Hey, everybody, welcome to another episode of the all in podcast. It's been a crazy couple of weeks here we had the all in summit. And boy, was it amazing our bestie David Freiberg couldn't make it today. He had some personal things he had to attend to. So joining us again, is Brad Gershner.

Welcome back to the fifth bestie on his Is this your fourth appearance now including the all in summit. I think you've been on four times now. Very good. All right. That's about 5% of the episodes. Nice, nice. I think that's a nice little chip in your in your in your your belt there.

I mean, unworthy replacement to Freiberg but I do what I nobody can replace Freiberg that is the truth. Let your winners ride. Rain man David Sacks. We open source it to the fans and they've just gone crazy. Love you guys. I see you guys next time. Bye. Just going around the horn here.

Chamath, did you have a favorite moment on stage a favorite moment off stage? What is your general impressions of the all in summit 2022? I thought the people I met were really impressive. I really enjoyed meeting people and learning what they did. I also thought you and your team organized really an incredible event.

And I forgot how good you are at these things. But I give you a lot of credit. I really enjoyed participating. The only thing that I was nervous about during that whole thing, which probably limited a little bit of my fun was my mom was coming. She's 81. And so it was not I was not super psyched to really be in the throes of all the parties to be honest, just because I was like, I didn't I didn't necessarily want to get COVID.

And I didn't want to introduce it to her and got it. Yes, you know, Nat ended up getting really, really sick, but more like a flu and a cold. Yeah. But you know, I've been fine. My mom's fine. I know a bunch of folks that came unfortunately tested positive.

So that was the only that's the only downside where I would I would have wanted to be a little bit more carefree. But that was the only thing that was that but that's not in anybody's control. So yeah, I think it was second I recall that when I had a Christmas party.

Like a week later, he called my Christmas party a super spreader even though I tested everybody at the door every single person was negative at this. So my parents went to this conference, they both got COVID. My aunt who lives in Miami, he was in her 70s. She got COVID.

Are they okay? By the way? Are they? Yeah, they're most important. It's you know, it's Omicron. It was like, you know, it's like bad for two days. And then you get better. So they're gonna be fine. Thank God. Yeah, one did and one didn't. So my brother's got COVID.

And so your brother's got it. Josh and Jamie both got it. And then Josh's wife got it. So she took the Paxlovid. And everybody's great now. But yeah, if you go to my a lot of people who came to the event, it was their first time out like this was for a lot of people, I think very emotional and exciting because it was their first venture out.

And if you go to Miami, to a conference like you're gonna get COVID, especially if the event organizer doesn't test anybody. Impractical to test 850 people, nobody would come like not if you want to make a profit, right? Nah, it wouldn't have actually been that expensive. You could put that on the people, they could just, you know, share their results.

But I think at this point, you know, even on the planes going out there, nobody's wearing masks. I don't know if you know, well, you guys are flying private. But you know, my flight out there, it was all you know, nobody's wearing masks anymore. But anyway, Jay Cal, I think everybody who went to the conference, took the risk upon themselves of COVID.

And you know, it's not the end of the world or anything, they're all fine. But I'm just pointing out the hypocrisy. My hypocrisy. Yes, exactly. It's like you're like Nancy Pelosi or something where criticizing every time a Republican gets COVID, it's their fault. Yes, when you throw a super spreader, and I think AIS now stands for all in super spreader.

Yeah, it's not your fault. It was well beyond your control. It was the virus. And in fact, it was probably just Florida. It was just yes, it's the sense of I was gonna bring it up. Both of you now have thrown super spreader events. Yes, but in mind, I tested.

Yeah. It's not even proven that mine was a super spreader. All right. In all seriousness, did you have a favorite moment on stage or some reflections on the event? I thought the thing was really good, by the way. And the only thing I'll say is the Palmer lucky thing was pretty incredible.

Which will be we will be releasing the palm. I'm excited to see that. I think that that episode is eye opening. Yeah, we don't want to say too much. But I think that you were really I think you handled yourself really well. Thank you for that. Chamath what actually happened?

I wasn't there for that portion. I haven't heard anything about a mini summary here of it. I guess I'll give you the outside inversion. He gives what I can only describe as an incredibly motivating breakdown of American defense and what his company and you know, you have to remember to put it in context.

This is a 29 year old young man who has now started to multi billion dollar unicorn. So you know this, he's going to be around for a long time doing amazing things. But he talks about Andrew, which is his defense company, really impressive. And then the whole, you know, everybody's kind of like rousing and cheering and applauding.

And then he talks about the whole, you know, everybody's kind of like rousing and cheering and applauding. And then he said, you know, I have something else that I want to get off my chest. And I was standing beside Jason, backstage. Jason was looking at the monitor, I was looking at the mirror at myself.

But and checking your sweater. And he said, you know, there's a person here that that has been, you know, really hard on me, you know, tried to ruin my life, attack my family, and represents, you know, these really this strain of very influential people in Silicon Valley. Who have gotten it totally wrong, basically.

And he called out cancel culture, and then he called out J Cal. And to Jake's credit, after he was done, Jake was the first one that walked out on stage, shook Palmer's hand. And then we all sat down, we talked to him, and then the two ended up hugging it out at the end.

But there were moments that were very heated in the middle of it. The whole thing was incredible to watch. I got to be honest with you. It was super dramatic. Yeah, incredible. I would I would say, that the most shocking and surprising aspect of the whole thing was that a person as important as Palmer and Lucky felt the need to get revenge on a person as unimportant as Jason.

That was the part I mentioned when he was like, my career was when he said important people in Silicon Valley, I initially thought, Oh, my God, he's talking about me. What did I say? I was I was thrown by that, too. If I'm being honest, he's like my entire career.

And I had to claw my way back, because Jason Calacanis said this. And I was like, no, actually, I'm looking forward to when you're going to be a great episode. It's going to be coming out next week. Thank you to all the speakers. Yeah, I want to give a shout out to Glenn Greenwald, Matt Taibbi and Antonio Garcia Martinez for appearing.

And you know, we did two different panels. We did one on domestic politics with Glenn and Taibbi. And then the we did a debate on Ukraine, which has now been published between Glenn and Antonio. And particularly, I want to thank Antonio, because it did end up being a little bit of a two on one at the end, which wasn't my intention.

But I have my own views on it, too. Although I did try to be somewhat restrained and even handed in the moderation. But it's a really good debate, we should have had longer, we only had about 30 minutes. But you can see that online right now. It actually is a great example of actually how to listen to somebody else having a completely diametrically opposed view and still be respectful.

I thought those guys were great to listen to. I think it's a new format, Saxon. I think you know, somebody was like, hey, maybe you and J Cal could do it. I think you and I moderating like two people with different sides. It could be like a really interesting format for us for future events.

Brad, did you have a favorite moment on stage? Maybe outside of Elon? Of course, you can mention I would say, you know, maybe both on stage and off stage. You know, I think listen, I think this podcast has taken some shots and probably appropriately so at times for being a bunch of men.

You know, I think, you know, I think this is a great moment to be in the room, you know, a little bro culture, and the effort made to build authentic community and diversity into that room. I've been to a lot of conferences, whether it's Claire the alky, you know, Patty Wexler, extraordinary, you know, minds, women, all diverse cultures, economic backgrounds, when we walked around the floor, he you know, Indiana, Kentucky, West Virginia, everywhere, right, and who are starting companies, authentic conversations, and frankly, we're grateful for the community, and the advice that they were being given.

