sacks, how are you doing with your Tucker afterglow? Amazing episode, the feedback is the number one episode of the year after the vape, I think in trending to be maybe a million views on YouTube. So how's the afterglow? Yeah, I did notice there's one particular clip that's going viral where he calls you stupid.

Yes, there's that. I thought Tucker was incredible. I found him so intellectually interesting. And it's not always the case that great moderators and interviewers make great guests, but he is so intellectually curious and has unique points of view that you want to hear them out. And his style of talking I find also, like very easy to listen to.

I thought he was really impressive, really, really impressive. You don't have to agree with everything he says quite honestly. And some people probably won't. But I found it really compelling. I don't agree with half of stuff he said or maybe a third. But I too enjoyed it very much.

I thought he was great sacks. I got you know, as the person people believe has Trump derangement syndrome, thank you for your trade. You know, or the person people consider like the far left, they're like, why aren't you pushing back? Why aren't you pushing back and this has become a MAGA takeover.

You had Jared Kushner, he didn't get pushed back, you didn't get pushed back to Tucker. You know, one of the things we're trying to do here, I'm speaking for myself, is to let people talk, let them put out their position. And if you do that, and we did that with the presidential candidates, exceptionally, I think, then you can decide for yourself.

And yes, we'll ask a hard question here or there, or maybe, you know, push them a little bit. But we don't want to make it uncomfortable to come here and make it like they come here and we take the 10 worst things about the person or the 10 criticisms and run through them.

You can get that on cable news, you can get that on either side of the aisle. What I want to do is let them talk. And then actually interesting things come up. Why do you always get this feedback? Because people perceive me because you say I have Trump derangement syndrome as the token left guy.

That's all. And I'm a moderate and I try to keep saying that but people keep wanting to say I'm like, for our left, I just want folks to realize that we're going to go and have more guests, especially if we can learn from those folks. And especially if hearing them out can expand how we think about what's going on in the world.

So get over it. And it's about learning and being curious. Hard conversations will be the norm here on the pod. We're going to have any guests we damn well, please. And some people will choose to not ask hard questions. I will choose to ask hard questions, but I won't hijack the show.

And so please don't email me and tell me I didn't do my job fighting for the left or whatever. That's not my job. I'm going to ask a hard question when I want to on the show. But I'm not going to hijack the show with 20. Bravo to you.

I suspect you're getting a lot of pressure from the private equity wives. Yes. What a great moment. What a great moment. People on SSRIs Jason are blowing up your inbox. Well, the conversation that everybody's going wild with so let's just get into it is these college anti semitism hearings.

On Tuesday, the House Education Committee spoke with the presidents of Harvard, Penn, MIT. And they faced a lot of tough questions. Many of the videos went viral. And I guess the part that specifically went most viral was the presidents of these organizations refusing to specify whether or not the calls for mass murder of a particular group genocide of students were or were not against the codes of conduct against bullying and harassment at places like Harvard, Claudia and gay specifically, was asked over and over again, whether chance of intifada were violations of Harvard's code of conduct.

She didn't give a great answer. I'm just curious, sacks. Obviously, you're Jewish, you went to the Ivy League, passionate about free speech. And you've talked about surplus politics. He is. What's your take here? Should students be allowed to march around campus, chanting from the river to the sea, intifada, etc.

Because of free speech? Or, you know, did these code of conducts come into play? And what was your reaction when you saw their answers? Because obviously, there's a nuanced issue? Well, look, I mean, I have a very high bar for free speech. So I would allow, you know, almost everything.

The problem that these university presidents have is that's not their position. They're trying to wrap themselves in the cloak of freedom of speech and academic freedom. But that has not been their practice on campus for many years. On a previous program, we talked about that fire survey, which polled students about how free they feel to express opinions on campus.

The results were dismal for the Ivy League, the Ivy League scored way worse than state schools. And in fact, remember that Harvard got the blue Tarski is 0.0. Their last place, students there reported that speakers were shouted down, they weren't even invited, they weren't allowed to, to continue and finish their speeches.

So Harvard has an abysmal record on freedom of speech. So it's hard to believe the president of Harvard when she claims that she's standing up for freedom of speech. And in fact, if you were to apply that same standard to other groups, do you really believe I mean, imagine if the representatives at that hearing had said to the president of Harvard, you know, are you allowed to advocate for genocide of black people or trans people?

I mean, would the answer have been the same? I don't think so. I agree. I think absolutely not. So the question is, why are Jews being treated differently than these other groups? And I think this all goes back to kind of woke identity politics, where in the woke ideology, there are certain groups that are victim groups.

And there are certain groups that are oppressor groups. And if you're in a victim group, then you get special protections. And if you're in an oppressor group, then it's just assumed that you can't really suffer discrimination or, you know, injustice in that same way. And I think that Jews have basically been put in an oppressor group, they basically are being put in the same group as, as all white people.

And I think this has come as a great surprise to a lot of donors to these university campuses, who I think, were okay with woke identity politics to some degree when they believed that Jewish people were a potential victim group, and that anti semitism was being treated as real.

And lo and behold, they have found out that no, they're an oppressor group, and they're not protected. And even very explicit cases of anti semitism are not being recognized by these universities because, again, it doesn't match up with this woke ideology. I think it would have been a lot better for a lot of these donors to realize that woke identity politics was a cul-de-sac.

It was something that they should not have wanted to participate in. But I think they're now waking up to the realization that in this, again, oppressor, oppressed dichotomy, they're on the wrong side of that. I think you're exactly they don't like that realization. Exactly correct. Identity politics road to nowhere.

Freeberg, you gave a passionate speech here about being forced to pick a side when we're talking about the conflict in the Middle East. And I guess there's underpinnings here of your discussion, anti Zionism, anti semitism, and where's the line between is just caring about humans and children being killed versus maybe harassment, etc.

I'm curious when you saw these answers, what was your reaction? And yeah, how do you feel about it? I was surprised that the Congress people didn't ask the university presidents, what would your reaction be? If they started to burn crosses, and say something about white supremacy, black people don't belong in the US immigrants don't belong in the US if you picked another ethnic group and made statements that have traditionally been deemed threatening and harassing?

Would they have made a difference of judgment? And if so, what's the difference between what's gone on this week, or in recent weeks, and what's gone on in other civil rights actions that have taken place in educational institutions. And I think that would have been like a really kind of telling understanding of the discernment that's that's being made on campus today, versus in the past.

It is interesting to see that there's clearly a sense of being torn with respect to allowing the freedom of expression about groups that feel oppressed to be allowed to happen on campus, because that is probably a majority opinion. And that's why I think this is particularly difficult for these presidents to handle the situation.

And I'm not excusing their behavior or their actions or their comments yesterday. But there's clearly something underlying this that I think we need to just acknowledge, which is that there is a large number of people, perhaps the majority of people that feel that there is some oppression going on, and that that oppression has a right to be spoken for, and that this behavior is the only way the Boston Tea Party did not follow convention, the Boston Tea Party was a rebellion against an institution that was oppressive and the Boston Tea Party was the only action that was going to make a change that could have driven a change and rebellion against an institution or an establishment that causes oppression isn't supposed to have rules.

It isn't supposed to follow convention, it isn't supposed to be a discourse. And so I think that that sentiment is where a lot of this conflict is coming from for the presidents in making these decisions that they see that the majority of people truly believe that there's oppression that this is the course to speak up for that oppression, and that they can't step on that because if they did, they would be causing more disruption to more people than allowing it and it's a very difficult situation that they find themselves in.

So I'm not excusing it, but I'm trying to frame up why I think smart people might be acting this way. Frankly, I think it's worth asking what would be the case if this were other ethnic groups or other people that were being kind of, you know, told, hey, we're gonna have an intifada against x or y or z, where the actions have been the same.

Chabot, if they were asked that same question, is calling for the genocide of black Americans, Asian Americans, Indian Americans, trans Americans, harassment or bullying? What do you think their answers would have been? And then where do you think this has gone? I don't know what their answers would have been.

But obviously, it's morally unacceptable. As best as I can tell, they were coached by lawyers before they appeared in front of Congress. And they found some verbal gymnastics, maybe to try to defend their point of view. And in it, they lost all moral clarity. Because to your point, Jason, if and to Friedberg's point, if you just replaced the Jewish people with any other people, maybe in this moment, it was harder to see.

But it's like, these should not be debatable, difficult moral questions. So how did we get here? I think that over the last 40 years, and to be honest, it started when the US News and World Report started to rank universities. They gamified the desire for these universities to get at the top of the list, which allowed them to theoretically get better recruits.

