Jason Calacanis: Welcome, everybody. It is going to be a great show today. We're going to talk about all this market volatility because we cannot help ourselves. We decided to go through a bunch of fundamentals, try to put this through the startup evaluation lens, go through the fundamentals for five tech companies that are down between 35 and 75% off their pandemic peaks. Yes, we know there was a big comeback, but we do not think that this is the last of the crash cycles. We go through Block, Zoom, Netflix, Coinbase, and Airbnb and see if each one of them remains a buy.

SPEAKER_05: And then in addition to looking at the current companies and trying to figure out their business fundamentals, revenue, earnings, PE, evaluations of the companies, we're going to compare this to the dotcom crash and we'll separate the real companies with high revenue that are undergoing a correction and more high growth from, say, some speculative assets like crypto or certain SPACs, not all of them, that are basically trading with very little underlying fundamentals and what that means. And then finally, we'll cover one of the large Peloton activists, investors, writing a letter asking for the termination of CEO John Foley's reign at the amazing but troubled smart workout equipment company. It's going to be a great episode.

SPEAKER_09: Stick with us. Stick with us.

SPEAKER_10: Oh, we nailed it today. Yay, we did it. Stick with us.

SPEAKER_12: We did it. Took two weeks. Strange. Wah, wah, wah, wah.

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SPEAKER_16: All right, Molly, what's in the news?

Jason Calacanis: There's really only one story today, and that story is an emotional rollercoaster. It is markets and how it affects all the companies that we're interested in and potentially all the companies we want to invest in. Tech stocks, when we started preparing for the show, were in the toilet. The broader market had lost something like 1,000 points throughout the day, full-on correction slash crash territory. Now, as we're taping, the market rallied. Most tech stocks actually ended only down slightly. NASDAQ and S&P ended the day up. But it's very clear that this is the start of a cycle, right? That people are calling either a correction or a crash. Today, there was dip buying, but one assumes that that is not going to last. And so we kind of want to talk about today, when will the bleeding stop? Was today maybe the bottom? And then we're just going to play a fun game and talk about how this might compare to the dot-com bubble in terms of some assets versus the stock market overall.

SPEAKER_05: Yeah, and I think it's really instructive for people who didn't go through the dot-com bubble to understand that that mania did, in fact, parallel a lot of what's going on today. There was a lot of speculation and there were a lot of new market entrants. What's a new market entrant? We call them day traders.

SPEAKER_23: Now you can look at them as crypto folks or day traders who are on Robinhood, trading stonks or stocks, and basically participating in the market. Retail investors, in fact, took largely two decades off after the dot-com boom. It was that bad that it scarred a lot of boomers and Gen Xers who said, like, just playing the market is a sucker's game. And here we are, you know, probably 30, 40, 50 million more people playing the stock market,

SPEAKER_05: especially young people, getting educated and, you know, maybe trading futures, maybe trading on margin, maybe buying crypto.

SPEAKER_23: And so we thought it would be instructive today to look at the stock performance of really strong companies with popular business models. Now, I've talked before about the four big business models we like to go after, you know, as investors. These are four classic ones that are working today really well and have worked. Fintech obviously is one, you've got Square or some people call Block now. You've got B2B, consumer SaaS, it used to be called enterprise computing, but that includes people like Zoom and Slack. Consumer subscriptions, something I've been into, which includes the Spotify's, we'll talk about Netflix today.

SPEAKER_30: Marketplaces, where you have one side is buy, one side is sell, and they come together and the marketplace takes a fee, and that's Airbnb. And then as a wild card, you know, a subsection of crypto and trading, of course, is a fintech. So for our crypto pick, we'll talk about Coinbase. So there's five companies, Square, now Block, Zoom, Netflix, Airbnb, and Coinbase. Yep.

Jason Calacanis: All right, let's start with a Square renamed Block, and I'm really, look, I get it, sure, blockchain. It's just that all it ever makes me think of is Minecraft. Yeah. So I'm going to have to start calling Jack Minecraft Steve. And anyway, Square, aka Block, bottomed out around $102 a share today, down 65% off its peak of $281 in August 2021.

SPEAKER_38: This represents a $70 billion loss in market cap, making Block's new market cap $54 billion. Over the last year, this company has done about $7 billion in revenue from transactions, SaaS, and hardware.

Jason Calacanis: TTM net income, $537 million as of that same quarter. And, of course, we have seen a decline since then. When you look at this, though, Jason, do you think the decline represents the business fundamentals? Like, is it an overreaction to what is otherwise an almost $7 billion a quarter business?

SPEAKER_27: Okay, so full disclosure, I have shares in Square because I was in an LP and a venture fund that invested in it early.

SPEAKER_23: And so I've done quite well. I think I sold half of them and I kept half of them. So I have a pretty significant position. So this is not super objective, but I think Jack is a product genius, right? So I always look at the founder and then to your point, you know, um, it has, uh, I'm looking at this one chart where it's trading at $112, which I think was today.

SPEAKER_30: Um, you know, it's down massively and the market cap of 51 billion PE ratio of 118. So the price to earnings is, you know, very high at over a hundred, but these companies are not trying to be super profitable. They're trying to grow. And so that is the question is you would have to look at what is the revenue growth here? So are they growing 30% or more? It's a high growth company. You can get, uh, a much bigger, um, valuation out of it. I think it's a company. I made the decision with this name specifically that I would hold it for the next decade. Um, and I think it's really because as much as square was a great product for small businesses, et cetera, you know, you use those square things when you go into a lot of cafes, et cetera.

SPEAKER_23: Um, any company that can grow on a large number, 20, 30%, and I think their last quarter, they were 26% year over year.

SPEAKER_09: I see here in my notes, that is really hard to do, right? Molly, like you got a big number and you're growing it, you know, 10, 20, 30%. That's considered high growth because it's growing on top of a big number. And what other companies do that apples of the world, Googles of the world, Facebooks of the world, just not easy to do. Most companies, when they get that big, start to slow down and grow single digits, you know, maybe 10% a year, 12%, something like that.

SPEAKER_23: And that's even considered good because it's a big number. So I decided to hold this for the next decade because the cash app to me seems like, you know, the way people in the future are going to, you know, uh, exchange money. And I think Jack is a visionary, uh, and a great product person. And I think he understands crypto really well. So I think now that he's a hundred percent focused on square, I'm even more committed. And so here I would advise a family member, a friend who was interested in this name, that if they were going to buy it, I would buy it, you know, whatever.

SPEAKER_30: Uh, you know, five times over the next year or two dollar cost average, you know, take the price you're paid per share and you can just average it and then hold it for a decade and see where you're at. I think you beat the market. That's what I would tell a friend. Yeah. I'm not giving financial advice.

Jason Calacanis: This is not, I know I was just about to say, this should not be considered official investment advice. In no way are we licensed for that.

SPEAKER_33: But if my friend was very interested in the name, I would say this is my strategy, hold for a decade.

Jason Calacanis: I mean, what you would always tell your friend is like, today is not the day to sell anything. That's the rule.

SPEAKER_23: Generally speaking, when the, when, when there's blood on the streets, that's when people want to buy stuff. Right.

SPEAKER_05: And I was looking at it today, yeah, I think you're going to see some Peloton buying. Um, I think Peloton was up today and we'll get to talk about that in a minute. Yeah. Mm-hmm. And then I even think like my Disney, which I really want to build a Disney position because I just think that company is going to be great forever. I don't know how Disney wound up today, but I know it's been, um, you know, it's corrected a whole bunch. Yeah. Yeah. It ended the day. Basically it was 137 share and it's valued at 250 billion. So that's it. It's 10% of the price of Apple. Right. Um, and I just think about how those assets they own. Yeah. Yeah.