These were from big startups to very small startups. And so for me, that was a highlight the effort you made, I don't know, almost 40% women, you know, both economic, I thought, as well as you know, geographic diversity. And then, you know, listen, I had a moment after Bill and I after Gurley and I got off stage.

I was stopped by a group of founders. And they said, Hey, we need your help. I said, What? And they said, We are that company, you and Bill were just talking about and said was screwed. We raised $100 million last November from from Tiger at 100 times ARR, what do we do?

Right? And like, like the fact that that you know, that those conversations are going on, of course, they're not screwed. And it's a very interesting company. But it led to a real conversation that you don't often have at conferences like that. And so I thought it was much more than just a bunch of talking heads on stage.

I thought it was a real give and take in, you know, in the crowd afterwards, the parties, the in betweens. And so I really enjoyed that. The other big thing that we avoided failing on was putting back the AMAs. I think these AMAs are some of the most interesting parts of that conference.

And I think that we should make sure that we probably do an AMA Jason, like, both days, we do a two day conference. The AMAs were awesome. Yeah, when the audience is asking us and just to explain to people how we were able to, you know, curate the audience, we asked people, I think it's a good playbook for other people if they want to steal it to, they could, they could pick the price they wanted to pay based on their station in life.

And so people said, I want to come up a 500, I'll pay 1000, I'll pay 2500, instead of the 7500 ticket price, which was like 300 people in the audience. And we just said, Hey, what do you love about the show? You know, what would coming to the show, to the conference mean to you, and we kind of just sorted that and we look for people who are passionate about the show.

And then, you know, the thing that stuck out to me, and I know Freeburg had a great time as well, was the passion of the audience and how much they appreciate what we do here every week. And so the love that we got people asking to take selfies, people telling us what the show meant to us, you know, and people coming from all different stations in life, really, it made it not elitist.

But it felt like the people who were there, were all builders. And that was really an interesting part, what I instructed the team to do was anybody who was like a real estate broker, a money manager, a sales executive, a business development person, I said, let's not have them there.

No offense to those, you know, critical functions, but a lot of people will come to the events to sell and get customers. But I said, anybody who's a builder and artists, they're making something in the world, let's give them the priority for these scholarship tickets. So, you know, when you met people, they were all building something interesting in the world.

And no press, I think also created a certain vibe there. We didn't have the media there, criticizing every panel and, you know, every speaker. And so it I think it just Yeah, I made it so great. Well, I think it really couldn't do it without all you guys, and Freeburg and the besties and Brad, you were helping behind the scenes.

So couldn't do without everybody. And my team turned out surprisingly well, I thought. I thought the whole thing was a J Cal grift. And it actually turned out there's been there's there's some grifting going on for sure. I haven't seen an accounting of exactly where all the money went.

So it's close. We'll have that accounting any day now, Sachs any day now. What could you have done better? What would you change for the next time? You know, I just a great question. You know, we always do a document with lessons learned right after the event. So I went through my team.

And I had 26 people for my team. 21 from launch, and I think five from insight came and, you know, helped staff the event, a little more time to work on the speakers in the agenda. If we had a little more time, I would have teased out of each bestie, you know, maybe five or 10 speakers or topics they wanted and worked backwards.

So it's just a little more time to, to experiment with the format. But I took an experimental approach to it. We did have people who did solo dolo like Ted style talks, we then had people come on stage with the besties and do discussions. But having all besties on stage all the time is a little hard for for everybody.

I know David likes to focus on maybe a couple of things. Other people like Chamath and I like to be on stage for everything, I think. But the format was experimental. And there was a couple of great moments, I think when we overlapped folks, so I think Nate Silver overlap with Keith raboi, you and Bill Gurley together, Tim Urban, I'm sorry, overlapped with Keith raboi.

Those were magical moments, I think. And so I have something in my brain about weaving individual talks and data points with the besties and then having the next speaker on the stage, the next speaker, and I would have liked to have more time to refine that format, I think.

Okay, my only question is, was the Palmer lucky deal? Was that a plant? Did you plan that? No, I secretly put that in there. I'll tell you the backstory is I you know, I had invited him on this week and starts before all in came out. Many times he said fuck you basically, in so many words, I hate Jake out.

And then when all in came out, he's a fan of this show. I think he's particularly a fan of David Sachs is. And I think David knows a lot of the investors, the investor pools, I think overlap in a lot of different circles of ours. And, I said, Would you like to come to the summit?

And I and I basically said to him heartfelt, like, Listen, I think the work you're doing to protect the country. Most people in Silicon Valley don't believe in building weapons systems. But I kind of am with you on this. So we probably have some common ground here. I think the mission of what you're doing is more important than our disagreement from, you know, the Hillary Clinton versus Trump days, maybe we could just, you know, put that aside and have you speak.

And surprisingly, as people were like, Yes, I didn't know they were doing yes, because he had a plot to dunk on me. But who cares? You know, like, I don't mind being dunked. On. If I'm wrong about something, or I'm right. It's the whole spirit of this show is to, you know, to learn and grow and have great conversations.

So with that, maybe we start the show now. Let's do it. All right, let's go. Let me Am I still allowed to do intros? Or is it too triggering? Because I do have interest for this week. Do it. Say do it. Okay, I got them. Only if they're nice.

Well, yeah, that's the caveat that I cannot guarantee. But anyway, here we go. Getting ready to gallivant across the Italian countryside. He spent 40k at all in summit on food and wine. He took 400 selfies in three hours. Those sweaters my lord, they reek of power. The dictator himself is back.

Chamath Palihapitiya. Welcome back to the show. Thank you, Jason. All right, his body looks like he doesn't eat cake. He's got a major stake in snowflake. You might have heard him earlier on the week with Bill Gurley. He's the crossover fund manager with that BD. Our fifth bestie the audience hangs on every word he has to say the dark night of namaste.

Welcome back to the program. Brad Gerson. I like it. What's BDE? If you don't know, then you don't know. You can look that up urban dictionary. He's about to turn 50 but he looks like he's 65. After 72 hours in Miami, we're not sure he's still alive. The creep reaper is jealous of the facts under his eyes.

His portfolio has been down for 35 straight days. No surprise. The Ray man himself is back. David Sachs. Too rough on sacks? No, it's okay. Is it okay? I felt like I might have gone too rough on sacks. All right. I get it. I get it. I get it.

I guess we start with markets and S&P 500 down 15% year to date Dow down 11% to stocks of note that did particularly well during COVID. Zoom and snowflake reported their earnings this week and they beat expectations. Of course, that gives them no reprieve market cap for zoom 31 billion, got almost $6 billion in cash, which was a prescient move to cash up I guess during the boom times.

Their stock jumped 18% after the earnings so great for them. Q1 revenue 2023 1 billion 12% year over year. They got an 80% gross margin for that business pretty impressive. 500 million adjusted free cash flow 7000 employees. They're at almost 500,000 per employee at this point and stock is still down 43% year to date but a little bump here so I guess we might be bumping along the bottoms and just to quickly recap snowflake and get your comments after that snowflake reported their quarterly earnings yesterday.

$41 billion market cap. They got almost 4 billion in cash. They were down slightly at the taping of this episode today and they're down 67% from the peak of $409 a share in November so they're not in the 85% plus club like Coinbase and Peloton. But still they've lost two thirds of their market cap 422 million in revenue 85% year over year beat their expectations.

And gross margin 72% net retention 174% 70% growth within within their existing customers to David Sachs his point about why SAS is so great. They got 4000 employees 6300 total customers. So I guess maybe starting with you Brad since you're in this in the thick of it. Thoughts on I know your major snowflake early supporter thoughts on what's happening in the market and maybe any indication from these two.

