44.960 | Tesla went up 800%. In 2018, a Tesla shareholder sued Elon and

00:37:49.640 | Tesla's board claiming the pay package was unfair. The guy had

00:37:52.920 | nine shares, a full nine shares, not 10, nine, worth $2,500. His

00:37:57.840 | stake went 10x in those six years. So he made a fortune on

00:38:01.440 | that bet. And then on Tuesday, a Delaware judge voided Elon's pay

00:38:04.640 | package, siding with the investor. Elon can appeal it to

00:38:09.920 | the Delaware Supreme Court, sacks, your thoughts on this

00:38:14.520 | ruling, I teed it up, I think I got all the details in there. If

00:38:16.920 | I missed any, please add them.

00:38:18.280 | Well, I think in order to reach this ruling, the judge had to

00:38:22.280 | find three things, and all of them had to be the case. And in

00:38:26.080 | her opinion, number one, that the pay package was excessive.

00:38:29.280 | Number two, that the process by which they came up with the pay

00:38:32.640 | package was not fair, meaning it was not sufficiently adversarial

00:38:36.480 | enough, that the directors, in her opinion, that too many ties

00:38:40.520 | to Elon, and didn't, again, take enough of a antagonistic role in

00:38:47.560 | negotiating that package. And number three, and I think most

00:38:51.320 | importantly, that the shareholder vote was invalid.

00:38:54.360 | Because even if the first two had been true, the shareholders

00:38:56.880 | approved it. And that would have been good enough. But she said

00:38:59.560 | that the shareholders weren't sufficiently informed. And

00:39:03.240 | specifically, I think this argument hung on a few internal

00:39:05.760 | emails, where people said that they thought that they could hit

00:39:08.920 | the numbers. I think that of the three legs of this, well, all

00:39:13.000 | three have been challenged by opponents to this verdict. I

00:39:16.400 | mean, number one, yes, the pay package ended up being a

00:39:19.200 | gargantuan amount, but you have to look at an ex ante, not ex

00:39:22.520 | post. Nobody thought Elon could hit all these numbers. Back at

00:39:26.840 | the time this package was negotiated.

00:39:28.560 | Let's be frank, it was absurd. The idea that he would 10x it

00:39:32.040 | was

00:39:32.360 | crazy. Great clip with Andrew Ross Sorkin, where they're all

00:39:34.800 | laughing at the idea that he's going to hit these numbers.

00:39:36.960 | Remember, this was at a time when Elon was going through what

00:39:39.240 | was called production hell, where he was sleeping on the

00:39:41.200 | floor in a factory. Yeah, I was there and come out yet and

00:39:44.080 | nobody, nobody believed that the model three was going to be the

00:39:47.160 | hit that it was. In fact, all the stories were pooh poohing

00:39:50.680 | that idea and basically saying that Tesla is basically screwed

00:39:53.120 | because they can't get the production line working

00:39:54.720 | correctly. Yeah, you don't play this

00:39:57.000 | Tesla now announcing a radical new compensation plan. It could

00:40:01.040 | be perhaps the most radical compensation plan in history.

00:40:04.600 | The executive will receive no guaranteed compensation of any

00:40:07.960 | time of any kind at all. He gets a salary cash bonus equity. He

00:40:11.880 | only gets equity that that vests over time, but only if he

00:40:15.240 | reaches these hurdle rates, which are, dare I say crazy.

00:40:19.440 | The only part of it that I think is really relevant is where

00:40:22.560 | Sorkin says that the milestones are crazy, meaning that everyone

00:40:27.240 | thought it was a pipe dream that the company would ever hit these

00:40:30.680 | numbers. Okay, so that's point number one on on magnitude. On

00:40:34.400 | the second part of the ruling about the process. It is true

00:40:38.760 | that, like in most venture backed startups, there's a

00:40:42.520 | long standing relationship between the founder and the

00:40:45.320 | investors because they work collaboratively to try and make

00:40:48.200 | the company a success. There were emails that came out where

00:40:52.440 | Elon shows that I'm not trying to go for the maximum here. So,

00:40:55.920 | you know, did the investors go in with a hostile antagonistic

00:40:59.160 | attitude that we're going to try and pay you the least? No. But

00:41:01.320 | did Elon go in with the attitude that I'm going to try and take

00:41:03.640 | the most? No, they eat the email showed that. Yes, they tried to

00:41:07.640 | do was come up with something that they thought was fair, that

00:41:11.120 | would fairly reward him for outsized performance. And if he

00:41:15.160 | had merely increased the value of Tesla, from 59 billion to 100

00:41:20.640 | billion, he would have gotten nothing. Let's just keep that in

00:41:22.880 | mind. So they tried to come up with something that would reward

00:41:25.680 | him for outsized performance, and give him absolutely nothing

00:41:28.400 | for merely decent or good performance. The third point

00:41:32.600 | about the shareholder vote. I don't think that there was

00:41:37.680 | anything about the shareholder vote that the shareholders

00:41:39.880 | didn't know. I don't think that the company didn't release. Elon

00:41:43.040 | always said, Yeah, we're going to do this, we're gonna be one

00:41:44.960 | of the most valuable companies in the world. He's always been

00:41:47.240 | super optimistic about their ability to reach these targets.

00:41:50.480 | But if you looked at all the Wall Street analysts, including

00:41:53.160 | Sorkin there, they thought that these targets were unreachable.

00:41:58.520 | Also, to add to that sex, this had the largest short position,

00:42:02.440 | I believe at that time of any company ever. People were

00:42:06.120 | betting with their dollars that this company was going to zero.

00:42:08.880 | There were a ton of people who the narrative was this, they'll

00:42:12.040 | never deliver the Model Three, it was two years late, right, or

00:42:14.680 | something in that range. It was, they kept trying to get the

00:42:17.480 | Model Three out, it was taking forever. So yeah, it's, it's

00:42:21.000 | absurd. Also, in that case, Sorkin said in that same clip,

00:42:23.440 | there's been a lot of speculation of Elon stepping

00:42:25.160 | down after the Model Three is in production in the judges ruling,

00:42:28.560 | she said the exact opposite, there is no reason to believe

00:42:30.800 | you on leave, except that he was running like two or three other

00:42:33.840 | companies that it was actually quite possible that he would

00:42:36.480 | leave, he never wanted to be CEO of Tesla, people forget that,

00:42:39.480 | too. He had tried three CEOs of Tesla, and he only took over

00:42:42.640 | Tesla. And I remember it was because he said, Jason, this

00:42:46.560 | thing's gonna fail if I don't take it over. He tried three

00:42:49.080 | different CEO, CEOs in the beginning, people forget that

00:42:51.720 | fact.

00:42:52.000 | And there was scuttlebutt that he would hire somebody I remember

00:42:55.840 | there was like rumors about Sheryl Sandberg, maybe getting

00:42:58.120 | off the job or something like that. I remember he was, he was

00:43:01.400 | going through production L he was sleeping on the factory

00:43:03.320 | floor. Yeah. And he was talking in interviews about how

00:43:06.120 | miserable his life was at that time. I mean, can confirm. Yeah,

00:43:08.760 | exactly. So look, did he have leverage to basically say, you

00:43:11.960 | know what, let's hire a CEO? Yeah, absolutely.

00:43:14.080 | Okay, come off any steel man you can do have the other side here,

00:43:18.400 | like as an investor, public market investor, sometimes. When

00:43:22.600 | you saw that pay package, what did you think? I don't know if

00:43:25.760 | you were a shareholder of Tesla at the time or not.

