Chamath Palihapitiya: All right, everybody, welcome to 2023. We made it through 2022. And as a little treat for the audience, we thought we would bring one of the top five guests in the history of the program, Keith Raboyan, to just give an outlook for founders as to what 2023 will bring.

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SPEAKER_04: slash twist. I assume, Keith, you're in sunny Miami. Am I correct? Yes. You should be able

SPEAKER_08: to see in the background. There's sun everywhere. A typical day, probably about 78, 82 degrees.

David Friedberg: Okay. And I am in the mountains in Lake Tahoe and it's literally blizzard conditions. At any point

Chamath Palihapitiya: in time, I could lose internet and have to take my Starlink out or lose power. That's the state of the world today. I guess the place to start is everybody wants to know the macro outlook. We're going to get into the micro, of course. We're going to talk about startups. We're going to talk about valuations. We're going to talk about all those details and what entrepreneurs should be doing in 2023. I think that's what everybody wants to hear, but I'm curious what you think about the macro environment heading into 2023. We had this incredible, what I call the speculative asset bubble. People were speculating those assets deflated. The Fed raised rates. And here we are, has the Fed actually gotten to the point where we have capitulation and the markets bottomed out? Or do you think this is what they call the old double dip recession? What are your thoughts on the macro

SPEAKER_12: environment? But yeah, in 2023, I don't have any incredibly insightful, unique perspectives. I

SPEAKER_14: think we're going to all live through kind of an unpredictable time. But the only thing that you need to know is whether inflation is going up or down and that kind of drives everything else. I don't know if I have any insights into whether inflation is going up or down that aren't widely available. The data, just go grocery shopping is the easiest way to find for yourself whether we've stabilized inflation or not. Even if you do stabilize inflation, then you have to worry about a consumer recession that's severe, which we haven't encountered yet. Consumers are still spending. They're spending a little bit more with debt than with savings, but they're spending and

SPEAKER_15: spending more in some categories like travel. They're spending more than they really ever have. So if we do stabilize inflation and consumers stop spending, that actually is a bad thing too. So nobody really knows what's going to happen in 2023. So it's pretty hard to predict. The asset bubble stuff was very easy to see. It was very easy to call. There's really only one tool left in the Federal Reserve's toolkit and they started using it. They may have to use it a little bit more. The employment data is still pretty hot, which typically drives inflation. The cost of labor is a major input to most things we buy. And so if the cost of labor is going up, inflation is probably going to continue for a while. But fundamentally, I don't think anybody has a crystal ball in 2023 that's super accurate. So I think the best thing you can do is therefore plan for different scenarios. You can't try to probabilistically pick one scenario. You're going to have to plan for two to three or four different environments and have a burn rate, have a fixed cost structure, have hiring plans that can be edited on a quarterly basis at a minimum.

SPEAKER_19: Wow. Okay. So you have to be a bit more dynamic as a founder. We lived through 13, 14 years of up

Chamath Palihapitiya: into the right. Once in a while, little headwinds here and there, but you basically were planning for

SPEAKER_19: growth. You were planning for expansion. Now you're saying, hey, founders have to maybe have multiple scenarios. One of the scenarios is, hey, maybe this will go down another 20%. Maybe the funding environment will get worse for startups. Another is, hey, we continue to slog and go sideways. And I suppose, you know, the, a rebound of some type is a minuscule possibility. So what do you advise when you're on the board of a company in terms of scenario planning? What has that manifest itself? The number of employees, the amount of revenue, how do you actually have that

SPEAKER_23: conversation on a high level? Well, it matters. I mean, it obviously varies by company, like how much cash they have, how much are they burning, how many dials and levers down under control