But really, what it did was allow them to build massive asset management businesses that ultimately consume these schools. And now what you find is that the learning process has gotten totally perverted, because it became a second order priority to being able to raise money and to manage assets. I think Harvard Management Company at one point was one of the largest owners of forestry in America, you know, the other large owner was john Malone, a rapacious capitalist.

So what this shows you is that the mission of these universities, which is to actually celebrate free speech and to teach kids to think critically has been lost. And I think that this was a very simple way of seeing it. And it should be disturbing to people that this happened, that the places where you send our 18 and 19 and 20 year old kids cannot at a very simple level, teach the moral clarity to say teaching or supporting even the concept of genocide should is wrong.

Can you teach it in a historical context, obviously, but that's not what they even said there. Right. So they got into a level of verbal gymnastics, which I think is really, it should be viewed by everybody is pretty morally unacceptable. I think it's well said, and it's clearly bullying or harassment, if you're going to chase Jewish students around campus.

And I think that's what we saw. Now, if you were to come off or sacks, or maybe sacks best since you're super, you have a super high benchmark freedom of speech. If these were students in a debate club, or in a lecture hall, giving their position taking hard questions, people opting into it, wouldn't feel like bullying harassment.

Yet, the hypocrisy is so thick that the you know, they chase people like Ben Shapiro, off campus, etc. When they had something controversial to say at many of these schools. But I think we can all agree, chanting about genocide, and chasing students around campus and disrupting the campus. That feels like bullying harassment.

I don't know that and I agree with you, Chamath this mental gymnastics that they went through. But the statements, it's just very easy to say, yes, that's harassment. Yes, that's bullying. Now, if you did it in a lecture hall, and you or you wrote a paper, sacks, maybe doesn't feel like bullying harassment feels like freedom of speech.

Yeah. Yeah, look, I mean, we can, you can always debate the hard cases and in free speech and where the lines should be. And again, I would draw the lines in a way that makes most speech permissible. But when you're talking about chasing students around campus to yell in their face, that clearly is bullying or harassment.

And there's no reason to ever allow something like that. But again, the point I would make is that what you're gonna see in the wake of this is that a lot of Jewish people are realizing that they don't have a home on the left anymore. And I expect that many Jews are going to start shifting right and into the Republican Party to a place where I've been for a while.

And and I think this goes back a long way. So if you go all the way back to the original civil rights movement, the 1960s, I think that many Jews were an integral part of that movement. And they felt a great solidarity with the original civil rights movement, civil rights leaders, because they felt like they had a shared history of persecution that blacks in America had suffered from racism.

Jews around the world felt like that stuff from anti semitism. And they basically believe that all people should be treated equally that we should have individual rights. And basically, they were advocating for a colorblind standard, right, a colorblind treatment of all people. And so I think that Jews historically have wanted to be on the left for that reason.

But I think what's happened over the last few decades is that the civil rights movement, in particular, and the left have moved to this woke ideology where it's no longer about colorblindness. It's more about identity groups. And instead of trying to get past racial differences, it's been about accentuating them.

And so we've had this whole equity agenda, which is really defined as redistribution from one racial group to another racial group. I think that for whatever reason, a lot of Jews just hadn't confronted the reality that the left had really changed in this way. And again, I think it goes back to the fact that they thought that, oh, well, if we're going to be defining identity groups in this, you know, woke way, you know, Jews obviously should be one of these victim groups, but they're waking up to the fact that Jews are not, you know, Jews are just in the minds of kind of woke ideology.

Jews are just white people. Okay, successful white people with two white people with a Jewish background. And as a result, they're part of an oppressor class. And I think that for a lot of Jewish people who are waking up to this are realizing, wait a second, this is actually a very destructive ideology.

And it makes us the bad guys. And so I would expect that, again, a lot of Jewish people are waking up to the ways in which the left has changed. And they're realizing that that is not a hospitable place in the political spectrum for them to be. And I would expect there to be kind of a pilgrimage now, of more Jews in America towards the right, as opposed to remaining on the left where they've always been.

Yeah, the left needs to remember, people should be judged, not by the color of their skin or their ethnicity, but the content of their character. It's a quoting MLK can get you canceled right now, I think, to actually say that people should be judged by their color blindness is considered.

You know, a lot of people call that racism. Now that's like, by the way, that that is the mainstream conservative view on civil rights related issues is that colorblindness should be the standard, right? I want to treat everyone used to be the same as individuals. Yes, exactly. But that was the liberal point of view.

This was the civil rights movements. Basic tenant. Yeah, we've lost it all. By the way, I think there is just one other caveat we have to say about this whole issue, which is that it should be possible to criticize the State of Israel or Netanyahu, whose government or the bombing campaign they're conducting in Gaza, or the actions that led up to this event, there should be room to criticize Israel without being called an anti Semite.

I want to be like really clear about that. And there needs to be a pretty wide latitude to have that conversation. And I do think that one of the mistakes that's happened for a while now is that Jewish groups have been a little too quick on the trigger to call people anti Semites for criticizing the policies of the Israeli government.

And again, I think there needs to be wide latitude to do that. However, I don't think that's the type of speech that we're talking about here, Jason, I think you framed it up pretty well. This is people who have veered off of legitimate criticism, whether you agree with or not the legitimate criticism about the Israeli government's action into this sort of genocidal rhetoric.

And that's what we're talking about here. Absolutely. Any final thoughts from the rest of the panelists before we move on to business? You guys think that they're going to get fired? Or what do you think is the right consequence for this? I think they're getting fired. I think the money, as you pointed out in your tweets, or is going to cause that they're going to lose a lot of donations.

What do you think? I'm not tied into these like donor groups. It's the donor groups that are going to drive the decision because they're going to call the boards. And so I think it's really board dependent. Obviously, Ackman is a big donor at Harvard, and he's been very vocal about what he wants to see Harvard's board do.

I think this is going to drive a big change. Whether individuals get fired. I really don't know. I think of the four, if I were to just have to make a bet, I'd say probably at least one of them is getting fired. It's like, but it's certainly going to change a lot.

Matthew, you think they're gonna get fired? What do you think as you wrap final alert tomorrow? Yeah, I think I think free burgers, right, you have to follow the money. And I think the money has been very clear that this can't stand. And I think that that's good, because I think the people who've been donating have enough moral clarity on these kinds of topics to say this is unacceptable.

So how long will it take to filter through the decision making? I don't know, because I also don't know how this machinery works. But I think what people have to decide immediately right now is all the kids that are applying for early access and early decision. Do you really want to go to these schools?

And the parents? Do you want your kids to be going to these schools? So I think that's that's a kind of a decision that can probably happen right now or needs to happen right now. While all of this other kind of like donation driven asset manager driven decision making, take shape.

All right, let's get into the state of the economy. It's a really interesting story I sent to the group chat from the Financial Times about tribalism now impacting how people view the economy. It's called expressive responding, basically, how you feel about the economy is based on which tribe you're in.

Here's a quick snapshot of what's going on. If you're a Republican, and you were doing really well under Biden, you're going to say things are terrible in the economy during Trump, Dems were doing awesome, like everybody else. But because they hated Trump, they said the economy was trash. Here's the chart that explains that.

And then I'll give you a couple quick bullet points of where the economy is. But you see the divergent there in the charts and based on the different administrations being in power. And if you look at the second chart, it's pretty telling this isn't happening. This tribalism is not happening in other countries, you can see France, Germany, UK, people feel about the economy, how the economy is actually doing pretty wild data.

And I'll let you respond to that in just a second. I'm just gonna give you eight quick hits on what's going on the economy credit card debt is reaching all time highs. We surpassed 1 trillion back in July keeps rising. People are taking money out of their 401k is hardship distributions increased 13% between q2 and q3 super spending just collapsed in October growing only point 2% last month versus 7% in September, but November year over year increases in Black Friday and Cyber Monday spending.

So maybe that's a head fake. I don't know maybe people are bargain hunting, hunting consumer prices rose just 3.2% year over year in October versus 9.1% in June of 2022. Home sell 13 year low in October. Most folks are betting interest rate increases are over and summer betting interest rate cuts will start as early as q1 call she's forecast say we should expect to see and that's a prediction market to quarter point cuts by July sacks.

We've been bearish on consumers. And all this crazy debt. Is this the beginning of the end? Is this the end? Where are we at in the consumer spending cycle? It's hard to know because there's so many mixed signals. Kobayashi letter had a great tweet on this. There's a lot of mixed economic data right now.

