Captain Calacanis is here reporting for duty. Where's that Spirit Airlines cap? Absolutely. Spirit Airlines. I just want to say all in podcast now sponsored by Moncler and Spirit Airlines or now sponsored by the village people. YMCA. Are you a pilot or a flight attendant? Jk. He's a flight attendant.

I don't think it's thin enough to be a flight attendant. Are you fat shaming me? Are you body? Can't do that nowadays. I'll get you canceled. Get exact canceled at this point. Like fat shaming would be number 72 on the list. He can't get canceled because all the libs have left Twitter.

There's nobody to there's no home monitors left. They all pretend. No, they quit every week. It's like all the libs. You said they moved to Canada when Trump got elected. Yeah, Canada immigration. Go ahead. A hacker figured out a way to take all this data and track, you know, people's yachts, people's planes.

Obviously, one of those people was Elon. Elon had a security issue. This is all public information. So the larger issue at stake here is. The fact that the law allows for people to do this persistent tracking of planes, which then becomes persistent tracking of a person and what really is at stake here is how we define the term doxing for people who don't know the term doxing.

It means giving a person's location that could be your home. That could also be your at a location for some period of time. You're you're at a hotel, you know for a basketball game and it's pretty clear. You can take a picture of a celebrity say there's a celebrity here.

Oh Lady Gaga's at the farmers market. What I object to here. We all understand doxing is dangerous and it in fact is against the law to just give people's addresses and stuff like that. The issue here is a new type of doxing which I'll call, you know, persistent coordinated doxing where dozens of times a month, you're giving a person's location.

It may not be against the first amendment sacks. I think you would agree but we have to ask ourselves do we want to live in a world where whether a person's on an electric bicycle or an airplane or any device in between somebody should be releasing dozens of times a month a specific dedicated feet of their location.

It is terrorizing as a parent when this happens. I've had doxing people on the call here. I've had various security concerns. We don't want to live in a world with de facto doxing. What these sites were doing was de facto doxing. I think it was a bad decision and I think that it represented you on the least generous statement would be that it represents deep hypocrisy in that not just a few weeks ago.

Did he say he would never delete that account? But he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime. And then he came in and did exactly what the old regime did, which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate.

Now, the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law and it is what it is. In those cases, I think you run into the exact same issue that the old guard at Twitter had that the moderators and the executives at YouTube have dealt with and that the executives at Google have dealt with and that we sit here and we criticize until you're on that side of the table and you're forced to make these moderation decisions.

You're forced to make these policy decisions and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate. And guess what? Some people will say that's not freedom of expression. That's not freedom of speech. You're taking that away from some people. You're taking this particular case away from a 15 or 16 year old kid who's built a Twitter feed.

And so I think what it shows is just how hard it is to moderate these sites, these platforms, and that there is no simple, easy, idealistic ideologue of, hey, all these things are open. All these things can be used by anyone all the time, because as soon as one of these edge cases start to happen, you want to come in and do something about it.

Shemoth, what do you think? What should happen going forward? So I have had these issues happen to me multiple times. I'm not nearly as important as Elon is, but it feels the same when you're in the middle of it. It feels pretty terrorizing. That being said, I think the real decision for somebody like me is that if it's too much is frankly just to get rid of it and you know to find a different mode of transportation that's a little bit more anonymous.

And you're pragmatic about it. And the reason I say that is that I just think that you would have to go and get the government to basically change the law which they're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal.

And in that I think you lose credibility. Let me just summarize this and be the first one to just state this. I think that if there's any person in the world that can figure out Twitter, it's probably Elon. But man, has he taken on just a gargantuan battle and increasingly I am not a fan of this battle and I'll tell you why this is a man who is essentially proven that he can bend the laws of physics on behalf of humanity.

He's done it twice once in electric cars and once in rocketry. The problem is that the realm of decision-making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonically right answer. And so he's quickly finding out that half the population will always find fault with him no matter what he does.

And now the implication of that becomes very important. We saw yesterday that he had to sell another 3.8 billion dollars of Tesla stock. Why is that? It's because this transaction which was, you know, very tight to get done probably required lots of margin, you know, there are I look I have a margin loan at Credit Suisse.

So I know how these things work and you can very quickly get margin called. You have to sell down things that you own in order to maintain your collateral limits. We've talked about this before. He's had to do this twice now in the last few weeks and that's because again not because of the demand at Tesla as far as we can tell but because people believe he's distracted and so people are anticipating weakness at Tesla.

People are now shorting the stock. Anyways, it's causing this downward spiral. And can he fix it? I think so. Can he pull it all out? Sure. Is it just putting himself under an enormous amount of pressure that he could have avoided somewhat? Yes, and I think that this is sort of where we're at six weeks in my God.

I mean, I was saying this guy learned in six weeks what it took YouTube seven years to learn how hard it is to moderate content and you know, I think this is where I disagree is you're you're attributing so much good faith to these content moderators at YouTube and Twitter when the Twitter files reveal that they made no effort to suppress their bias.

In fact, they were like pretty much dancing in the streets every time they booted off someone they didn't like. Fair enough. Before you react to what Freeberg just said at the end that coda, can you respond to what I just said? Isn't it true? Like it's like well look, I mean if you define what Elon is, you know doing there as you know, acting as a judge arbitrating on every little content moderation decision.

Is that a great use of his time relative to what he could be building at Tesla and SpaceX and doing on behalf of humanity then? No, clearly not. But if you define what he's doing in the larger sense as restoring free speech to the most important Town Square social network, hopefully thereby inspiring other tech companies to move in the direction of opening things up.

Then I actually think it's a pretty good use of his time. So look, I think we can quibble about this or that decision that he makes or this or that tweet, but I think the overall thrust of what he's doing is very important for the country and for humanity.

So I get where you're coming from. Hopefully he'll find some people at Twitter who he can empower and trust to make these content moderation decisions. So he's not drawn into every single little battle, right? We do want him focused on the highest priority problems. My point is just that I get that.

I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space. There's only a decision where some percentage will support and some percentage will always be against. That's my point. Correct. He did say when he took over he knew that would be the case.

He said you will know I'm doing the good job when both sides are equally upset. Just to put a pin in it. I think it's important for people to understand what the new policy is. So I'm just going to quickly read it just to hang on. Sorry, hang on one sec before you get to because I think the philosophical point rather than the specific one is an important one and I just want to respond to what you said and have sacks respond to this in the case of the points you make around the Twitter files.

And by the way, I don't agree with any of the moderation decisions personally. So I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion. Just so I'm clear on that because I know that you know that we describe yourself as a libertarian speech.

Yeah, libertarian. Sure. Okay, got it. Sure. And and so in this particular case, I think what really irked me I was trying to identify why it made me so angry yesterday. It triggered me. It really did. And I think the reason was that in the case of the Twitter file points, it was a minority.

It was a minority that was affected. It was one person that was affected because the majority wanted to do that thing to that person. And I think in this case, it's that the minority wants to affect the majority in the sense that Elon has aggregated this control and this power over moderation and he's benefiting himself and a few people that have private planes and he's shutting down hundreds of tweet feeds Twitter feeds that are using publicly available information.

And so it feels even more onerous of a use of power and influence because he's taking he's doing something that benefits a small number and affecting a large larger number. Whereas the alt whereas the other one was affecting a small number that benefited a large number because that's what a lot of people wanted to see happen.

A lot of people wanted to see Trump suspended and it wasn't right either. Okay, I don't know if that if that makes sense. Yeah, we understand your position completely. I just want to add to that in this policy. I think it's very important to understand what he is saying about this accounts dedicated to sharing someone else's live location are going to be suspended going forward.

You can still share your own location obviously content required, you know content for public engagements, you know, the president is speaking somewhere whatever you just really can't be persistently consistently tracking an individual otherwise known in you know, sorry, Jason, if any are talking but Jason if NPR is live tweeting sure Jerome Powell speech perfect problem XYZ location not a problem if they do Jerome Powell's location for the next year for the next year 10 times a week on his off duty on duty.

That's the thing we're talking about. I'm just saying like let's just say he gives a speech every week. Is that illegal? No, if you're really funny if you're giving a speech at a public place where you've announced that you're going to be appearing at a certain time and place you've already made a problem where you're going to be what we're talking about is and what what what Elon Jett was showing was a live stream of precision GPS coordinates over a sustained period of time.