Let's face it strong results in the bouncing along the bottom I think is how we'd all describe what's happening right now. Well, I think listen, what makes investing hard is sometimes you have to hold simultaneous truth. Right and the reality is there's a lot of cognitive dissonance when you see something down 30 40 50% but it may be still fair value.

Right we were talking about last October, like make no mistake about it. Just take snowflake as an example. The move from 400 to $420 billion in revenue is a huge step forward. And that's because we're talking about a market that's going to be a little bit more competitive. And that's because we're talking about a market that's going to be a little bit more competitive.

And that's because we're talking about a market that's going to be a little bit more competitive. And that's because we're talking about to 200 was probably just what I would describe as normalization in a world where rates were going back to two and a half or 3%. Right the market last October had gone too high.

We discussed it on this pod we discussed it on CNBC. And so I expected a return to what we call the five year average as we discussed at the summit. What's been surprising to me is the negative reflexivity that's kicked in as a result of the war in Ukraine.

David Collum: Uncertainty about hyperinflation, uncertainty about hyper rates. And so now we're seeing software generally, all risk assets, growth assets trading now 30 40 50% below the five year average, right? So I don't think it's helpful to say well, none of that should have happened. No, the reality is normalization meant that all of this stuff was going to be down 20 to 50% because it was way overvalued last fall.

We gaslighted ourselves in many respects. David Collum: We didn't hedge it perfectly in many respects. But that's, you know, that's what happens in late market cycles. So the question is, where are we today? And for example, like, why is the NASDAQ up 300 basis points today? Right? This it feels like whiplash, I come in one day, and you know, you have market caps up 10% one day down 10% the next.

And so I think it's really important to help the people listening understand, you know, like what happened this week and what's going on. David Collum: It is been, kind of a pretty mixed bag this week, in fact, of things going down. Shamath, what are you going to take on this of what we're seeing in the market this week, specifically with precipitous drops, and then, you know, the bouncing up again?

Shamath Nani: Look, we, we still had some amount of rate uncertainty from the Fed. I think people weren't sure how aggressively they were going to hike. But by early this week, it was pretty clear, there's going to be 250% point hikes, one in June, and one in July, and then effectively a pause, because then the Fed funds rate will be at around 2%.

And everything from there will probably be path and data dependent. Okay, that's effectively what they said. Now, I think the the markets had actually already started to see that writing on the wall. So if you go back to you know, one of our favorite measures, which is the 10 year break, even it's effectively rolled over, which, which meant that, you know, which means that from the highs in sort of late April, it started to come down, which says that, you know, they were thinking that, you know, the inflation was not going to be as bad in the back half of the year.

And then the second is that corporate credit, which is really what matters in some ways to the Fed, because that's where they can intervene, what is the spread above treasuries that a company can issue debt? When it goes crazy, and it goes up, it means oh, no, the cost of capital, the capital is going up, that's going to be hard for companies to raise money, they may have to lay people off, they may need to get into cost cutting mode, right?

That's what goes through everybody's mind. But that's also now about 35 and 40 days rolled over, which means that the gap has started to shrink, you know, between the US Treasury price, and what you know, decent corporates can can issue debt at. So it looks like we are set up for potentially a decent little rally, here.

The problem is, is it a rally that is sustainable? Or is it a rally that's basically what we call a dead cat bounce or a bear market rally, where, you know, you just get some one or two weeks of relief before the thing spears down again. And we're not going to know although tomorrow on Friday, there's going to be a really important set of inflation data that gets released.

And I think everybody's going to be sweating these details. So right now we're in a moment of pause. And there is the potential if this data comes back as reasonably good, which means prices are, you know, not escalating as much as we thought inflation is not going to be as bad growth is going to be moderate, that that gives a lot of ammo for the Fed to kind of take their foot off the off the gas here.

And in that case, markets will go boom, sacks. The interesting note, I think is what we talked about here, everything was correcting except housing. And we were wondering when this, you know, the increasing rates would hit mortgage rates mortgages way above 5% in the last two weeks, I think it's come down a little bit.

But the mortgage rate basically doubled. And then we finally saw it earlier in this week. What day was it was two days ago. So we're taping this on Thursday. So I think on Tuesday, new home sales 591,000. They expected 749. And I think the last month before that was 763.

Is that indicative of the raising the rates and slowing down inflation has finally occurred. And that went maybe we, the Fed maybe steer too much into the turn? How do you interpret that mass? It was a pretty massive miss in terms of home sales in the estimate? Well, the costs of buying a home are going way up because home loans are now more expensive.

So that's going to factor into all sorts of consumer purchases. Anything that's financed can be more expensive. You're also seeing companies starting to slow down spending, really starting to slam on the brakes we see in startup land startups are all slashing costs right now. But that's eventually going to percolate up to big companies to you saw Dara's memo, basically, when he got back from Wall Street memory published that a couple of weeks ago saying we sharpen our pencils, cut everything.

What Wall Street is looking for now is free cash flow. So it seems to me like we're headed into a pretty serious downturn or recession here. Yeah, I think that's a pretty serious downturn. And I'm going to say that we're headed into a recession here. I mean, I've been saying we're in a recession for months.

The the the tricky thing for the Fed is that they don't have a lot of good options because we have a lot of recession indicators blinking red right now. At the same time, inflation is still high. So they're kind of caught between a rock and a hard place. I think what the Fed should have done is in 2020 hindsight is back last summer, we first got that shock CPI print.

Remember, it was like 5.1%. And then we got that shock CPI print. And then we got that 5.1%. And then we got that 5.1%. And then we got that 5.1%. And then we got that 5.1%. And then we got that 5.1%. And then we got that 5.1%. And then we got that 5.1%.

And then we got that 5.1%. And then we got to come out of the blue, because for years and years, we've been talking about deflation. Nobody thought inflation was a problem. All of a sudden, we got that 5.1% print. They were in total denial about it. They just dismissed it saying that inflation was transitory.

And Yellen said the same thing. And so basically, everyone just ignored the data for six months. And what they should have done was stop QE right then and there, they could have taken a little bit of time to think out, you know, a rate increase strategy. But they were still basically engaging in QE for nine months after that, you know, first inflation warning.

And if they had stopped QE there, then we wouldn't have had this asset bubble in the second half of last year, that's when it inflated the most. And we could have had more of a soft landing. Unfortunately, now, they let the they kept inflating. And really, until the end of Q1.

And then they let the they kept inflating. And really, until the end of Q1, and they've yanked away the punch bowl so violently that I think the real economies can go into recession. So that's where we are right now. I mean, I don't know what the what the right answer is now.

Given that we're in this, you know, almost stagflationary position. Let's try and answer that, Brad, what is if, if we didn't act soon enough, if you agree with Sax's point, pretty hard to disagree with. And we didn't take the medicine a little bit at a time. And now maybe we've overreacted, or maybe it's going to get worse.

What is the right thing for us to be doing now? Because all these companies doing hiring freezes layoffs, at the same time that the housing market tanks at the same time crypto tanks at the same time the stock market tanks? This feels like a major shock to the system.

Is it time to maybe reconsider some of these? No, you know, for the Fed to reconsider or just slow and steady wins the race here? What's the best option? First, we should erect statues to Senator Manchin, for saving the republic by vetoing stimmy to that would have been bill devastating.

That would have been devastating. So we'll revisit that. Listen, the Fed said two really important things this week. They said number one, our communications have been helpful in shifting market expectations. What that means the Fed is the air traffic control. They said to the markets at the beginning of the year, you're 90 degrees off runway heading.