But I mean, the economy seems to be doing fairly well, but the electorate doesn't feel it. And you're seeing in recent weeks, you're seeing a lot of commentary by pundits trying to convince the American people that the economy is better than people evidently feel that it is. And I think that one of the big reasons for this gap is that over the last few years, we've had a lot of inflation.

And the rise in price levels has not been matched by the rise in people's incomes. So people simply feel worse off because their spending powers diminish. Now, it's true that the current inflation rate is going down. But all that means is that the price level now is growing at, call it 3% issue year, it's still growing.

It's not like prices have come down. They're just rising at a slower rate. So you know, last year, we had a 9% in inflation. And inflation has been high the last couple of years, the rate of increase is slowing down. But people's wages, if you're working class have simply not kept up with the price of goods and services.

And so I think people feel worse off than they did a few years ago. And you can try to convince them till you're blue in the face that actually, the economic data is great. But if you're somebody whose wages have not kept pace with price levels, you're not going to feel better off.

Jamal, on your first point, I think that there is this thing that we've grown accustomed to, which is how you feel about what's happening versus what the data may say. And I think that the press and journalists in a pretty untrustworthy way, amplify this separation. So we hear about the economy doing well, maybe it's not doing well, we hear how the economy is not doing well, and it actually is doing well.

Nobody wants to write about the data, people want to write about their feelings. And their feelings largely are more defined by the people around them and what they feel. So simple example, Nick, if you just want to throw this up, but there was a this is the Federal Reserve's data, this is not anybody else's data.

But you would think that the wealth gap is being exacerbated. And you would think that wealth gains are going to a few. And again, without having an opinion, the data shows something truly incredible, which is that the American dream is not hanging on by a lifeline. But more and more American families are achieving it.

You know, 12% of American families are now considered millionaire households, 8% are considered multi millionaire households. That's incredible. But what's even more impressive is that even as they do well, the cohort underneath them, the folks that make 150 to 250 k a year are the ones that are absolutely crushing, and they're making more than the top 10% of all families.

So I think Jason, the the broader economic takeaway I have is unless you're willing to look at the raw data, the risk is high, that you will be fed an emotional perspective that amplifies your bias, or causes you to reject that view, because it just seems so untrustworthy. And it doesn't map to what you're seeing.

It's very, very hard to tell the truth. That is Federal Reserve data that tells the truth about the US economy. And it turns out that, you know, the economy is pretty good and doing a lot for a lot of people. Freiburg, where do you sit, you've brought up the issue of credit card debt as a leading indicator, it's continues to surge.

But there is some inkling that consumers may be tapped out IE tapping their 401ks. So what's your take on the consumer and this tribalism that we're seeing in the interpretation of data and how people feel about the economy? No, I mean, I think if people don't feel like they're progressing on the order of 10% a year, in terms of income adjusted for purchasing power, they're generally going to be unhappy, and they're going to project that as a general statement about quote, the economy.

And so the more people that that's the case, the more you see that happening. And so while there may be, you know, a minority of people that are seeing great economic mobility, if a large enough percentage of people I don't see it, roughly call it 10% increase in lifestyle ability year to year.

That's going to, you know, catch up to these overall scores of consumer sentiment. I think the way that economists measure the economy is a lot different than the average person measures the economy, which is really their own, you know, purchasing power and income. Saks your thoughts. Look, at the end of the day, the question that people ask themselves, which is the question that Ronald Reagan as voters in 1980 is, are you better off than you were four years ago.

And I think that a lot of people, particularly working class people don't feel better off, because mainly their wages have not kept pace with the overall inflation level, not just measured on a one year basis, but over a four year basis. And I do think this could explain some of the tribalism Jason is that we've talked about this before that the biggest gap in the electorate is between professional class and working class.

If you're a professional class, meaning you have a at least one college degree, by more than 30 points, you're likely to be a democrat. And if you're working class, which just means, you know, no college degree, let's say high school educated, you're much more likely to be a Republican, the parties have sort of flipped, the Republican Party is now a working class party, I think a lot of people find that very surprising.

It's not the party of, you know, fat cat bankers anymore. And you know, the fortune 500. So the parties have really flipped. And I do think that working class people are most impacted by inflation. If you're kind of in lower to mid income, and your wages, the wages of labor have not gone up and prices have then you're going to be worse off.

I do think that is a big part of it. And I think the media is sort of working on overdrive right now to convince people that they should think that their circumstances are better than they actually are. And, and maybe look, maybe the overall economic data right now is mixed to positive.

I'll certainly concede that. But I think for the average person, what they care about their pocketbook, and it's far from clear that they're better off now than they were four years ago. Jason, what do you think, I think is a very important segment, because you're correct. sacks in a very nuanced point, multiple things true at once here, there is still sticker shock from inflation.

I went to buy birthday cake, $47 for a cake. I was shocked. How does perfect it goes for you? So now is it made of cocaine? No, no, I just put the cocaine all over the top. But yeah, that's, you know, I got truffle shaved on it. I really felt like it was a white truffle cake.

And this was a small cake. It was nuts. Anyway, there is sticker shock. The truth is, though, wages are very strong right now. And wages are slightly outpacing inflation. But that is a new phenomenon. Correct sacks. That is a new phenomenon. So people are still feeling the sticker shock.

But at the same time, unemployment and wages drive how people feel and people are feeling obviously very confident as you see in the credit card debt when you're confident to trumat point about just follow the money and look at the actual numbers. People would not be taking out credit card debt, they wouldn't tap the 401k if they felt they've got great job prospects.

They have options for jobs. It's a 50 year low in unemployment, which is unbelievable that that's continued. And wages are increasing. Uber drivers are now making 30 for $36. And listen, I've been tracking how much they think from the beginning, it was $15, then $20 and $25. So wages are increasing massively, the GDP is 5%, or something like that.

And unemployment is low. So the economy is actually doing extraordinary. That's just the fact but the sticker shock is very, very real. So I think we can wrap it there unless anybody wants to add well, by the way, just over the last month, there's been a huge rally in stocks, especially growth stocks, Bitcoin is now rallied to 44,000.

What? Yeah, that's nuts. A firm is up like 20% today. That's you know, the buy now pay later company because on strong Christmas spending, like you're saying all the stocks, sacks that bottomed because of interest rates have now just started to massively rally, massively. So all the secular this is all based on expectations of rate cuts coming sooner than people thought.

And I think Bill Ackman has really led this trade and he timed it perfectly apparently, by basically going long the bottom market like a month ago, 10 years at 417 411. Sorry. We're off like, you know, 80 basis points in like a couple months. It's not right. But all this euphoria, we've gone from fear to greed.

And, you know, really in one or two months, it's all driven by rate expectations that people are expecting a rate cut in q1. And so far, that's not really justified by the feds. hawkish rhetoric, but people nevertheless seem to think it's coming. I think that this could be a do I put on my tinfoil?

conspiracy. I think there will be a rate cut in q1. And I think this is the Biden bailout. Let's I think this is I think this is a Biden bailout by the Fed. Because if they cut rates in q1, that's going to make everyone feel really flush. It takes about six months to work its way into the system.

But that's going to give a big boost to the Biden campaign. If you see a quarter point rate cut in q1. A trillion of the 5.7 trillion in money market accounts will rip into the market. Oh, wow, that'll be nuts. Just people knowing that they're on the way down that they peeked in on the way down is gonna unlock a lot of capital.

It's gonna unlock a lot of capital. And to be clear, it's a small group of people who believe it's coming in the first quarter, Bill Ackman and David Sachs. The majority according to prediction markets think we'll have two of them, you know, by the summer, without debating whether it happens in first quarter or second quarter.

The more fundamental thing is, if you look two years out, you probably see rates around two and a half percent. And that's 160 basis points from here. That's the big, big change that I think helps all of us quite honestly. Yeah. And let's segue here. Great segment, by the way, gentlemen.

Because in our backyard, what we do every day in terms of capital allocation and building companies, the cleanup work continues. It was a rager folks, people partied well into the next day. And we're still seeing seeing the cleanup Carta has some great data. And this is data amongst Carter users, which is a subset of users willing to pay an expensive price to manage their cap tables, the number of companies that shut down after raising 10 million, which is a very high benchmark that's up 238% in 2023.

From 47 companies last year to 112 this year, also VC firms, and I'm seeing this very quietly happening. This isn't reported on VC firms are very opaque about laying people off or reshuffling the deck, but a firm called Openview out of Boston just abruptly shut down they had 70 plus employees, they just raised about 600 million of an $800 million target for their fund.