SPEAKER_56: That feels 5 trillion. You know, that actually does feel underpriced.

SPEAKER_57: I mean, when you, when you express it that way, I mean, just everybody owns a

SPEAKER_48: really expensive iPhone and they upgrade every two years. It's Prince, a lot of money as you've talked about. Um, but yeah, I just love Disney for some reason.

SPEAKER_09: I just still think this is like, if I, if I like had to give my daughters, like I had to pick like three stocks for my daughters to own, uh, for their inheritance or something like

SPEAKER_48: Disney would be one of the three.

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SPEAKER_65: Producer Justin has a good question too, which is how does this differ in venture when you

Jason Calacanis: see something with strong fundamentals that had, for example, a down round, do you ever go big in a down round?

SPEAKER_68: So if the company is doing well and it's got great, uh, metrics and stuff like that, there

David Friedberg: tends to not be a down round because private marketers investors do have a 10 year view. So we assume it's a great question, producer, Justin, we assume as private market investors like, Hmm, great team, great product, great growth, whatever problems to figure out. I'll make a bet. I'm going to hold at least five, 10, 15 years.

SPEAKER_09: So they just private market investors have a, just a much different outlook. We, we always think in a decade, uh, maybe a decade and a half in public market folks, they think in quarters, so they might think 10 quarters. So you're talking about, uh, just a magnitude difference in, in outlook.

Jason Calacanis: All right. Let's keep our tour through the tour, through the fundamentals, go and zoom big pandemic winner, obviously bottomed out at $140 a share today. It's down 75% off its all time high of $559. I mean, $120 billion loss loss in market cap. It's current is 44 billion revenue. Uh, what, maybe about half of a block, $3.9 billion last quarter had 35% year over year growth. So you are seeing that high growth.

SPEAKER_35: But I mean, clearly this is a case of just like, highly profitable, but obviously like massively overvalued. Right.

SPEAKER_23: Um, you know, 10 times top line revenue is where it trades today. Um, so that's like 10 times sales, right. To, the value of the company.

SPEAKER_27: So we, and then it's trading at 44 times their profits. So that is, um, still pretty high.

SPEAKER_83: So you're basically betting on this thing to keep growing at a very, very fast clip. That, that would be the bet you're making.

SPEAKER_23: And so their PE ratio is 37, right? And so the average PE ratio tends to be, you know, historically, I think 10 to 15 is a pretty good range. Historically for a high growth company, it tends to be double or triple that. So this actually makes sense to me at this price.

SPEAKER_85: At 44 times.

SPEAKER_31: That was 44 times top line 37 times the, uh, the, if they made a trillion dollars there,

SPEAKER_23: you know, uh, 37 times. So we have to ask is, can they keep, will people unsubscribe post pandemic? No, no, no, I don't think so.

SPEAKER_87: Everybody's keeping zoom forever. Yeah, forever.

SPEAKER_30: And then you have to ask, can they, is there margin expansion or is there customer expansion? So certainly there are both of those things, margin expansion can come two ways. They charge more for the same product, uh, or they add to the current product line, which I think they could do as well. Yep. So I would still be bullish on this company, especially because it's profitable. Anything that's profitable is default. Alive has money to play with. They can acquire companies. So what you're going to see in a down market like this is everything gets repriced and that things that have revenue and profits will be favored in a, you know, internet winner, a stock market winner, more than things that are speculative and have yet to make money as we'll see, as we go through these.

Jason Calacanis: Yep. Uh, Netflix has a product has revenue has profits down 50% though, from its peak of $691 per share in November of last year. That's $150 billion loss in market cap. Its current is 170 billion on revenue of 28.6 billion. Uh, last quarter saw 16% year over year growth. I know you talked about this, um, on all in, so we probably don't have to hash, uh, rehash

SPEAKER_38: too much Netflix for people who listen to both shows, but a little bit, I mean, the stock has fallen 50% in what six months, not even.

SPEAKER_93: Yeah.

SPEAKER_27: So at the current market cap of 170 billion, uh, if we round up the 28.6 billion trailing 12 months to whatever, 30 billion, it's like what?

SPEAKER_05: Five, six times, uh, the sales ratio. Um, and you know, what's their growth rate going to be again, when we talk about the growth rate, you got to put that there, they're going to lore competition galore. So maybe they're at, you know, 10% growth they'll hit, they're, they're slowing down, but they're still a money printing machine. They still have, you know, a decent amount of profitability here, 5 billion in profits. Let's say back of the envelope here, 5 billion in profits, 170 billion. Uh, you know, we're looking at 34 times or something like that. So that's, pretty, um, aggressive on the price to earnings ratio. I'm looking here at one chart that says 31.5 ish.

SPEAKER_83: So it's still expensive, but it's a high growth company still and worth owning. And do we think there's a world in which they are not as relevant today as they are in 10 years? I think the answer is no.

SPEAKER_23: That's why they command a pretty juicy price to earnings ratio and a good market cap. And if they weren't spending as much on content, you know, you'd see that price earnings ratio easily go down to half, right? If they really didn't want to invest, I mean, they can make 10 billion in profits a year.

SPEAKER_30: Yeah. Um, but you want to see them investing in that library, creating original IP and, and

SPEAKER_76: building the value there. So I still love both of these, all, all of these companies. I still love all three and would hold all three and might increase my position.

Jason Calacanis: Really? Netflix is the only one where I might disagree with you a tiny bit. I think that this is such a money pit game to play, to have to keep throwing content, uh, keep throwing money at content. Netflix, Netflix has an okay library, but the more you see, you know, NBC launch Peacock and CBS really actually try to do whatever the hell it's doing with. Paramount plus and you know, Disney and HBO want to own their own libraries. I think that represents a long-term risk for Netflix in the library department. And then I think it becomes at some point a zero sum game to keep throwing money at content. And then just purely from a, like anecdotal one household perspective, like when I look at all the things I subscribe to and it's all like, yeah, I have all of those. Where's Netflix on the list? Netflix is the one that is closest to irrelevant to me and they keep raising the price. So like, I don't need to be spending 20 bucks a month for 4k Netflix when I've also got Hulu, HBO, Disney, Peacock, like a paramount plus.

SPEAKER_03: Like I have so many other things to watch and even though the content is good, I'm like,

Jason Calacanis: there's only so many hours in a day. That's the one I could lose.

SPEAKER_83: Yeah. I, I put them at number three or four for me. So I, I, I'm, I'm going to have to agree with you that the competition is the X factor here.

SPEAKER_30: Um, and then you look at the market cap now at 150 billion, you know, we talked about Lena cons, new rules of future competition, et cetera. Is there a world in which Netflix and Disney, HBO, you know, et cetera, somehow come together or Apple or Amazon, who knows, you know, and I don't know if they could be bought out or not, given the current, uh, structure, but the current changing rules, uh,

SPEAKER_48: around, at least in a, under this democratic governance right now, I think they're going to be an administration. They're not going to be pro mergers and acquisitions. If Republicans win again, it could, it could flip very quickly again to allow something like that.

SPEAKER_05: So it's certainly not clear that they will be number one forever, uh, in terms of total subs, but I don't see them slipping out of the top three.