00:43:27.520 | In the mid teens, I started investing in public's stocks as

00:43:34.080 | well as private tech companies. And I got invited to give a

00:43:38.480 | presentation at the iris own conference, which is like the

00:43:41.280 | most prestigious conference of public market investors you in

00:43:45.360 | May, you show up at Lincoln Center, and everybody in the

00:43:49.520 | audience is paying like 10,000 bucks a ticket or something and

00:43:52.000 | all the proceeds go to a foundation in support of this

00:43:56.160 | gentleman iris own who passed away. But in any event, it's

00:43:58.640 | like, Ackman, Tapper, Einhorn, and I picked Tesla and I was a

00:44:05.600 | very big supporter in many ways and still am. And I think that I

00:44:12.160 | knew the company, frankly, better than most people, except

00:44:15.360 | for him, obviously. But I think that I studied this company

00:44:18.520 | quite deeply. When I and I'm just setting the context when I

00:44:21.880 | saw the pay package, I thought, he's making a mistake. This is

00:44:27.120 | unachievable. I thought the probabilities were in the low

00:44:31.360 | single digits. And then he did it, which just kinds of shows

00:44:37.440 | how incredibly adept he is as a CEO and a manager and an

00:44:44.600 | executor. So then, you know, to go back five or six years later,

00:44:49.640 | after he actually does something that so massively

00:44:54.360 | disproportionately, positively impacted investors, and then to

00:44:59.800 | just rescind it and unwind it, I think is really un American and

00:45:04.080 | unfair. And I think it sets a very poor standard for why

00:45:09.040 | anybody should actually build a company governed in Delaware, it

00:45:12.560 | makes no sense anymore. And just to give you that example, he and

00:45:16.760 | I have both now done this, but like these incremental companies

00:45:19.440 | that I've started, are in Nevada, they're in different

00:45:22.400 | places, because I find the Delaware court slightly and

00:45:26.120 | increasingly unpredictable, and acting with other mandates that

00:45:31.080 | they weren't ever given. So you what do you think that mandate

00:45:34.480 | is, you had a place where there was highly predictable

00:45:38.600 | governance, and they had very narrow ways in which they would

00:45:43.000 | act and opine. And I think in a situation like this, where you

00:45:49.040 | had every opportunity to actually vote this thing down,

00:45:53.600 | and what little of the documentation that I saw about

00:45:56.920 | the communication back and forth, doesn't seem to support

00:46:00.280 | this theory that he rammed it through. Nobody rams anything

00:46:03.440 | through over nine months where he takes month long breaks, and

00:46:07.320 | he tells the GC, this is actually more than I wanted.

00:46:10.520 | Nobody does. If you're right, it's the opposite of raving

00:46:13.560 | something through. It was and I suspect if you really asked him

00:46:17.840 | and I haven't, but I would, he probably thought it was like

00:46:21.480 | largely crazy. And so I think a lot of people thought that we

00:46:25.800 | that we were as shareholders, and I'll tell you that I felt

00:46:28.960 | this way, getting his hard work, and that he may have just

00:46:32.840 | mathematically been mistaken. So yes, he got 55 or that packages

00:46:37.680 | are at 55.8 billion. But you're missing the point where every

00:46:41.760 | other investor made $500 billion. Right? Yeah, the

00:46:46.120 | investors, investors did approve it, it will have a chilling

00:46:49.320 | effect, I think, and how people think about compensation, it

00:46:52.040 | will cause companies to be even more constipated and sclerotic

00:46:57.160 | and unimaginative as a result of this, because the most talented

00:47:02.920 | individual entrepreneurs now have even more of an incentive

00:47:07.240 | for incorporating in other places, and also staying

00:47:10.840 | private. And I think what that deprives is the broader

00:47:15.720 | shareholders, including this gentleman, look, we live in

00:47:18.520 | America, he had the right to sue, he had nine shares, and he

00:47:22.560 | was able to bring this lawsuit nine shares.

00:47:25.560 | I mean, David Elias, yeah, I mean, the idea that nine shares

00:47:29.640 | or 10 x their money, but what he does is, but you know, I don't

00:47:33.520 | know if he remained a shareholder through this whole

00:47:35.240 | period, but even those nine shares, 10 x in value. Yes. But

00:47:41.800 | he would now be deprived of that in this next iteration of Elon

00:47:46.520 | Musk's because why would they ever go through this to put that

00:47:49.520 | much work into something to be so at risk, personally, your own

00:47:55.040 | mental and physical health, we saw him in those periods. And

00:47:59.040 | then to have it taken away, I think is deeply, deeply unfair.

00:48:02.240 | Sex.

00:48:03.120 | You're right, this this deal was a win win. I mean, if Elon could

00:48:07.160 | achieve these numbers, it was good for him. And it was great

00:48:10.480 | for shareholders. And that's why I think the key point is that

00:48:13.600 | 73 or 80%, depending on how you want to count it approved this

00:48:17.440 | deal. I think they knew everything relevant that they

00:48:20.440 | needed to know when they approved it. This is the deal

00:48:23.600 | that most shareholders in most companies would want for the CEO

00:48:27.920 | the deal is you get nothing unless you deliver an outsized

00:48:32.480 | return for shareholders. Most CEOs won't sign up for this

00:48:35.600 | deal. Most CEOs work their way up through the corporate ladder,

00:48:39.120 | they get into the CEO chair, and then they pay themselves huge

00:48:41.760 | amounts of money in regards to whether the company succeeds or

00:48:44.280 | fails. And that's the deal they want, because they don't really

00:48:47.520 | have confidence in themselves to deliver what Sorkin called the

00:48:52.520 | crazy outcome. Elon had the confidence in himself to deliver

00:48:56.200 | the crazy outcome. And nobody was really complaining about

00:48:59.280 | this until like you said, this small shareholder, who's really

00:49:03.360 | basically just, you know, a named plaintiff for the trial

00:49:07.200 | lawyers bar somebody who wants to get you on brick to bring

00:49:10.280 | this suit.

00:49:11.240 | 6% to create 600 billion in value. I mean, it's quite a

00:49:16.880 | bargain, folks. And I think if you went to Ford or GM and said,

00:49:20.480 | Hey, would you like you want to be your CEO? I think that often

00:49:23.160 | half the company

00:49:23.840 | Mary bear doesn't want this deal.

00:49:25.560 | Yeah, no, Jake out sack said something really important that

00:49:28.280 | you just mentioned as well, which is that if you actually

00:49:30.760 | look at the average compensation plan of most public company

00:49:34.200 | CEOs, it actually is very much counter to shareholder value.

00:49:38.960 | I'll give you one simple example. If you look at the

00:49:41.800 | number of CEO comp packages that are tied to earnings per share

00:49:45.480 | growth. But then if you actually look at how these CEOs achieve

00:49:49.560 | their EPS targets, they do it by raising debt. So in getting the

00:49:54.240 | company right, increasing the enterprise value by by loading

00:49:57.920 | the company up with debt, and then driving repurchase plans.

00:50:00.760 | And what what do those do? I mean, look, if you look at

00:50:03.720 | Disney, where do their repurchases come from from debt?

00:50:06.080 | So does debt help an equity shareholder? It categorically

00:50:10.440 | does not under no world doesn't do that. However, for the CEO,

00:50:14.960 | and for the handful of investors that that can hold on for long

00:50:18.360 | periods of time, or have you, they benefit from a lower share

00:50:22.080 | count, they benefit from increased EPS, and then the CEO

00:50:24.440 | gets compensated. And so to say that tacitly, what you

00:50:28.280 | disapprove of our performance incentives, and what you are

00:50:32.640 | actually approving of our mechanics that saddle a company

00:50:38.080 | with debt, and allow basically gaming of numbers is what you've

00:50:43.920 | implicitly also said. And this is where I think the Delaware

00:50:48.200 | court used to be known for a level of intellectual clarity

00:50:52.880 | that would have prevented that implicit assumption. But that's

00:50:56.640 | now what's left on the table. And I think it will have a ripple

00:50:59.280 | effect across how so many other companies design, design their

00:51:03.560 | compensation plans, how CEOs think about risk, no CEO, as

00:51:07.880 | SAC said, will ever want an incentive laden plan like this

00:51:11.680 | ever, they will want 10 years later, you could do all the work

00:51:15.040 | and then it gets canceled, canceled. So they will want

00:51:18.680 | something that is totally gameable. Right, where you'll

00:51:23.440 | have 90 plus percent support and approval, because of how vanilla

00:51:27.880 | and benign it is on the surface. But it will actually be quite a

00:51:32.440 | terrible plan underneath the surface. And what I mean,

00:51:34.960 | specifically, are these EPS targets for CEOs. So Elon did

00:51:39.160 | the one thing that was crazy, which was I'm just going to do

00:51:41.680 | it based on pure profitability and performance. And he gets

00:51:45.960 | punished. And all these CEOs in this other class were like, let

00:51:49.160 | me saddle these companies with debt that actually undermine

00:51:52.200 | shareholders have been rewarded.