There were reports about great cost, not hitting their target and reshuffling a bit that might have been overstated to be honest. But on the bright side, we're seeing some rebounding in a RR of the public SAS companies that started to rebound in q3. Here's the chart from altimeter. Looks like we hit bottom in q1 of 2023.

Another bright spot public firms that are continuing to downsize are getting rewarded by the public market Spotify just did a third layoff 17% throughout 1500 employees. So I guess sacks everybody was thinking SAS was over it was the end of days we talked about not a recession SAS but a depression and I think that was accurate.

How are you feeling about the private company market and maybe stabilization or the return of growth in SAS companies? Well, what I've been saying for the past year, year and a half is that we've been in a software recession, the overall economy may not have been in a recession because the consumer has stayed strong, as you said, consumer spending has stayed strong.

So the BTC part has held up the economy. But I think in B2B, and particularly in software, there has absolutely been a recession. It started in the first half of 2022. With rate hikes, there was a huge revaluation of growth stocks. And you saw multiples come down on SAS valuations from in the public markets as high as 35 down to seven or eight, something like that.

In private VC world, we saw valuations go from called 100 times ARR to something more like 30 times ARR. So the first half of 2022, we saw a valuation correction. But then around mid 2022, what I started seeing in all my board meetings was every startup started missing its sales forecast, and they started reforecasting down.

And that process really continued for a year. And we saw the exact same thing in the public markets in public SAS companies as well. And it's really remarkable how the data from the public stocks that our friend Jammin' Ball from Altimeter has been publishing, you know, regularly, how that has matched up with what I've seen kind of anecdotally, in board meetings, and you know, in conversations super healthy, correct, that the, the CEOs and the boards understand, hey, these private market valuations have to in some way, be informed by public, this is a very short because the public stocks are the exit comps.

Right. So you know, if the public stocks are worth, I don't know, a third of what they used to be, then private valuations have to reflect that. But in any event, I want to go beyond just talking about valuations here, I want to talk about the business results. And again, for this time period from call it mid 2022, to mid 2023, there was a software session, software companies were cutting jobs, they were reforecasting down, they were growing slower, and many cases, they're actually shrinking.

I mean, some companies lost AR are because of churn, you know, a lot of their customers were shutting down, or sharpening their pencils, they were consolidating vendors. The last year has been a really, really tough time in the software space. But I think now we've turned a corner I started seeing in the last couple of months, I started seeing green shoots, and some my board meetings.

And now here we have this chart from jamming that can you just put this on the screen again, where we saw that finally in q3, we went from four quarters of negative growth in net new AR are to finally a quarter of positive growth. Now, 2% is not a great number, but at least we are finally positive, as opposed to negative, which means that net new AR was shrinking.

I think again, the the software session, I'm calling an end to the software recession. And is it an official breaking breaking news? SACS has called an end. So let's let the party begin, I think software revenues are going to rebound. I think the open question that's remaining then is will valuations rebound?

Or will you have to grow into the last valuation or some truncated valuation? And this is where, you know, even if rates go to 2% are people going to be as excited again, to bring the public markets back to 15 and 20 times forward ARR. And that's an open question.

I think the market says no, which means that even as growth comes back, you still have a valuation reset, that may actually explain why startups are shutting down. Why venture firms that you know, if you looked at that firm in Boston that shut down, they had some seemingly very good companies in their portfolio.

So there should be nothing stopping them from continuing to raise capital and invest. But I just suspect the the end market that they operate in is going to be value constrained if they pay top dollar for things that are now just worth a lot less, even if they double revenue.

I'll give you an example. We talked to the private equity guys a lot just because we try to understand where they are buyers, right? Why is that important? explain why private equity versus public markets and how they think about businesses? Because I think it's a very important point that you've made to me privately.

I think that when you look at the ecosystem, the ecosystem doesn't work. If you never get liquidity to your employees and to your shareholders. So liquidity happens in one of two ways. It can go in the public markets, or you can transact to private equity. Why? Because they have almost as much money and frankly, more in many cases to pay than a public market can give you via a traditional IPO.

So I think that they are a pretty rational buyer. And they do a very good job. Because they are a concentrated buyer of finding a very fair price, what is the real honest market clearing price. And so if you don't want to look at the market through rose colored glasses, and you want sobriety, ask a private equity investor what they would buy your position for.

That's why I spend a lot of time talking to them because I want to know what this stuff is really worth. And what I would tell you is that even for companies that are in the hundreds of millions of ARR, the premiums that they're willing to pay are between three and five times ARR at the high end.

And that a lot of deals get transacted between one and three times ARR. That may not be what people want to hear. But that's because when you look at the underlying ability to generate cash flow, many of these businesses haven't proved it yet. And so they want to buy things in a margin of safety where they can come in and cut certain expenses, while still helping to grow in certain markets.

All of that used to be a 10x multiple in the public markets. So private equities buying for three to five times and really one to three times. It's going to be hard for the public market buyer to be paying a lot more than that. Got it. Can I build on that?

This is a chart that was published on December 1 by jamming at altimeter. And I do think it speaks to the valuation question quite well. You can see here that there's this line at 7.8 times, which I think refers to 7.8 times next 12 months revenue. That is the long term pre COVID average.

So that is where the average SAS stock has traded over a long period of time. Eight years. Currently, as of December 1, we're at 5.8. I think it's probably a little higher now because the markets pretty much rallied over the last five days. But you can see that we're still trading below the long term average in terms of multiples.

And part of that is because interest the 10 year is still at 4.3%. Although it's come down quite a bit, you can see a peak there around 5%. Now it's at 4.3. If you believe that the 10 year is going to go back down to I don't know this two and a half 3% range.

And if you believe that growth is re accelerating, then I think there is room, you know, for this number, the 5.8 number to at least grow into the long term average, which is 7.8. So there there is room there, I think that as the stocks are priced today, it doesn't feel like they're overpriced.

Let's put it that way. And I never want to tell anyone what to buy. But you can see here that we are still trending below the long term average, he should pull this number back to 2010. Interesting. So at the start of the super cycle, after the Great Recession, yeah, not a bad point, but and probably pull it back, frankly, all the way to 2005 2006.

Because you had enough companies there that were public that were sassy software companies, including Salesforce might be a six instead of 7.8. And we might be at the 20 year average is a really good point. I'll ask Brad to do that freeberg. Switching to you, you have been a capital allocator and company formation, executive for the last close, getting close to a decade.

And you made big news this week, instead of doing more funds, which I know you had a lot of people interested in backing your funds, you decided you're going all in, and that you are choosing to take the highest performer most promising company in your portfolio and become CEO of that company explain your decision because I think it does relate exactly because you're got skin in the game here the most skin possible, which is your time.

You've decided to go the CEO route put all your eggs in one basket explain your thinking. We started a business at the production board, which is my firm. Four years ago with Judd Ward, who's the CTO and co founder of this business who came up with some pretty novel ideas on how we could use gene editing to make incredible transformations in agriculture reality.

The conversation originally started from a paper I read. In January of 2019, I reached out to Judd and said, Hey, we should talk about this paper. And we started brainstorming and Judd came up with this concept for this business. And it was really a, you know, call it a moonshot that they undertook, and we've put 10s of millions of dollars of capital into this project over the last four years and been operating in stealth.

And the team had some pretty significant breakthroughs this year that make the whole thing a reality. Now, the potential of the business is so significant, that I really don't have a choice. But to go all in on this, it's a no brainer, as, as I said, in the tweet, I put out, I could spend a bunch of my time as you said, like, starting other businesses or making investments, but at the end of the day, you know, investing a cruise to a power law, where if you have something that's going to be transformative, it could be many multiples on all the other stuff you do.

And so it only made sense for me to say, Look, I've, I've got to dedicate my time, attention and energy to making sure that this business realize its potential, I'm going to go in full time as CEO. So it's pretty exciting, you know, gene editing, I'll talk a little bit about it.

But I can't share too many details. gene editing, as you guys know, was discovered it's controversial whether it was discovered first by George church and the group at the at the Broad in Harvard, or Jennifer Doudna and her group at Berkeley. But CRISPR cast nine is the system that allowed us for the first time ever to go in and make specific edits to DNA.