Yes, and not to be too dramatic about it. But if you look at like the weapons are so successfully being used in Ukraine right now, they're all precision GPS guided now right now you have to be a state actor to get a hold of those weapons, but you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time.

It would be pretty easy to target them for and not to be too dramatic here, but for assassination. No, that is a security risk. There's no way around that. I brought this up with Palmer lucky man. I'm scared that Duke come at me anytime when I get my jet.

I don't want Palmer lucky taking me out. Yo Palmer. I'm sorry, dude. Do not take me out. What I'm going to get my jet. I'll be on my first flight and he's just going to send a drone in but look, let's talk about hypocrisy for a second. Okay, because here we go.

Let's let's talk about CNN's hypocrisy in the media's hypocrisy because earlier in the week they were saying that any criticism of Yoel Roth who is Twitter's former head of trust and safety amounted to a threat to his safety and they had this like theatrical tweet where they claimed he was having to flee his house, which a lot of people found pretty preposterous.

They were basically saying that public criticism of someone who has put themselves out there to engage in a public debate who's writing op-eds for the New York Times. That is a threat to safety. However, publishing someone's real-time location on a continuous basis so they can be talking about it.

It's not intellectually consistent. It's not intellectually consistent. It's not a threat to safety. That is not. I'm sorry. If one of those two things is a threat to safety, it's the real-time doxing of somebody. Yes. I think we now understand why Elon did what he did. He basically had an incident in LA in which the safety of his kid was threatened because he's got stalkers coming after him.

So his safety is a real issue. It's not like a made-up issue. But why should that look? Yeah, why should his personal experience affect the usage of the service that hundreds of millions of people use and that's the big issue. The decision should not be based on what affects him personally.

There needs to be a principle basis. Yeah, it's be a principle basis for any decision about content moderation or censorship. Maybe in the first few hours that decision it wasn't handled perfectly because there wasn't a principle basis. But since then one has been put in place. The principle basis is what J Cal showed and this applies to everybody.

And so, you know now it's a debate about whether that policy makes sense. Now is Elon just as arbitrary and capricious as the former executives who are running trust and safety at Twitter. I don't think so for two reasons. Number one, he's promised transparency. He said that when we ban or shadow ban an account there has to be a reason for it and you have to be alerted to it.

In other words, none of the shadows stuff. No shadow. You need to be informed. You get your speeding ticket. You get your ticket. It's there right no more shadow that is different. And then the second thing is that and again, I think you could say they didn't do this perfectly in the first few hours, but there needs to be a principle basis for a censorship decision and it needs to be applied to everyone equally.

And so far we haven't seen any basis for believing that he's not applying this principle equally. I mean still very early. Whereas the former rulers at Twitter were indulging their personal bias and personal preferences and who were they were banning. There are two standards of justice. If you were someone who is allied with them, it was almost impossible to get censored no matter how hateful your tweets were.

But if you were somebody on the other side of the political debate, they were eager to suppress you. And I think that at least so far Elon has not shown that type of selectivity. He selected against someone that put him at personal risk. I think yes, and so here's what I'm saying.

Yeah, if that's where the decision had stayed, yeah, then I would agree with you, but I think that since then they've put in place they've undergirded that decision. I got a personal policy. I think those sites are I think those tweet streams are cool. I think there's some cool tweets streams that some of these people run and there are hundreds of them and they're actually kind of cool.

You can see where these different labor of people tracking people's planes like where Air Force One is they show all these different planes it look and whether or not the FAA should be publishing the state as a separate question, but it's on the open internet. It is already there.

It's like turning off the RSS feed from the open internet to protect himself. Okay, that's why it feels owner. So here's the part I agree with which is I think this policy with regard to plane specifically is going to be futile. Yeah, it's going to be at best harm reduction because as long as there's many ways to publish this information on Reddit, it's pointless.

It's on Facebook. So listen, I think this whole I think this whole policy on Twitter is a little bit of a red herring. I think the real issue the real underlying issue is that the FAA is publishing these I count numbers thereby making every plane personally identifiable. I don't think there's I have a counter to it.

If I'm necessary, I have a counter to it actually sacks if I may what we saw whether you agree with it or not with the mass banning of certain individuals did actually silence them and take them out of the public square. One of the reasons in fact, you'll I'm wanting to buy Twitter.

So if you look at certain individuals, whether it's Milo Alex Jones Trump himself right on down the line when they got banned across all systems, it was dramatic in terms of the reach of the that information. So because of the size and scale of YouTube Facebook Twitter, etc. When they act in coordination, they can have a dramatic impact not a perfect impact but a dramatic which is why we have this issue of hey should 230 be rethought because when they act en masse, it is extraordinary what they can do to an individual they took.

Yeah, Alex Joe. How do you consume Alex Jones? You have to seek that out in a major way. It's distinctly different Chamath last word. And then we're moving on to what could be the greatest science corner ever in the history of all in pod final word. I think this is this is a great transition.

We're about to talk about nuclear fusion. And my point is I don't care about any of this stuff. Like I said, like this is my point is like the if you if you take like an average person, okay, you know, we are let's say awake 16 hours a day.

And you know, if you take out the time with our family, David the family is people that are related to you. We'll get to can we DM sacks those people one more time. So he has that will send you their names. But if you take that out and you take out, you know, exercising and you know, we also explain that to sacks.

That's when you increase your heart rate and sweat sacks. The point is that you have let's just call it 12 hours, you know, a functional executive time that you can apply to a problem and you can break that down into these blocks, right? I would really love what is basically the smartest human and the most productive human of our generation to be filling those blocks with things that sort of like really transcend and increasingly and I agree that freedom of speech is important increasingly those buckets are being filled with things that are very low level and hyper tactical and are distractions at best to the to the path of free speech.

And so I think that hopefully he gets all this shit under control over there. He finds a good executive team. I would like to see him get back to landing rockets on barges getting to Mars. Let's get it getting to finish self-driving. We're almost there. Chamath definitely has a point.

But I just say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speeches are different levels protection. The fact of the matter is like business advertising is not as protected as political speech porn is not as protected as political speech political speech speech criticizing the people in power is the most protected category of speech because the founders of the country understood that the people in power will always try to insulate themselves from accountability by limiting that kind of speech, but that is precisely the kind of speech that the former rulers of Twitter suppress the most and show the least sensitivity to so listen.

I mean is Ilan going to be the perfect content moderator? No, I mean nobody is nobody nobody is but I do not believe that puts him in the same category as you know, Vijaya Gaudi or Yoel Roth who showed no sensitivity for political speech. He has indicated a desire to restore freedom of speech and I think they ultimately ended up in a good place.

I want him to get us to Mars. I want him to get us to Mars. I don't let's move on to Twitter handles best science corner ever. So according to sources scientists work for the US government have achieved a net energy gain in a fusion reaction. No, no, not net energy gain get it right.

We had ignition energy, which is very different from net energy game. Okay, hold on. I know that you're in the anti camp. Please let the science nerd have you you have to you have to say it correctly so that people understand what you're talking about. Let me just make it even simpler than explain to us.

What fusion is Dr. Friedberg and explain to us why this could potentially change everything we did this on a on a show once before but I'll kind of do a quick kind of summary again, basically, if you take atomic nuclei, which are made of protons and neutrons, and they repel one another right because protons are positively charged.

So they want to push apart from each other. So with enough energy and enough density meaning that they're moving fast enough and they're close enough. They'll overcome their repulsion and jam into each other when that happens. Some energy is released because the total mass of the fusion of those those nuclei is actually less than those nuclei when they're on their own.

And so some energy is released and that energy drives a chain reaction. And so fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe. So the star in our in our sky, the sun is driven by fusion and only about 15% of the mass of the sun at the center is dense enough to actually drive fusion.

So the big challenge with fusion is how do you get these these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy and that's super hard. The reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together, they get close enough, they get hot enough, they move fast enough, and fusion happens, boom, all this energy comes out and every day we're warm.

Now, to do it on Earth is very difficult. But if we can do it, what happens when you fuse nuclei together is you don't release any this isn't like a radioactive fission reaction. You release energy that can be harnessed to drive our systems are technology. How is it done?

Yeah. So in the 1950s, you know, this was theorized, hey, we could do fusion on Earth, we got to get a really, really dense plasma meaning the atomic nuclei and the electrons have kind of gone off the atoms. And it's just the nuclei spinning apart. You got to get them to move super fast, like 10s of millions of degrees Celsius, and you got to get them really close together.