SPEAKER_120: I think all of the top three would be worth owning. Yeah. So this is probably going to wind up a great buying opportunity for people who own Netflix

Jason Calacanis: Netflix as well, Netflix itself should go shopping. I think they need a more cost efficient way to build up content, like buy steam, get for,

SPEAKER_125: you know, get seriously into video game streaming or something like that.

SPEAKER_126: I mean, if you look at Spotify, you know, they added podcasts, they started doing original

SPEAKER_05: podcasts, but Joe Rogan bought the ringer, yada, yada. They bought anchor. So they really said, you know what?

SPEAKER_30: Music, we have to give all the money to the labels, podcasting, we could sell the ads ourselves. Yep. And then they were like, Hey, can you want to be part of the video? And so now you can watch us on video inside of Spotify. It's a bit of a tell that Spotify is going to be feel more like Netflix, perhaps, um, and podcasting. Yeah. So why wouldn't Netflix add more podcasting and games and just go right to it?

SPEAKER_130: Cheaper IP.

SPEAKER_30: And sticky. Right. And so if they, if Netflix decided they were going to have Netflix plus podcasts and had a podcast channel, man, they could just go to all of the talent base they have and just say, yeah, you know, let's make a companion podcast for Ozark. Let's make a companion. Let's get the Dave Chappelle podcast going. You know, we got Dave Chappelle, we pay him 25, 50 million per comedy show. Let's offer him to do a, you know, a Jerry Seinfeld car comedians, getting car, coffee and cars, whatever kind of, you know, project and, and see what that does. Right. And it could be, he's on video. It could be, it's just audio.

SPEAKER_132: So yeah, they're going to look for product extension for sure.

Jason Calacanis: Yeah, absolutely. And just more cost-effective because content is just a, it's a money sink.

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Jason Calacanis: Okay, now to some slightly more speculative, well, maybe one more speculative bet Coinbase, which is down also over 50% from its November peak of $357. It's low point on Monday was 165 a share, $50 billion loss in market cap on revenue of

SPEAKER_03: about $6 billion last quarter growth was only five and a half times year over year, which

SPEAKER_138: you know, listen, we should be delighted.

Jason Calacanis: Everybody should be delighted. But when you look at, you know, Netflix was 16%, even though we're now saying they're the expendable one, all of a sudden five times year over year is like, that's fine. Um, trading based revenues, super volatile coin basis profits about $3 billion, $2.9 billion.

SPEAKER_21: Is this a fair to, is this, you know, is that 50% drop fair, I guess, as a metric, well, random metric price

SPEAKER_07: earning ratio is, you know, 17 or something 1617 right there.

SPEAKER_23: So you're getting what would be the high end of normal, but with a high growth company. So why is this company that has much higher growth, getting a much lower price earnings ratio, you have to ask yourself.

SPEAKER_30: Yeah, and I think it's because people are looking at crypto and are not convinced or some group of

SPEAKER_05: people are not convinced that this is built to last and that this isn't a fad. Uh, and you're there, they're probably not wrong in that, you know, there's going to be a lot of ways to trade crypto. That'll be easier and more fluid than going on Coinbase and actively trading. So think about like crypto ETFs and stuff like that, which I know have been hard to, uh, get past, et cetera, but it'll become easier and easier.

David Friedberg: I think if Bitcoin and Ethereum in these, this basket of crypto is actually real,

SPEAKER_05: you'll see a lot of money market, uh, or money managers be able to just say, you want to be 1% in crypto, you want to be 4% in crypto, we can manage that for you. And just like they manage, like we have a way for you to get access to bonds or real estate through these various funds that, you know, balance them out and, and you abstract it from you having to manage it. So, yeah, it does, you know, but obviously they're going to add NFTs. We saw that. And so maybe there's more to come. I, I would not, I think Brian Armstrong is a very unique founder with a very unique set of principles. Um, you may or may not agree with them, uh, obviously him saying there's no politics at work and taking that stance caused a lot of like hand wringing. And ultimately he said the company ran better without having people talking about politics

SPEAKER_23: or social causes at work. So he's iconoclastic and iconoclastic people tend like Jack also is iconoclastic.

SPEAKER_114: Reed Hastings is iconoclastic. Elon's iconoclastic. A lot of the companies we're looking at here when they have that founder authority, I would not bet against them. Hmm.

SPEAKER_149: Even though crazy things, you know, crazy, literally like crazy fidelity or TD America

Jason Calacanis: or Ameritrade or chase any or Schwab, any of these could come in and essentially replicate coin bases.

SPEAKER_155: Business fundamental business model, almost wholesale, right?

SPEAKER_23: Hmm. I don't think they would be as aggressively going to every nook and cranny and adding NFTs and adding, you know, these kinds of coins at the same pace. So just like, I think Robin hood and coin base represent for this younger generation. How they interact financially with the world. And I think also the cash app does, I do think that they are unique and generational and that the names you rattled off are for boomers. Yeah. And then gen X kind of falls in between probably falling closer to the coin base,

SPEAKER_120: moving to the coin base cash app, you know, Robin hood part of the world.

SPEAKER_114: So I think if you wanted to have a wild card in your portfolio at this price, coin base would not be the worst thing to own either.

SPEAKER_23: Um, you know, at these prices, you start to look at these companies and if the founders in there, their product innovation, product velocity, I talk about a lot. If there's product velocity and the original founder still running the place, I'm feeling pretty good about it. Yeah. Because that means they're going to keep innovating. Right. Yeah. Keep innovating. Who knows? Square would not be where it is if the cash app didn't happen. Now you see Jack's going to do some other things. You might Bitcoin mining rigs, whatever, you know, all that crazy stuff. You know, sometimes it hits.

SPEAKER_162: Yeah.

SPEAKER_30: You know, and when it does hit, it could hit and make a trillion dollar business. That's the thing with founder led companies. They always have that ability like Steve jobs did to create the iPhone.

SPEAKER_164: And then the iPad and then Apple TV and then AirPods. Like, and you go on a run like that and each of those things prints money. Oy.

SPEAKER_65: Well, and they have the internal permission.

Jason Calacanis: I do think that that's super important that when you're a founder, you can make things happen within a company that might not otherwise, if you've got like you brought in the grownup CEO or you've got some turnover, then you get a little more protective. You get a little more safe. You maybe don't have as many ideas and you don't have the sheer, the word that you use authority. Right. To just say, I mean, if I'm working at square and all of a sudden it's block and Minecraft Steve is like, we're getting into mining rigs. Like, no, you know, there's not a lot of companies where that level of disruptive business planning would happen. And if it's founder led at that, you know, at that level, I think a lot of those employees

SPEAKER_35: are sitting there like, okay, let's go. Sure. You've been right every time so far.

SPEAKER_120: And then, you know, for both Robin hood and for coinbase, there is the issue of,

SPEAKER_30: you know, during the pandemic, people didn't have the ability to bet on sports or spend their money going out. And so what did they spend their money on? They gambled on crypto. They gambled on stocks. They, it was like, uh, you know, a specific type of pursuit, um, that was also for entertainment value, right? Yeah. Entertainment value of owning crypto, whether it's NFTs or Bitcoin or picking your coin that you want to see win something. I don't know. Most of the coins don't actually do anything in the real world.

SPEAKER_171: So it's a little weird.