Get your ass back on runway heading. It was a slap in the face to markets, and it was a radical adjustment. Now you hear the Fed in these little statements this week, they said, Hey, we're well positioned this year to assess the effects of policy firming in the back half.

So they're saying, we're going to hit it with 5050. And then we're going to take a look. So now think of it as air traffic control your two degrees to the left your two degrees to the right. They're steering us on runway heading. I don't think the Fed wants to do anything at this moment to lose credibility in the inflation fight, we're going to get 50, we're going to get another 50.

But they're doing what they want to do, which is keeping markets sufficiently tight, right? They wanted to take the crypto market down. They wanted to take all the excessive risks in the stock market down, right? You're absolutely right, the inventory of $350,000 homes spiked from four months to nine months, right used car prices are rolling over the last three months, all the things they needed to do they're doing, right, they need to stay the course.

However, the hyperventilation this week by Bill Ackman on Twitter, that the Fed needs to be doing radically more that somehow we need to be raising rates to six, seven, 8%. In order to squash inflation, to me seems highly misdirected, and totally out of touch with the fact that on layoffs.com/fairfax, we're going to get to the bottom of this.

I think we're in a we're in a pretty reasonable place here, the real, the real question is now, what do you need to take the market lower? And this is more of a nuance. But you know, when you look at companies that are now quote unquote, cheap, right, let's take an example like you, you know, what we hear a lot about Google or Facebook, right?

And people will say, my gosh, this is cheap, because if you run a screen on it, it's like 1011 12 times price to earnings. Well, the price, you know, because you can look on the screen. The real question is, are the earnings right? And the thing that can take the market lower is if you actually think earnings are modeled incorrectly.

Right. So we saw this week as well. Snap. I mean, completely just blew themselves 46% down. And for day yesterday, I just want to say something about one day, they have the most incredible propensity to self immolate on earnings calls than any other company I've ever seen. There's probably been three times no less than three times over the last four years, where I don't know whether it's just poorly scripted, or not well rehearsed, or the people that are helping Evan get ready for these things.

But these are disastrous calls. You know, Facebook, I've had a couple in its lifetime, but snap consistently, probably once every 18 months, we'll do this. Anyways, the thing just completely implodes, the stock implodes by 48%, or something. And then it, you know, rolls over to companies like Facebook and Google, who then are off eight or 10%.

My point in telling you the story is that if you think Facebook and Google just as an example, again, are cheap at 10 times, while you better hope that the earnings are right, because the earnings are actually wrong. That's actually 27 times and 19 times, you know, I'm making these numbers up to give you the example, because the earnings are fundamentally wrong.

So that's the risk now that's left in the market, in my opinion, that could take it much, much lower is if that, you know, all of this slowdown really contracts spend, and the earnings are actually not accurate. The forecasted earnings will need to be revised over the next two or three quarters.

And that's where we will probably see the low. If however, growth is muted, and the Fed can as Brad said, it's a really good analogy now just course correct by degrees, you know, a degree here degree there. We've probably consolidated the lows. So said another way, we look at a company like Snap, or Google, a lot of their expected value has to do with people's ad spend, we now see less homes being sold.

So maybe people in real estate stop spending less on ads, they're a major advertising category, maybe direct to consumer, people are not buying because of supply chain issues. This is a major advertising category. Maybe direct to consumer, people are not buying because of supply chain issues. This is a major advertising category.

Maybe direct to consumer, people are not buying because of supply chain issues. This is a major advertising category. And we're not going to spend on ads. And so all of this ad revenue, that's some of the first to come out of people's budgets. So, you know, even as great as snaps results actually look, they were up 38% year over year, they're generating over 100 million in free cash flow, the guide was terrible, because what they said was our E, right, our earnings, right, are not modeled accurately.

Right. And so that's the risk that you now have to take to every company, you cannot look at a screen on Yahoo Finance or Bloomberg, look at a price to earnings ratio and say, wow, seven times that's so cheap. It may not be seven, you have to do your own work, it could actually be much higher than that, because your earnings may be at risk.

The earnings being at risk is this contagion that we talked about, I don't know, six, maybe we're going on almost a year now, sacks, we talked about a contagion happening, because we've all experienced it in the last two recessions to the dotcom bust in the Great Recession. So what are you seeing in terms of at companies, this contagion risk?

Are people canceling SaaS contracts on the margins? Obviously, people are doing hiring freezes, obviously, people are laying people off? Are people going to start renegotiating salaries? You know, what's the next couple of shoes to drop your sacks? And that would signal to you a true bottom here? Like, have you seen, I thought maybe one would be if somebody offered somebody an investment with a two or three times liquidation preference?

Have you seen one of those? Yet? Have you seen people say we're going to renegotiate salaries? Because that's when it was really dark, right? The last two times? Yeah, no, it's gonna take time to get to that point. I mean, where you start seeing structure and deal is in deals is when a founder is trying to preserve evaluation they got last year.

And that can't really be justified, but they don't want to just take the down round. So you try to preserve the optics last round by building all these preferential terms. We don't like to do deals that way. But you'll start to see them happen later this year, when you know, companies get more and more of these deals.

More desperate. That's not the first thing that happens, though. I think that that to your point about the talent market, it's definitely going to happen. Has it happened yet? No. What has to happen is first all these open recs get cancelled companies freeze their hiring plans, then eventually they do layoffs that's coming.

And then the things are here. Both are here. So what's the next in talent wars? Well, yeah, I mean, look, but within the next six months, the talent market is not gonna be as hot. And you know, in the same way that startups aren't getting 10 term sheets, now that maybe they get one or two, if they're a good company, same thing with talent, right?

They're not gonna have 10 job offers, they might have one or two. And that's gonna create, that's not gonna create the same upward pressure, continuing upward pressure for, for increases in comp. To your point about like, will SaaS contracts be cut? I mean, I think software is pretty sticky.

I mean, if it's a good product, will deal cycles get longer? Yes. Will there be more mortality risk in the startup or SMB customer basis of companies? Yes. I think one concept that startups may want to wrap their heads around is what I would call deferred mortality risk, meaning that during the last few years during the boom times, the graduation rate from C to series A to series B was very high, perhaps artificially high.

So there's a lot of companies that got funded in advance to the next round, where in more normal times, they wouldn't have made it. Got it. Now, if those companies haven't really fixed their issues, they've just deferred the mortality. So I think all of us probably in SaaS land need to be modeling out higher logo churn for, for customer bases that are skewed towards startups or SMBs.

And we don't know what those numbers are going to be yet. But that is likely to happen. I think that that's right. I think the other thing is that there, there's a lot of companies that are going to have to get religion on free cash flow conversion. ASAP. And I just think that most CEOs to be very blunt, are poorly educated and enumerate.

So their level of numeracy to even understand this is pretty poor. And most board directors are equally. Can you unpack it right now? What does it mean to get the business to free cash flow? What does it take? Why is it important? And what are the how do those businesses look differently to spend less?

Yeah. Then you make, okay, hold on, I just want to make sure I got it correct. You make money, but the number of the money you make is higher than the number of the money you spend. Got it. Okay. And then there's a delta there, there's some difference between those two numbers.

And that number is important to some people is what you're saying. I think increasingly getting that number to be greater than zero is going to be really important. It, it allows you again, everybody starts to throw out this whole thing, which is, oh, my God, you can never slow growth and the company will die.

And yeah, maybe in a vacuum that that's true. But when every other company is fighting tooth and nail to survive, the only thing that you need to do is actually survive by surviving you win. And if you can basically make your cash last as long as possible, even if you cut to the bone and stop growing, if you come out the other end, and you're the only company that's left, you will win and run over the market, you may have pushed to the right a few years, your plans of world dominance, but they're still available to you.