So how the heck can you do this? So there's a couple of concepts to do this, one of which is called inertial confinement, which is where you basically create a little pellet of the material, you're going to try and get to fuse, and you put a ton of energy on the outside, you compress it really hard, really fast.

And when you compress it really hard, really fast, and you can get it to be done in a perfect sphere, and you can get it to collapse on itself very quickly without, you know, kind of shooting all over the place, enough of those particles will come close enough together fast enough hot enough, and they will start to fuse.

Another way is through magnetic confinement, where you use magnetic fields to create a really hot plasma, get it to spin around or to move. And then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast, and they're dense enough that they start to fuse.

So you know, one is called magnetic confinement, the other one's inertial confinement. And so what we saw happen this week is at the National Ignition Facility, which is a facility that was built starting in 1997. And they've spent about three and a half billion dollars to date, they demonstrated a net energy output from the fusion reaction of an inertial confinement system.

And what that means is they took a little pellet, and that pellet was made up of deuterium and tritium, the atomic nuclei that they use the particles that they use are deuterium, which is a proton and a neutron stuck together, and then tritium, which is a proton and two neutrons stuck together.

And the reason they use those two combinations is of all the different ways you could fuse nuclei together. This has the best energy output of any kind of reaction. Freeberg, what actually happened this time that made this work for what apparently only $3 billion. You said you didn't say 3 trillion, 3 billion, three, about a third of Yeah, about a third of what Sam Bankman fraud stole.

We have done something here. Allegedly. So what actually happened that is so dramatic that we have a press conference, everybody's losing their mind. So yeah, I just want to highlight one more thing about why this is so hard. You have to get such an incredible density, you have to get an incredible energy.

So high temperature and high density, that confining those atoms and not letting them escape and, you know, basically dissolve before they fuse is super difficult. It requires so much energy in such a controlled way in such a perfect and precise way that all of the digital technology, the magnets, all the measurement systems, all the software, it's taken us decades to get everything that allows us to do this today.

And now we're at the point that we may be able to start to realize production scale, kind of versions of this. So what they did is they had a small deuterium and tritium pellet. And they shown 192 lasers onto this container that held that little fuel. 192 lasers, the whole thing happened in a billionth of a second, the lasers pulsed, boom, here's an image of it.

And as they did that, they, you know, basically x rays kind of hit the sphere, this little BB, if you will, BB kind of thing and compressed it and it compressed so quickly. And with such heat, and it didn't dissipate because it was done so precisely, all the lasers hit at the exact right time, boom, this thing compressed, and then energy came out.

And the energy that came out that was measured was one and a half times the energy that kind of went into that reaction. And here's a chart that that I'll show you from the National Ignition Facility, which shows just how inefficient the system still is. And this isn't even speaking to to Chamath's point, but basically these guys lose 90% of the energy that they put into the center of the system, only 10% is actually used to drive the compression, the rest of it is lost.

And there's a lot of ways to improve the efficiency of the system from here. But basically, they put two megajoules in, they got three megajoules out. And so it was the first proof point production proof point in the 70 years that we've been theorizing about nuclear fusion here on planet Earth, that this is possible, and it's real.

Now, this is these kind of inertial confinement systems. There are 33 private technology companies today that have raised about three to $4 billion so far this year, to pursue several other technologies, besides what the National Ignition Facility is showing to try and build production ready versions of nuclear fusion.

And so these 33 companies are using a bunch of different types of tools, one of which is the tokamak. If you show the image, I'll show you this one. There it is. Yeah, tokamak. This is what we talked about. That is the magnetic spinning thing that looks like Iron Man's arc reactor.

Yeah, based it on Yeah, yeah, you create a plasma, you basically speed up the hydrogen nuclei super, super fast, these uterium and tritium nuclei, super, super fast. And then you use magnets and the magnetic field has to precisely squeeze the plasma, squeezing and squeezing and squeezing it. And if it's slightly off in even the tiniest way, think about a balloon, right?

If you put a pinhole in a balloon, everything escapes from the balloon. You got your account. That's how technically hard this is. You're basically trying to create a balloon with a magnetic field and you're trying to keep the gas and you're trying to make it smaller and smaller and smaller.

And if any tiny hole emerges, the entire plasma. Is that what happens in Uranus? Like when you're trying to hold in the Wagyu? Anyway, let me ask this question then about the consistency of this and then we'll go to you, Chamath. Can they do it consistently? Or do you think this is like they got lucky once?

Or are we going to be sitting here a year from now and they're like we put in two when we got out six. So we did it five times. Yeah. So now we've proven that humans can do this. Okay. Which is look, I mean, I want to give you guys some and I know kind of some of Chamath concerns, which is how humans can recreate the sun is what we this comes down to.

No, no, no, I want to just say one like, even close. I want to say one important thing from a historical context. All breakthrough technology starts out seeming impossibly large, impossibly expensive and impossibly slow. The human genome project 20 years ago cost $100 million to sequence the human genome.

Today, we can do it in a couple of minutes for $100. Okay, credible. The first computer, the ENIAC computer had 500 flops of compute capacity, it filled a room, it cost $8 million to build. 20 years later, we had a mainframe. 20 years later, all the wrong No, this is all this emotional bullshit.

You're using the wrong examples. Okay, let him finish. Then you go to finish your sentence freeberg. And then we go. And today we have an iPhone that can do 2 trillion flops of compute in your pocket. I think that what we're seeing with fusion today is similar to what we saw with the ENIAC computer in the 1950s, which is the demonstration that compute is possible.

And now we're seeing a demonstration that fusion is possible. And a lot of folks have anticipated this moment. And they've invested ahead of this. Now, I don't know if any of these companies that are currently kind of being built are going to be production ready anytime soon. My estimate is that we will see production demonstration.

Okay, fusion, here we go. 23 in the 2030s. So call it eight years from now plus, and then you'll see grid scale scale up in the 2040s. So this isn't something that's going to happen next year or two years for already happening. What are you talking about? Okay, now, Chamath your rebuttal.

Oh my god, knowing you're a huge fan of solar. This is the most navel gazing head up your ass scientific bullshit. I've ever heard. Okay, couple points. Let's start with the basics. The first is that there was no previous technical. Why are you being like, why are you angry?

At me? I'm not angry. I find it so tiring hearing this. It's all syrup. You're a little triggered. He's right. Yeah. Why? Like, I don't get it. Because I don't find this intellectually honest. Okay, I find it intellectually dishonest. Let's keep on. Let me finish. Let me finish. Okay.

When you talk about sequencing the genome, there was no alternative. So you're right. It was an enormous technical leap forward. When we built a computer, there was no analog. It was an enormous technical leap. And so you're right, we have a cost curve we don't understand. And then we iterate as rapidly as possible.

And all these innovations where we built an entire infrastructure to ride down the cost curve. The thing is, fusion energy exists today. It's called the sun, we actually know how to capture it at virtually no cost right now. So according to the IAEA, today, you can capture grid level solar energy for about 3 cents a kilowatt hour.

That's as close to zero as we've ever been. And over the next 10 years, their forecast is it's going to get to one and a half cents. If you then want to store it, and you layer in storage costs will be at a whopping 3 cents a kilowatt hour.

That's where we are today. And so I think that fusion does exist. I do think that this is an incredible technical leap to replicate something that exists. And I think that's where the intellectual dishonesty is, it does exist. It has been captured, it can be harnessed. And there is a positive energy equation, just in a different modality that doesn't speak to these technically minded individuals, a couple of other points about what I saw.

I think it's incredible what happened, okay. But just to make sure we're clear, this is 192 lasers, the size of three football fields, that consumed 322 megajoules of energy, which then ultimately delivered two megajoules to a target, which then released three. So this is why I'm saying we had positive what's called ignition energy, we did not have positive electrical energy captured.

So yeah, could we figure this out? Absolutely. Can we then shrink the three football fields down to something that looks the size of a laptop? We possibly could, will it take 20 or 30 years? Possibly. But in the meanwhile, if the goal is unlimited, costless energy, you're on that cost curve already.

Yeah, but why can't it be both? So you said I was being intellectually dishonest. What was I dishonest? Yeah, you're comparing what you're saying is right. Yes, you can get you would you seem to be an agreement? Like, yeah, I just think that I think that you're trying to say that this is an entirely new thing.