SPEAKER_14: to manage that burn rate. Some companies have a lot of flexibility and kind of skate to effectively a break even, and some have no shot at, you know, a break even in a foreseeable future. And so they need to worry about, you know, availability, capital, equity, and debt. The equity markets are not going to get better in any foreseeable future. There are a lot of companies that need to raise money. Fortunately, you know, for many companies in our portfolio, they raised money in 2021. They were smart. They realized that the terms were very attractive to founders, less attractive to investors. So a lot of our companies have a fair amount of cash on their balance sheet. And they were able to skip raising capital in 2022. In 2023, I don't think most companies can skip two years. And most companies don't have the levers to skate to break even. And so they're going to have to go back to the capital markets or make really radical changes in their cost structure or their business model. And if they go back to the capital markets, they're going to be in for a rude awakening on pricing of the terms. You know, I tweeted over the weekend, so that borrowed from Fred Wilson, which is, you know, the seed deal should basically be done at 10 million, a series A at 20 and a good B at 40 to 50. And a lot of founders have not yet digested. That is the normalized world of tech investing. And that's like the best case, you know, scenario for 2023. Investors are going to be much more selective. But even when they pull the trigger, they're going to demand terms that reflect reality. And reality is 10, 20 and 50 are about the maximum you want to invest at if you want to return dollars to your LPs.

Chamath Palihapitiya: So to unpack that just a little bit, when we were sitting here, 2008, 2009, 2010, it was five, maybe 15, and then maybe 30 to 50, maybe 30, 40, if you're looking at seed, series A, series B, then it went up a little bit, 10, 20, 25, 50, seed, series A, series B. But what you just described is, hey, there were people in 2021 who were graduating from an accelerator, or were three, you know, developers, collaborators, say they worked at Google or Facebook previously, they would come out of the gate. And they would raise a seed round of $5 or $10 million

SPEAKER_29: at a $40 or $50 million valuation. That was the norm, or we saw it frequently in 2021, correct?

SPEAKER_31: Oh, absolutely. And it made no sense. It made no sense at the time. Historically, over the last 40

SPEAKER_14: or 50 years, it would be completely irrational. And we're just back to historical averages. Actually, this is not a bad market for tech. A lot of founders are confused by this too. Some investors are confused. Right now, the multiples are pretty normal. Actually, if you just took a 40 year average, we're pretty much right on the average of where tech owners are valued. So there's one of the reasons why it's unlikely to change is we actually haven't seen the downside at all yet. We've seen

SPEAKER_34: like a normal correction to the middle of the bell curve, like regression to the mean.

Chamath Palihapitiya: Right. So the valuations, if you're raising a seed round, you get an $8, $9, $10 million cap on your safe or note, that actually is the average. And then, you know, we did have an below average that famously com.com, Uber, some of these were raising at 5 million in that first round or Airbnb, other companies. So founders should feel pretty good about this unless they don't have product market fit. And their last round was at 40.

SPEAKER_06: But then they're not going to raise money. Like people are just going to pass. Like the willingness to pass is just anything greater. I'm talking about companies that are actually real traction,

SPEAKER_14: build teams with a lot of positive signal. These are the appropriate terms. I mean, you're right. When I invested in either, let's say YouTube or Airbnb, they're both roughly three

Chamath Palihapitiya: to three and a half million posts, right? So that was incredible. Because if you put in 500 K, it went a lot further back then, you could hire developers for 80, 90, 100 K. At that time, 15 years ago, now the concept of a developer, you know, some of these large companies, you know, total comp 3, 4, 5, 600 K. So there is a very big matrix here. There's a very big system that startups play in. And part of that is what the large companies are doing. Okay, if you're a SAS

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Chamath Palihapitiya: Salesforce just today cut 10%. Always that as Bill Gurley would say, like the 10% number, not enough

SPEAKER_19: to actually make an impact, but, you know, enough for I guess the CEO to save face. What do you think the impact of Facebook hiring freeze cuts, Microsoft, Google hiring freeze, Apple hiring freeze, and I guess it's Facebook, Salesforce, and then obviously Twitter, the big reward. But what are those

SPEAKER_29: major companies behaviors and contractions doing to the startup market?

SPEAKER_23: Well, I think they're driving down the entitlement factor. I think there were a lot of people looking

SPEAKER_14: for jobs in the startups or roles in startups that were predicating, you know, their expectations on Google, Facebook offers, let's say, probably not the best fit for startups, truthfully, early-stage startups, definitely. But they were using that as a way to benchmark the terms and offers that they were trying to negotiate. With Facebook firing people and Google freezing people and Salesforce, et cetera, that's not going to be a very successful negotiating strategy.