00:51:54.400 | There is already a mechanism for somebody who disagrees with the

00:51:57.520 | comp package, this person who on the nine shares could have sold

00:52:00.000 | their shares. It's a liquid market at any point in time, that

00:52:02.600 | person can say, I don't agree with this. I'm taking my nine

00:52:05.320 | shares and $2,500. I'm going to put it in Apple, I'm going to

00:52:07.920 | put it into. I like Tim Cook's pay package better. I like

00:52:11.000 | Benioff's package better. And I'll make my better person had

00:52:14.080 | choice. Yes, x. This person was not a victim. He's not victim

00:52:18.600 | because he could have sold the shares and bought other shares.

00:52:20.400 | And he's not a victim because he 10 x two shares and beat the

00:52:22.280 | market.

00:52:22.720 | Yeah, I mean, look, I don't place the blame on the

00:52:27.000 | shareholder per se. Because this is really about a judge's

00:52:31.240 | interpretation of Delaware law and what companies are allowed

00:52:33.560 | to do. So whether the shareholder was harmed or not,

00:52:37.560 | or had one share, or a million shares, that's just the way that

00:52:41.040 | this case gets into court. The question is the interpretation

00:52:43.680 | of Delaware law. And again, the part of this, I would go back

00:52:46.400 | to that, that I think was the mistake is that I think the

00:52:49.400 | shareholder vote was valid. I think the process was valid as

00:52:53.840 | well. I don't know that the process has to be this

00:52:57.320 | extremely adversarial process where one side is pulling for

00:53:00.080 | the most one sides pulling for the least. I don't think either

00:53:02.640 | side operated that way. But again, I think shareholders knew

00:53:05.300 | what they needed to know. And the evidence of that is, in all

00:53:08.760 | of the public coverage at that time, nobody thought he was

00:53:12.320 | getting a good deal. Right? No one thought he was getting

00:53:15.520 | excessively good. They thought he was getting a delusional deal

00:53:19.520 | meaning delusional for him. And everybody seemed to be okay with

00:53:24.440 | the idea that if somehow, Ilan could pull off this miracle that

00:53:28.480 | he would be entitled to this compensation, and he would get

00:53:30.960 | nothing if he did it. Now, again, I would go back to do you

00:53:35.000 | think Mary Barrow would have wanted this deal? While Ilan was

00:53:39.600 | spending the last five, six years, making Tesla go 10x. Let's

00:53:44.120 | look at GM, GM stock price was trading more or less in a flat

00:53:49.480 | range. I don't even think the share price doubled.

00:53:52.880 | Compare it to you see the compare to button there, put

00:53:56.360 | compare to and then put Tesla in there.

00:53:58.000 | Right. So if Mary Barra, GM had signed up for that comp package,

00:54:00.800 | she would have gotten absolutely nothing, which is why I'm sure

00:54:03.760 | that the thought and everyone crossed her mind of having an

00:54:06.240 | all incentive based comp package that doesn't even start until

00:54:10.240 | you at least double the value of the company. By the way, on

00:54:12.920 | those milestones, it wasn't just the share price, it was share

00:54:17.800 | price and revenue or profit targets being met. So in other

00:54:21.760 | words, if the stock just rallied because of macroeconomic

00:54:24.800 | conditions, like for example, interest rates go down, and then

00:54:28.120 | all of a sudden, the whole stock market goes up, that was not

00:54:30.760 | good enough. It was also tied to the combination of stock value

00:54:35.520 | increases with revenue and profit targets being met. It was

00:54:40.480 | a compact is that couldn't be gamed. I mean, you have to hit

00:54:43.520 | the numbers in order to get the comp package. That's what she

00:54:45.960 | got. And I don't want to pick too much on Mary Barry here. I

00:54:49.240 | guess I'm picking her out because Joe Biden said that she

00:54:51.840 | created the EV revolution.

00:54:53.680 | Well done. 17 cars. They canceled the car.

00:54:58.320 | Yeah. There was there was a remarkable article in the Wall

00:55:02.840 | Street Journal just in December, where they finally admitted that

00:55:06.760 | this whole idea that GM had been leading any kind of revolution

00:55:10.880 | or had been a transformational company was revealed as basically

00:55:13.520 | a ruse. But look, you have to wonder how much of this is

00:55:18.360 | political. I mean, Delaware is Joe Biden state. He's the

00:55:22.240 | senator. There were articles describing how this judge was

00:55:27.760 | connected to a law firm that had helped Joe Biden get elected.

00:55:31.640 | And you just kind of wonder whether Biden's directive from

00:55:36.800 | the White House podium that we got to get this guy, we got to

00:55:39.320 | look into this guy that he's an enemy, which has been reflected

00:55:43.480 | through all these different administrative agencies, sudden

00:55:46.280 | actions against Elon's companies for the glass house,

00:55:49.760 | starlink and the FCC.

00:55:51.840 | Yeah, there's been a whole bunch of these issues. And you just

00:55:54.360 | wonder, is this another manifestation of that?

00:55:57.520 | Yeah, I mean, the conspiracy theories are quickly coming

00:56:03.280 | closer to reality. And we definitely need to investigate

00:56:07.200 | that, for sure. Because the FCC thing is crazy. spending $15,000

00:56:11.800 | putting fiber into people's homes when you could spend

00:56:14.360 | $1,500, giving them starlink makes no sense. And the same

00:56:17.200 | people who have to wait for fiber. That's on a previous

00:56:20.080 | episode. They're gonna get starlink. Anyway, they're gonna

00:56:22.760 | buy starlink while they're waiting for the government

00:56:24.400 | fiber for 10 years. It's absurd.

00:56:26.800 | I do want to uplevel this just back to what I was saying. And

00:56:29.680 | I'll try to I'll try to make the point better. I think I think

00:56:32.840 | it's really, really unfair. What's happening to you on, but

00:56:37.560 | I want to take a step back and think about just the bigger

00:56:41.400 | picture. If we want an economy of vibrant companies that do

00:56:47.360 | great things, we're going to need to reward people to work at

00:56:50.960 | those companies. And in order for the United States to sort of

00:56:56.280 | continue to exert some amount of dominance in the areas that we

00:57:00.800 | think are important, we need to be economically vibrant, right?

00:57:04.200 | And fair and fair. And the problem is that this really

00:57:07.000 | perverts incentives. And it's going to exacerbate a trend that

00:57:10.920 | I think has actually held a bunch of our companies back. So

00:57:14.280 | the first thing I just wanted to show you guys was just this

00:57:16.520 | little thing that it's just a pie chart that shows Okay, how

00:57:20.640 | do CEOs get paid, right? So we want CEOs to go and run really

00:57:26.040 | important companies, right? We want those companies to do great

00:57:30.160 | things in the world. We want these CEOs to be deeply

00:57:32.640 | motivated to go and push the boundaries of what's possible,

00:57:35.640 | right? We want all that. And so we want to compensate them to do

00:57:38.960 | those things. This is just a representation of how CEOs have

00:57:42.400 | structured their pay packages. And you'd say, well, all of

00:57:45.920 | these numbers seem reasonable, return on capital, total

00:57:49.040 | shareholder return earnings per share. So what you need to do

00:57:52.480 | then is double click into this, right? So this is how CEO pay

00:57:56.960 | packages are made. But the problem is, and Jason, this is

00:58:00.240 | my problem with a bunch of these companies that all the returns

00:58:04.360 | all that shareholder return that you saw the return, it's all

00:58:07.480 | driven by share buybacks. Yep, this is an artificial

00:58:11.120 | gamesmanship of performance. This is not companies pushing

00:58:14.840 | the boundaries. You know, this is not Disney figuring out. It's

00:58:17.960 | not innovation. This is this is a this is Disney creating

00:58:21.920 | footfalls and falling into potholes of their own making.

00:58:24.840 | But you can drive great compensation because you can

00:58:28.480 | game the way that you are paid. This doesn't make America

00:58:33.560 | great. It doesn't create American exceptionalism. In

00:58:36.640 | fact, it just creates a bunch of financial engineering that

00:58:41.240 | results in marginal companies. And David just gave an example

00:58:45.160 | of one that could be considered that. So the point is that when

00:58:48.680 | you have one person that tries to buck this trend, I just think

00:58:53.760 | it has a huge impact by basically saying, hey, play the

00:58:58.800 | game like everybody else, just game it, just dial it in from

00:59:02.920 | your country club. Make sure that you become a member of

00:59:05.720 | Augusta. That's more important to us than actually sleeping on

00:59:09.120 | the factory floor.