SPEAKER_30: Um, and then trading stocks, like, you know, it's one thing to trade Disney or talk about names like we're talking about here today that have consumer products consumers love. But, you know, if you're trading SPACs, which we'll get into where you're trading a meme stock like GameStop or AMC, what are you actually trading? Because the fundamentals of those businesses are whacked in some cases. Right.

SPEAKER_174: So you're just gambling in some weird way to beat some shorts or whatever. Like that's like high risk, crazy behavior. You know, it's like Russian roulette.

Jason Calacanis: We're going to talk a little bit more about SPACs and crypto in a minute, but just kids, like, again, this is not official investing advice, but if you're buying the dip on margins, I want you to stop.

SPEAKER_38: I know that I saw, like, I saw by the diff trending yesterday and I was like, oh my God, I know this is all crypto kiddies like buying the dip on margins. And every time, you know, look, when you wash out, when you have the leveraged washout, because of all of you who bought on debt, then lose all of your money. Hey, you lose all your money and be the institutions that you're trying to disrupt only when they just

SPEAKER_179: come in and scoop it all up because they buy the dip for real. Like, don't do it.

SPEAKER_05: Yeah, margin and leverage, all this stuff, you know, are really like interesting, fun devices when the market's going up.

SPEAKER_23: And then there is a concept called the risk of ruin, which I've seen in poker because I've played in very large poker games and I played a large poker games that were a fraction of my net worth and a fraction of a fraction of some of my friends net worth. And then somebody gets in the game and it's their entire net worth is on the table. And it's uncomfortable, Molly, like to be when I was in L.A.

SPEAKER_30: I saw this more often because, you know, in Silicon Valley, people are flushing. They care about money in Hollywood. You got people who get quick money, you know, entertainment, people, whatever. They don't value money. They didn't work hard to get it necessarily. And all of a sudden, you know, they've got $200,000 in the table. You're like, what percentage of net worth is this of this, you know, TV writer or whatever? It's like, it could be, you know, 50% of their liquid net worth. It could be, you know, very significant. And people face something called risk of ruin.

SPEAKER_183: What that means is your bankroll runs out and you're out of the game. So there's no way to come back.

SPEAKER_30: That's what's happening to a lot of crypto folks. They, they own two Bitcoin. So Mazel Tov, you know, they bought it at 5K and it went up to 70. Now they got 140 and then they get that levered up. So they have some crazy buying power on it. What they don't read in the fine print is if it goes down 15%, it gets called and all the Bitcoin gets sold. And I don't know, I was hearing people getting five to 10 X leverage. And I'm like, that doesn't make sense. Like I'm not allowed to do that.

Jason Calacanis: I mean, that's the, that's actually the hidden story about crypto. Honestly, like it's the, it's how much people are being able, how much people are able to borrow and how much they're buying.

SPEAKER_193: And these are offshore exchanges doing this.

David Friedberg: So they're offshore exchanges. You're putting your money up and if you just get a modest trip, you just trip, you know, somebody's putting 20 X in the, uh, one of the nodes with 20 X and, you know, that's like going to a loan shark.

SPEAKER_05: And they're like, yeah, I'll give you $10,000 to play in the world series of poker. You gotta give me a hundred thousand. You know, next week. And it's like, well, I'm gonna, I'm gonna win the world series of poker and make 8 million. So it's not a problem. It's like, it can only be one winner. A lot of these people are.

SPEAKER_30: Right. You know, betting for, and they don't have the ability to, to cover it. So if you don't have the ability to cover your margin, they sell the underlying asset and then you lose everything. And that, that's what they said happened.

SPEAKER_183: And when that triggers, um, it can create like a spiraling event from what I understand. So leveraged washout is what they're. Leveraged washout. Right.

SPEAKER_09: Yeah. So if you, if you were, you know, leveraged up and you had to, you were forced to sell at 50 and then I was forced to sell at 49 and then a bunch of people at 47 and then even more people at 45. Everybody starts getting this leverage washout.

SPEAKER_30: And then people who might be buyers are like, ah, am I going to catch the falling knife? I'm going to just, I'll wait it out six months. I don't need to buy it now. I'll wait six months and see how the session, like people will do with buying a home. If like the homes are going down in value and the market's correct.

SPEAKER_48: And they're like, I think it's got more to go. So I'll wait.

Jason Calacanis: Yeah. Some exchanges even provide 200 X. So that's crazy gang. Yep. 10 X. Isn't it? I mean, this is, this is like a joke that's indicative of the mindset though. Bo John says leverage in, uh, no, sorry.

SPEAKER_75: 10 X isn't even leverage 50 X minimum or go home.

SPEAKER_168: I don't know if they're like joking or am I? At what point do they cover? So if, if you took that 50 X and, you know, let's just say Bitcoin was at 50.

SPEAKER_23: At what point did they cover? You know, because if you went down 10% and it went down to 45,000 a coin and you had 50 X leverage,

SPEAKER_07: like they would have to liquidate you immediately.

Jason Calacanis: Yeah, I would think. Yes. Makes no sense. And that's what happens. And then Citadel comes in and is like, ha ha suckers. Okay, everybody.

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SPEAKER_38: All right. Airbnb is a great one. Airbnb, our last. Yeah, exactly.

Jason Calacanis: Our last business of fundamentals here bottomed out at $136 a share, down 35% from its November peak on revenue of $5 billion. It's lost about $30 billion in market cap. Um, let's see.

SPEAKER_218: Not so bad as the others, right? 25%.

Jason Calacanis: Not so bad as the others. I mean, Airbnb has had a hell of a ride through the pandemic, obviously. Big layoffs, right? But down 35% overall. Big layoffs. My ex-husband got laid off in that first wave. Yeah. Um, but Airbnb, I think, so it, let's see, it lost $4.5 billion over the trailing 12 months,

SPEAKER_03: which is significant, unlike the other companies that we've talked about. Yeah. Most of that was related to $3.8 billion in losses in Q4 2020, which was about the IPO, but also, uh, stock compensation expense, presumably because of those layoffs in their

SPEAKER_125: most recent quarter made $830 million in profits.

SPEAKER_223: Yeah. So it's a profitable company if they're right sized.

SPEAKER_09: So if they were making 3 billion a year, 4 billion a year, and, uh, you know, their market cap is, let's see what their market cap is here.

SPEAKER_228: It is 92 billion.

SPEAKER_23: Yeah. So they, if their money losing, you wouldn't have a PE ratio, but if we were to assume they had 3 billion in profits next year, right? We just take that 800 and times it by four and put it at about 3 billion in profits.

SPEAKER_83: Uh, they would 3 billion times 30 would be 90. So, you know, they're just under, yeah, it's probably 28 X price earnings ratio. Seems reasonable to me for a high growth company. Again, 10 to 15 would be normal in the price earnings.

SPEAKER_23: So if you doubled or tripled that for high growth company, you would be betting on the future and that they can keep that incredible growth up kind of makes sense to me as well.

David Friedberg: So when you reprice companies like this, right, all of a sudden things that didn't make sense start to make sense. And if we look at what happened over the past, let's just call it three years, you know, the

SPEAKER_23: year or two before the pandemic, the two years in the pandemic, we had a disconnection between the reality of companies and reality means revenue and earnings and growth, right? You just look at those three things and some and the valuation, right? So when you start looking at the valuation in relation to the growth in relation to the earnings in relation to the revenue, you can actually, um, say this is a real company and

SPEAKER_30: here's where historically it would be pricing. Yep. And, and that's what people are doing.