No, it's a different approach to a thing we've already beaten and basically captured. Let me bring what I would argue to my and I think this is important be the net energy you can capture on, say, a football field sized facility from solar is, you know, a tiny fraction of the energy you could generate from a football field sized fusion reactor.

And that's why the argument would be like, hey, you know, when we were developing computers, hey, we have abacus is we shouldn't be developing computers. And I think that's, that's the analogy I would use here. This is why the cost per kilowatt hour is what the the levelized cost of energy tries to do.

It tries to, to normalize that argument away, because everybody would say that, hey, hold on a second, you're going to need plainfuls of this or boatloads of that. And people said, No, what's the levelized cost of energy? How what is the cost per kilowatt hour to generate energy? And what I'm saying is, that is an absolute scale, and free is zero, and we're at 1.5 cents.

Here's what I would say once check out one sec, the okay, come off, the opportunity here is not necessarily about cost reduction, it is about scalability. And if hydrogen is abundant, which it is on this planet, it is nearly infinitely abundant, we can take that hydrogen, and we can scale up energy and electricity production in a way that is unimaginable compared to solar.

And I don't think that solar should be excluded. Solar is key today and should be scaled up. And I'm 100% agreement with you. But the scalability to go 100 x if we want to make 100 times more electricity, I think we need fusion. And I think that's feasible. So I think we have reached a good settlement here.

Chamath you're saying, Hey, listen, we're getting solar down so cheap, we can solve this problem, all forms of energy. Okay, great. We are solving that. So for our needs today, and then what freeberg is saying, but what if you had unlimited a thing that we can't even imagine? Beautiful.

Now, watch, as I get sacks involved in a science conversation. He has zero interest in Mr. David sacks. If in fact, there was 100% more free electricity available in this time frame, the next 100 to 200 x 100 x the available energy, in other words, supply of energy just becomes flooded.

And it's free, essentially, what would be the geopolitical reaction on planet Earth in terms of this incredible rivalry, rivalry we have with China, and for humanity on a political basis? Such a good question. J. Go ahead, sir. Good question. Here we go. Thank you. World's Greatest moderator. Why don't we let freeberg answer?

No, no, you're the politics guy. Get in there. Take a second to think it through. He has thought about this. Let's I want to hear his answer. I actually want to hear your answer. Yes. You know, in a world where you know, energy becomes more abundant, David hasn't been paying attention, guys.

This is what he's trying to say. Tucker, Jake, I'll call your intellectual dishonesty and raise you a steel man. Go ahead. I love you. I love you. You know, I do. I like to have a great night on Monday night, a Sunday night. Great. Let's talk later. I just want to be together last week.

You call me petty to I think we're well, here's what I want to be clear. I think that I'm just glad you guys are fighting not mean sex. Guys, please let me finish. Okay, I think that this breakthrough is really valuable. I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government sponsored facilities and not private companies.

And I think that that's probably where a lot of these innovations will continue to come from because look at the scale of what had to be built. Three football fields and 322 megajoules of energy and 192 lasers. This is really complicated, expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs.

I want to be clear. I think that where I struggle is translating this into actually an investable area. And I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster.

So for example, you know, there are all kinds of things that we could do to secondary, ternary, third, fourth and fifth generation batteries that aren't happening today. There are a bunch of things that we could do to actually create an infrastructure of green hydrogen. And the the simplistic answer is we could do it all.

But the reality is money is finite, and we can't. And all I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this. And my skepticism is that this is still in the realm of government sponsored research and is not really an area that for profit private companies can tackle.

And so I would rather those for profit companies, for example, why combinator just today, put out something where they were, you know, call to action a request for startups in climate. And when you look at that list, those are really practical, investable areas. And I just want to make sure that the capital allocators that listen to this, weigh those equally.

I am glad. I'm glad that the US government did this. I hope they do more of this. But if you're asking me quite honestly, I would rather the next $10 billion go into energy efficiency HVAC, then fusion because a fusion exists and B, I think it's going to happen at an innovative bench scale level by the government and not by a particle.

Let me let me just respond to that real quick. Tomorrow. I think that the idea of allocating our resources as a society should be done on kind of, you know, on a portfolio basis, 80% on the pragmatic near term, 15% on the kind of next gen and 5% on the moonshot.

And this maybe starts to shift from the 5% to the 15%. Maybe it's still in the 5%. But I don't see kind of overfunding happening. So I'll tell you guys there was a survey done. There's 33 private companies in fusion that are kind of fusion companies today. VC back eight new this year.

So the number is kind of increased by 33% this year. And so far this year, those companies have raised around three to $4 billion, which by the way, is a fraction of what was done by 15 minute delivery companies for convenience stores. Exactly my point. And and by the way, the biggest funding is happening in iter, which is the largest construction project in Europe.

And this is a $30 billion production scale fusion demonstration system that should be online by the end of the 2020 government sponsored government sponsored. Yeah. And so to my point, I'm a huge fan of government sponsored research. We get finally, the first science corner, everybody brace themselves. It's the first science corner, where David Sacks has the cherry sacks.

Here we go. Come on, you can do it. You can do it. Mr. David Sacks. What was your question? Your question was a little bit was was not a let me reframe. Okay, I'm coming in. What's the geopolitical impact if this does happen 100x energy? It's fantastic for the United States if it actually happens.

And the reason is, if you look across the world, there's this thing in politics, known as resource curse, where the worst governments, the most despotic governments tend to be in the countries that have the biggest natural resources, ironically, so the countries that have huge amounts of petroleum or other kinds of minerals, they've tend to have pretty corrupt governments.

And the reason for that is that if you're sitting on a giant oil reserve, you don't need to make anything else work, you just fight over who gets to control that oil reserve. And that's what politics ends up being, you don't need to create policies that foster innovation, or attract knowledge workers, right, you just basically mine that oil.

So if all of a sudden, you're talking about turning energy into a software problem, or an innovation problem, that looks a lot more like the software industry. That's an area where the United States has a huge advantage. And yeah, I think it would pull the rug out from under many countries all over the world in favor of the United States.

I mean, it's a big if because where I agree with Chamath is this stuff still seems pretty far off. And it's still pretty unproven from a commercial standpoint. But I agree with freeberg, why not try investing in and cultivating it and see where it goes. Okay, fantastic. This was a fantastic science corner, where we actually engage David Sachs, which country did you disagree with their J cow?

All right, take it easy. Yes, I just want to let you know, I think you like that answer, right? Well, I love all of your intellectual enough for you. Or was I love your intellectually? I love it wasn't knows I was a steel person. felt silver silver silver manning.

But I love what your intellectually silver person. Yes, you're silver. They're silver thing. Was that was that platinum, gold or silver? I think that's your you're in platinum with some diamond dust. I just can I just say spent a couple nights together this past week has really really done the mood of the show.

I mean, when you guys go out and drink together and you guys are left our asses off Sunday night. Can I just say, we Saxon I had the best 48 hours together in a decade. This is Sunday night. It turns out Chris rock and Chappelle are playing at the Chase Center, where Chamath used to own a piece of the Warriors, right.

And this incredible arena has this incredible show. And you know, me and Saxon, some friends will leave it at that go to the show. Our bestie dream on is at the show. So I text Dre and I'm like, Hey, you're going to see Chris rock by chance tonight with Chappelle?

Say yes, sir. I said, Hey, we're gonna go with a couple of friends. Maybe we roll together hang out after the show. We go. And after the game after the show, which was incredible. We go backstage and I'm sorry to the to the practice court. And we're hanging out with dream on in the practice court with Dave Chappelle, Dave Chappelle, and I start shooting hoops.

David Sacks is talking to Chris rock about free speech. Steph Curry comes out and starts giving Dave Chappelle and Jay cow a shooting lessons. Where Chappelle and I are breaking like old men, you know, you know, on a concrete court, all of a sudden, Steph says, Hey, Jay, how you got it?

And by the way, he's fan of the show. He says, you're short every time. And just, you know, hit the backboard, you got to go long, then he tells Chappelle, you got to change this. All of a sudden, we start hitting shots like, you know, we're on the rain, injuries, you're raining, freeze, rain.

It was literally like cut into here were these mid range jumpers or threes. I was a free throw line extended free throw line extended cut into here rain man and rain dance from a long came Polly rain dance rain. Let it rain. Rain is literally I was hitting brick after brick, rest in peace, Philip Seymour Hoffman.