00:59:10.160 | And don't take risk. I mean, if you think about what do you do

00:59:13.240 | if you're Apple, you're Google, you're Microsoft, you're

00:59:15.600 | sitting on tons of cash. It's a safe thing to do. You see what

00:59:19.200 | they do. You just buy back the shares. No, you can't do m&a.

00:59:23.000 | You issue debt. Yes. And then you buy back the shoes

00:59:26.240 | arbitrage, you encumber the shareholders with debt. And then

00:59:31.280 | you artificially inflate total shareholder return and earnings

00:59:35.000 | per share and the return on invested capital because of how

00:59:38.120 | we can play these games in America. So right now what we

00:59:41.720 | are doing is we are not motivating CEOs to run great

00:59:45.840 | companies were motivated to understand financial arbitrage,

00:59:50.200 | the result will be crappier companies that diminish American

00:59:55.360 | exceptionalism. That is the only outcome.

00:59:57.280 | Perfect. We said and there really are two caveats there.

01:00:00.000 | Number one, we have to let m&a occur as well, because that's a

01:00:03.000 | better thing to do in some cases with this, with this excess

01:00:06.320 | capital profits people have sitting there. And the only time

01:00:09.000 | really to buy shares back is when you think they're

01:00:10.800 | undervalued. You would agree

01:00:11.960 | to your point, I actually think you're absolutely right. If you

01:00:14.560 | have a bunch of CEOs that don't know what they're doing, which

01:00:16.600 | is what these charts kind of show, let them buy whatever they

01:00:19.040 | want, because you're going to screw it up. And that's fine for

01:00:21.200 | us anyways.

01:00:22.040 | Well, yeah, it's great for fluid marketplace.

01:00:24.320 | The CEO that you don't want to have be able to buy companies is

01:00:28.280 | the actually motivated one to get paid when things go really

01:00:32.480 | well and to be you know, more profitable. So that would be the

01:00:35.720 | CEO where you would be scared. Oh my gosh, more m&a for that

01:00:38.400 | person may be bad. But more m&a for these CEOs is who cares?

01:00:42.360 | Yeah, Microsoft starts buying a bunch of stuff. Google starts

01:00:45.200 | buying stuff at their primes, man, that's scary, right? When

01:00:47.760 | Bill Gates went on a heater, he bought, I think he bought

01:00:50.200 | PowerPoint, a bunch of these suite was bought, not created.

01:00:54.480 | And then Google and Facebook, man, they went on heaters,

01:00:56.960 | YouTube, Instagram, WhatsApp, and that was the golden age of

01:01:00.240 | m&a. All right, we got a couple more things on the docket. I

01:01:02.120 | want to catch on. I just found these stats. Good sex. Great

01:01:05.320 | conversation. So just while we were talking, I just looked up

01:01:08.120 | what Mary Barra's compensation was over the past several years.

01:01:12.680 | And according to this source, she was paid $167 million for

01:01:18.160 | four years. So while Elon got zero, thanks to the judge's

01:01:21.520 | decision, Mary Barra, basically, if you add in probably the fifth

01:01:24.760 | year, let's call it roughly $200 million of compensation over the

01:01:28.400 | last five years. Now look at the stock chart of GM. Literally,

01:01:32.600 | this it is the same price today as it was five years ago. It's

01:01:37.320 | $38 a share today. It was $38 a share five years ago. No, but

01:01:41.720 | it's worse. It's probably worse because they've issued options

01:01:44.000 | since then. So there's dilution you have to take in, right? So

01:01:46.160 | it's, it's worse than that, actually. But at best, the stock

01:01:49.440 | price is flat. And the stock basically fluctuated in line

01:01:53.840 | with market trends. So when there was an asset bubble in

01:01:56.760 | 2021, the the share price went up about 50%. And she got even

01:02:01.960 | more stock and options during that time. But it was, it was a

01:02:06.120 | no lose proposition. Basically, she got paid regardless of how

01:02:08.760 | the stock did. And then when there was simply market

01:02:11.280 | volatility, she did even better. One of the nice things about

01:02:14.160 | Elon's package is that unless Tesla at least doubled in value,

01:02:18.680 | he would get nothing. And it was tied to milestones around

01:02:22.000 | revenue and profit. So he couldn't just ride market

01:02:24.960 | volatility. No, to getting more comp if you gave this executive

01:02:29.000 | the same deal, as Elon, she would have had to double 38. So

01:02:33.280 | you know, she would have had to get to 70 $60 bucks a share to

01:02:38.720 | get 80 bucks a share before she got anything. I bet you if she

01:02:41.840 | got zero, she got paid $1 and her healthcare, and she had to

01:02:44.960 | get $8 a share. I bet you that would be an $80 stock price.

01:02:47.640 | Well, I don't I don't know if she has the ability to engineer

01:02:51.920 | that outcome. But I doubt I don't. So she's saying she's

01:02:55.400 | unqualified. No, well, the Wall Street Journal said it the Wall

01:02:58.800 | Street Journal just had this 10 year. No, that's where they said

01:03:02.240 | that she failed. They they're they're hiding. And yeah, well,

01:03:06.840 | look, I mean, I don't want to say she's incompetent. I just

01:03:08.840 | want to say that the stock price is the same. The Wall Street

01:03:11.160 | Journal had an article talking about swept to answer all of our

01:03:14.320 | transformation initiatives have failed. She swept roughly 200

01:03:17.080 | million over just the last five years. I think she's been there.

01:03:19.440 | 10. How is she in charge? She's probably made several $100

01:03:22.680 | million. And the company hasn't created any value for

01:03:26.680 | shareholders. So how is she still in charge? Just Jason,

01:03:29.440 | this is the way the fortune 500 works. It's a country club. Okay.

01:03:32.880 | Who gets appointed to these companies, these companies are

01:03:38.120 | not run by founders. They're not even run by VCs or serious skin

01:03:41.480 | of the game, the kind of directors that this judge

01:03:43.680 | didn't like, okay, it's run by people who play the game, they

01:03:47.320 | basically are on other boards. And it's basically a

01:03:51.160 | backscratching club. And they choose the CEO, they choose

01:03:55.040 | someone who's politically savvy, who's worked their way up

01:03:57.680 | through the system, who donates to the right people who can get

01:04:01.080 | Joe Biden to come to a factory and talk about how great they

01:04:03.720 | are, and and hold an EV summit at the White House and invent

01:04:07.080 | this, this fiction, that they were responsible for this

01:04:10.080 | innovation. This is basically how the system works. So

01:04:12.960 | corrupt. I'm glad that women have been admitted to this

01:04:16.320 | country club, it is still a country club, it is still a

01:04:19.280 | backscratching club. It is basically a collection of people

01:04:23.000 | who don't create any value, but pay themselves enormous amounts

01:04:25.520 | of money hob now at the right people and work their way in

01:04:28.520 | with the powers that be at the White House, who then talk about

01:04:31.360 | how great they are, while actually accomplishing nothing,

01:04:34.720 | nothing, 0.0. I think the common through line in these two

01:04:39.040 | conversations we've had this morning is about just how

01:04:43.800 | capitalism can be perverted, if you will, by a small group of

01:04:48.880 | actors. In the first example, I think what we were talking about

01:04:53.040 | is the trial lawyers association and their ability to impact and

01:04:57.840 | influence what is going to happen around section 230. And

01:05:01.200 | in this example, I think what it speaks to is the influence that

01:05:04.560 | a small group of consultants can have in having built a very

01:05:08.800 | thriving business in designing these compensation plans for

01:05:12.080 | CEOs. And it reminds me of a of a clip of Buffett and Munger.

01:05:17.160 | And Nick, if you just want to play it, I think they say it in

01:05:20.200 | very clear, plain English, and not to debate their opinion, just

01:05:22.960 | to state it, but Nick, if you want to play it,

01:05:24.280 | we do not bring in compensation consultants, we don't have a

01:05:27.600 | human relations department that we don't have, we don't have the

01:05:30.440 | headquarters, as you can see, we don't have any human relations

01:05:32.720 | department, we don't have a legal department, we don't have

01:05:34.400 | a public relations department, we don't have an investor

01:05:36.360 | relations department, we don't have those things. Because they

01:05:40.000 | make life way more complicated. And everybody gets a vested

01:05:43.080 | interest in going to conferences and calling in other consultants

01:05:46.040 | and it takes on a life of its own.