SPEAKER_223: They're actually doing the math they should have been doing all along instead of what's called momentum investing, which is also known as bull , you know, I hate to say it that blunt, but you know, if you're just making it up, you know, you're like, well, it's gone up. So I'm basing it on momentum.

SPEAKER_30: It's like, you know, momentum trading. Yeah. That's like some like hot score. And you're like, well, clay Thompson just hit seven three pointers in a row. So he's gonna hit 70 in a row. Like it's it's possible, but not probable.

Jason Calacanis: There's always some version of that that happens, but that is why everything that you've just described in the idea that Airbnb now finally with this $92 billion valuation matches. The math is why you call it a correction.

SPEAKER_238: It's correcting something that was wrong.

SPEAKER_23: That's a very astute point. And if it was a crash, you know, then you'd be looking at it going, okay, you know, it's a crash tends to be over 30% of correction sense to be 20 or 30%. That's why I have advocated for calling this.

SPEAKER_30: Like an audit, uh, and a repricing. So I think we're auditing all these companies, looking at the fundamentals and then repricing them to what is the fundamental actual value of the company. Now, if you were to look at things that are super speculative, like a cryptocurrency, what is the actual revenue being generated by a certain coin or an NFT? Yep. Arguably there is no revenue being generated in most of these projects. Therefore the underlying asset has no value.

Jason Calacanis: And yet incredibly, when you look at the drops in Bitcoin and Ethereum in particular,

SPEAKER_03: in this exact same time period, November to January, each of them has also much like

Jason Calacanis: most of the companies that we just talked about with the exception of Airbnb, which only went down 35% from November to January, they've dropped 50%. Interesting.

SPEAKER_03: They've lost 50% of their market cap, almost identical to block, to Coinbase, right? To these companies with real- Fascinating. Strong fundamentals behind it.

SPEAKER_57: Wait, I thought they were supposed to be uncorrelated assets. Bitcoin was uncorrelated to the stock market. What happened to that? Exactly. Right. Once Bitcoin became-

SPEAKER_69: So much for that being- Bitcoin, I believe, is an asset class that is almost identically correlated to the market now. Hmm. What went wrong?

SPEAKER_250: Why would that be, Molly? Why would it be? And you know, you worked at Marketplace, New York Times before this.

SPEAKER_183: Why would it be correlated in your mind?

SPEAKER_21: I mean, honestly, I have no idea why it would be correlated other than the fact that it has become- Well, here's why, actually.

Jason Calacanis: I do have an idea. Because it is not decentralized. Ugh. Sorry. Right? Because it is a very lucrative asset class that has been snapped up by institutional investors. Yep. The same institutional investors that are currently selling out of Coinbase or Square or Netflix.

SPEAKER_03: Like, it's correlated because retail investors don't actually own the vast majority of Bitcoin and Ethereum.

David Friedberg: And another way of saying it's correlated is it's the same group of buyers.

SPEAKER_07: It's the same group of buyers, exactly. Right.

SPEAKER_53: So that's sort of what you're dancing around here is like the same people who are buying

SPEAKER_140: Bitcoin and Ethereum are also buying Square, Block, you know, Airbnb, Robinhood, whatever.

David Friedberg: So it's the same market participants. So now I assume you're a market participant and you just went through the five stocks we did and looked

SPEAKER_23: at them and said, wow, some real revenue here. Oh, profitability. Okay, great. Oh, okay.

SPEAKER_16: This is starting to look good here. Now your sixth holding is Bitcoin. Yep.

SPEAKER_257: And you're looking at it going, well, how many customers do they have? And what's the library value of Netflix? What's the library value of Bitcoin? Nothing.

SPEAKER_23: Okay. Well, how many customers does Coinbase have? Okay. You know, 10 million, uh, 20 million, whatever. Okay. How many customers are there Bitcoin? Are there any customers to Bitcoin? Like who's, I mean, they're speculators, but customers who are

SPEAKER_61: getting a service out of it other than entertainment value. No. So which would you sell?

SPEAKER_30: If you own the six, the five companies we just did and Bitcoin, and you said, you know what? I got to get rid of one name. I got to sell off because I got to pay my mortgage. Where would you start pairing? And I think that's when people are scared. The scariest asset to own is one that has no intrinsic value, which is the criticism of cryptocurrency. There's no intrinsic value. That's what the boomers say, you know,

SPEAKER_38: I will tell you if I were looking at this list and I had to pair one. I would sell my Netflix before I sold my Bitcoin. Really? That's what's so crazy about momentum.

Jason Calacanis: Momentum is dangerous, but momentum is actually real.

SPEAKER_03: So Bitcoin has yet to be forced to prove that it can operate in the real world as like a currency, right?

Jason Calacanis: Or as a mainstream product. However, Bitcoin has proven quite conclusively that it can kick a lot of ass as an asset class.

SPEAKER_03: And it's not going to go anywhere because it has intrinsic value. I mean, it's like the dollar, right? We only believe, Kairos Dahl is a fan of saying, that it is the full faith and credit of the United

Jason Calacanis: States that makes the dollar the world's reserve currency. That's a leap of faith.

SPEAKER_03: And I would argue that investors the world around have taken that leap of faith on Bitcoin

Jason Calacanis: and Ethereum and the blockchain, and they are confident that those markets will eventually be found and that that confidence alone makes this safer than it should be given the fact that, yes, it's like a total invention.

SPEAKER_05: Well, here's the thing, you know, when you talk about and Kai talks about the dollar, like people, you know, project into it, that it has some core value because it's the United States. It's a proxy for our, our value in the world. Well, if you look at our value in the world, we create the best companies in the world.

David Friedberg: Yeah. And, uh, we got the biggest army in the world. So those two things combined make it easy to buy into. So now why would you buy into Bitcoin? Well, the answer would be a lot of other people do. Yep. A lot of other smart people do.

SPEAKER_23: And there's a finite amount of, and the technology seems to be rock solid because this technology has not been hacked with the exception of like endpoints, which are different than hacking. It's like somebody leaving the car unlocked. Right. So if people leave the cars and the keys in the car, that's, that's not the problem with the car or the key.

SPEAKER_09: So here, you know, maybe you're making a bet that Bitcoin's built to last stability is why it's worth this, but even still, I would rather own the other five companies, but I mean, as a gambler,

SPEAKER_31: you might want to own Bitcoin, but yeah, it does seem to me that a lot of the most recent people

SPEAKER_05: who bought, and this is what I've heard from, like, there are these on chain, um, analysis people. So what they look at, and I, you know, pomp does a podcast about this, uh, where they look at who is

David Friedberg: selling and it turns out the original holders, you know, people who have very low cost basis in Bitcoin, you know, under 10K, under 20K, they don't sell because they're, you know, in the money and they just sit there. Yeah. And then if you look at the latest people who bought, you know, people who bought at 70, 60, 50, 40, they're selling. So they're the bag holders. Right.

SPEAKER_83: Like the most recent people who bought into it are like, oh, this is BS. I lost half my money. I lost 30% of my money.

SPEAKER_23: I'm going to lose it all. I'm out of here, but the early people are, they're not yet expanding their positions, which is kind of cool. So they look at the wallets and this could be easily manipulated. So take it for what it's worth. But the early wallets that bought Bitcoin early are not expanding their position, nor are they selling it. So they're kind of neutral. What we've seen in the past is those early ones maybe add to their position,

SPEAKER_30: but they just may be out of capital. They have enough Bitcoin that they don't want to expand it. But the latest wallets that bought in are having the paper hands and they're getting paper cuts.