It's the company that foolishly thinks that they can continue to spend money at the same rate or in the same ways that are going to learn this hard lesson. Because I think that investors are not going to tolerate being able to, you know, provide incremental capital to organizations funds, who are then you know, miss allocating that capital to basically support a poorly marked portfolio.

And I think that is going to be the real come to Jesus that actually makes all of this thing come clean, like pension funds, family offices, endowments, all these organizations are smart enough to realize that they're giving good money after bad if what those folks are going to do is not demand portfolio rehabilitation, and instead are just going to basically keep the marks of their old funds because they're just in a in a game of waiting it out.

Where the hope taking action, greater than, you know, blind hope and just going, you know, steady doing what you've been doing, you got to make some changes. I mean, look, I love Brad's reaction, I think that most growth oriented funds are looking at their portfolios. And they're trying to balance two strategies.

Strategy one is get into massive rehabilitation mode. The problem is, most of these people have never built or run a company. So they have no idea how to rehabilitate anything. They're, you know, market momentum folks, and in that they were excellent, but in actually helping CEOs build and rebuild a business, I think that they're not as well suited doesn't mean they can't do it, but they're not as well suited.

That's Path A. But I think that path is very painful. And it requires you to take medicine, the bitter medicine, which is to basically mark your portfolio down 50 or 60%. Just like the public market, terminal valuations have gone down. The other alternative is to basically raise enough money to do, for example, unpriced converts into those same companies so that you don't have to remark so that the auditors will be allowed to carry these fake valuations, you can maybe market down 10 or 15%.

But you don't have to market down 50 or 60%. And hope the market returns to his previous state. But as we've all talked about, that previous state is probably unreliable, because it was a moment where we had a global pandemic where we took rates to zero. And we printed nine or $10 trillion of excess liquidity that inflated these things.

So I got to think that, you know, prices in 2019 were a little bit ticking up 2020. We're really ticking up 2021 was egregious and 2022 is the come is you know, where it all comes home to roost. Brad, explain to us, we hear free cash flow, we hear income, net income, EBITDA, we hear all these terms.

Now free cash flow is what everybody is focused on. I believe that seems to be the predominant rallying cross. I believe that seems to be the predominant rallying cross. I think that's a great point. And I think it's a great point. I think it's a great point. And I think public market companies now, can you explain to people what the difference between these things are?

Because people kind of bundle them together? Why would somebody like Dara at Uber, just say, Hey, you know, we've been talking about adjusted EBITDA, EBITDA, income, net income, all this stuff. But free cash flow is what we want to focus on now? Or is that correct? Yeah, you know, and our friend Bill Gurley, rails on this adjusted adjusted.

And you know, look to your left, look to your right adjusted one more time EBITDA, right? Like in markets like this, what people want to know about is, is that the way that we want to see the market? What people want to know or what's the green stuff I can take out of the business and put under my mattress, free cash flow, distributable free cash flow.

And not only that, how much per share? I think the single biggest issue growth investors are focused on today is the easy way out for all these companies, they'll tap down a little bit on their hiring, they'll tap down on their spend. But out of the back door, they want to give a bunch of free stock to employees to help offset that pain.

This is really important to understand. Because stock is a real expense, right? When a company goes public, the more shares you have, the lower your price. So it is a real expense to everybody, the founders, the employees, the investors, right? And so what's what I think the single biggest conversation going on in boardrooms in Silicon Valley today is, hey, can we have a little bit more stock this year, whether it's options or whether it's outright RSUs to give to employees because if we don't give it to employees, they tell us, hey, we're going to give you a bunch of free stock.