Historically, any work we've done in the genome has been, you know, very ad hoc haphazard, throwing large amounts of DNA into a cell to try and get that cell to do something. But CRISPR really unlocked this call it search and replace function in DNA. And that capability has allowed researchers to make novel therapeutics to create have new discoveries in biology, and it's really unlocked an entirely new era in biology.

One application of gene editing is in agriculture, where we can look specifically at the genes and plants and what they do to the plant. And if we can make specific changes that you would otherwise see in nature, through traditional plant breeding and mutations happen over time through plant breeding, can you accelerate those changes?

And can you make a set of changes? Rather than spend millennia breeding plants, can you make a specific set of changes that will cause the plant to do something very novel, and as a result, get the plant to be more successful. And by editing the DNA of the plant to make it more successful, its yield goes up, it can generate more food with less water, more food with less land, more food with less labor, etc, etc.

That's the general premise on how we can use gene editing to drive productivity in agriculture. Amazing. And you could, I assume, make the strawberries taste more delicious, like those ones from Hokkaido in Japan, as opposed to just making them giant flavorless softballs. The way gene editing has been thought about in agriculture over the last decade has been exactly what you're saying, which is to make a specific trait edit, which is one edit in one gene that does one specific thing to the plant.

And what Judd and the team came up with was starting with the problem rather than starting with this, you know, kind of very specific thing that we could do. And they said, how do we get yield to go up significantly in plants. And they came up with this creative idea, which is doing a series of edits, which is called multiplex editing, multiple edits across multiple genes, that would actually change the biology of a plant in a fundamentally understandable way.

But that would ultimately drive such a transformative increase in yield, it would open up entirely new opportunities in agriculture. And so that was the moonshot was the series of edits that could, you know, change how plants, you know, do a specific set of things that makes their yield go up significantly.

And we weren't sure if it would work. First of all, we weren't sure if it was possible to do the edits. Editing plants is very hard, the cell wall of plants has to be dissolved, then you have to get the editing machinery into the plant into the cell. And then you have to get that cell to edit the right gene and not have other edits.

And then you have to get the cell to grow back into a plant. There's so many complicated, difficult steps, you have to get all of them to work. And then we weren't even sure if making all those edits would cause the outcome that we expected. And it turns out that that it does.

And that happened as of a few weeks ago, this company. And that's why I decided to step in because suddenly, it's like, oh my gosh, the moonshot is working. We put in a lot of capital, we spent years funding the exercise, it's real. And now we're going to take off.

And that's why I'm going on this. So I'm being a little cagey with respect to the details. As I understand, it's top secret stuff. That's fine. I definitely want to talk more specifically about what the team's done and what we're going to do with the business, which I will happily do in a few months when some some things become public.

But in the meantime, I'm excited to do it. I got to tell you, the last set, it's been seven years since I've been an operating CEO. And, you know, to some degree, there's always been a piece missing for me and what I do every day, that I haven't felt like I've had the ability to have the influence and make the decisions that I think need to be made.

You're advising the CEO, you're sitting in a board seat, kind of encouraging them to do certain things. But then sometimes they listen, and sometimes they don't. So to actually be in the seat feels to me like the right place. It's the right place where I can have the influence and drive the change that I want to see.

And I haven't done that in a very long time. And so it's also personally, I think the right decision for me to find, you know, satisfaction in the work I'm doing, not to mention the excitement I get out of the business. And you and I have talked about this privately, you know, the world has too much capital, there's just tons of money, there's too many problems to be solved.

The real issue, especially when you're running an incubator, or a studio, you know, a startup studio, like some of the startup studios, is who is going to pilot this very fast jet fighter and the number of people who are ambitious, and technically know how to fly one of these planes, and do it at high speed, and you know, want to take on that dangerous cockpit is very low.

And so I think it's very courageous of you to jump on and do this. So congratulations. The point you're making is a really good one worth talking about just for a second. There's been this criticism in Silicon Valley. And I'd love your guys's point of view on this to Chamath and sacks, but like, and Jacob, but like, there's been this criticism in Silicon Valley, which is that, you know, we do too much of the easy stuff.

And to all the capital goes into the apps and stuff, you know, things that are the path of least resistance to making money, not into the hard things that are low probability require a lot of capital. It's not universally true, but it's generally true with respect to how capital is allocated.

And, you know, I was kind of talking with a bunch of people last week about this. And I kind of realized that, like, there's only if you're going to do a difficult project that requires a lot of capital, you're going to want to entrust that capital to someone that has proven themselves.

Someone who's proven themselves is generally going to have the choice of things they're going to want to do with their life. And if they've proven themselves, it usually means they've had some exit event or some liquidity event that discourages them from doing a very difficult thing and taking on a lot of risk and burning themselves to death again, when they've already made it.

And the people that have made it usually make it in software the first time around because software creates a path of least resistance to generating returns. And then the challenging question for them is do you do it again, and you make easy money, you know how to do it?

Or do you take a 5% shot or 2% shot of success 98% chance of failure, going after a very hard project that takes a very long period of time. So I think that the challenge with difficult technology being developed in Silicon Valley is less about a dearth of capital or dearth of ideas or dearth of opportunities.

It's more about a dearth of talent, that finding the right folks who have the capabilities and have done this before, to want to step back into the saddle and take on a very large low probability problem is really the challenge that I see a lot of in getting a lot of these things kind of going and funded hard to get people to be in the arena.

Yes, Chima, you've seen this in your portfolio, a hard problem is what I'm saying, like a 2% chance of success kind of problem. Like, why would I do that? When I can go do something that's I'm 60% likely to succeed at and do really well doing it. I find that most companies are very under managed and under experienced.

And it's surprising for me, it lacks a level of sophistication that I just assumed existed. And I guess that's because my last experience was when I was helping to build a company that frankly, coming out of the great financial crisis, we were recruiting people at Facebook from Google for the most part, and then building an entire core of young people and grooming from within.

It was, we had a pretty good go of it. Fast forward to 2023. And I must admit that the companies that I interact with when I get into the weeds, I think the real talent to Friedberg's point is spread too thin across too many businesses. And so there are pockets of greatness in every company, but there's no real gravitational pull for any of them as a result of that.

This is an excellent point as well. When we had a SERP environment, so many companies got funded, an amazing CMO, CTO, VP of Ops, started their own company. And they were just their natural position was the sixth man on the bench, you know, on the Knicks or the Warriors, not the primary scorer, they weren't Steph Curry, they shouldn't be in that position, they should be coming off the bench and being an amazing contributor.

This is I've concluded the best time in the world to start a new company. I am absolutely amazed by the companies coming in applying for funding for us. I understand because that's your business model. But what about encouraging people to actually join a good company and learn how to be a good manager?

Absolutely. These are two, the two best options, I think, if you have two or three really great builders, you actually know how to build into two or three, you have a great idea, and you want to do it, I encourage you to start a startup. If you don't have a great idea, you don't have two or three co founders, you don't want to leave the thing.

Find somebody who's just getting onto the launchpad or just getting a little escape velocity in their rocket, which would be defined as 10 to 30 employees, maybe having raised two to $20 million, that's an ideal time to get on the rocket. And just any seat you can get. As Sheryl Sandberg said, famously, any seat on the rocket ship is a seat on the rocket ship, you just want to get on board.

Yeah, I disagree with the first part of what you said. Oh, okay. Explain why. I run into two and three person teams every day that I think are exceptionally talented, who should be inside of a company. And instead, they found somebody to give them money. And so instead, they're starting something and they're just meandering.

And the problem with these two and three person teams is that even now, if you stick the right label on it, like AI, you'll find five or six or $7 million of money, it won't be led by any single investor. So it's all done in a safe. None of these folks have boards.

And so they come in and check in with me time to time. And I asked him about their progress, and it's a mess. And I'm shocked. And I'm like, why are you guys wasting your time, like you should be at a startup that's winning. And part of it is that they think it's the right thing to do.

And I don't think there's any valor in being a founder. I think there's a lot of valor in building something that's really valuable for people. And if that means being a director of marketing, go do that instead. It's a valid point. I think your most valid point in that is that there is not governance and mentorship for during the peak Zerp era.

We created something called founder university to kind of sit well, of course, where we teach people how to do this stuff. And then we wind up investing in about 10% of those companies. And it's nuts how many people are applying. And we tell people when you hit $255,000 in revenue, we'll start doing quarterly board meetings with you.

And they don't even have to be officially board meetings, or just mentoring sessions for one hour where you present as if it's a board. And so I agree, largely the passing of the hat and doing a party round. And having no mentorship is a weakness in the system in our firm.