01:05:48.240 | Well, I would rather throw a Viper down my shirt front, than

01:05:52.440 | hire a compensation consultant.

01:05:54.520 | Tell me which kind of consultants you actually like.

01:06:04.640 | Oh, man, Waldorf and Statler, you know, from the Muppet sacks.

01:06:08.560 | Statler and Waldorf.

01:06:11.440 | Yeah, well, you mentioned grumpy, you mentioned this is a

01:06:15.680 | problem in capitalism. I think there's two kinds of capitalism,

01:06:18.480 | broadly speaking, there's corny capitalism, and there's risk

01:06:21.000 | capitalism. Risk capitalism is the founder who starts with

01:06:24.640 | nothing but an idea, along with the investors who are willing to

01:06:29.640 | write a check, knowing that nine times out of 10, it's going to

01:06:33.400 | be a zero, but maybe in that one out of 10 chance, it's going to

01:06:37.440 | be an outsized return. That is true risk capitalism, everyone

01:06:40.200 | has skin in the game, they work together, entrepreneur board

01:06:43.760 | members to try and create a great outcome. And they work out an

01:06:47.880 | arrangement where everyone benefits. It's a win win

01:06:50.560 | situation. Okay, that is risk capitalism. That's the part of

01:06:54.280 | our economy that drives all the innovation, all the progress of

01:06:58.120 | the job creation. Then you got corny capitalism, you got these

01:07:01.320 | companies that have been around for 100 years, the value was

01:07:04.640 | created by people long dead. And it is now managed by both

01:07:08.840 | directors and professional managers who work their way up

01:07:12.200 | through they go to like the right business schools, and they

01:07:14.560 | join the right organizations, they donate the right

01:07:17.040 | politicians. And they somehow engineer a situation where they

01:07:22.320 | get in control. And then they pay themselves as much comp as

01:07:24.960 | they can possibly justify whether or not they create any

01:07:28.560 | value for the shareholder. That's what we saw at GM. And

01:07:32.320 | that's corny capitalism. And you know, while they're doing it,

01:07:35.280 | the President's son is probably going to figure out a way to

01:07:38.160 | take a nice big chunk out of it, too. Okay. Oh, that's, that's

01:07:41.960 | the system that we have co is the grade. Here we go. Now,

01:07:45.800 | which of these two systems receives the brunt of the

01:07:50.660 | criticism by the mainstream media, who is attacked? And who

01:07:55.080 | is celebrated? Okay. Here we go. There's a great point. I've

01:08:00.320 | seen a zillion attacks on Elon Musk, I saw one article pointing

01:08:04.880 | out that all of Mary bears transformation, General Motors

01:08:07.720 | was a failure, created no value for shareholders. And the whole

01:08:10.920 | thing was basically a fraud.

01:08:12.080 | Well, how's the union doing? And how did the union one article,

01:08:14.920 | and I'm frankly shocked that the Wall Street Journal even ran

01:08:18.240 | that article? Yeah, okay. Yeah. And how did the union do? And

01:08:21.920 | who did the union get behind and vote for? Yeah, let's maybe

01:08:24.440 | double click on a couple items there. We'll see. All right.

01:08:26.800 | Listen, I want to go over one more thing where we're cooking

01:08:28.360 | with oil here. And I just wanted to talk a little bit about IPOs

01:08:32.000 | possibly coming back. I just interviewed Alexis Ohanian, the

01:08:35.360 | founder of Reddit, which according to Bloomberg, they've

01:08:38.880 | been advised by potential IPO investors to target a $5 billion

01:08:42.600 | valuation, they're going to go public possibly in March, which

01:08:45.520 | is wild. That's only a couple weeks away. In peak Zerp, Reddit

01:08:49.280 | had raised at a $10 billion valuation that was back in 2021.

01:08:53.360 | They were valued in 15 billion in the secondary market. That's

01:08:56.200 | where people like previous employees, angel investors, etc

01:08:59.360 | might trade their shares. And so if it goes out of five, it's

01:09:04.200 | going to be between a 50% to their tear cut. And it is

01:09:08.680 | trading at 4.5 billion tomorrow. We talked about this a bunch of

01:09:12.600 | the down run IPOs, Instacart, I think, being the best example

01:09:16.680 | they got out, but they've been hovering at a really low number

01:09:21.040 | for a long time. And people have been talking about them

01:09:22.960 | possibly being a takeout candidate by DoorDash or Amazon

01:09:26.200 | or Uber. So your thoughts on the Reddit IPO news?

01:09:29.840 | I think that if I had to price the IPO, I would be modeling two

01:09:36.600 | important levers in the business. The first is, what is

01:09:40.320 | the actual attainable revenue from my audience? And so what is

01:09:47.200 | the ARPU of the average Reddit user? And you can model it as a

01:09:53.480 | distribution. And I think Facebook has the best data

01:09:55.880 | because they've been publishing it in their quarterly returns

01:09:58.840 | for a very long time now for over a decade, which is, there

01:10:02.480 | is a distribution of value of a Facebook user economically,

01:10:05.760 | right at the upper end, you have the folks that are on Facebook

01:10:09.120 | proper, in America, in a certain age band in certain states that

01:10:14.160 | are probably like 30, 40, $50 ARPUs, all the way down to in

01:10:19.000 | developing countries, those users are worth low single digit

01:10:22.720 | dollars economically. And I think that people will have to

01:10:27.280 | very much understand what is the average Reddit user? And what is

01:10:31.760 | the distribution of economic value that they represent?

01:10:34.200 | That's the first thing. And I think that that's really the

01:10:37.200 | thing that will determine whether it's worth 5 billion or

01:10:39.760 | 10 billion, or frankly, 2 billion. And then the second key

01:10:43.840 | lever, it will be the risk factors in the IPO, because

01:10:48.640 | where the shareholder lawsuits will come from, which will

01:10:53.080 | really dictate if the how the hedge fund community buys this

01:10:56.720 | thing is going to be the potential for my ad ran against

01:11:02.200 | content that is deeply offensive to me that whole construct. And

01:11:07.240 | I think that they are going to have to very carefully ring

01:11:10.480 | fence that liability to get this IPO to be successful, but also

01:11:15.040 | for them to execute a scaled ad revenue business. And not

01:11:21.240 | spending enough time on Reddit, I don't know how bad of a

01:11:25.000 | problem this is. I don't think it's for Chan or 8chan as an

01:11:28.280 | example. But I also don't think it's Facebook and Instagram. And

01:11:32.120 | so it's kind of somewhere in the middle. And I think that those

01:11:34.480 | risks are really what's going to determine its terminal

01:11:36.960 | valuation.

01:11:37.600 | You nailed it, they they've always been under monetized

01:11:40.320 | $800 million in revenue, reportedly, and 400 million

01:11:45.120 | monthly active users. So two bucks a user, compared to 2030

01:11:50.240 | 40 for the prime users in on Facebook's network. So it's

01:11:55.640 | totally underutilized part of it is it's a little bit of spicy

01:11:58.320 | content. Part of it is that that's the number including all

01:12:00.840 | the international users, of course, sacks, there is this

01:12:04.640 | concept that Reddit has the greatest pool of data for large

01:12:09.240 | language models, and, you know, something like say, Quora,

01:12:13.040 | YouTube, amongst the great pools of data. So you think there's a

01:12:18.080 | play here with that they have talked about, they want to get

01:12:20.200 | paid for licensing, and that if you want to use their data for

01:12:22.400 | your language money, you got to get permission, your thoughts,

01:12:24.360 | sacks?

01:12:24.720 | Sure. I mean, that's going to be an incremental revenue source,

01:12:27.280 | for sure. It's hard to know exactly how valuable that is,

01:12:29.320 | because we're still in the early innings. But I mean, they can

01:12:31.760 | definitely do something with that data. Grok's whole

01:12:33.760 | competitive advantage is having exclusive access to Twitter's

01:12:36.760 | data, which is updated in real time, basically by hundreds of

01:12:40.640 | millions of users. So yeah, look, that data is valuable. We

01:12:44.080 | don't know how much I guess the numbers I saw were that they're

01:12:47.760 | doing about 800 million of revenue growing about 20% a

01:12:50.160 | year. The $5 billion valuation seems, I think, pretty good. I

01:12:55.560 | mean, is it down from 10 at the peak in 2021? Sure, but

01:12:59.280 | everything is down. Since that peak. I mean, that was

01:13:01.760 | definitely a bubble. I mean, I can tell you, we bought some

01:13:04.520 | shares as a late stage investment, I think, in 2018, at

01:13:08.480 | a $2 billion valuation. So you know, a two and a half x in five

01:13:12.840 | years, I mean, it's not setting the world on fire, but it's not

01:13:14.680 | a bad outcome. Yeah. And you know, the investment bankers

01:13:18.480 | will know how to price this to take it out and make it

01:13:20.880 | successful.