And so we're going to give it to they're going to leave this is a real hard truth i had a ceo of an incredible company call me and say listen we pay our engineers a million bucks ahead but we give them stock that over the last five years has been worth another million dollars each year so they built their lives as though they had two million dollars a year in income they bought a house they bought cars they sent their kids to private schools based upon that two million dollars and now when we tell them that this upcoming year the mill we're not making whole on that million it can't be when when we win you win and when we when we lose you win so the tough conversation is we're not re-upping you because the stock's been cut in half and so now that engineer's saying yeah but this year that means i'm only getting paid 1.2 million and the answer the tough answer is yes right shared sacrifice you should have never assumed that that was going to be worth an incremental million dollars a year but that takes leadership that takes courage that takes a board that knows what they're doing to explain that over the full arc of that employment and the first thing the mercenary employee says is well i'll just go work somewhere else and the right answer for a good leader is okay if that's your approach to this business then you need to go work somewhere else i mean you just did a great test right that's a great filter you you uh you're a mercenary and you know you were with us when we're up but you're not working somewhere else that's a great filter you you're a mercenary you're not with us when we have to take some austerity measures is this the end of entitlement across the board sax i mean we had an entitlement class everybody thought they could raise a vc fund everybody thought they would have 100 irr because they would just buy nfts and flip crypto projects that had no released product and the same with employees they just thought i can just keep you know raising my salary x amount and now it looks like apple said everybody comes back to work three days a week and we don't see a lot of people quitting apple because there may not be another option and maybe a lot of the firings that are occurring i'm thinking of cameo here had top three of their top like six or seven leaders leave i interpreted that as maybe they had really big comp packages and when they did the layoffs they said you know what the number twos in these positions can get the job done for a third of the price maybe that's better for the business so is this the end of austerity the end of entitlement i think so or a lot of it there's a great article here uh in well that was that came out recently about netflix where netflix they're finally getting real about their kind of entitled their woke entitled employee problem and this is in the new york post but there's many other newspapers that covered it basically it says here netflix tells woke workers to quit if they're offended if you find it hard to support our content breath netflix may not be the best place for you said the memo so period full stop yeah they're just sick of it they're just not going to put up with it anymore they're sick of being held hostage by their employees who think that they can kind of muscle the leaders of the company by starting a petition or boycott campaign every time they want to drive the company in a certain direction and so i think companies are finally figuring out this is the only way to react to basically being held hostage if you don't like it quit if you don't have seven eight job offers you know and recruiters calling you constantly because everybody's on the hiring freeze well then maybe people will appreciate the contract of i work for you you give me money and then everything else is superfluous on that note did anybody see the ricky gervais netflix special yet if not netflix it's on netflix it's unbelievable i mean dave chappelle you know in terms of bravery ricky gervais was like i've already made my money i'm burning the whole building down i mean he went full equal opportunist and i mean i think the trans issue became like 10 or 20 percent of the of his latest special so it does seem like the comedians are saying you know what we're going to make jokes we're going to make jokes about everybody we're not going to buy into this you can't cancel us we're just going to keep making jokes and we're going to keep making money and and that whole concept that you know people are going to be held hostage i think is over independent of what you think of making jokes of you know various marginalized or smaller groups of people okay can we please go back to something brad said a while back about how mansion saved the democratic party because i think there's actually an interesting point there yeah yeah such notorious right-wingers as jeff bezos have said something very similar lately when uh do you see that where biden tried biden tried to blame billionaires for the inflation and bezos was having none of it he said no listen it's not because of us or our companies because you printed too much money and joe biden or he said mansion saved you from yourself because it would have been another four trillion of of spending on top of all the other trillions of spending that we had last year so it's absolutely the case that that if the administration was left just to own devices remember they were touting back in december they were touting the idea that this four trillion of buildback better spending would somehow be the cure to inflation imagine if they had poured that gasoline onto the fire i mean we would go to 20 inflation we might have had a currency uh you know like a serious currency issue no chamath but but i mean hold on but let me just finish the points i don't want to just make a partisan point here i'm going to go to the next question and then we'll get to the next question point here i want to there's there's a serious economics point here with or learning i hope our policy makers learn from this which is what happened over the last couple of years we had 10 trillion dollars of money printing right why did they do that they thought that they could stimulate our way out of this covid recession that they had induced with lockdowns in any event the point is they thought they could stimulate economic activity by printing money and maybe cynically politically they thought it'd be good for them in the midterms what actually happened that 10 trillion goes into the economy but there's no corresponding increase in the output of goods and services so two things happen first price levels rise and we get inflation and second we get an asset bubble in the stock market and then the way both those things sort of come crashing down to earth is the fed looks at this inflation and suddenly has to jack up interest rates that pops the asset bubble it vaporizes something like 14 percent of global wealth and then simultaneously workers feel a lot poorer because their wages haven't kept up with inflation so this whole idea that you can just print money as a way to create wealth and prosperity i hope what we take away from this i think recession that we're going into is that is not a viable strategy the only thing that creates wealth in a society is the output of goods and services that people want and you just can't try to sort of play games with that by creating phantom this sort of phantom money that doesn't represent a real increase in good services or productivity yeah i think that's a good point yeah it's hard for people not to take this all as partisan but if you just look at the objective facts the last two administrations have printed money like drunken sellers and it's a mess right now so you you can divorce yourself from any conception that this is partisan trump spent a ton of money and so did uh biden and who's more qualified than trump and biden elon bezos the people who appear on this podcast we have much more of a pulse on what's happening in the actual real economy and in entrepreneurship and in the real world and so i think that's a good point i think that's a good point i think that's a good point i think that's a good point i think that's a good point i think that's a good point i think that's a good point i think that's a good point and i love the fact that now you know bezos is a poster he just doesn't get he doesn't care and i think we're having like an honest discussion now right one of the one of the areas where i i don't think elon gets enough credit is when he explains macroeconomics i think he actually really understands the the what an economy is i mean an economy is basically a trading system for the production of goods and services if you were to go this is a point he's made if you were to go to a desert island and somebody just gives you a billion dollars when you're sitting there on that island you can't buy anything it doesn't make you wealthier what makes you wealthier is the production of goods and services that people want and that's ultimately what an economy is money is just the accounting system the dollars is the accounting system if you start printing lots of money all you're doing is debasing the accounting system it doesn't make anyone richer and yet you know the way that conversations around economics really take place the only thing you ever hear about is stimulating demand you never really hear anything about production and i mean this is an old debate that goes back to the 1980s about you know supply-side economics but regardless of what you call it wealth ultimately comes from our capacity to produce goods and services that people want it's a great point chamath all this adds up to companies and the government's balance sheet becoming tighter and more efficient so the talent diffusion across the industry is going to be a huge factor in the development of the economy and the development of the industry perhaps everybody being entitled and getting overpaid people not wanting to go to work people who have jobs not wanting to go to the office all of this seems to have actually reversed in three months so this medicine we're taking we stopped eating the bad food we started working out we're getting better sleep this is going to turn around for the the companies that take the medicine the management teams the capital allocators who do the hard work and sharpen their pencils as we've talked about this will all result in a more efficient and vibrant economy yes i think for the most part i think there's still going to continue to be examples of folks who basically run themselves into a brick wall because they don't want to make the hard decisions that is going to be more exaggerated in silicon valley because we have a culture of tolerance and we have an economic business model that supports kind of irresponsible decision making and supports poor governance you know look i've said this many times but a fund's job ultimately is to make a very important decision about whether they truly care about generating massive returns or whether the fee income becomes so meaningful so as to drown out every other incentive that they have and i think by and large in silicon valley if you track all of the increased frequency and fundraising you can also probably follow those dollars and they generally will be the most poorly run they'll be held the least accountable and i think those will have the largest negative outcomes and then instead if you follow the dollars of the the real practitioners who have discipline they look kind of sheepish and silly for years in the middle of a rally but they're the ones that are able to really reset and help some of these few companies really win and i think that you're going to go through that cycle over the next four or five years and so you know i think it's super well said because i have felt at where i've been made to feel silly by some folks who said why are you asking to do diligence why do you want to have a board seat why do you want to talk to customers why are you asking for month-by-month revenue you made a sub-economic decision like the idea that over the last four or five years you optimized for anything except the market beta was kind of dumb you know and it's and and the worst thing that you could have done in that period was confuse alpha and beta meaning alpha is what you are able to do because of your discrete skill versus anybody else beta is when just the market goes up said differently you could take any nba player and put them on a high school basketball team and they would be the you know college player of the year any single one okay that's beta yeah if you then can be the mvp of the nba that's alpha yeah okay and i think that a lot of folks um were made to feel very silly or you know a downer or a wet blanket um in these last few years who will probably have the last laugh it's been unbelievable brad to watch the changing of attitudes and the entitlement in fundraising and private markets in the last 60 days and it's been even more pronounced in the last 30.