Jason Calacanis: See, that's just foolish. You only lose money when you sell people.

SPEAKER_276: Yeah. Well, but the corollary is all money has value.

SPEAKER_23: So if you lost half your money on Bitcoin and you believed it was going to, you were going to lose another half, putting this money into Disney or

SPEAKER_30: Amazon and trying to get whole, you know, you still have a bet you can place. So chip in a chair. Sometimes you want to get out of a bed. If you believe there's bad management at a company and they're not, don't have good product velocity and the founder's gone,

SPEAKER_36: then that might be a good reason to leave. You know?

SPEAKER_280: Yep. Yep. Absolutely. It's, uh, it's, this stuff is not easy folks,

SPEAKER_09: especially when you're trying to figure out cryptocurrencies, I think is really one of the hardest things to figure out because they don't have fundamentals.

SPEAKER_213: There is no fundamental.

SPEAKER_83: It's just so much speculative nature. It's like trying to get the fundamental value of an artist's work.

SPEAKER_281: What is the fundamental value of that artist's work or another? It's like one of them might've spent a thousand hours on a painting.

SPEAKER_30: The other one spent 10 and the thousand hour painting is a better painting, but the 10, you know, caught heat.

SPEAKER_38: It's interesting though. Cause it's like not. Yes. And no, it's not unheard of for.

Jason Calacanis: Like, it's true that the, that Bitcoin doesn't necessarily have fundamentals, at least not as we think of it. But we're also having a conversation in which you said it is perfectly normal and acceptable for like Airbnb to trade or a high growth company to trade at 30 times price earnings. Yeah.

SPEAKER_288: That's not a problem. Like a, that's a lot. There's like, that's like a lot.

SPEAKER_83: If you think they're growing 30% year over year, that means every two years are basically doubling.

SPEAKER_09: So therefore, you know, you own a much bigger company very quickly. Right.

SPEAKER_291: So that's the same thing is what I mean. I guess it's a leap of faith. It's a leap of faith either way.

SPEAKER_23: You are looking and saying, can they continue to grow and delight customers? Right.

SPEAKER_276: And sometimes it's very clear, like Airbnb or Uber, like, are they going anywhere? No, you know, and other times it's unclear, like Peloton, are they going anywhere?

SPEAKER_120: Is it clear that they're gonna keep growing 30%? I'm not sure, but let's, let's get into this.com comparison.

Jason Calacanis: Cause I think this is, this is a lot of fun. And I know that Nick put a ton of work into this too. He's gonna leave us for the Ray Dalio hedge fund.

SPEAKER_38: Yeah. How to think about thinking. The question on everybody's mind of a certain age, your hosts in particular, is how does this compare?

Jason Calacanis: Is this a bubble burst that could end up anywhere near the level of the 2000.com? Particularly since you are in fact talking about these massive, uh, run-ups on things that have

SPEAKER_21: very little value behind them, like Bitcoin, crypto, and then of course, also SPACs. Yeah.

SPEAKER_114: Yeah. Uh, we looked up an article, uh, CNN money published back in November of 2000.

SPEAKER_23: And it was titled the $1.7 trillion.com lesson. Here's a quote. It's hard to think of a publicly traded internet company that is not down at least 75% from its 52 week high, and that hasn't trimmed its expenses or laid off workers. And this was unbelievable. The amount of people being laid off was crazy. There were literally Arion chairs. You know, those really expensive chairs in the streets of San Francisco because they would give them to the laid off workers instead of their last two week pay. They just say, take your $800 chair home with the people walking home with them. Yeah. Um, and we have a lot of tech companies here that are down 50 to 75% from the peak. So how is it different? Well, if the asset was overpriced, a lot of the companies did not have revenue back then. They did not have customers. So they did have customers. It was hundreds of thousands or low millions. Now you've got people with millions, tens of millions, hundreds of millions of customers

SPEAKER_30: paying customers in the case of like a Netflix. So the SPACs though, make a better correlation because the SPACs to me feel very similar to the dotcom bubbles in that they were massively overvalued in some cases and didn't have a lot of traction.

SPEAKER_183: So there was a big delta, a big difference between the reality of the company and the valuation being assigned to it. Yeah.

Jason Calacanis: Lots of SPACs, 70, 80% are off now 70 to 80% from their peak. And this is where, you know, our, like to get behind the curtain, our pre-show conversation was

SPEAKER_03: like, let's try to separate because we have many more market dynamics now than we had during the dotcom crash, right? The, the primary market crash in the dotcom bust was, or sorry, dynamic was IPOs. Right. And they were just simply publicly traded companies that were way, way overvalued. And out of, you know, $3 trillion in value, they lost 1.7 trillion. Now you have a situation where you have IPOs, you have publicly traded companies like Airbnb and block. And that's like, you can evaluate that in one way. You also have crypto, which is driving massive investment, trillions of dollars in investment. And then you have SPACs, which is like a financial vehicle as the likes of which we've never seen

Jason Calacanis: before massively overvalued. And so I think what we want to do is try to separate. When you look at a drop like today, followed by a rebound, I'd be interested to see how much of the rebound affected some of these SPACs.

SPEAKER_03: Yeah.

SPEAKER_291: And whether in fact 2021 is going to turn out to have been peaks back.

SPEAKER_05: Yeah, it's going to be peak for a lot of companies and markets because people were at home during the pandemic, not spending money and pouring money into stocks and crypto and all that kind of stuff. If you look at, uh, the internet index from 2000, uh, 280 stock 79 were down 90% in the 52 week size, 72% were down over 80, 72 were down over 80%. Uh, so you had this big washout because many of them were speculative. If you look at, um, the.com crash losers that were referenced in the article above Yahoo had lost

SPEAKER_83: a hundred billion from its peak, AOL 90 billion, Cisco 210 billion from its peak.

SPEAKER_23: And then if we look at, you know, what we hit the companies, we just went over Netflix down 150 billion zoom 120 off the peak square 75. So it's actually similar numbers. The difference is, um, the scale of the companies we're talking about here are much bigger.

David Friedberg: The revenue from, you know, zoom, Netflix, et cetera, is just tremendous when compared to

SPEAKER_47: those.com did not have revenue.

SPEAKER_05: They certainly didn't have earnings at that time. People were not, um, concerned about earnings. They were just concerned about top level growth to the point at which, you know, if you leave

SPEAKER_23: that out, you can start selling a hundred dollar bills for $60 and the growth is going to be

SPEAKER_30: tremendous because there's a line around the block to buy them. Right. And that's what people were doing at that time. They were like, oh, pets.com is cheaper than me going to the store delivered. So that's where earnings really in that discipline around unit economics. I think we talked about that a little bit in VC Sunday school, you know, unit economics. That's what's happening here, you know? And that's when people get a red flag when they see a company that's just breaking even. Are they doing that because they want to keep growth and beat competitors? Or is there something fundamentally broken with the business that it can never be profitable?

SPEAKER_170: Like delivering dog food, which is heavy and cheap and the shipping of it might be as much as the actual, uh, dog food.

SPEAKER_03: Well, yeah. And here's what I think is interesting about SPAC. So when we have this conversation about, um, whether we're at peak SPAC.

Jason Calacanis: So, uh, producer Nick found this chart that said in 2022, 81% of US IPOs were SPACs. Those are raised SPACs. That's just so far 2021 is the big number. Of course, that's where 63% of all US IPO activity was SPAC. So just shell companies, right? Empty hermit crab shells on the beach waiting to merge with some new company. Just sitting there. So what we don't know, it's sort of hard to figure out, I guess, how many of them have successfully then, uh, had a hermit move in. Yeah.