So then we're chilling. And Saxon are talking to Dave Chappelle. Joe Lakeham owner of the Warriors are there the majority owner, you know, as opposed to you being a minority owner. Chamath that's right. The only person who drops more names is Phil Hellmuth. I mean, absolutely. I'm trying to catch up anymore.

No, he's only got three names. Saxon, am I leaving? I want to say it's so bad, but I'm not gonna say not dancing. So brutal. There'll be zero docks. So we I kid you not. Chappelle comes over and says, Jacob, fact, you guys want to go to after to do it.

Go go see me do a show at like 1am at this like local comedy club with 70 seats. I said word. Yes, we go at 1am. Chappelle sits on stage, smoking cigarettes. And doing 90 second pauses, and then having a beer and interacting with the audience. And does a two hour set after doing this set with Chris rock at the Chase Center.

Me and Saxon Draymond hilariously laughing. The stuff Chappelle is a genius. And when you see his show and Chris rock, by the way, he puts a tight set together. I mean, Chappelle's got this storytelling thing where he kind of meanders a little bit and then he hits you with it.

But Chris rock is just bang, bang, bang, bang, bang, bang, bang. Extraordinary, just two incredible minds at the top of their game artists, artists at the top of their game, doing what society needs. But more importantly, doing what David Saxon I needed, which was to laugh our asses off together and remember our friendship.

So it was a great night out. I want to say to bestie Draymond Dave Chappelle and Chris rock. Thank you. The David Sacks J. Cal bestie friendship has never been stronger. I don't know about freeberg and Chamath that seems to be on the rocks. Yeah, it's weird. We'll be in.

We'll be we'll be vacationing together next week. So I love I love freeberg. Yeah. Well, well, we are going to be whatever, whatever's going on. We'll take a walk and figure it out. Well, I just want to say the alliances amongst the besties people. I'll be honest, I got mad at freeberg when he edited that Google bit to say the exact opposite of what he actually said that we don't bring that up.

Yeah, just beep that. But yes, that is the thing that bothered me. I have to be honest. That's you playing to the crowd versus you being honest and telling what you think freeberg that freeberg can let me put that in the form of a question freeberg has your fame as the sultan of science.

Because listen, you nobody knew who you were outside of Silicon Valley before this. Has it impacted your ability to speak? No, no, no, not my family. Look, I'll be I'll be honest. And I'll speak openly about this. I had said that there could probably be a significant headcount reduction of like 75% at Google and the business could keep operating.

And I took it out. And I took it out because I have a lot of friends that work at Google. Google is a close partner of mine. They're an investor of mine. And frankly, I just want to be careful about that. It's not something I commonly do. You know, as you guys know, I usually speak my mind pretty clearly, but I was just trying to be respectful.

And that's the reason I did it. You know, so that was fine. What I'm saying is not that it's just that the part that you edited in actually made it seem like you were not saying that at all. But the opposite, I think if you had cut the whole thing, it would have been more honest.

So to keep that other thing in actually led the perception of the opposite. So I think that I think no, no, I don't want to trigger it. I'm saying, but I think you should have a principle. I don't hold on very often tomorrow. Like, yeah, I know. I think that we should just have a principle to not play to what the perception of what we say should be, especially if it means we could be saying the opposite of what we actually mean.

That's all intellectual honesty is a best tenant. It's a best tenant. I think so. Absolutely. Bestie 10. Always and the other bestie tenant besties always come back together. If we have a fight, we always come back together. Saks. Can I'm still mad at you? Just kidding. Okay, but just talking about hypocrisy.

I mean, so how great was Sunday night? How great was that gets up there and he gets like right out of the gate. He's attacking woke right out of the gate. Swinging came out swinging like Will Smith. shooksmith. You mean? shooksmith. He took down Will Smith. I mean, the Will Smith takedown, which you will see in this special is so complete.

It is just chef's kiss. But how great was his set? Let's say just give Chris Rock his flowers. He did he did he fillet and fricassee? He, he did. But I thought the more important part of the set was the he came right out like calling out all this, you know, you know, holier than thou woke stuff.

Yeah. And there was that undercurrent to Chappelle's set as well. And also he said, Listen, words can't hurt you. Unless you write them on a piece of paper and time to a brick. We these a bigger point right now and this does tie into our first story is I think comedians look at Twitter as a place to get canceled, not a place to be part of the discourse.

And that's a huge loss that's indicative of our society being broken. And it's incredibly important that these comedians be allowed to mock and to speak and to step over the line and challenge us as citizens in a free society. And we should cherish them. And we should not even try to cancel them, let them cross the line, let them say things that make us uncomfortable, so that we can understand ourselves and our society better.

And I just want to say, Why can't you include lives of tick tock in that? Oh, do we want to have a discussion about it? I can't go. I'm okay with mocking. I just don't start you guys. You did so well. Come on. Here we go. No, J. Cal cut it out.

All right. Well, we have two more science corners to get. All right. You know what I mean? I just know what's wrong about the Coupa deal. And sex. This is right up your alley. Have you touched into it? To be honest? Oh, really? The thing you guys asked is like, you know, what signal will Elon's moves at Twitter be for the rest of the tech industry?

I think the biggest wake up call is to actually PE companies. So if you play this out, and you think that Coupa is, you know, explain what is, please. Coupa is a is a software as a service company that does revenue management, I guess, or expense forecasting or some something in the financial realm.

I don't particularly know to be honest. But anyways, this is a company that you know, was off 70 or 80% from the high like a lot of SAS companies were when rates started to go up. And they got this offer from from Toma Bravo. But here's what's so interesting about this deal.

If you think that, you know, these guys bought a company, I'm just going to make up a number at 20 times EBITDA. Right. And, and you see Elon at Twitter, and you think, well, wait, maybe we can't cut 75%. But maybe we can cut 50% headcount and the company can still do well.

And, you know, you take half of the expenses out of the business. All of a sudden, you know, if you're even two doubles, you're actually buying it at 10 times. So I think the thing that is the that is the real insight here is twofold private equity can still put out a lot of private credit to fund these deals.

And SAS companies are perfect because they have huge free cash flow, right. So instead of funding it based on earnings, they can fund it based on ACV and ARR. So private equity will be super active. And to all these rifts basically show what the efficient frontier is for the number of employees you need to run a company.

And if you can cut 50% of the headcount, private equity folks will do that. And so I think Cooper is like the canary in the coal mine, it is the beginning of what I suspect is a tidal wave of PE sponsored deals in tech companies, largely SAS, but may go into other realms, recurring revenue, that can go to these two things, tap the private credit markets and finance it based on ARR, and then fire 50% of the team and double earnings capacity.

Zach, your thoughts. So on on Cooper, I thought the most interesting thing was just the we got a public comp, well, we got a comp on what private equity is paying for public companies right now. So the deal happened at an $8 billion valuation, that was a 31% premium to the public price.

It was 8.4 times next 12 months revenue. And on a trailing basis, it was about 10.4 times the last 12 months revenue. And by the way, all the comments were around how what a rich price Toma Bravo was paying people generally thought they're paying a premium to the valuation.

So it was 77% premium before the rumors came out that this was happening. So the premium, yeah, and there was and there was a there was a bidding war with Vista. And so it was a it was a really rich kind of deal that got done here. Right. So my point is that people thought this was a really rich deal.

And yet the valuation multiples are so much lower than what private company founders expect. So remember, last year, at, you know, the peak, founders were thinking 100 times AR was normal 100 times, and, you know, you could roughly say, you know, AR is roughly equivalent to next 12 months revenue.

It's not perfect, but it's roughly the case. So these founders were expecting evaluation, multiple 10 times what the public markets are paying. And the public more and actually, the public markets are half of where Toma Bravo was in this particular deal. So the public markets right now are valuing the median SaaS company at about five and a half times, and a high growth with that be for like a 20% year over year growing company.

And they're valuing the high growth companies that may be eight times, you know, and Toma Bravo did this at 10 times. So that gives you a sense of what the ballpark is. And these are companies that are already public, they're at scale, they're doing roughly a billion dollars of AR, they have already kind of won their category, to some degree, whereas private companies are subscale.

They're, you know, typically, you're talking about companies with one, five, 10, usually under $20 million of AR, they are, they're not de-risk, there's still a ton of risk. We've seen many, many SaaS companies fizzle out and plateau at 20 million of AR, never get to 100 million, nevermind a billion.