SPEAKER_47: If, you know, an engineer told me today, like, well, I can get paid, you know, 300K Facebook, I'd be like, good, go there, just even get an offer even.

SPEAKER_50: Yeah. I mean, if they're on a hiring freeze and they break their hiring freeze rule to hire you, more power to you.

SPEAKER_14: Yeah. Good luck. You know, like, I actually don't really care. I usually don't care anyway, but it's a lot easier to say, you know, go out, interview there if you want to, you're going to

SPEAKER_47: wind up in the same place. So you might as well join the company where you're going to learn the most, challenge yourself the most, and have the highest economic upside.

Chamath Palihapitiya: Which was exactly the sales pitch of startups. You know, let's say a decade and a half ago, two decades ago, three decades ago, when people were coming into the industry in the 90s or, you

SPEAKER_50: know, early 2000s to, you know, maybe even the great financial crisis, 2010 period, 1990 to 2010,

Chamath Palihapitiya: you had a choice. Max cash would be two times what a startup would pay, maybe. But that delta got really huge. And then some startups started trying to compete with the Googles and Facebooks, where I think during our era, the idea that you would even try to compete was farcical, you just wasn't a possibility for the YouTube founders with a 500k C check to compete against IBM jobs.

SPEAKER_06: Well, we very intentionally didn't want to, you know, PayPal was predicated on this notion that Peter taught me and were explained to me in November 2000, that you don't want to hire the

SPEAKER_14: people that started that the large companies want. One of the reasons why is you don't have the economic competition, but you really want to hire people that they won't hire. And then they don't know how to hire, they don't know how to assess, and that's how you build a startup. So I've kind of always wanted to build a company on people that aren't going to get offers from Google, Facebook, Amazon, Apple, Netflix, etc. But it has the economic advantage that you don't have to deal with this like stuff. But I think it's just a different personality, traits, character, ambition, skill set of the people you really want to build the foundation in the first 100 to 500 people in a company. So like, for example, I have a friend who runs a company, and he was considering hiring an engineer who's like, I have to think about your offer versus Facebook. And his reaction was,

SPEAKER_47: well, if you have to think about it, like you're not the right fit for our company. And that's more right than wrong.

Chamath Palihapitiya: If you would consider being the 7,234th developer at Facebook, versus being the third developer at a startup, and you're making that decision, based on salary alone, you have already made the decision.

David Sacks: It's like a walking IQ test, you know, it's like, if it takes you more than 30 seconds to figure out

SPEAKER_65: that you don't want to be the 700th developer at Facebook, then you're totally the wrong fit for any successful startup.

SPEAKER_67: Right. Now let's talk about entitlement. Entitlement up and down the stack. Being a capital

Chamath Palihapitiya: allocator, you and I got to that career later in our, got to that profession later in our careers, we were like seed investors, we followed a similar path and writing bigger checks. There seemed to have been entitlement up and down the stack. I want you to talk for a second, we know the entitlement of the employee class, Google created it, right? Hey, come to the campus, we're going to create a college like environment. We have a money printing machine that the world has never seen before. Therefore, what does it matter if we overhire? We're Google, we've literally created a machine that prints diamonds, we don't need to look at the cost of salaries, right?

SPEAKER_19: Um, but we also saw this, uh, sneak into like, say, uh, capital allocator class and VCs and the,

SPEAKER_29: and how hard it is to do our job. Maybe you talk a little bit about entitlement. We all know the entitlement that was created amongst employees. They're going to get the dry cleaning done and

SPEAKER_19: get free matcha lattes, whatever. What about capital allocators? Because so many new venture firms were started in the last two or three years, so many $10 million, $30 million, my first venture fund,

SPEAKER_29: what happens to all of those that deploy capital in 2020, 2021, with very little discipline?