SPEAKER_75: I don't know. I don't know why I'm so obsessed with this.

SPEAKER_132: I think it's a pretty good metaphor. Yeah. The crab has to get into the shell and the shell is the shell. It's not bad.

SPEAKER_38: And they're all over the place, right? They're just scattered across the beach now.

Jason Calacanis: And they're either going to get stepped on by a server or get washed out, or they're going to find a little crab to move in. So the best, it looks like data that we could find is this chart from Bloomberg law from September,

SPEAKER_03: 2021 70 of the 589 active SPACs in September, 2021 75% of them had no deals pending or even been rumored, 4% had rumored deals that had not yet been announced and 20% had pending deals that were announced.

SPEAKER_21: Now that sounds like a bubble.

SPEAKER_114: Yeah.

SPEAKER_23: I mean, I think what happened was a lot of smart people saw what Chamath was doing with SPACs and others were doing and said, Hey, um, I could do that. How much does it cost to set up a shell company? There's money around. Oh, it's $10 million to set this up and we could make hundreds of millions. Great. That seems like a logical thing to do. And so venture firms started creating them, former CEOs, Mark Pink has started creating them. Everybody just said, let's just test this new vehicle out.

SPEAKER_30: And then I think what they found was finding quality inventory of a public company that wants to be public at this time is not that easy. Now, the, the way SPACs work is people buy those shares typically at $10. It sits there, but then you present the deal to them and they can redeem, right? They don't have to fund the company. So it is kind of contingent on finding a great company. And I think that's what happened with Buzzfeed was a lot of people were like, why would I give the money to this company? Right? I don't want to be in Buzzfeed kind of for the SPAC. And so I appreciate people wanting to take more companies public and give earlier access to tech companies, to the public.

SPEAKER_05: However, if the public is going to run up these shares and they're going to, you know, sell them and flip them, that's really a problem, you know, you have to be willing to hold these for a decade. And so when we had a company like desktop metal go out and SPAC, you know, we were planning on holding that company as, uh, you know, a holding for, you know, another five or 10 years. And now it's trading at whatever, you know, $4, uh, or so. And I would have rather it just stay private. Right. And it had bounced up to 30, but we couldn't take advantage of that because we were, you know, locked up and then it just slowly came down to where it is today at $3 and 90 cents. I would like to hold it and see it go back up to 30 and 10 X from here. But I don't think a lot of public market traders want to sit on a company for 10 years, you know, and same thing with the, uh, other companies that probably went out too early.

SPEAKER_83: That's the problem is the public market investors want to be this early or not.

SPEAKER_03: Right.

SPEAKER_83: And I don't think they do want to be this.

Jason Calacanis: I mean, so far it seems like maybe no, or the, the real problem, like you pointed out, isn't even that the investors don't want to be there. They might want to be there. But if the, if 75% of the specs can't find a company to absorb, to turn themselves into a fully formed termit crab and not just an empty shell, then why would you ever buy that? Like who's buying shells? I'm not buying shells.

SPEAKER_331: Yeah. So maybe we just had too many people wanted to get in the race and there just weren't enough drivers. Exactly.

SPEAKER_125: A lot of cars, a lot of drivers, you know, Every plan makes sense until it encounters scale.

SPEAKER_30: Yeah. Yeah. I mean, there's something about that. Like, yeah, the, the, the, it's a great plan until it faces the enemy.

SPEAKER_242: Exactly. Contact with the no plan.

SPEAKER_03: No plan survives contact with the enemy. Exactly. Right. Exactly. So this is no financial instrument survives contact with way too many people trying to copy it.

SPEAKER_332: Yeah, there you go, folks. And so what does this mean?

SPEAKER_05: It means this is a healthy process for a market caused by, you know, a crazy pandemic in which we printed a bunch of money, did a bunch of quantitative easing and, you know, inflation and then raising rates, all of these crazy variables and knobs and dials being turned has resulted in

SPEAKER_30: the public markets getting overheated and now maybe getting over-cooled or not. And now everybody is saying, let's just do some math. Yep. Let's just do some math. And so people are taking out their calculators and that's it. Just take it out.

Jason Calacanis: And tease ahead. Tease ahead possibly to Sunday BC school. Yes. When we will have a conversation or I would love to have a conversation about what a down market might mean. If this does turn out to be the start of a crash and listen, history suggests. Oh, it's a crash. Yeah.

SPEAKER_342: It's a crash for certain companies. Yeah.

SPEAKER_69: What we're going to want to know is, uh, Hey, I just got here. What does that mean for our job? Yeah.

SPEAKER_83: Uh, and it may not be as it might not be as dire as you think. So just a little tease there.

SPEAKER_23: Okay. And other public market news, a large Peloton investor has called for CEO, John Foley to be fired.

SPEAKER_83: Jason and Tommy, uh, founder and chief investment officer of Blackwell's capital. Never heard of him or the firm wrote the following this morning, uh, according to the wall street journal, Blackwell's owns a significant stake, uh, under 5% of the company and the letter

SPEAKER_23: says, quote, we believe the pandemic offered Peloton a tremendous and unexpected opportunity to accelerate consumer adoption of its category defining products and drive performance of the business and value for shareholders with the stock now trading below its IPO price and down more than 80% from its high.

SPEAKER_83: It's clear that the company, the executives and the board squandered this opportunity. Remarkably the company is on worse footing today than it was prior to the pandemic with high fixed costs, excessive inventory, a listless strategy, dispirited employees, and thousands of disgruntled

SPEAKER_188: shareholders. And no wonder the latter, given that Peloton's underperformed every other company in the NASDAQ 100 over the last 12 months, the ride for Mr. Foley is over. This board must now independently chart a new path for Peloton.

Jason Calacanis: I like that you eventually, I know. I like that you eventually got into an emperor Palpatine voice because this is a mean letter.

SPEAKER_357: Like if I got a letter about this in my performance, I'd be like, whoa, it's a nasty

SPEAKER_283: gram, but man, when you put it that way, that is pretty bad. How do you keep your job?

SPEAKER_276: Some of the gripes cited in the letter include committing to a 20 year lease on a massive office space in New York. That sounds crazy confusing pricing strategy.

SPEAKER_30: I can't disagree with that as a lover of Peloton's. It does confuse me. Yep. Uh, fully sandaling of a massive product recall after the death of a young child. I thought I, they said this on the show.

SPEAKER_361: I thought they overreacted to that. Very badly handled. Yep. Yeah. Very badly handled.

SPEAKER_223: I hate to be candid here, but kids should not be playing anywhere near a treadmill. We know this like period, full stop.

SPEAKER_30: There is nothing that can stop a child and a treadmill being a deadly combination.

Jason Calacanis: No, it's, they're super dangerous and everyone knows it. And the thing, and, but it was the, and it was the handling of first being like, bite me. That's not a problem, right? Sounding completely unsympathetic without acknowledging that these things are dangerous. And then doing a recall after the fact, making it seem like you were totally jerk.

SPEAKER_03: And then you got in trouble for it. Like it just couldn't have been, it was very, very, very tone deaf.

David Friedberg: I mean, the thing goes to sleep right after you get off of it. Basically there's a pin code they added and there is a safety key.