And yet these founders think that they're entitled to, you know, even in this market, 30 to 40 times AR, no way. I mean, like, it's getting to the point now where, you know, maybe it should be 10 times 20 times like max, for that to be for a company that's growing two and a half, three x year over year.

So I still think that like, so I think basically, what we're seeing here is even a good scenario, like a coupe acquisition that was done at a premium, like it's still a wake up call to the private markets that the valuations are still completely and utterly out of whack.

Yeah, let me ask you a question, Zack. So this company was growing 45% last year, they're growing 35% this year. And they got this multiple. Why is it not worth a significantly higher multiple if a company is growing two and a half to three x, which is 250% 300%.

And these guys are only growing 35%. Sure. I mean, it is. And that's what you're paying a premium for. But so the so the here's the theory of it is that if you can invest in a private company that say tripling year over year, and they can do that for another five years or whatever, then you're paying for that you're paying for that outcome in a couple years.

Basically, well, think about it discount to the outcome in a couple years. Well, if you're paying 30 times today, and it triples next year, you're only paying 10 times next year. And if you're only paying three times, so if that keeps going, that's where your arbitrage is. But here's the thing you have to weigh against that is that these early stage private companies, many things go wrong.

And they hit a plateau, they fizzle out or their growth rate starts to the bigger they get, the harder they should be priced at a discount, not a premium, because there's risk, there's more risk, they're growing faster, but there's more risk. But also, it's very hard once you get to a bigger number of ARR 50 100 million of ARR, it's extremely difficult to be doubling or tripling year over year.

Let me just point one thing out. So I looked at the numbers on Coupa. I think they had about 170 million of stock based comp expense in the last nine months. So those are employees that are getting $170 million in compensation in the form of shares. So they get those shares, they can then sell those shares and get cash for them on the market, and then on the public markets and pay their bills.

So when a company like this goes private, for those employees to just remain at their baseline comp, that stock based comp needs to be replaced with something else, or else they're seeing their salaries reduced. So, you know, there's this balancing game when these companies go private, in terms of how do you give them the comp that they're earning to keep them engaged in the business, the answer is don't versus no, but you let them you let them quit because you want to do a riff anyway.

Right. So I mean, do you but for the people that stay, right, so there's a balance because it's not just hey, cut the opex, you have to cut the opex, including stock based comp. And this company generated about $100 million, sorry, $210 million of free cash flow or operating cash flow in the last 12 months.

So if you if you take out the stock based comp, these guys are actually break even or losing money roughly. Yeah, so yeah, and break even roughly. So there's a real question mark on this business and businesses like this that go private, where if you actually cut the opex and you cut the salaries and you cut the headcount, but you have to find new ways to pay people because you've been paying them with stock in the past, how do you kind of bridge that gap?

And I think that's probably a little bit of the balance and the art of what these guys do well, Jamal, if I may, can you explain to the audience what a private equity firms expectation is in terms of return when they buy a company like this, and then sacks, I saw your tweet that you want to feature and you'll go next.

Well, I think it's changed over time. And this is what's so powerful about the private equity industry. Look, you have to think about what their incentive is, because it kind of guides the yes. Early on, they were very much like venture capitalists, they were out in the, you know, edges of risk taking, doing all kinds of very difficult, gnarly deals.

So if you look back in the history of private equity, you know, these huge, crazy deals like RGR Nabisco, or TWA Airlines were the first of the industry, and they weeped enormous returns, but there was a lot of risk, and it required very heavy handed management. Oftentimes, what that meant was firing a lot of people.

Over time, private equity has gotten institutionalized, and they don't generally feature themselves as a place to get the best necessarily returns, but they are places where you can put enormous amounts of money, where the likelihood of loss is extremely zero, and you generate very good rates of return. Now, again, this depends on whether you want to look at IRR, or DPI, right?

So a lot of people will market IRR, which, you know, I think is kind of like a gameable metric. But you know, those IRRs can be 20-25%. If you look at DPI, which is really how much cash you get back, you know, private equity firms can generate one and a half to 2x of the money you give them.

But they do it consistently, and they very rarely lose money. So all of that is important into understanding what's going to happen in this cycle. These folks are going to buy a ton of these private software companies. I think that they are going to fire lots of people. I think they are going to make these companies run hyper efficiently, and they will make sure that they generate that 1.2 to 1.7x that has been historical.

Very rarely will they lose money in these things. By the way, that's going to mean that a lot of these other companies will have to reset valuation. So you saw yesterday, checkout.com went from a $40 billion valuation down to 11. You're seeing some companies only go down 10 or 15%.

But it's a process, isn't it, Shamath? Isn't this just like what happens in real estate where beginning of this process? Yes, because in real estate, my understanding having lived through these boomer cycles is the person living in the home still believes their home is worth, you know, this incredibly valuation, and then the people who want to buy it are like, that doesn't match reality.

And then the real estate brokers go back and forth trying to get people to, you know, go through this messy middle and come to true price discovery a private company, it's hard to get true price discovery until they're on the brink of insolvency. We don't have the money. We just got some data on that actually, can we bring this Cooley data?

Yeah, so Cooley looked at a law firm in Silicon Valley. Yeah, they're a prominent Silicon Valley law firm, they looked at 1000 deals over the last three quarters of this year. And what they saw is that you're the later the stage, the bigger the valuation correction. So series D rounds went from three and a half billion to 527 million.

That's an one 7% Oh, yeah, that's an 85% drop. Series C went from 502 million 230 million to 74% drop. Series B went from 164 to 90. That's a 45% drop. And then series A went from 58 to 45. That's only a 22% drop, there's just less room to compress there.

But the point is that series B roughly a 50% drop series C roughly a three quarters drop, and series D, roughly a 85%. Yeah, one seventh drop. So I think founders right now are they're just like a little bit delusional about this money they raised last year, they're still way too anchored on last year's valuation.

And if only they would think in terms of this capital they raised last year, in terms of, of its real dilution in terms of what the company is worth now, I think they'd be treating it more more precious. So for example, sex, for example, hold on, if you like, they won the lottery, and they don't want to they don't realize they won the lottery.

I had this conversation with the founder, this is the only money they're ever going to see is the bottom line. And they're spending like they're going to win the lottery every year. So for example, let's say you take a company, yeah, let's say you take a company that raised 200 million last year at 2 billion.

So it was 10% dilution. So in their heads, they're thinking, Oh, well, this isn't that expensive, like 10% dilutions around the era, but really, probably the company is worth maybe 400 million now, right? Because it's gone down 80%. Yes, 200 million of your 400 million is half the value of the company.

Yes. And you're squandering it, you're squandering it at a rate of 100 million a year. So you're basically burning up 25% of the value of your company this year, and the next year. And then by the way, you're going to be in crisis after that, because you're probably like a lottery winner buying like a giant superyacht.

I had an observation that a lot of the investors that sit on the boards of these companies. They have an incentive to not see those valuations come down too quickly, do they not. And so there is this sort of like, interest in, hey, I don't want you to have to go reprice the company or do a down round because then my portfolio gets written down.

And then I'm in the middle, everyone's always in the middle of a fundraising cycle with LPS. And then I'm going to have a tough conversation with my LP is about my, my value. So do you not see VCs and investors playing an active role in trying to keep the valuations propped up to some extent, particularly where they have big markups 100% by extending bridge rounds or doing other sorts of, you know, look, nobody, nobody likes to go through a down round.

And that includes founders and existing investors in the company. That being said, we're not talking here about new financing conversations we're talking about is advice that is happening in board meetings. And, you know, maybe other VCs aren't pushing as hard as we are. But you the advice I'm giving in board meetings is what I'm telling you publicly today, which is, this is the last money you may be able to raise on attractive terms, if at all, you need to treat it much more preciously, the world has fundamentally changed.

And by the way, we haven't even gotten into what's coming the demand contraction that's coming next year. Explain what demand contract contraction is for the audience, please. Thank you. Okay, look, there's going to be three major sources of slowdown for software companies next year. Number one, new business is going to dry up companies are just going to be spending a lot less money next year, because they're all cutting costs.

So you should expect your new business to be roughly 50% of what it was. Next year, it'll be 50% of what it was last year. That's my rule of thumb. For most companies, new business down 50%. Number two churn is going to be higher. We haven't seen that much logo churn yet.

But next year, a lot of companies are going to start going out of business. And it's going to happen over the next two years. So you're simply going to see logo churn rates, say among small businesses go from like a historical norm of 15% to maybe 25 or 30.