SPEAKER_14: Well, almost every one of those venture firms, almost every one of those venture firms started in the last five years is going to fail. Um, there's maybe two or three that might survive. The reason why is you just, there's two, two fundamental, three fundamental drivers, actually. First is if you can't return capital, I don't mean mark up things on paper, return capital in the hottest market in the history of technology. There's a question of when you're, when the hell you're ever going to return capital to anybody who didn't put literally points on the board and distribute money to LPs should not be raising future venture runs. And I think LPs are going to be adamant about that. Like if you literally couldn't mint money between 2019 and 2021, you're never going to mint money in technology because things aren't going to be that good and that easy. Second, a lot of LPs have lost money in the public markets and they have a capital allocation balance of how much money can be in private assets period, venture as a private asset class. And so they have to quote unquote rebalance their portfolio, which means they have to be more selective about which VCs they fund. So that's going to drive more selectivity and more scarcity in venture. And then third is, I think a lot of people just don't have the right skills to be a good VC. And venture is a hard job actually, truthfully, it's not as challenging as being a founder, just to be clear. It's certainly not as stressful, but it's not easy.

SPEAKER_15: And I think when everything was up and to the right on paper, people believe that the only thing they had to do was identify promising founders, promising companies, and everything's easy.

SPEAKER_14: You actually don't, that's like 10, 20, 30% of the job. The other stuff is pretty challenging and a pretty rare skill to do well. And so I think a lot of these people were not set up for success because they didn't really understand, didn't really learn through multiple market cycles, how complicated the job of an investor, how complicated a job of an investor can be.

SPEAKER_77: And when you go through multiple market cycles, you kind of learn that you have to earn your money, you know, the hard way too.

SPEAKER_67: This is the key. Let's unpack number three here of how hard the job is. I think everybody likes to

Chamath Palihapitiya: think that what they see on Shark Tank, negotiating some term sheet, placing the bet, is the job. That is but 5% of the job, low single digits, placing the bet. Really getting on that board, giving advice to the founder, helping them stay on track. There's so many things that you need to have experience, you need to have scar tissue for. What are the best qualities of an investor, in your mind, post placing the bet? What are the things that capital allocators need to learn to do in terms of servicing these companies after the bet has been placed?

SPEAKER_82: Well, I think it's ultimately being a consigliere to the founder, which is, you know, every founder is different, they have different experiences in life, they have different skills and

SPEAKER_14: weaknesses. And you're trying to complement them, so that you're sharpening their thinking, because it's really all their decisions, like founders make all decisions. We just have the benefit of experience, sometimes our horizontal perspective, peripheral vision. And so the question is, can you use the benefits of more horizontal data, or more vertical data over time, to sharpen

SPEAKER_15: the thinking of the founders, which increases the probabilities of the company's success? And so being able to communicate with clarity based upon those perspectives,

SPEAKER_14: so that founders can make the best possible decisions, and therefore maximize potential company, is a lot of the job.

Chamath Palihapitiya: And this is the key. If you're picking the right founders, they're going to be strong founders, with strong opinions, with a perspective, you know, with drive, you can't, and you're not in the company every day. So it's not like you can run the company, nor do you want to, because you have a portfolio. So you have to be able to say, Hey, listen, I have 30 active bets right now, here are some things I'm seeing, to the left of you, the right of you and right behind you, that you don't have access to. This is what is happening in real estate. This is what's happening in consumer, this is what's happening in China, and you can give them that information. So hopefully, they make better decisions. How do you frame that? With let's say, I'm going to give you a couple of different founder archetypes. You take the founder archetype, and you tell me how you would deal with them. Distracted founder, who can't stay focused on the one money making, let's assume they found something that makes money and is growing at five or 10% a month. And the second they get that into month six, seven, eight of making five or 10% a month, they have three new ideas, two new subcommittees, they want to launch another venture firm, they're doing a conference, they started a podcast,

SPEAKER_45: the distracted ADHD founder. I'm that founder right now. How do you deal with me? Hey,

SPEAKER_47: I got four more ideas, Keith. You got to simplify, simplify, simplify. This is true, actually, as an executive, and it's certainly true as a consigliere, a board member, etc.