i literally have people we talked to last month who had really crazy expectations they've come down by 50 they wanted 50 now they're at 25. they didn't want board seats now they're okay with board seats information rights they were fighting against information rights i don't know why that's a hill to die on now they're like information rights yeah sure here's our cfo's email we need to get money in the doors but they're not going to get money in the doors so um i guess what's the silver lining here it does seem to me as a great setup right now wait jason let me ask you a question hold on yeah like or to brad like and then you're forgetting one other key thing in in the in the race to raise all of this money what did these folks do they hired these mid-level kids as partners into their venture firms and gave them money to put into companies what do these people know no mentoring i'm not saying it disparagingly i'm just like what do they know how do they know how to actually invest in the business invest investing is just not you see it you just say okay well i think it sounds cool you know there are some of those uh younger folks who are going to turn out to be all-stars in there just like in the nba and they're going to be some that you know prove to be right in the beta but let me answer jason's question because you know maybe end on a on a note of uh optimism you know in some countries you know notably china right now they're doing a lot to prop up a bunch of companies that should be allowed to fail right one of the beautiful things about free market capitalism the creative destruction the cycle time on creative destruction in this country has never been faster right make no mistake about it if you took money at a valuation over a billion dollars okay last year you're not that's not a venture capital bet i call it quasi public right you stepped into the bigs and you said i will deliver this plan and if you don't deliver the plan there's not going to be a lot of tolerance there's not going to be tolerance for just giving away a bunch of more stock there's not going to be tolerance for no course correction right maybe in seed or series a right there's a lot of tolerance because you sign up to a lot of unpredictability but the level of tolerance that you'll see out of late stage growth investors is going to be akin to what they do with a public company that runs them off a cliff you know how that is you've been on those earning calls so i think this is going to shine a light on the bifurcation that we really have we call all of this venture capital but the truth of the matter is series c and before is venture once you're stepping into the bigs and taking money at a billion two billions the expectations are different your access to capital will be different um the expected course correction will be different right but i take it as a um i take it as a sign of strength that we're going to work through this we're going to have you know the the private markets are absolutely going to go through a reset but we'll get through it and the winners will win and those who fail to course correct and want to fly into the wall will do that and we'll get on with the next generation of incredible entrepreneurs solving big problems the secular curve of technology is the only way to get through it and the cycles that overlay that secular curve are not suspended we have not suspended wars we have not suspended economic cycles and so we're going to have to get through this one it's happening in record pace actually that's an interesting point i want to let me ask about a question about that which is what's the potential here for more of like a v shaped recession where to your point the market's correct more rapidly and violently than ever and it's not going to be a recession it's going to be a recession and it's going to be a recession and it's going to be a recession and it's going to be a recession and it's going to be a recession snap misses a you know issues a new forecast down 40 percent um is there a possibility that this thing gets resolved in say six months that's not to say that uh valuation levels are ever back to where they were you know in the second half of 2021 but in six months could we have sort of done this big reset washed out a lot of the problems and um you know again valuations are not back but the market becomes the the capital markets become unfrozen and we're back to a more normal operating environment as opposed to say yeah as opposed to say like more of a u where we're kind of bouncing around the bottoms here in this volatile state for about 18 months um you know and then it's more like the dot-com crash we come out of it in two years i see smart people on both sides of this i hear jason lemkin's been saying i think this is kind of short deep sweet six month reset fred wilson just wrote 18 months at least i think sequoia two years i mean i think our instinct is 18 months to two years but what do you think the possibility is that we could be in a more normal environment in six months right so let's let's separate public markets and venture markets because venture markets as you know have a six to 12 month lag just in terms of the reset but i would say you know the future is a distribution of probable outcomes there's a downside case an upside case in a base case i think the base cases by this fall will have very good evidence right of where inflation's rolling over i think it is rolling over what the fed is likely to do the upward bound on on interest rates and i think we'll be at a point where we can start underwriting to the five-year average again make no mistake about it the s p and the nasdaq today are still 30 above where they were in january of 2020 30 above where they were in january 2020 how much better is the world today than where it was in the past year and i think we're going to see a lot of growth in the world today than where it was in the past year and i think we're going to see a lot of growth in the where it was in january 2020 well i think what the market is saying is that we've grown the economy on a nominal basis about 15 percent during that time and earnings have about doubled right the earnings margins of those companies are about have about doubled so you would expect normal course and trajectory maybe that those companies would be 30 percent more valuable the problem is as we look ahead to chamath's point the earnings are likely to come down profit margins are being squeezed so i think there's a decent decent argument there's more pain to come in the public markets that we haven't seen the bottom however i do think that the fed is taking a good course here i don't think that we have runaway inflation i think that um you know we're going to have an investable environment come this fall however i think for venture there's a six to a 12-month lag to that so i think you got to add it to those six months to really get to the market clearing prices for all these companies but i think it's incumbent upon all of us to give really good feedback today and i see a lot of it right to entrepreneurs about making that course correction if they're only turning the plane 10 degrees when they see lightning dead ahead they're making a huge mistake the default action by every founder today should be a 90 degree course correction unless they have very good idiosyncratic reason in that business in terms of their output in terms of their outperformance to stay the course plan for the worst hope for the best yeah and you could even bifurcate the companies in private markets to ones that have strong product market fit and the ones that don't there's a lot of companies to david's point that we're getting series b's without product market fit you know it's one thing to get your series a when you have this like weak product market fit and a great story but when you start seeing series b's happening on momentum it's like that to me is a very good thing to see that's a good thing to see that's a good thing to see that's a good thing to do so i think that's a great thing to do and i think that's a great thing to do and i think that to me is is is going to be impossible to resolve that company has to go to zero or has to reset or give even give money back to founders those are really the three things i would see as a true bottom like the really dark moment where people have two or three liquidation preferences people reset reset comp and tell people listen we're going to cut comp 30 across the board for management if you don't like it leave um and then finally people saying you know what we're going to give the 60 cents on the dollar back to investors those are the two down terms you're saying something that i think is also important that's not really talked about which is that there's going to be a lot of really good companies with really horrible capital structures really terrible cap tables really bad valuations really big overhangs of preference stock that are going to have to get worked out and in getting that worked out going back to what brad said the person that course corrects 90 degrees will win and the reason they'll win may not even because they're being that courageous they're just being less stupid than everybody else quite honestly because you have to remember in most of these markets over the last four or five years we funded four or five versions of every imaginable company right and there's going to be two winners 70 and 30 percent yeah and and there's really only going to be one winner and then there's going to be a marginal second kind of also ran that captures some value and everybody else is not that valuable and you know that's roughly been true but the reason we were able to support that was that every company looked kind of interesting anyone with traction um could be you know competed against because the only differentiator at the time was very cheap money that was effectively free and it was flowing in you know faster than you could count so all of that has to get sorted out so i just think that that those dynamics shouldn't be ignored and so you know again hard work too i mean to the thing we've been saying here it's hard work for a board and founders to do this but what choice do you have well the problem is the problem if you take much more sophisticated markets like the market market markets like the debt markets which i would say are much more sophisticated okay cutthroat liquid covenants when you see the people that make the money two things are true number one is they're incredibly sharp elbowed and number two is they make money in moments like this right if you look at apollo's great returns or blackstone's great returns or cerebras you know these folks were the you know they they really were the barbarians at the gates and they made all the money in moments of true dislocation if you apply that construct here you know we've never had to go through a period where there are some real terms and conditions attached to the incremental dollar um and i think that if that does come to pass in silicon valley you're just going to have a reckoning and i think that that what it'll really do is just sort out the winners and the losers and it'll sort out the folks that were able to get to default or close to default alive or at least default life support saxon investable um i mean sax made a great tweet he basically said it's not default alive or dead investable or not and that's an even finer filter well default default alive is fantastic if you can get there basically just means cash flow positive i mean all default alive means is that you're cash flow positive or you're going to be cash flow positive based on the money you have in the you don't need money yeah exactly you don't need money well of course that's the best place to be is you don't need money but i think you know for early stage companies that's almost an impossible standard you know it takes time to get to the point of being cash flow positive so therefore i was trying to propose a standard that i thought was more actionable for founders because it was because it wasn't impossible and i call it default investable which is here are the metrics that you need at least i can tell you what they are in the sas world you know here's what great metrics look like here's what good metrics look like here's some danger zone metrics and you need you know out of the five key metrics you really need three or four great ones and one or two good ones to raise in this environment and no dangerous metrics and if you don't have those you need to give yourself the time to fix the problems in your business to get to those metrics um on that note you know sequoia had a really good chart called survival the quickest that illustrates this concept of giving yourself time and i threw it in the chat but basically what