It's not the words your customer, the logo customer simply doesn't exist. Yes, that's what I'm going to go means. Yes, the actual entity. Yes, logo churn means the entity doesn't exist, then you've got seat contraction, which is these companies are not hiring as fast. In fact, they're doing layoffs.

So they're simply not going to buy as many seats of your software as you need to in the past. For the last decade, we've had a tailwind, an enormous tailwind for software companies of seed expansion, which is every year your existing customers would buy more seats of your product for their new employees.

Now they're actually going to have fewer employees or maybe headcount freezes. So they're actually buying fewer seats. By the way, if you if you take all those three things, the deal of the century was figma selling to Adobe for 20. Because if you take those three things, I mean, oh my god, they just absolutely top tick before any of this stuff was no.

So today, Adobe could probably buy this thing for like 7 billion, 20 billion. So does that mean they try to do a breakup thing get out of the deal? I don't know. But if I was if I was figma, I try to close this thing ASAP and get that money.

Yeah, yeah. Yeah, you're right about that. And by the way, what I'm seeing from founders is that they still want to grow 100% plus over the next year. The problem is that the headwinds are going to be intense. So if you're flying a plane, and the headwinds are extremely intense, and you try to maintain your speed, you're going to burn an enormous amount of fuel, you're going to be incredibly inefficient.

It's better to basically just moderate your speed. Let the headwinds basically pass, we're gonna have major economic headwinds for the next four to six quarters, call it year and a half. It's okay to have a slower growth rate, preserve your cash, don't burn up your fuel bunker down. So what we're trying to do is we're trying to give permission to our founders to grow at a slower rate because they feel this enormous pressure from their VCs to grow at at at insane rates.

Can I build on this? I think freeberg said it very well, the scan in venture capital is demonstrated in the following chart. This is using Cambridge and our friend Brad Gerstner helped put this together. So what is this? This goes back all the way to 1997. And the gray bar is what venture capitalists share with their limited partners as to how well they are doing what is called quartile of venture capital.

And this is the top 25%. Okay, so this is this is a venture capitalist. And you know, our returns have been consistently top quartile. So instead of cherry picking anybody else, I'll just use us but it could be Sequoia, benchmark, you name it, we will go back we're in their launch, you will go back to folks craft, we'll go back to folks and say, Hey, guys, the total value of our portfolio is three times your money in 1997 is vintage.

Okay, it was four times your money in the 2010 vintage feels really good. But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically, there's been a decay. So for every dollar of gray bar that you show, you typically only get 73 cents actually returned to people.

Okay. The valuations that you get when you sell your company or goes public, end up being 73% of what you marked at the peak what you said they were exactly right. Exactly right. And the actual value of this purple bar going back, you know, 30 years is 1.7 x.

So just to put numerical numbers on this, if you were a venture capitalist, you would raise $100 fund at the peak, you would actually show that that $100 became 200 and about $28. But when when push came to shove, and when it was all said and done, you would return $170 back to your investors.

That's the rough equation. So what's the problem? Well, the problem as you can see in this chart is right around 2015 which is all of a sudden, you know, what we've started to see are these continually elevated gray bars. Yes, this stuff is worth seven times six times five times.

But we have not seen the purple bars catch up. Now some people will say, Well, yeah, but you have to give it time. And, you know, this is it has to make other reasons look at. And all you need to do is do what's called a regression. And you need to regress these things to the mean and make the following assumption.

Assume for a second that this time is not different. Assume that these historical averages 2.2 x 1.7 x holds. Well, that's what the the black line here shows you can calculate the area above the curve as the value at risk, right, the amount of money we will destroy, because of all these shenanigans that free bird just talked about propping up marks, not willing to look at actual market clearing prices.

Well, if you do the math, the sum of the area above this black line is almost a trillion dollars around the world. And it is about $600 billion for us venture capitalists. This is the dynamic that the private equity industry is going to prey on. So if you saw Toma Bravo just closed a $32 billion round, you know, Vista is raising a $20 billion round, everybody's stepping into tech, they are going to destroy those gray bars.

You describe that as bottom feeding? No, no, they are. They are the rational actor. Yeah. Okay. Who is finding the true market? I think the private equity industry is unbelievably precise, and talented in being dispassionate and telling us what these things are cut through. They're logical. No, no, it's not.

They're just not shooting for the private equity industry is going to be created by profligate founders. And look, you could blame VCs for the high marks last year as well. They were profligate too. But look, if you're a founder, if you don't start acting in a more capital efficient way and preserve your cash, your company is ultimately gonna be owned by a private equity firm, and they're gonna make all the money.

Well, here's because because because when you sell to them at a low price, all you're gonna end up doing is paying back the liquidation preference. And then that private equity firm that was willing to do or less, but that private equity firm will be willing to do what you were not willing to do, which was simply act, but cut your burn, cut your costs and act in a more capital efficient way.

And they will end up making all the upside for your decade of hard work. Because you got a basically addicted to venture capital and the high valuations and refuse to, again, adjust to the regime. I'll give you an alternative, I'll give you an alternative. The alternative is that the majority of acquisitions made by private equity firms are not actually pure acquisitions, they're bolt on acquisitions, meaning that these are companies that are added to existing platforms that they own.

So this acquisition they're doing of Coupa, I think it's very likely over the next couple of years, you will see like the playbook and private equity includes not just cost cutting, but also synergy building. And they typically do bolt ons and add ons. And this happens across all private equity platform deals of new products and services that can be sold through the existing sales channel, the existing customer base, and as an add on to the existing service or product that's already offered.

So one of the feet, one of the things that I think you may see in Silicon Valley, over the next couple of years is a rationalization away from funding feature companies, and thinking much more carefully about what can be true standalone product companies. Sure. And many of these companies that have raised a ton of capital, and have gotten crazy valuations, at the end of the day, they're more likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own.

And that's where the majority of these acquisitions will likely end up going. Yeah, in the private equity landscape, and they will be vacuumed up and attached to existing platforms that these private equity guys are building out. And by the way, just look as an example of what Oracle did over the years, what Salesforce did over the years, what Google did so many of these companies bolt on acquisitions by bolt on acquisitions by building a channel, building a platform, and then adding on top of that.

And I think that a lot of these guys are going to try and mimic two critical points. Number one, what about the bottom 75% of VCs? Oh, if you show that chart, just for one more second. I just want to remind everybody, that is the absolute cream of the crop VCs.

The best. These are folks. I mean, again, I'll just say us Sequoia benchmark, we've consistently been crap. Thank you launch craft. These are these are top chefs. Return Street. Thank the Lord. What about the bottom 75%? Not gonna be able to raise funds, man. It's over a lot of these people who raise first time funds in the last three or four years.

So it's also the company's own. Because like, like, it's like the today is the now is the moment for the sober founder and the sober venture capitalist to sit and say, what is the real valuation? What do we need to do to make sure that this company has a chance because what SAC said is so true.

Otherwise, all these profit dollars will be made by the private equity. In order to win today, you're going to have to grind, you're going to have to work 5060 hours a week, you're going to have to be absolutely embrace the age of austerity. And you're gonna have to focus on your customer, your product and your bottom line.

The age of excess is over. If you're not working 5060 70 hours a week, you're not going to cut it in Silicon Valley. Also key second point, profligate, extravagant or wasteful in the use of resources just so we get the word of the day from David Sachs. That's David Sachs is word of the day after a very powerful bull.

This is this is that one crazy. You see the trauma boy for winter, we will, we will went viral. This is I think, Elon's biggest, non obvious impact in this moment, JTOW, here's your one answer to your question about what happens to the the the bottom 75% of venture firms, it's equivalent to what happens with the, you know, kind of, this is the bottom of the top, the slide that I just shared, it's the one we looked at a few weeks ago.

And I keep referring to it because it's just such a staggering like demonstration of what people call the power law, which is how you know, kind of excess returns accumulate to minority of investments. So just a few investments make up the bulk of value that the you know, market cap of 43% of companies that have gone public since 2020 is $750 billion.

The market cap of three, the other 300 is only $26 billion. And the cash that went in to the $750 billion is 136. And the cash that went into the 26 is 107. And so the cash that went in to generate that 26 billion 107, that's your bottom 50%.