SPEAKER_14: It's just like, all ideas are not equal, you can only fund so many. And the reality, the constraint that the founder probably doesn't realize is the ideas can be good. But typically, only one of them is exceptional, and you don't have enough talent to fund them all correctly. So by trying to fund four, instead of one, you're going to have your second or third or fourth best people in every discipline, engineering, design, marketing, working on the third and fourth one, and so that you're actually undermining the probabilities of success by not concentrating your best people on one or two initiatives. And so you're actually suboptimally going to perform. So I think that's the most important thing. Then secondly, most of those other things are just pure distractions. And they're like eating junk food. They taste good, they make you feel good, but they're not actually healthy. And so conferences, things like that, unless there's a very specific line of sight to what do they do for the business metrics in the next three to six months, just can't be doing that stuff. And so I think giving a lot of feedback on the prioritization help, occasionally helping rank them, you can talk through like, what's the upside potential of this one versus the cost, implied cost of shipping it? What's the upside potential of project two? How does that compare? What's the probabilities of each, etc. But it's helping shape their brain on where do they want to really fire... They have a very scarce number of bullets in terms of energy, even. This is also an idea that does resonate with some founders who can be a little distractible is even if you have an infinite time, you don't have infinite energy. And so if you don't channel your energy into the most important things, you're going to smooth it out like peanut butter, and you're not going to get your best time, your best focus, your best creativity on the biggest upside potential. And you really want to do your best work with your best energy, with your best focus at the best time of the day, when you can do that.

SPEAKER_18: Hmm. So letting them understand, hey, listen, you're taking your limited resources,

Chamath Palihapitiya: you're spreading them like peanut butter, you got to get more wood behind one arrow, and then, hey, just for yourself personally, how much energy can you actually, you know, build and get into each

SPEAKER_58: of these projects. Super important. Okay. What about the founder, um, who, uh, just cannot, uh, seem to

SPEAKER_19: get along with everybody and the culture becomes chaotic. They are too abrasive. They chew people out.

SPEAKER_93: They are basically, um, I don't want to use the word toxic because it's a little too woke for you.

SPEAKER_95: I don't want to trigger you with, uh, any work for me, way too work for Keith. But I mean, maybe I'll just ask the question, can anybody be too hardcore in business? Maybe you don't buy into it, but just

SPEAKER_19: somebody who's creating a bit of like, uh, interpersonal chaos. Sometimes you have founders who create a little chaos. They're constantly fighting with individuals. Is this, uh, how do you get them

SPEAKER_29: focused on, uh, not self-sabotaging maybe is a way to frame it?

SPEAKER_82: Well, I think the founder personality like that can actually be very successful because

SPEAKER_14: the people who opt into working with them kind of know what they're getting. And so I don't think that's a really good personality trait for an executive who's kind of joining a company. It can be really painful, but for a founder, people choose who they work with. And it's one of the benefits of joining a startup. And so I think you can be successful with that kind of DNA because everybody's opting into your call. However, the one piece of feedback I would

SPEAKER_47: give somebody who is of that ilk, and I actually worked with founders, like I've worked with founders like that for 23 years. I've worked for founders like that. I've worked with founders, I've funded founders on the board of founders like that. The one piece of feedback is you want to ensure that

SPEAKER_14: the friction you're causing is not collateral damage, but it's intentional. Wow. And sometimes these two things get mixed. So one of the founders I work with once asked Mike Moritz, who I consider to be an amazing investor, what's the most consistent, what's the most important trait for a successful founder in his entire career? And he said, they relentlessly apply force. So that's very similar to being quote, unquote, toxic in the world. Yes. Relentless application of force people do not like, but that's what makes founders unreasonably successful. However, you want to make sure that you're applying force intentionally on the things that matter the most, not on things that don't matter that much. So it's causing collateral damage is not a good idea. So you can help isolate, how important is this? And are you causing friction because it's critical to the company? Or are you causing friction that isn't even something that important? And then you're just going to distract people from focusing. So being conscious about when you're causing the friction does work. You can't talk somebody out of who's a highly energetic, highly opinionated, disruptive person, who by the way, is almost always the best founders are disruptive. You can't talk them out of that personality trait, but you can channel it to make sure you're using

SPEAKER_15: that skill very wisely and very carefully.