01:13:21.440 | Yeah. And if it had if it was, if it becomes a billion dollars

01:13:24.640 | in revenue, and they have a 20% profit margin 200 million, you

01:13:28.960 | can you can start doing your back of the envelope math there

01:13:31.080 | for a 25 EBITDA, you know, 20 times price earnings ratio. So

01:13:35.600 | it doesn't seem outrageous. It does seem like such valuable and

01:13:39.080 | under under monetized asset. Do you think there's a likely

01:13:43.080 | acquirer here, if you were to think about somebody who might

01:13:45.520 | want to own this? Do you think it's a Microsoft for the data?

01:13:48.320 | Google for the data?

01:13:49.480 | Yeah, I think there's probably people who'd like to own this.

01:13:51.920 | But the problem is that about two problems. One is they just

01:13:54.720 | can't get it through. We've talked about this before. The M

01:13:57.520 | and A window is even more closed than the IPO window, I would

01:14:01.640 | say. And the other thing is just because of the raunchy content,

01:14:06.600 | and all of the brand issues that come with that. It's not clear

01:14:10.760 | to me that let's say a Microsoft would want to own that headache.

01:14:13.840 | You know, they might not want to be hauled up in front of these

01:14:16.200 | congressional hearings that we talked about these kangaroo

01:14:19.120 | courts, where it's very easy to go on Reddit and pick out Well,

01:14:22.160 | what about this post? What about that post? Why do you let that

01:14:24.480 | one through? Why do you let that one through? Well, because it's

01:14:26.920 | a, it's a platform of user generated content, where

01:14:29.560 | hundreds of millions of people post what billions of items. And

01:14:33.720 | you can have the best content moderation policy in the world

01:14:35.760 | is always gonna be edge cases I get through.

01:14:37.360 | I think that Reddit is the honeypot of edge cases. It is

01:14:40.480 | the place you go. Yeah. When you're just so disaffected that

01:14:44.040 | you can just let loose anonymously. It's not

01:14:46.320 | right. I mean, at a certain point, you have to you have to

01:14:48.320 | realize that when people cherry pick those edge cases, what

01:14:52.280 | they're really saying is a platform like this shouldn't

01:14:54.600 | exist. Yeah, right. Because there's no way to eliminate

01:14:58.040 | every single one.

01:14:59.400 | Or which is basically like saying if you just take

01:15:01.760 | platform, you say conversation, you're saying this conversation

01:15:04.640 | shouldn't be allowed to

01:15:05.480 | exist. I want user generated content to exist. They don't

01:15:08.360 | want on what member within your times called unfettered

01:15:11.200 | conversations, unfettered conversations. They want

01:15:13.640 | controlled conversations. Yeah. Yeah, pretty dangerous. It just

01:15:19.000 | reminds me of remember that Bob Iger for like 10 seconds was

01:15:22.800 | actually considering Disney buying Twitter. Can you imagine

01:15:26.920 | if they actually bought it? What would have happened? I mean, it

01:15:30.600 | would have been chaos.

01:15:31.720 | Well, it would have been it would have been content

01:15:33.840 | moderation on steroids where, yeah, they would have massively

01:15:37.240 | empowered and scaled up content moderation, even more than what

01:15:40.800 | jack Dorsey's Twitter was doing. So I think jack actually, he was

01:15:43.680 | unable to operationalize his principles, but he did have

01:15:45.920 | principles in favor of free speech. Whereas, Disney, I don't

01:15:50.960 | even think has those principles. So they were there. They would

01:15:54.720 | have censored everything.

01:15:55.640 | Yeah, you know, it's paradoxically the most censored

01:15:58.960 | social media platform is Tick Tock. Like, my Tick Tock is

01:16:03.200 | bulldogs and sandwiches, like you trim off and then sopranos

01:16:06.880 | clips. And every time there's a sopranos clips, when somebody

01:16:09.360 | gets whacked, they have to blur it out. Or they the person who's

01:16:12.240 | uploading, it takes that clip and cuts out the actual person

01:16:15.720 | being whacked. It's crazy. All right, I got to give sex his red

01:16:18.760 | meat. We're going to now go to our war correspondent, David

01:16:21.720 | sacks. But in all seriousness, tragically, we had a terrorist

01:16:26.040 | attack. And the response from some of our Republican senators

01:16:33.360 | was absolutely insane. They want to bomb Tehran and go after Iran

01:16:38.560 | and start World War Three sacks. I know you have some strong

01:16:41.080 | feelings on this. And you're always about diplomacy and

01:16:44.320 | pursuing peace. What's your reaction to Lindsey Graham and

01:16:47.440 | the neocons? Well, you had several Republican senators try

01:16:51.160 | to goad Biden into striking Iran immediately. It was, you know,

01:16:55.560 | not just Lindsey Graham is in favor of every war, but it was

01:16:59.000 | Mitch McConnell, Senator, Republican leader, john Cornyn,

01:17:02.960 | and there were some other ones who were, you know, demanding

01:17:05.080 | immediate retaliatory strikes. It's very unfortunate that we

01:17:09.560 | had three of our troops get killed and another dozen or so

01:17:13.600 | get injured. This was at a base on the border between Syria and

01:17:19.280 | Jordan. Some of us have been saying that we have no business

01:17:23.120 | being in Syria. I mean, I tweeted 10 months ago, that all

01:17:26.280 | we were doing was putting our troops in harm's way, and

01:17:31.120 | risking getting drawn into a larger conflagration. And that's

01:17:35.000 | exactly where we are right now. I mean, you had to know, and

01:17:39.000 | many commentators pointed out that these bases are very

01:17:42.240 | exposed, they're very vulnerable, they don't have good

01:17:45.560 | enough air defense against they don't really have a good answer

01:17:48.320 | to the swarms of drones that these local militias have. And

01:17:54.400 | based on the intelligence we have right now, are the space

01:17:58.920 | this tower 22 was attacked by an Iraqi militia that's operating

01:18:02.720 | that there. Why did they get attacked? Well, these militias

01:18:07.520 | want the United States out of their countries, they want them

01:18:10.480 | out of Iraq, the government of Iraq has said we want the US out

01:18:14.000 | of Iraq, the government of Syria says we want you out of Syria.

01:18:17.240 | We are there without a congressional authorization for

01:18:21.960 | military force. I mean, what are we doing in Syria, we're just

01:18:26.320 | occupying that country without, again, without a war being ever

01:18:31.000 | declared against the Assad regime. So some of us have been

01:18:34.960 | saying we need to get out there for some time. And if we don't,

01:18:37.080 | it's inevitable that something like this is going to happen.

01:18:39.280 | And sure enough, it did. And when it does happen, you get

01:18:42.040 | this lunatic fringe, who unfortunately are some of the

01:18:44.320 | leaders of the Republican Party, calling for a larger war against

01:18:48.360 | Iran. And I think Biden to his credit, so far held back. And he

01:18:53.200 | has not a lot of restraint, however, they've been actively

01:18:58.160 | talking about this. And all the reports are they're gaming this

01:19:00.960 | out. And there is going to be some sort of retaliatory strike.

01:19:04.660 | It might be focused on these militias in Syria and Iraq, it

01:19:09.540 | could be attacking Iranian assets, we don't know, if they

01:19:13.260 | do attack Iranian assets, Iran has promised a response. So I

01:19:17.820 | think the Biden presidency is a little bit of a crossroads here,

01:19:20.180 | depending on the action they choose, we could very rapidly

01:19:22.900 | find ourselves engaged in a wider regional war on five

01:19:27.820 | different fronts. I mean, a war with Iran would involve us in

01:19:32.900 | Iran, Iraq, Syria, Lebanon, and Yemen, where we're already

01:19:36.540 | bombing. So this could turn into a huge conflagration in the

01:19:41.320 | Middle East. Yeah, I don't think we should be drawn into this.