We fixed it. We found a university Yeah, but isn't dropping a slightly different point? Jason's with respect? Well, I think that when you have bubbly funding conditions, it leads to an over fragmentation of talent. Sure. I mean, isn't that the point? Yes. I mean, it takes a certain concentration of outstanding people, not just founders, but also like early employees to create a great company.

And now with PayPal, right? I mean, that was the greatest concentration of news in history with talent, right? You have like that in Google would be the two best examples. Yeah. Yeah. So one of the reasons why you can end up with again, an over fragmentation is if there is too much funding in the system, and everybody's getting funded for really, you know, mid ideas.

And it prevents a congealing of great talent to come together at companies where to have a really big idea. If you believe that the startup ecosystem was overfunded during the ZURP bubble, which it clearly was, I mean, you don't just get bubbly valuations, you also get bubbly funding conditions, then by definition, there are companies at the margins, they're getting funded, that shouldn't get funded.

And that leads to an over fragmentation of talent. Here's what's happening on the ground. We used to see a lot of solo founders outsourcing their tech, what we're seeing now is usually two, three, four founders getting together to do a company. And one of the counter prevailing forces here is what we saw with Spotify, just laying off 1700 people Google laying off 20,000 Facebook laying off, I think 25 or 30,000, Microsoft, Uber, all these companies have laid off so massively, they're all on hiring freezes.

So then what happens is there's massive amounts of talent at reasonable prices joining together after having worked at those companies. And so I would say the companies were funding at this early stage, we're never doing solo founders, I mean, unless it's a serial entrepreneur, and we're seeing two or three people who worked at Uber or Google or Airbnb, you know, who have like this really great product velocity coming together, and they have to be builders.

So I think it's two things are true at once that the number of companies being funded has plummeted, I think about 75% sacks. But the quality and the amount of concentration of talent, even in those startup cohorts is really high. And they don't have for job offers from big tech, they're not having like a Salesforce $300,000 offer coming in or a Google $400,000 offer coming in.

So I think this is going to be the best vintage of venture in our lifetimes. That's my personal belief. I invested in 100 companies this year. But I could be wrong, we should talk about the Google Gemini launch, Google just dropped their chat GPT killer. And from my perspective, it's often awesome.

Just two quick videos here. It does have very strong multimodal mode, if you don't know what that is, just means you can use images, videos, text input and output. In this demo that you're seeing on the screen, if you're watching the show, they take a picture of a physics test that somebody took in handwriting, they find which answers are wrong, they explain it lots of reasoning going on in here.

And obviously, the multimodal means you're seeing an image and you're getting text back. Second video they showed in the in the they launched a lot of stuff today with this Gemini brand. They're using the classic example of doing a party, planning a party. They use my likeness in the Google video.

Wait, what's going here? It is there's there's a chubby chema. Sorry, can't body shape people. Sorry, folks. There's chubby chema. Please strike that. Oh my god, I shouldn't have said that. I thought Vinnie Lingham was fat chamath. Vinnie Lingham has claimed fat chamath. That was that's why I went for chubby.

I didn't want to infringe on his IP. But anyway, no, I'm gonna get canceled. So in this video, the person asked to do a kid's party, what's very unique here is that it does the follow up questions, which is, you know, really interesting and understands reasoning and context, but it built a dynamic interface for this use case.

And it did like a pinboard and a kind of Google s, task lists and KPIs and all this other nonsense. But behind all of this, in the Gemini exceptionalism, I think is that they did all these benchmarks against a bunch of, there's a bunch of tests and batteries of tests that language models use to prove how strong they are.

And Google says Gemini beat GPT for the latest from open AI in 30 out of 32 benchmarks, this is going to come in three flavors, ultra pro and nano. That's basically cost and strength. And there's a lot more behind this. But based on what I'm seeing, in my opinion, I've been looking at this stuff every week with Cindy and looking at all of the latest and greatest, this feels like it is a leapfrog by about 20 or 30%.

If this is true, but freeberg, you looked at the original papers, what are your thoughts on the underpinnings? I talked about the UX and some of the reasoning, what are you seeing? And we'll consider this a flash on the fly science corner for all those Friedberg stands out there.

I haven't read the whole 60 pages, but I looked at the performance charts, and it's pretty damn impressive. I feel I use the demo that I feel like you're interacting with data from Star Trek. Do you guys ever watch Star Trek? On your face? Your dream has come true from your child.

I mean, I was like, this is a lifelong dream. I can finally have a chat with data. It's like conversational. It's predictable, in the sense that it kind of predicts the details that I might ask or might otherwise forget to ask fills them in. There's some, I think, really smart features of it.

And I think it says a lot that Google truly does have the muscle to compete. And now is showing the way of us to do so that they're actually putting this out there, that they're willing to disrupt themselves cannibalize their own search business potentially, in a way that everyone's been worried they wouldn't be willing or able to do, they'll figure out a way to monetize it later.

But they really are showing that they're willing to try and make the best product for users, which has always been a core mantra for Google from the origins of the business, focus on the user and all else will follow. And everyone's been saying the last couple years, they're too focused on profit, they're squeezing every nickel and dime out of every click, and showing that they're willing to put this out there says a lot about the strategic imperative of the board and the leadership there.

So that makes a big difference. The product seems really good. The scoring data seems incredible against GPT for, which is I think the key benchmark, as we know, open AI has some new models that are coming to market. Here, let's pull up the table of results. But this shows Gemini's performance against GPT for using a number of well known metrics.

I'll say that there is no business on earth that has more data than Google. YouTube is the richest data repository, digital data repository on earth. The YouTube data set gives Google an extraordinary advantage in training. And clearly, we're seeing that the results are getting on imaging and video here.

So you know, big, big, big announcement for Google, I think it's definitely on earth, saying that they're in the game. And it's going to be pretty powerful to watch pretty, I think pretty important to watch. Saksis freebird said the cojones are on the table now Sundar has dropped the wave us.

What's your take? I think it's pretty clear that Google's gonna be a major player in AI. But the question is, are they going to be dominant in AI? And I think one of the points that our friend backers are makes that's well taken about Google's market position is that if you look at their position and search, which is gradually being replaced by AI, they're absolutely dominant in search.

So even if they turn out to be good or great, in AI, their AI franchises is never going to be as dominant as their search franchise was in that market. And so to the extent that AI is replacing search, and I think we're seeing that more and more right, if you can get the AI just to give you the answer, instead of a list of 10 blue links, that's a better user experience.

So I think as more and more searches get replaced with AI, it's just impossible that they're going to maintain that same dominant share. Moreover, it's really unclear how you monetize those, let's call them AI searches, where it just gives you the answer, because nobody wants to get three ad links up at the top of their answer, no one's going to click on those.

So I think look, Google is gonna be a player in AI. But as AI displaces search, it's going to be a real challenge for them as a company, I think, I have the opposite position, I'll explain sex. While I do think you're right, their dominance won't be the same.

Having used the Google flights, AI integration, Google shopping and integration that's in bar right now, which is very like 1.0, or even point one, I think the number of searches or the number of interactions, the number of queries, let's call them questions asked, is going to go like 10 2050 100x, I think they're all going to be talking to their eyes all day long.

And where I think you might be wrong is I think actually, the clicks are going to fit in certain categories perfectly into the response. So in this birthday one, if you had a bunch of ideas of what you could click on to purchase, if it said, Hey, great idea for the birthday, did you think about these hats?

Did you think about these pinatas? Did you think about these places to get cake, and those were all paid and AI inform them because you want to do an animal based jungle party, and it showed you it's going to make unbelievable ad targeting that is right into your planning, hey, get these hats here, get this, get this flight here, book this restaurant, I think it could be a goldmine.

And I think the the clickstream and the ad network is going to fit perfectly into it. Same thing with those questions being asked, you know, hey, do you want to get a math tutor? Do you want to buy this book, etc. So I am going to take the other side of it.

Chamath, where do you land? Are you short, long or neutral Google based on this? I think that there's two important things to notice about this. The first is who is in charge of this project. And this is I think, after they did that reorg, the most important person in all of this is Jeff Dean, who, if you look back, is the one of the most preeminent technical lights, frankly, of the internet, but within Google is just a giant, right?

So TensorFlow, MapReduce, BigTable, Spanner, the guy is just an absolute animal. He's proven an ability to not just conceptualize big ideas, but then get them to market in a way that can work at scale. Right? That's the first thing. The second thing is that this Gemini is a collaboration between DeepMind for the first time and Google Research and a bunch of other people at Google.