Chamath Palihapitiya: So it's said in another way, pick your battles. Hey, listen, if you're going to go in and give a speech and tell the sales team, Hey, you hit, you missed the quarter. This is unacceptable. We're not working hard enough here. And Frank Slootman, you know, uh, being like one of the canonical examples, you know, pretty intense dude, or Larry Ellison, sales driven executives. Yeah. They they're going to put some pressure, uh, but it's in the right place in the sales team.

SPEAKER_93: They're not starting fights willy nilly with the HR department or, you know, some developer over where the button is, unless where the button is and it's Jack, it's where, and that's critical.

David Sacks: Yeah. Yeah. No, you can, this, the Steve jobs, this is a piece of is valuable if your company competes

SPEAKER_14: on the basis of design and elegance, but like, that's why you have to be both.

SPEAKER_08: You have to be right more often than not. Yeah. And you have to make sure that it's highly impactful.

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SPEAKER_45: This is part of the problem with taking over a company or putting in a professional, quote unquote, CEO.

SPEAKER_110: That's why we don't fund those people at Founders Swim. Yeah. We only fund founders.

SPEAKER_112: Tim Cook has been extraordinarily successful at shepherding Apple.

Chamath Palihapitiya: He is not the founder. How do you explain that? Is it just based on just what an extraordinary setup Steve Jobs did and he's just riding the wave?

SPEAKER_08: Well, I mean, obviously, unfortunately, it wasn't really a choice for Apple. Yes. Obviously, Steve left way too early for reasons beyond anybody's control. So, I mean, obviously, if a founder is going to die, you don't have a choice. Yes. You don't have a choice. Right. So you have to choose as wisely as you can.

SPEAKER_14: I do think that you see some of the advantages of Tim in Apple's execution, but you do see some of the disadvantages too.

SPEAKER_120: Describe that. The disadvantages in...

SPEAKER_14: We'll see if the company ultimately proves to be as visionary. They haven't yet shipped a brand new product, which is okay. Typically, Apple, you would expect every five to seven years to really be out there with the new product if you look through the last 30-ish years. So it's not really too late, but whether it's headsets, whether it's a car or something, at some point, the company has to really say, hey, we have a new product. And it's going to work. And it's not something consumers are demanding. We're actually going to inspire consumers to buy something new. And that'd be the real asset test.

SPEAKER_120: You buy into VR, AR, either of those categories. What do you think of this bold, some people say, farcical, crazy bet that Zuckerberg's making? And obviously Apple...

SPEAKER_128: I would separate VR and AR. I think VR isn't a really great idea at all.

SPEAKER_14: I do think Facebook's bet on Meta is insane. I think it's the wrong company with the wrong DNA, with the wrong founder, with the wrong vision, and the combination is really lethal. You should look at their stock price since they changed the name. It's a perfect proxy for where the company is going. Facebook's never been an innovative culture. A VR-ish headset is very innovative. Facebook's really good at executing consistently compounding advantages quantitatively, but disrupting through a new product, not in their DNA. But the politics around the Facebook brands, it's hard to recruit that DNA into the company. And then third, with the regulatory regime, it's impossible to acquire that in, which would be the right move. Mark actually is a brilliant strategist. His acquisitions are usually dead on, but he can't really acquire creativity at scale,

SPEAKER_28: innovation at scale right now because of things that he can't control. And that's not going to change in the next two years, at least.

SPEAKER_131: So short Facebook, basically.

SPEAKER_134: Yeah. If you want trading advice.

SPEAKER_19: If you want trading advice. I mean, I actually, the second he said he was going to cut 10,000 people, bought the stock at 94, and it's been a great trade.

David Sacks: It's a good, well, it is a good, yeah, that was a good first step.