01:19:44.620 | Yeah, no, the answer is here. And yeah, the craziness to me,

01:19:48.620 | Jamal is like, these people want to go bomb Tehran, because you

01:19:53.180 | have, you know, some militias doing these activities. I mean,

01:19:57.540 | this like would be, you know, some terrorist, who's French,

01:20:01.260 | we're going to just blow up Paris, and a bunch of civilians

01:20:04.060 | are going to die. It's there's no proportionality here. And

01:20:06.220 | there's, and there's, there's no direct relationship here. It's

01:20:09.540 | like two or three steps removed. What are your thoughts, Jamal?

01:20:11.540 | I think the thing that we've lost in this whole issue is, how

01:20:17.740 | is it possible that a multi decade billion dollar drone

01:20:21.620 | system was designed by the military industrial complex in a

01:20:26.940 | way where when one of our drones is coming back, and there's an

01:20:30.260 | inbound drone, that doesn't seem like a weird edge case, where we

01:20:34.460 | couldn't handle it. Because at the at the root cause of what

01:20:37.380 | happened was a pretty faulty way in which we were dealing with

01:20:42.140 | confusion about what was our drone and what was the enemy

01:20:46.380 | drone. And I think that that's also worth talking about before

01:20:50.540 | we talk about bombing another country is we're the most

01:20:53.940 | sophisticated technological country in the world, our weapon

01:20:56.540 | systems are the most sophisticated weapon systems in

01:20:58.780 | the world. Am I supposed to believe that if Palmer lucky and

01:21:02.500 | Andrew were building this system, that this is what would

01:21:05.340 | have happened? Absolutely not. Yeah, that there's no beaconing

01:21:08.580 | system on these drones that you could turn on remotely that

01:21:11.140 | there's no way when you see the number of drones in an aerospace

01:21:14.780 | that are yours, so that you can quickly triangulate which ones

01:21:17.180 | are not yours. And all of this, to me, I think is also worth

01:21:20.740 | exploring, because if it's really, again, faulty

01:21:25.220 | engineering, because of this monopoly oligopoly in certain

01:21:30.500 | sectors of our economy, that then cause us to go and make a

01:21:34.100 | foreign relations decision about going to war. And we don't even

01:21:37.300 | talk about this thing as a root cause it's worth talking about a

01:21:40.140 | different example. On the same vein of this is like, it turned

01:21:43.660 | out that in that Alaska Airlines issue, they actually shipped the

01:21:48.620 | plane without the door plugs. Oops, we are the most

01:21:53.500 | sophisticated country in the world, guys. Our most

01:21:57.860 | sophisticated industries are not showing their best in this

01:22:02.540 | moment. And I think that this is yet another example of before we

01:22:06.020 | make totally separate decisions about war and implicating our

01:22:10.300 | children's safety. We can also just ask, wait, we spent

01:22:14.100 | billions of dollars on this thing. How is it possible that

01:22:17.380 | this that this, like, honestly, like, this is exception

01:22:20.940 | handling. This is like, CS one on one type stuff, guys.

01:22:25.020 | Put the plugs in the door and it's regulatory captures the

01:22:30.660 | answer. This is crazy.

01:22:32.340 | There's no competition, and they're they're charging costs.

01:22:35.220 | Plus, they're not innovating anymore. And they need

01:22:37.940 | competition, right? Just like SpaceX was massive competition

01:22:41.380 | for all of the governmental agencies around.

01:22:44.660 | We have the execution in our industrial complex. And now the

01:22:51.260 | way to answer that turns out to be a foreign policy decision to

01:22:55.020 | go to war. And I think that those two things need to be

01:22:57.540 | decoupled for a second so that we can deescalate and say, hold

01:23:00.740 | on a second, this thing happened. But why did it happen?

01:23:04.380 | Meaning? Yeah, of course, people are going to attack us. We are

01:23:07.620 | the bright shining beacon on a hill. People should hate us and

01:23:10.860 | want to attack us. That's just the nature of being a winner.

01:23:13.540 | To be fair, they're not attacking us. Because we're the

01:23:16.340 | shining city on a hill over here, just minding our own

01:23:18.620 | business. They're attacking us because we're no, I know that

01:23:21.540 | Iraq. But yes, that yes, we should expect that these things

01:23:26.020 | work, we should expect it. So there's a few things happening

01:23:29.620 | here with our military industrial complex. So the first

01:23:32.260 | one is that drones have been a huge game changer. We've seen

01:23:34.980 | this in the Ukraine war. The one really new technological element

01:23:39.340 | has been drones has completely changed the face of war. And one

01:23:43.700 | of the things it does, it's a huge leveler, because these

01:23:46.860 | cheap drones give these militias in Syria and Iraq, or it gives

01:23:51.140 | the Houthis in Yemen, a capability to strike at us that

01:23:54.860 | they didn't have before. And we saw that our air defenses are

01:23:58.740 | just not really cut out to deal with this. There was that

01:24:01.980 | article describing how it was costing us $2 million to use an

01:24:06.380 | air defense missile to shoot down a drone, or a cheap rocket

01:24:10.740 | that costs just a few $1,000. So you have this asymmetric warfare

01:24:15.980 | now, where we simply cannot afford over sustained period to

01:24:20.980 | shoot down all these drones.

01:24:22.900 | But wait, sorry, can I ask a question? Yeah. Our most

01:24:26.180 | important partner in that region is Israel. Israel has what we

01:24:31.980 | have thought to up until now, an impregnable system, right, the

01:24:35.580 | Iron Dome, and which is meant to deal with all of these edge

01:24:39.500 | cases, right, projectiles of all sorts, shapes and sizes coming

01:24:43.660 | in every direction. Yeah, I've never heard of when the Iron

01:24:46.580 | Dome has failed. And we are sending Israel billions of

01:24:50.540 | dollars. Why couldn't we actually just buy the Iron Dome

01:24:52.980 | system for them and say, you know what, we're going to secure

01:24:55.260 | our bases in Syria. And in all these other places? Yeah.

01:24:58.980 | Well, I'll tell you. So there's a military analyst named Stephen

01:25:01.820 | Bryan, who I follow as a former Undersecretary of Defense, and

01:25:05.300 | he talked about this. He has been calling now for before this

01:25:09.100 | attack happened to send to Iron Dome systems to Syria to Iraq to

01:25:13.660 | basically the Middle East to protect our troops. He says he

01:25:16.500 | said in his article, the reason why the US Army hasn't done

01:25:19.340 | that is because they didn't want to buy the Israeli system.

01:25:22.140 | They've been favoring some homegrown system that has

01:25:24.540 | improved. There's a there's a big problem there that we should

01:25:28.180 | be deploying Iron Dome there. Look, I would just get out of

01:25:31.140 | that area. I don't think we should be there. But at a

01:25:33.540 | minimum, if we are going to stay there, we have to protect our

01:25:35.460 | troops. So yes, we should be deploying Iron Dome. But the

01:25:38.620 | problem is that again, just these drones are a game changer

01:25:43.140 | and they can overwhelm a system even Iron Dome can be

01:25:47.300 | overwhelmed. If Israel gets in a war with Hezbollah, which

01:25:51.060 | supposedly has one drone, it's n equals one, we were overwhelmed

01:25:55.540 | by n equals one. Well, I mean, I'm just I'm saying like, it's

01:25:59.980 | true, right? We were overwhelmed. When n equals one,

01:26:03.620 | there was a report just the other day that one of our ships

01:26:06.820 | in the Red Sea, it was fired on by a missile from Yemen. And it

01:26:14.340 | made it through the Aegis system. And they they took it

01:26:17.060 | down with their last line of defense, these like close in

01:26:19.540 | guns. That was kind of scary, because the Houthis have

01:26:24.100 | missiles that are capable of making it through our main air

01:26:26.900 | defense system for ships. So I'm just saying like these what's

01:26:30.340 | happening with these cheap rockets and these drones is

01:26:32.580 | it's giving our opponents capabilities that level the

01:26:36.340 | playing field a little bit.

01:26:37.380 | But this is what I'm saying. I understand that concept. But I

01:26:39.780 | also understand that we have people on the ground that work

01:26:42.420 | for Team America. Again, I'll just I'll take Palmer lucky as

01:26:46.020 | the example, who frankly, I would bet on 1000 times over a

01:26:49.500 | Houthi rebel, he'll outsmart now power these guys. Why aren't our

01:26:53.340 | best and brightest people in a position to make these things?