it shows is there's a green line and an orange line the the green line is the company that realizes in may of 2022 that we've gone into a very different environment and they slash their burn in half and they're going to have to go back and do it again and they're going to have to go back and do it again and they're going to have to go back and do it again and they basically double their runway and then there's the other company that just keeps going along the same path they were at until they realize oh wait a second you know and then you know some point in the future they realize there's been a change they make a small cut they make another small cut and they're always behind the eight ball and i've seen this so many times before that the company doesn't make cuts until they're forced to and so they never really lengthen their runway and then when they finally do make the cuts they go into a death spiral and die and now they're over the atlantic and there's not enough fuel to get to a landing strip and you just plunge into the cold ocean and die founders really have to think about the the asymmetry of the risks that they face right which is let's say that you cut too much and the environment is better than you think it's going to be well you can always hire back i promise you a lower price in all likelihood i promise you you'll be able to hire back okay but on the other hand if you don't cut enough and the situation is worse than you think then you just die so you this is why andy gross said only the paranoid survive you've got to think about the downside risk and be more skewed towards the bad scenario than sort of the the sort of wishful thinking scenario hey david just just one final point here you know because we have all these decks flying around now by venture capitalists telling founders to go make these really tough decisions being a little self-reflective where were we all six months ago where were we in october when we were putting more money in and they were hiring like crazy where were we in november right i remember some of the conversations that we were having but i look i posted in in chat layoffs.fyi right the number one company on that list gets here sequoia company okay are they making a course correction you bet your ass they are they're laying a 4 500 people 15 of the workforce and they're making a course correction the second company on that list lacework an altimeter software company that's doing terrific growing hundreds of percent laying off 300 people 20 right a 90 degrees turn of the plane right that company will never need cash again but it's not just flying toward the lightning they're making the tough decisions because that's what leaders do in businesses that are even good businesses there are a lot of companies that are businesses that should be on this list but they're bumbling along the way they're not they're not making money they're making money they're not bumbling along and not making the tough decisions we need venture capitalists that instead of you know this being a popularity contest venture capitalists need to look inside as well and say what about our firm didn't didn't work right why weren't we issuing these course corrections and telling people to tap the brakes a little bit when we knew markets were overheated last year right and so i think this there's a lot of responsibility that sits on both sides of the table um but i'm you know there's 714 startups on this list by the time we're done there are going to be at least 3 000 startups on that i was about to say at a zero at a zero that's another reason i say the fed is getting what it wants right this labor market is you know is cooling down very quickly at least in silicon valley well i mean and the fact that people felt like they didn't need to take a job and they could live off credit and there would always be jobs for them i think people are going to have to rethink like can i be fun ployed forever and you know do i need to take my career seriously do i need to pay down my debt do i need to have a balanced uh balance sheet do i need to my personal balance sheet needs to be in order as well i think that's what individual workers need to think about yeah i mean brad's right that there's certainly enough blame to go around in the ecosystem and you know vc's bought into these frothy evaluation levels last year um to some degree we were all by by the fed and these low interest rate policies i wrote my post about burn multiple and how to measure capital efficiency two years ago um it's getting a lot more retweets now than it did back then but uh but look do vcs have some self-reflecting to do definitely but you know i'm seeing a lot of tweets going around basically saying like people objecting to this advice on the grounds you'll hear something like if you vcs wanted us to operate more efficiently then you should have invested more efficiently or if you wanted us to be disciplined you should have been more disciplined in your investing and to me that's kind of missing the point it's kind of cutting off your nose to spite your face the reason we're giving this advice is because we just want our companies to survive and we've been we don't want a zero we don't want a zero we've been through multiple down cycles and the truth of matter is unless you've been in the business world for over 14 years you've never been through a down cycle i mean that means that you know no founder under the age of what like 36 has even seen a down cycle before they don't know what it can be like when you go into a two-year nuclear probably they probably weren't the pilots at that time anyway so it's more like people who are 40 45 have the scar tissue because they were in the pilot seat totally totally so the reason you're hearing all these vcs all of a sudden say get more disciplined is is mainly because we've seen this movie before and we don't want our companies to run out of money and die i think you can say if you could the stock of all of these random peanut gallery ceos tweeting their disdain on twitter if you're right that would be a great index index down fixing stuff just write that company to zero yeah just turn your twitter out and just sharpen your pencils um i i we we would be remiss if we didn't talk about uh at least for this last segment about the tragedy in uvalde uvalde texas uh 80 miles west of san antonio on tuesday 19 elementary kids in twitter and we're gonna talk about that in the next segment but i'm gonna end this video here and i'm gonna wrap up this episode and i'll see you in the next one bye bye bye bye two adults were murdered um how are we gonna talk about this without losing our it's really hard i think maybe the roadmap i did give this a lot of thought it was like why why is this first segment on the market trundling along on life support for an hour and 10 minutes and i think part of it is because none of us can really talk about this without losing our cool it's really hard and but i do think we did good work chamath i i was thinking about the good work we did in the episode of roe v wade and we actually came to a point where we said you know here are the extreme positions and then you're like hey wait a second i found this data point i found this data point and we actually figured out hey 80 of people want this definition of abortion in the united states so i i'll throw it to you chamath you know we're all outraged we're all frustrated but maybe we could start there is there a consensus of what could be accomplished here that you've come to i've started to think about it a whole bunch but you know we're all outraged we could all yell and scream here but we're all outraged we could all yell and scream here but a path forward is where my mind goes i'll just tell you what i what i um have been thinking about okay this is just a random stream of consciousness let's do it i think that the democrats will not make any progress because they try to make this unfortunately uh a moral virtue signaling issue the republicans will not make any progress because they become sort of very binary adamant um absolutists about constitutional rights and the interpretation of that right in a very specific way um the truth is in the middle you know if you go back before we talk about uvalde um peyton jondron who was the kid that shot up a tops supermarket in buffalo and killed umpteen you know black shoppers he was a black shopper lived in a state where there was a red flag law for those that don't understand what red flag laws are david you know tweeted some stuff about it as well but essentially it allows a community member or a family member or a school teacher or a police officer to essentially put a restraining order around an individual that they think could cause harm and use that as a way to confiscate their weapons people have talked about red flag laws as being possible while he lived in a state the kid was you know put under a psych hold you know a year ago and it it all just falls through the cracks now you know ted cruz or somebody else said let's spend 10 billion dollars and only have one door into a school and put an armed guard there well then you find out that uvalde you know doubled their security spend over the last two or three years they actually had a person that may or may not have just kind of like stepped to the side or something to let them in the police according to the uh ap showed up and stood around for 40 minutes before they were able to actually breach the school you know so much so that the quote in the ap article was that there was a parent that tried to get other parents to for 40 minutes they were standing there you know in california you have you know very restrictive measures um but we've had you know in san bernardino and other places we've had mass shootings here as well because the police are not there to protect the school they're not there to protect the guns can just get transported across state lines and there's there's no real way to stop this the nra i find out just so if you guys are interested uh mitt romney took 13.6 million dollars from the nra this is the moral finger wagger of the republican side who you know last time i checked is a multi-centi millionaire but somehow still needs to take 13 million dollars from these folks rich burr took 7 million roy blunt 4.5 million tom tillis 4.4 million cory gardner 4 million marco rubio 3.3 million there's no effective counter lobby that says how about we have a more moderate and restrained pro-gun set of rights and field candidates on the left and the right that could jason find this middle ground and so you know we're in this two or three day period it seems like where folks will get extreme and then nothing will happen here's one thing that i think we can all agree as well if you look at the underlying family situation of all of these mass shooters there is a really disturbing theme that i think is worth putting out there these are all universally young men 18 19 odd years old they come from broken families this individual salvator ramos um father was absent uh again according to the times in the wall street journal article i read mother intermittent drug use issues, lived with the grandmother.

Bullied. They're unemployed, barely graduated, if graduated at all in high school. They harbored these deep resentments towards women or minority groups. They then project a lot of their frustration. They were bullied potentially in high school growing up, and all of the, they were posting all kinds of very challenging content.

You know, apparently this kid had a one TikTok of where he sat in a car with a dead cat in a paper bag. You know, he would post on Instagram of assault rifles, and nothing happens. So I just think that we have to acknowledge that there's a complete failure of our politicians.

And at this point, I think they should all be replaced, writ large, every single one. Nobody has added value to this solution. Nobody has really tried to figure this out. But then also, like, parents have to do something. Incrementally more from the perspective of the community, because these kids are going to school with our kids.

And the red flags are there. The red flags are there. So just one last thing. And I said, I said, Brad, I said to my kids, when you interact with your friends, I just want you to understand when you're on social media, and you encounter this content. I hope you're never like either scared or embarrassed or unsure enough to just show somebody when this stuff is happening, so that you can let somebody with a little bit more maturity and judgment, try to figure out what to do, if anything.

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And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.

And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key. And I think that's the key.