SPEAKER_14: I think the company definitely over hired, definitely became a little bit woke in its own ways. He's trying to counter steer some of those. But I think the fundamental problem, and he can counter steer some of those actually successfully. But I think the fundamental innovation step, innovation DNA is not something Facebook has.

Chamath Palihapitiya: They have been incredible as a mememic machine. If they see some great innovation, they copy it, and they iterate on it better than the person who created it.

SPEAKER_139: You look at somebody.

SPEAKER_128: There's nothing wrong. I don't, by the way, I'm not being dismissive of that. I actually think that's great. Sure. I mean, but you have to know who you are, what your strengths are, both as a founder,

SPEAKER_14: and what your strengths are as a team and culture, and building some disruptive technology out of left field is not in their core DNA.

SPEAKER_142: It is definitely not. But hey, if you're going to keep iterating on stories on Instagram, and then Instagram

SPEAKER_58: stories turn out to be much better and larger than Snapchat, that's some form of innovation.

SPEAKER_144: I do think there's more, by the way, I think there's more in AR than VR.

SPEAKER_14: I think there's clearly applications of AR that will resonate, whether they're industrial or

SPEAKER_31: consumer, but there are times and places for AR that will be real companies.

SPEAKER_38: It does feel like AR is distinctly different than VR. Why do you think that?

SPEAKER_142: And what do you think the top consumer application or applications will be? And what do you think the top corporate B2B applications will be for AR?

SPEAKER_14: Well, there's a lot of industrial applications that are very obvious, like surgical stuff. And there's actually law enforcement, pretty intuitive. Some of this is already happening, like a little bit under the radar. Technicians, auto and repair, auto, actually aviation. So this is a lot of both training and actual use in the real world as technicians do things. Very fundamentally obvious stuff and not that difficult to envision because these people are professionals that are used to, like for example, headgear, like surgeons, technicians, they're all military, law enforcement. They're not walking around. With consumers, you have a problem of most people I know, intentionally decided to get LASIK to strip away. I hear from their life and most people who got LASIK considered the best decision they've ever made. So I think you're fighting uphill with consumer to add a device as they navigate the real world. I also think people are going to want to navigate the real world more than sit at home alone. And so one of the reasons why I think VR has limits as a gaming platform is at the end of the day, people are only spend so many hours in isolation and they're going to want to spend hours with other people. And so the best you can build maybe in VR is about a hundred billion dollar company because you can build the virtual gaming platform, but it's not going to be something people spend 24 seven on. And therefore there's kind of a natural limit to the implied TAM of a VR monopoly.

SPEAKER_58: Yeah. And it does seem like getting people to put something on their face. That's heavier than

Chamath Palihapitiya: sunglasses. You have to have a value proposition that is pretty significant, right? Because like

SPEAKER_14: you're saying, I've seen, yeah, yeah, exactly. The friction is real and the pain in the cost is real. I have seen some versions of AR, VR, mostly AR that are a little bit more like a lens and the form factor does matter. So one of the things I do trust Apple with is getting a form factor correct. I've seen startups pitching the technology to do this well with something that would feel like more like a lens is incredibly difficult. Even just the powering of it is incredibly difficult to safety. There's so many different challenges to it, but that might kind of work, maybe. So maybe they're there on AR. You still have to think through the use cases pretty carefully though, if you're going to have any friction. What am I really getting out of this as a consumer? People talk about name recognition at parties and yeah, there's value to that. Some people, it's more important than others, but are you really going to wear around a device 24-7 that improves your name recognition at a social event? Maybe you're a professional politician, sure. Average person, how often do they go to events like that? How often is it important to them that they don't forget someone's name? You have to start thinking this through. What's the value against the friction, let alone getting into the cost? What does this thing cost? I think there are some pretty significant challenges to a breakthrough in AR on the consumer side. It doesn't mean that someone can't create a form factor that feels non-invasive.