And the top 50% put in 136 to make 750. And I think it gets even narrower as you move further up to that top quartile. So you know, it's just I can tell you what LPS are saying, because I'm hard business. This is the companies that went public. So this is also of the top company of the top funds and the top companies that were actually able to IPO.

And so it highlights how much of a power law actually plays through. And so the majority of these companies as in Chamath, even in your chart, you show the top quartile, the bottom 75%, or the bottom 50%. I've looked at this data as well, of those various vintages are below 1.0, they lose money for their LPS.

Oh, consistently. And it's a cycle. And so what ends up happening is the next generation comes through, and LPS, they make a portfolio of bets. And they hope that they make enough bets in the right VCs that their portfolio generates greater than you know, market returns greater than call it 15 20% target 15% target.

But they're going to expect that you're not I have an LP report. I'm out there raising launch fund for right now. And I moved from like the accredited the individual investors say that Oh, yeah, because you're yeah, I'm on 506. Yeah, so I'm publicly raising it. And I've moved on from individual investors $45 million in commits after five webinars.

Amazing. Now I'm talking to no, it was amazing. It's just 506. He is going to change the entire industry letting the you know, the masses have some access to this capital. And this opportunity accredited and QB is going to change the world, I believe. Do you have to do deal with everyone?

One of them is easy to administer. It's incredibly complex, because you have a large number of people and they all want to talk to me. So I did webinars, five webinars, and it resulted in 100 commits, hundreds of commits for $45 million. You'll be able to get all those capital commitments drawn down when you need to, like you have to go ping a couple 100 people and get them all wire money to you.

We need to have more operations people and we only do for we let them one thing. One thing you may want to do is like for these smaller slugs is you can pre wire you can set up an escrow account where you pre wire 100% of the capital. Yes.

And then you also don't have to you take it down when you're going to deploy it. So you keep your IRR correct. So we're actually looking into those solutions. I'll talk to you offline. But I just did my first two meetings with endowments, etc, fund to funds. The entire discussions right now are around what is your secondary strategy?

How are you getting in earlier, not later? And how are you building a larger position? It is an even like some of the QP is where sophisticated in our you know, are in over 10 venture funds, the entire discussion governance of these companies. Are you taking board seats or not?

How early are you getting in and building a larger position over 10%? And what is your secondary strategy? When are you going to start taking some chips off the table? So the and I got to say, if you're an LP, who didn't sell into the upmarket at all, and you're on your first fund, you know, and you had all these great marks, and they're getting the coming crashing down, they're not going to deal with you.

They just have too many options. I don't think I don't think they've they've started to come down yet. I don't think we know what the top quartiles really going to look like over these last few years. I think that's going to take four or five years to really sort out.

Of course. Yeah. So I think explain why Chamath just so people understand. Yeah, I understand. Well, I think I think that there are lots of valuations that have supported huge TV PIs. These, you know, paper gains that have allowed venture funds to raise enormous amounts of incremental capital and new funds.

And so they are going to try to wait as long as possible before they're held accountable for that. And the best way to do that is to not change the valuation. And so it will happen slowly, it'll be a trickle of these things. And I think that takes probably four or five years for it to really sort itself out.

But in the meantime, companies will still need to get financed, companies will still need to get built. That's why I think like the public markets, I think what SAC says is true. Giving us a signal of what these true market clearing prices are, will eventually slip into these, you know, series D or E companies, because a venture capitalist who has now taken some big write downs in one part of their portfolio, I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return capital.

Totally. Totally agree. Yeah, it's gonna be rough out there. You guys watch White Lotus. Yeah, I just started season one. I'm third episode in. Okay, what a treat. We won't say anything. But how great was season two? Oh, the rap was awesome. It's just incredible. The last two episodes were extraordinary.

Just finished watching all of Handmaid's Tale, which I will tell you is, that is a fucking stressful show. It's like, it's like you're putting in work when you're done those episodes. You're like, oh, emotional labor. You know, when they said this emotional labor, watching that show is like, it could could, it could not be more sadistic and insane.

Oh, my God, it is brutal. But you can't look away. Incredibly well done. Alright, listen, this has been an amazing episode. And this is news for the other besties. Friedberg and I have been secretly collaborating. Now we have to a plan that we're working on a joint plan for all in summit 2023.

Because we are both helping each other out. I'm ready to tip guys. I love it. The tip. I know. That's it. We don't need to sacks. I'm a permanent No. That's all that's fine. We know that. I love that I have sacks as my anchor on this one. I can always float back that way.

But Friedberg and I I'm like, the root of all evil. Totally in this case, but power and influence is something that you that's free bird celebrity. Friedberg had so much of a good time at all in summit 2022. That his hatred of my producer fee is less than his joy from the event.

And we are collaborating on super super gut. I have made up for my producer's fee by using super gut and becoming a big proponent. Announcing the debate. I've used the promo code. Paid you for that. That's the quip. Oh, yes. Yes. You know, this is no conflict. No interest to go along with doing the no conflict.

No interest. That's what's going on. bars. Amazing. So I use the double mocha. The only the only person that you haven't taken money from is SPF. I mean, pretty much you're by the way, can I point out on the most loathsome person in tech? Bracket? We go through it.

Do not name the company. Do not name the podcast. I'm eliminated already in the first round. This is and you win. No, I thought you won. No, he lost. He was the bracket. Do not mention the podcast. Jesse get on your chest. Not I only want the bracket. Do not mention the podcast.

We're not giving them any. Just black out that in post. I want you to black out easy. I don't want to give these guys any credit. So here we go. The worst person in tech. Martha and sax we would say it's a B podcast. That's run by literal socialist.

Well, look, Chamath got a very tough draw. I mean, of course, I was to SPF. That's ridiculous. Of the group went up against the Warriors with KD. It is no way to win tough. That's a no shot. You guys should have what about sex? Easy draw sacks versus in the most hated person in 10 by 1% that's bullshit.

Andy Jassy is I don't Andy Jassy is a complete gentleman. Andy Jassy is delightful. I gotta be honest with you. Human compared to him. Just in spice. That is I want to recount. No, I wanted to win. Saks. I want to recap. This is election interference. Union busting. This is election interference.

I get something you're a specialist in, I guess is worse to be a union busting Amazon CEO than a reactionary conservative investor. This is ridiculous. I just want to point out that the biggest travesty here is that I did not make the list. There are and you know what these guys are trolling me.

Guys, shout out to producer Nick who just retreated. With basically you basically pick the what is it the 30 most relatively well known people in tech. That's what tilts Jake Caldwell. This is terrible. Worst person in tech. I don't make the list. I'm going to double down this year constantly kowtowing to the media.

You're you're right. You're right. I need to be horrible. Stop with that. I need to be a worse human like you Saks. I'm going to try my best this year to work against humanity and society and be more loathsome than you. I'm really going to redouble my efforts. Obviously, I can't catch up with you buy into all their phony.

I'm too kind. I got a big heart. I care. I have empathy into all their phony. I know my empathy. But here's the problem. These guys left me off on purpose. If you want to pull up the replies between Andreessen and Bill Gates. Oh, Andreessen. That's a lock. That's Andreessen.

Of course. Andreessen. A 16 co founder and man of terrible. Is a world class shit poster. Bill Gates is hiding somewhere nobody Bill Gates is doesn't tweet. Mark Andreessen blocks unblocks he shitposts with the best of them. He's up there. I mean, that guy's a dark meme Lord. Any other I mean, I really I really sympathize with each month that you got your ass handed to you there.

That's just that's like going up against the dream team. Hold on, hold on. Slow down, bro. You're not even letting us read these things. All right. Give me a joke. Twitter former idiot CEO versus the Airbnb CEO making Oh my god, that's so well written. Brian. Hold on. This weekend.

Guy, guy who really tried to make us believe web three was going to happen versus world coin and open of course, critics and wins much more loathsome than Sam Altman. All right, listen, free bird, you didn't even come. I want to just congratulate free bird on an amazing the best science corner ever.

An amazing product is super gut that has helped me lose weight. I feel great. And for you know, recovering from whatever illness you had. All right, everybody. I love you besties. Shout out to David Sachs. Love you guys. And we'll see you all next time on the all in podcast.

Love you besties. Love you guys. Bye Let your winners ride rain man David we open sources to the fans and they've just gone crazy with it. Love you. Can we besties are dog taking a should all just get a room and just have one big huge orgy because they're all just like this like sexual tension that they just need to release what you're about to be good.

We need to get Merck is our dog. Oh, man. you