01:26:55.980 | Well, because you're right, the defense industry is dominated by

01:26:58.820 | five of these prime defense contractors who work on cost

01:27:02.500 | plus are basically an oligopoly. They're not particularly

01:27:05.260 | innovative, but they just keep charging more every year for the

01:27:08.220 | same product. So we're getting less for more money.

01:27:10.820 | And they're led by leadership, who are motivated in a way

01:27:14.660 | where the returns that they generate and the success and the

01:27:17.900 | progress they make is not really coupled to progress, right? It's

01:27:20.860 | not really coupled to building an even better version of Iron

01:27:24.540 | Dome. It's about, as you said, having a job that you've earned

01:27:28.700 | over many years of fealty, and then getting paid an enormous

01:27:33.020 | amount of money to just keep it going in the same direction, even

01:27:36.340 | if that direction means you've been adrift for decades. That's

01:27:39.260 | the shame of it. And then you're seeing every day, like, isn't it

01:27:42.140 | incredible?

01:27:42.780 | Graham is saying hit Iran. And I bet you Lindsey Graham is to

01:27:46.580 | getting donations from those five companies. I don't I don't

01:27:49.100 | know. But

01:27:49.620 | look, there's no question that we need to shake up the military

01:27:53.180 | industrial complex, we need to get a lot more startups in

01:27:55.820 | there. There's a lot of VCs now who are funding. Yeah, defense

01:28:00.340 | startups. So it is a big area. Andrew, obviously, is kind of

01:28:03.180 | the leader of the pack, but there's a bunch of others

01:28:04.780 | getting funded. I saw that Eric Schmidt even created a drone

01:28:07.780 | company. So this is gonna be a huge area of innovation. And I

01:28:13.020 | think that because of the Ukraine war, the Pentagon must

01:28:17.580 | now realize the urgency of being able to mass produce effective

01:28:22.140 | drones, as well as create effective drone air to

01:28:26.220 | countermeasures. Yeah, countermeasures. Yeah, just to

01:28:28.620 | give you a sense of this, like we led the series eight, a

01:28:33.260 | company called sail drone about seven years ago. And they make

01:28:37.300 | drones for the seas. Right. And what we did was we put these

01:28:40.860 | massive sensor arrays in these drones. And because of because

01:28:45.340 | of the sensors, it has perfect visibility into what's going on

01:28:50.900 | in any condition of weather, right day, night, it doesn't

01:28:53.780 | matter. And so these drones in the Middle East, all over the

01:28:57.660 | waterways allows us to have perfect understanding of what's

01:29:01.180 | going on. But despite that, it has taken years for us to be in

01:29:05.060 | a position to generate enough revenue. And now we're finally

01:29:08.180 | at that scale with the Navy and whatnot. But David, to your

01:29:12.500 | point, it is incredibly hard for startups, no matter how

01:29:16.300 | innovative we've been to break through this logjam. And the

01:29:20.620 | reason is, because what we are good at is not what's rewarded,

01:29:23.700 | we are good at engineering and execution. But what is rewarded,

01:29:27.300 | to your point is this very lobbying, specific form of

01:29:31.780 | relationship management, right? And cultivating certain pockets

01:29:36.740 | of influence. It's a very difficult game to play. If what

01:29:40.020 | we come as bright eyed bushy tailed from California with a

01:29:43.340 | product that we think is superior, that actually helps

01:29:45.780 | advance American exceptionalism. It still doesn't always land, it

01:29:49.780 | takes a lot longer than it needs to, in some cases.

01:29:52.420 | Yeah, I mean, so the Pentagon and the military industrial

01:29:55.660 | complex is going to be a lot more permeable to this type of

01:29:58.780 | innovation. I think that they're going to be incentivized to do

01:30:01.820 | it now. Because they have to see what's happening in Ukraine,

01:30:05.020 | what's happening in the Middle East, and they realized that the

01:30:07.900 | gap is closed.

01:30:08.900 | And we had three innocent people that were killed. These people

01:30:11.340 | didn't deserve to die. They didn't deserve to die in an end

01:30:14.300 | of one. It's not an edge case and have one there was a drone.

01:30:18.940 | Come on, guys, we're better than that.

01:30:20.180 | And so what do you think is gonna happen if we get in a war

01:30:22.580 | with Iran, every single one of our bases in Syria and Iraq, and

01:30:26.940 | we have a lot are going to be sitting ducks

01:30:28.780 | to your point, you're forecasting you're you're

01:30:31.020 | orchestrating a game plan for them. Because it's like, if you

01:30:33.700 | if you were going to enter a war, does it take a brilliant

01:30:36.820 | strategist to sit in a room and say, Wait a minute, if they

01:30:38.820 | can't defend against one, what happens when we send 12? What

01:30:42.100 | happens when we send 12 to every single place? And to your point,

01:30:45.300 | Jason, it's this is like the unnecessary escalation that then

01:30:49.180 | happens, because then we have to respond with more force. Well,

01:30:53.460 | and with more kinetic energy,

01:30:55.060 | it was a certainty. Look, I've been talking on the show about

01:30:58.980 | how our bases in Syria and Iraq have been under attack by these

01:31:02.860 | militias for months. I think the last time we talked about it,

01:31:05.780 | there had been something like 80 attacks. And it was just a

01:31:08.580 | matter of time before Americans, servicemen were were killed,

01:31:12.700 | unfortunately. And so like you said, this was predictable.

01:31:16.700 | What's also predictable is that if we get a war with Iran, every

01:31:20.300 | single one of our bases will be attacked. If we strike on their

01:31:23.220 | soil, they will strike back. And they have hypersonic missiles,

01:31:26.660 | they have precision missiles, they can destroy every one of

01:31:30.900 | these bases, unless those bases have the top of the line air

01:31:33.620 | defense, which most of them don't. But if you go to someone

01:31:37.100 | like Lindsey Graham and say, Listen, our troops are

01:31:39.820 | vulnerable, we need to basically either pull out of

01:31:43.100 | Syria and Iraq, or we need to consolidate down to a few bases

01:31:46.780 | that have Iron Dome or the best systems. These neocons will say

01:31:49.900 | absolutely not, we're not conceding anything.

01:31:52.100 | So they would they would never pick up a gun. They never wear

01:31:55.300 | uniform, right? They want us to strike Iran. So these these

01:31:59.980 | strategies don't line up. If you wanted to attack Iran, the first

01:32:04.820 | thing you would do is basically get all of our troops out of

01:32:07.460 | harm's way, who are currently sitting docks for Irani

01:32:10.660 | retaliation. By the way, I think it'd be a terrible idea. But

01:32:13.700 | that's what you do. So they have these strategies that don't make

01:32:16.820 | any sense.

01:32:17.460 | All right, everybody. It's been an amazing show for the dictator

01:32:22.140 | chairman himself. Shemoth Palihapitiya, the rain man. Yeah,

01:32:25.500 | David Sachs. I am the world's greatest moderator. We missed

01:32:29.020 | you. Sultan of science, David Fribourg couldn't make the show.

01:32:31.860 | And we'll see he's still in if anybody gets into the Apple Pro

01:32:36.580 | Vision Vision Pro. And is somewhere out in the universe by

01:32:41.500 | Uranus. And you see I'm bringing back for next week. So I'm gonna

01:32:43.980 | go find him. We got to send out a search party to Uranus. Love

01:32:46.740 | you boys. Bye bye bye bye.

01:32:49.900 | Let your winners ride.

01:32:52.820 | Rain Man David Sachs.

01:32:55.700 | We open source it to the fans and they've just gone crazy with

01:33:02.260 | it. Love you guys.

01:33:03.260 | I'm the queen of Kinwana.

01:33:04.820 | I'm going all in.

01:33:06.460 | Let your winners ride. Let your winners ride.

01:33:09.180 | Besties are gone.

01:33:12.780 | That's my dog taking a notice in your driveway.

01:33:16.300 | We should all just get a room and just have one big huge orgy

01:33:24.660 | because they're all just useless. It's like this like

01:33:26.540 | sexual tension that we just need to release somehow.

01:33:29.980 | Let your beat be. Let your beat be. We need to get besties are

01:33:36.780 | gone.

01:33:37.060 | I'm going all in.

01:33:46.660 | you

E164: Zuck’s Senate apology, Elon's comp package voided, crony capitalism, Reddit IPO, drone attack

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