SPEAKER_23: When I get off my Peloton tread, I undo the safety key and I put it in the cup holder. Right. So my five-year-olds don't take it and plug it back in. I also don't let the five-year-olds in the gym area. I also put a pin code on it. Yeah.

SPEAKER_114: There's, and when they come in the room, I, I pause it immediately.

SPEAKER_274: I don't let them, if they come into the room to talk to me about something, they have a question. I stop the treadmill.

Jason Calacanis: And the reaction, I mean, the reaction was, it was a knee jerk followed by a knee jerk. And both knees ended up just kicking them themselves in the balls. Like it was just terrible. Absolutely. Then there were also evidently, there were complaints of some Newman-esque governance issues, such as fully promoting his wife to an executive position inside the company. And then on more of the business fundamental side, large investments in increased manufacturing capacity, which of course we talked about, uh, this is why we're doing the followup of the story,

SPEAKER_03: which were ultimately canceled over a decrease in product demand, which suggests some serious forecasting fails. I mean, these are pretty fair critiques.

Chamath Palihapitiya: It seems like, you know, and if the company was selling machines at a brilliant clip and let's say Omicron and people were not getting back to it.

SPEAKER_05: And the Omicron was more deadly, he'd look like a genius because they would be selling even more of

SPEAKER_23: them at higher margins and, you know, running out of inventory. So one thing to keep in mind is if you win, you know, promoting your wife to an executive position in the company, you know, get in trouble at least like, nobody cares. This is why whenever you do any behavior inside of a company, you have to say, if things are going

SPEAKER_09: poorly and people, you know, find out that I, I don't know, uh, bought an apartment for myself or, you know, whatever, I bought myself, uh, uh, a plane on the company like Newman did.

SPEAKER_380: Yeah.

SPEAKER_31: You know, like, or I bought, I bought a company that makes wave machines or something.

SPEAKER_364: Registered the IP and then sold it back to my own company. All that stuff.

SPEAKER_23: Nobody cares about if the company is doubling its valuation every two years.

SPEAKER_30: And then when that stops, all that stuff gets re-examined. So impropriety, the appearance of impropriety is impropriety in business. If you accidentally put, I don't know, your warrior season tickets on your personal, on your corporate card, and you used it personally, like, and you're a founder, just reverse that and pay for it yourself. Like I've seen founders do all kinds of wacky stuff where they paid for something that really the shareholders should not have paid for.

SPEAKER_09: Yeah. And I just say to them, like, that doesn't look good. Why don't you just pay for it out of your money?

SPEAKER_334: Well, I don't get paid a big salary.

SPEAKER_384: I'm like, okay, why don't you ask for a larger salary and then pay for it with your own money? Like, yeah. Yeah. Come on, guys. Come on.

SPEAKER_385: There's, eh, you gotta be careful. Tight is right.

Jason Calacanis: Tight is right. On this note, I think the noties have picked up on my suggestion that Apple should buy Peloton. And so, uh, rock Mike and others want to know, all right, Jason, how much should Apple pay for Peloton, which is currently at a $10 billion, $9.7 billion market cap?

SPEAKER_30: Yeah. So you would have to make an offer that is at least 20 or 30% better than what the current price is. So it would have to go for 14, I think, or 15 to get the sale done. You'd have to be a premium over the current price. So as companies do better, it gets even more expensive for a buyer.

SPEAKER_27: Yeah. And so, you know, they did offer it. It would have to be 14.

SPEAKER_390: I think at this point, 30, 40% Apple have $200 billion in cash.

SPEAKER_05: Yeah, they just, I'm just saying, I know that it seems silly that they, they don't buy things that weren't built there.

Jason Calacanis: Yeah, that's true. That's their, that is actually very true. Yeah. It was a shame because it would be a delightful, uh, accessory to the Apple watch was, which itself is an accessory to the iPhone. And I'm just saying your Peloton could sell it.

SPEAKER_396: It would be perfect. I don't know why they didn't get it done. But it is what it is. They match. Yep.

SPEAKER_114: I mean, it could be that, um, you know, I think Google wound up buying Fitbit. Yeah. Google bought Fitbit. Yeah.

SPEAKER_399: I know Facebook was considering it and that was such a minor acquisition.

SPEAKER_05: I know they looked at that with a lot of scrutiny, again, back to antitrust. I think they were looking at the privacy issues around it. That was a day. Yeah.

SPEAKER_03: That was a major data acquisition that had nothing to like, who cares about them reducing competition in the fitness market? They bought so much data. Exactly.

SPEAKER_23: I mean, they literally know what we weigh and what our heartbeats are. Um, but I think it could be like Google actually has done a good job in hardware with Nest.

SPEAKER_83: Software has been a little janky, but Nest hardware is pretty good. A Fitbit is okay to good.

SPEAKER_402: Maybe Google should buy Peloton and folder. That would be, that would be a nice. Where you're going here.

SPEAKER_30: Mm-hmm. Yeah. Alphabet buying it and having a hardware division that created this range of products. Right. Kind of cool. So.

SPEAKER_405: I'm picking up what you're laying down. Yeah. I'm smelling what you're stepping in.

SPEAKER_407: I like, so to speak. I think it would be, uh, yeah, I think it would, you know, I would rather see Apple buy it.

SPEAKER_30: But for Google, you know, maybe you put, you know, maybe the founder is actually good.

SPEAKER_83: And we, you put him in charge of, um, nest and everything over all the hardware at Google.

SPEAKER_30: So I think they, they did figure some things about hardware and software out. I would rather see them buy hydro and tonal and just run all of these things into one subscription at a really great price and then start opening gyms up with all this equipment. So when I went to the Austin, I talked about this on a previous episode. I went to the proper hotel in Austin. They had a tonal, took out my tonal app. It was like, uh, do you have a tonal account? Press here. I pressed there. It's gave me a QR code. It's a take out your app. Scan the QR code. Boom. All my settings, all my workouts at Austin proper hotels gym. So I use the machine. It recorded everything. And I understanding is Pelotons are now showing up in, uh, corporate gyms and other places.

SPEAKER_183: And, you know, if tonals are doing that and hydros, it's going to be a great future where all your stuff will just automatically be connected.

SPEAKER_05: So if that would be what I would want them to do, if I was this activist investor, I'd say, listen, we got to use our market cap to buy tonal and, uh, hydro and create a bigger suite. And just, you know, okay. Yeah, maybe we're going to be for the top 10% or 20% of consumers, but we're going to have

SPEAKER_48: four different items for them. Because in my gym right now is the tonal, the hydro and the, um,

SPEAKER_219: Peloton and the Peloton and they don't talk to each other. Yeah, no, they don't talk to each other.

SPEAKER_02: But if you think about them, you know, if you were, what does Equinox cost now? 150 a month? I heard 200 a month. I have no idea.

SPEAKER_119: Yeah.

SPEAKER_02: I think Equinox is like 150 to 200 a month and you have to sign two years.

SPEAKER_23: So if my wife and I did that, you know, you're, you're looking at like, that's a lot of money. It's like 5,000 a year. Yeah. So you do that for 10 years. It's $50,000. Okay. $50,000 is crazy. You start thinking about these machines. You could buy all five, four machines for three or 4,000 each and then, you know, pay the monthly fees and you probably wind up in the same space and have a better dope gym at your house. If you have the space.

SPEAKER_177: Assuming you have the space. Yeah.

SPEAKER_09: Assuming you have the space. Yes. Which people outside of cities do. All right, everybody. It's been a great show and we'll see you next time. Bye.