So I think Friedberg mentioned this before, the test for Google is not their technical capacity, but their ability to organize everybody and get them to row in the same direction. So I think that that's, that's really important. My takeaway is what I kind of put out on Twitter, which is that I think all of this is one more brick in the wall on this theme of commoditization.

So we have all of these really interesting foundational models. If you just look back a little bit, Llama 2's advances have been pretty amazing. Out of the UAE, Abu Dhabi, the government showed some Falcon, which showed some really interesting promise. Obviously, OpenAI is doing some great work with GPT-4 and GPT-5.

Now you see Gemini and the results that they're generating. There's going to be a proliferation of foundational models, the cost of those models will go to zero. And so why is why is that an important thing? Well, one, it's good for the ecosystem. Two, it's really good for developers.

And three, it allows us to then figure out where the real value is going to be made. And I think the value is in taking these models and wrapping them with cheap, abstracted hardware, right? You can't have an economy get built in AI when you have year long waiting lists for H100s and A100s from NVIDIA.

That's not possible. So that entire layer as well will get commoditized. So the folks that are the AWSs, the Azures and the GCPs of the world or these next generation entrants, who are building AI clouds, those folks, I think will make money and then the apps will make money.

So I think it's a very good thing. I think that you don't want a lot of the lock in that NVIDIA was trying to create, they were trying to create essentially a walled garden where you have to use CUDA in order to basically compile to these, these miles to their chips.

It's going to break all of that. So I'm generally quite constructive. I think that this is a really good step in democratizing this whole thing, and letting the value agreed to the ends. It's a barbell, infrastructure providers and app builders. That's my best guess of where money gets made here.

All right, Adobe's $20 billion acquisition of Figma is stalled right now. UK CMA stands for competition and markets authority. It's effectively blocked this acquisition for a couple of obvious reasons. One reduces innovation to it eliminates competition between two top competitors and product design. And three removes Figma as a threat to Adobe's Photoshop in Illustrator products.

CMI a mentioned some potential remedies divesting of overlapping operations in each market where the deal could cause less competition, or just prohibiting the merger entirely feels like that's what's going to happen. And also actually, I have to take a sharp right, there was a peak Zerp deal. I have to take issue with you said that they are doing this for obvious reasons.

I don't think these reasons are obvious in the sense that I don't think I don't think they speak for themselves. I think they have to be defended. And I don't think these are good reasons. Oh, yeah, no, I, the I'm when I say obvious reasons, I'm not endorsing them.

I'm just saying the standard reasons of lack of competition, and consolidation of competitors. So but yeah, expand on your point, and you think it should not be stopped this merger? Well, first of all, this merger was originally announced, I think back on September 15 of 2022. Over a year ago, what is that?

That's almost 15 months ago. Yeah. So this is a ridiculous amount of time for regulators to take to figure out whether they're going to approve the deal. That's no good for anybody. I think businesses, whether you're Adobe, whether you're Figma have a right to have these questions answered much more quickly.

So what are the regulators doing? So that's point number one. Point number two is that it's mostly the UK regulator, which is called the CMA or competition and markets authority. They're the ones who are dragging their feet and holding this up. So figment Adobe have to get the approval of three different regulatory bodies, they have to get approval in the United States, from I think the DOJ, they have to get approval from the EU with Brussels.

And now because of thanks to Brexit, they also have to get approved by the UK. And to me, it's a little crazy that one country's, you know, competition authority, the UK, which is not in the grand scheme of things, that big a market can hold up this entire deal.

You know, it should be faster, of course, right? They should not just start number I question whether like one country, the UK should be able to hold up a deal if the US and the EU approve it. And one thing I would say to startups is, if the CMA is going to start holding up deals for a bunch of novel reasons, meaning, you know, reasons that haven't previously been articulated before in an antitrust law, why in the world do you would you want to create nexus with the UK?

I think this pertains to all the startup ecosystem because look, I remember when I was doing Yammer, we decided to open an office in Europe, and we decided to settle in London, and we created a pretty big office in London, we thought that was the best place for a startup to locate.

If you had told me at the time, that that was subject our acquisition by Microsoft to the CMA over there, and that they would take some novel interpretation and hold up my deal. There's no way I would have wanted to open an office in the UK. So let's be clear about that.

Now, I want to move on just quickly to the argument, the CMA is making and I do think it's a novel argument. They're not saying that Adobe and Figma are competitive today. And actually, I think they are operating in different markets. Figma is a product for web designers, and web developers.

And the end state of a figment design is code. If you look at Adobe's products like Photoshop, the end state is marketing collateral. It's it's a marketing design product. Nobody uses Figma to create marketing collateral, they use Photoshop and nobody who's using Photoshop is using that to build websites.

Okay, these are in practice pretty distinct markets. And I think the CMA has conceded that they're distinct and separate markets. But what the CMA is trying to say is that at some point in the future, if we block this deal, Figma might compete, might compete with Adobe, they might create a competitor to Photoshop.

And that is a bogus rationale for blocking a deal. Because first of all, I think we all know that Figma has no interest in competing with Photoshop, they're not going to compete, they're much more interested in AI, they're much more interested in doing things like prompt to design to code, they're not interested in building, you know, a Photoshop competitor.

And there's no reason to believe that they would do that. Moreover, that is not an objective standard. Think about it. If you can block a deal on the grounds that these two companies don't compete today, but might one day compete in the future, it gives the regulators a veto over any deal.

And that is not the way antitrust is supposed to work. The way that antitrust is historically worked is you define what market these companies are in, and you add their market share together, if they're both in the same market to see if it would create an undue monopoly or oligopoly something some dynamic like that it was a market share test, which is an objective test.

This is not an objective test. This is a regular saying, Hmm, you know, we know you don't compete today, but like one day in the future, you might, that is bogus. So if you allow the CMA to block this deal on that ground, they can block any deal for any reason.

And then on top of it, they've taken 15 months to come down with this opinion. I think this is gonna have a very chilling effect on M&A activity for for not a good reason, for not a good reason. And that is the last thing the startup ecosystem needs right now.

I'm going to agree about the time, I'm going to agree that we should let a little more M&A happen. I'll disagree. Adobe has a product XD competes directly with Figma. And then I've gotten multiple designers who have included me in Figma designs for things that are other than interfaces.

They're using it for decks, they're using it for marketing collateral. And if you go look at figmas templates offering, they are all Photoshop, Illustrator key functions. So in the market, even though the products were not designed as competitors, designers are starting with Figma for many design projects in my direct experience and by looking at the templates.

So I'll disagree on that third point. Well, hold on, I gotta do a fact check on one thing. You're right that Adobe had a competitive product to Figma called XD, they shut it down. They shut it down. Yeah, it was a failure. So they are out of the market for a web design tool.

They're out. So that argument no longer exists. And I don't know if they shut it down because of this deal or because it was failing anyway. But they solve that problem. Now with respect to these use cases where Okay, yeah, you're talking anecdotally, Jason about, you've seen some web designer, no, I'm talking, go look at the templates.

I just put the link in there. It's still anecdotal. It's not based on a market share test. If you want to make this argument that Figma and Photoshop are competitive products, break it down in terms of market share. That's my point, add up figmas market share in the market for marketing collateral, and see if that would create undue concentration.

Fair enough. My objection is that they're not basing this decision. If it can even be called a decision, I think it's more like just concerns and dragging their feet. But they are basing their concerns on something that's unquantifiable. And I do think that anti stress decisions should be quantifiable.

The concerning thing here is that this is on the heels of Activision and Microsoft, which was equally protracted and drawn out. I don't I think it's bad for capital markets, when deals that are offered up just linger for 1518 months. I don't think that that's healthy. It causes a lot of pause amongst investors.

And it probably freezes both Adobe and Figma from investing the way that they would if they knew that this thing was voted up or down in three months or whatever. So I think that I totally agree with you that there needs to be an SLA around these things. And you can't take this much time.

I breezed through the CMA report. My gosh, it's 400 pages, which is like, that's insane. A 400 page document is like it's a little outlandish. But I wanted to call out two parts of that document. One is in support, sacks of what you said, Nick, you can just throw it up here.

What they said was that in assessing the competitive effects of the merger, we must decide whether there is an expectation, i.e. more than 50% chance that the merger will result in diminished competition. Now, that's like a little nuts, because David, as you said, it's like, we're going to take an expected probability and a guess into the future about what we think will happen.

And I think that that's not a fair way of doing business. I think that you have to look at what will happen when this happens. And judge on its face. You can't say, well, also, by the way, I expect that you guys will be intelligent and really execute. So that'll just increase the odds.

That's not right. That's, that's what business is. So if I had to steel man, the pro figma side, I would say that that's unreasonable. The second side on the pro figma side is there's this long point here, I think it's like number 27 or 28 in this document. And this is what's crazy.

It's it basically says, like, hey, we went through document discovery, we found some emails that basically said, by Adobe, that said, we did market analyses, we didn't think we were doing very well. And I think it's important to note for the CMA that this is what 100 years of MBA classes have taught people to do.

I mean, you teach executives that go work at companies to do what's called a SWOT analysis to figure out what are the risks and opportunities for your business and then to go and invest to fix them. That's capitalism. And that's business theory. And we've taught executives at every single company to do this.

That can't be illegal. Meaning to use your brain inside of a business to realize that what you did isn't working. So that would that's also I would say, sacks in support of what you're saying, which is, it's taking too long. It's speculative. And you're punishing people for actually being good business people.

And I don't think that makes sense. What's the number six months, just to add to that, you know, again, like an important overlay here is that the CMA is the UK regulator, and they're the smallest market, the GDP of the UK is 3 trillion, the GDP of the US 16 trillion, the GDP of the US is, I forget, it's in the 2025 trillion range.

So you've got the toughest regulator, who is coming up with no novel legal theory, I think it's worth exploring that these regulators, I think, are working in conjunction. And those fingerprints looked a little bit more obvious. I'm not playing conspiracy theorists, but it looks like the EU, the FTC, and the CMA did work together.

I don't know how officially or not in Microsoft Activision, it looked relatively coordinated. I suspect that it stands to reason that they're in touch. And they talk about these deals and their combined perspectives. I don't know how else you just generate a 400 page report with this kind of specificity, unless there's some amount of collaboration and, and sharing, which, by the way, I think does make sense.

I think it does make sense to coordinate your point of view. But I think I agree with you, David, that we don't know that for sure. I mean, like, all I know is that in the press reports, it's been about the CMA, it's possible that the EU or I don't think us will do this, because that would just be like inventing a wholly new antitrust law, right?

Where I understand, I'm just saying that my point of view is that as a business owner, my response to this would be to gatekeep the app in these geographies, so that I don't create a nexus if I ever get bought. Bingo. That's my point. That's exactly my point is that the smallest market is creating the most problems for this merger.

So assuming they're kind of on their own in this, and the EU doesn't just copy it, if you if you're right, if they copy it, then figment Adobe have a bigger problem. But I think that's what's going to happen. Right? Then maybe the EU does copy. But right now, the CMA is way ahead of any other regulator in terms of a novel theory.

So So what I'm saying is, if you're a company, why would you subject yourself to green when it's so easy to avoid their market? I think I think it fundamentally hurts UK productivity over the long run, because I don't see how companies if they can't a get a reasonable SLA for a response, and then be get a reasonable document, that's not going to require $50 million of, of lawyers and consultants to read.

To do business in a country just goes down the incentives to do business. So now if you steelman, the other side, I actually think it's very difficult to steel man, why this is bad for competition. I think the only steel man is more from the economic shareholder perspective of Adobe, which is good, they have paid a different price.

What does that because I think it's a mixture of cash and stock. So that's changed because Adobe's rallied a lot. And is that price worth it? But that's, again, not a reason to use a regulator to run a deal to the ground, right? Adobe should just man up and talk to Dylan and say, here's the new price.

Otherwise, here's a billion dollars. I don't think Adobe is driving in that way. I mean, by all accounts, Sigma as a business is still doing very well, even if they paid too high a price 15 months ago, they've grown, they've partially grown into that valuation already. I don't think Adobe is driving this.

I really think that the CMA is driving this. I think there's a regulator who wants to pioneer a novel legal theory. And in a weird way, I mean, it's not. Have you ever seen like a pack of dogs where you've got like a Great Dane and a Doberman and then a Chihuahua and the Chihuahua is trying to leave the pack.

The CMA is like the dog and it's like barking the loudest and trying to shepherd all the other dogs. You got a yappy little Chihuahua here. The issue that you bring up is a great day and then the EU is a is a is a big dog. And yeah, but if the EU and the United States follow suit, it will, it's just death by 1000 cuts, meaning it will require a Brad Smith like character inside of this company, who can go and work with regulators to really get it done.

And this is the brilliance of of him at Microsoft is it when you look at the track record of his ability post this consent decree to get deals done inside of Microsoft. It's truly incredible. There is nothing that they've really tried to buy, whether it's nuance or whether it's Mojang, or whether it's GitHub.

Activision, they've linked in, they've got around the table, do we really want to create an economic system where whether a deal gets through is completely arbitrary, because there's no longer a quantitative test, the regulators can just pause it, that at some point in the future, these companies may be competitive.

No, the and it takes and furthermore, in order to get past the regulators who have a completely subjective standard, you need like a political genius like a Brad Smith. I mean, that is like the definition of crony capitalism, right is that you get your deal done if you got a Brad Smith, and you don't get it done.

If you're a startup like Figma, that's not the system we want to be in. Absolutely not. Three important things. One future competition is a stupid test. Number two, just put six months on it. It's not even future. It's their assessment of the probability of future competition, which is just dumb.

It's this is pre cogs in minority report, Figma could sign an affidavit today, saying that we're not making a list. We're not building it. Yeah, it's not. It's not our roadmap. It's not even an affidavit. It's you could go through, you could conduct discovery on the question of whether Figma has ever even discussed internally, whether they should compete with Photoshop, right?

Because you don't just launch a Photoshop competitor out of the blue, you probably discuss it for a while. So they could conduct discovery on that question. I guarantee you Figma does not have robust conversations in discovery about competing with Photoshop. That's not where their interest is. And then also, they should be just have a six, they should have a six month clock to do this.

And then if I'm Adobe and Figma, I would say, I would pull a Zuck when they came out Zuck and said, you have to pay for news in Australia, you have to pay for news in Canada. Remember these two government overreaches, that you can even put a link to a news story.

He's like, okay, fine, we're just going to not include links to the New York Times and feeds that's not allowed. They should just say anybody who's in the UK, you can no longer we're going to look at your IP addresses, we're going to look at your address, you can't buy Figma, you can't buy Adobe, we're going through with this.

So if you don't want consumers to have this product, you don't have to have it. And then people have to get a VPN to use these products, like I would call their bluff on it. Kind of overreaching. I agree. Okay. Freeberg, any last thoughts as we wrap up? Jake out in order to have a healthy startup ecosystem, we need exits.

That's the big picture. Yes. When you put this kind of chilling effect on M&A, because think about it. If you're either an acquirer, or your target, you're thinking about doing a deal, and you know, that it will take you at least or it could take you 15 months to get it's not worth it.

You children and the standard for whether it gets approved is completely arbitrary. That's going to have a dampening or chilling effect on M&A activity, which means fewer good exits for the ecosystem, which means that less risk capital will want to go into the ecosystem to begin with. And a fair thing.

I'll run this up the flagpole. So you think sex? Why don't they say if they're really concerned about the top 10 companies, hey, the top 10 companies, the trillion dollar crowd, right, the Microsoft, the Google, etc, Apple, they have a different standard than the mid market. So if you really were concerned about consolidation in the in the top 10 companies, just say they're not allowed to buy these companies without going through the scrutiny.

But anybody under 250 billion dollars, they can merge, they can buy each other, they can do whatever they want. They're exempt from this kind of review and just let the free market decide because then that would build up the mid market, right sex, I'm concerned about the power of big tech companies.

Okay, but I would deal with that by targeting anti competitive tactics, interoperability. Yeah, require interoperability, don't let them bundle things like that. Don't invent some wholly new arbitrary subjective tests for whether a company can be acquired. We have a good standard around that, which has to do with market share.

Hey, shout out Lena Khan come on the pod anytime. All right, everybody. This has been an and sincerely Lena Khan come on the pod. Let's talk about this has been another amazing episode of the all in podcast for the dictator. Chama polyhypertia. The rain man, David Sachs, and El Capitan, the pilot, Sultan of science and CEO, David Freeberg.

I am the world's greatest moderator. Love you besties. We'll see you next time. Back at you. Let your winners ride. Rain Man David Sachs. We open source it to the fans and they've just gone crazy. Love you. Besties are dog taking a notice your driveway. My avatar should all just get a room and just have one big huge orgy because they're all like this like sexual tension that they just need to release.

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