SPEAKER_19: Yeah. I mean, I wore the latest VR headset that you can see through from meta and basically every Thanksgiving or Christmas, somebody pulls one of these out, you put it on. It's like, I'll give it a try. Oh, wow. Oh my, this really has advanced. And then goodbye. I'll see you next holiday when somebody pulls this out of the hat again and buys the latest one. But it does need to be small enough that, hey, it feels like these sunglasses I'm holding up, or the value prop. And this is what you have to understand as an entrepreneur, right? The value you're providing has to be so significant

SPEAKER_128: to change people's behavior. Yeah, it has to be the proverbial TEDx. And it's hard to even think about that. I mean, for example, people talk about travel, for example. Wouldn't it be great if you

SPEAKER_14: could travel to Paris and get the experiences of going to Egypt and seeing the pyramids and all that stuff? People forget that the travel... Someone is about learning and experiencing new things. But it's also a social thing. I mean, people travel because they want to be with their family, or they want to be with their partner, or they want to be with their friends. Yes. VR travel is not a substitute for that.

SPEAKER_164: And they want to get away from their day-to-day life, right? No, exactly. It's about what you're eliminating.

SPEAKER_14: Yeah. They want to leave. I mean, yeah, they don't want to spend six hours on a plane that's uncomfortable, sure. So I believe in teleportation. If you could do Star Trek, sure. Sure. That's a product. That's a product.

SPEAKER_08: That's a thousand X product, sure. That definitely works. But I don't know how to

SPEAKER_14: build it. But if you did, people would buy it. But the virtual transportation to Paris is intriguing in a curiosity sense. And probably 10% of the travel market plus or minus is intellectually driven.

SPEAKER_128: But most people are traveling because they want to be spending time with other people or meet new people. And you can't do that in the VR world. I mean, television is the perfect analogy. People

SPEAKER_50: said, hey, we have television now, you have the History Channel, you're going to be able to travel around the world, you will not need to get on a plane. And people have only traveled more, even with the History Channel or Travel Channel or Anthony Bourdain, rest in peace doing incredible

SPEAKER_58: shows that, you know, essentially teleport you to different places, you're still going to want to

Jason Calacanis: get there. Hey, everyone, it's Molly Wood co host of this week in startups and managing director here at launch. Our mission here is to back builders. And one of the best ways we do that is with the launch accelerator. The accelerator is a 15 week program. And it's small, there are just seven companies per cohort, we keep it small, so that we can tailor the program to the needs of the companies. The program has three main focus areas, fundraising, founders get coached by Jason and then present to 150 or more professional investors, plus about 1000 investors in Jason syndicate. We also facilitate scores of introductions to targeted investors, which is a lifelong benefit. Next, we focus on growth. We got bi weekly jam sessions focused on different aspects of growth, including customer acquisition, marketing, SEO, and also operations, legal accounting, then we're moving on to networking, founders are dialed into the launch network. This is a key benefit because I'm not gonna lie, we know everybody. Okay, so here's what we're looking for, for our accelerator. So here, vertical agnostic, although we do love SaaS marketplaces, consumer subscription, fintech, climate, we're looking for scrappy resourceful founders who can execute at a high level in big markets. And some of our alums in our accelerator include Fitbod, Steezy, Lead IQ, and Grin. Please go to

SPEAKER_170: launchaccelerator.co slash FAQ to find out more and apply. Okay, chat GPT. It comes out,

Chamath Palihapitiya: people are losing their mind. Is it a parlor trick? Is it truly innovative? What is your take on, you know, the reaction, not just the technology, but the reaction to the technology, people are

SPEAKER_29: losing their minds about chat GPT? Well, maybe you should hang out with different people. But in any

SPEAKER_06: event, I do see people on Twitter that lose their mind. I actually use Twitter occasionally, you know, try to prop up your efforts. But no, I think, you know, Vitaly had the best point about the people

SPEAKER_14: losing their mind is the things that tend to get shared socially, they're predicated on like open AI products, are like the top one to 10% of outcomes. And they do blow people away. But they don't consistently blow people away. So people aren't posting the median output. Now that will change, you can shift the distribution curve with better improvements, better advances, better data sets, all that stuff. But it is a lot of representative sample that you see posted. So that's one and you're going to productize it needs to become closer to representative sample. But that can happen. The more fundamental constraint in the short term is cost. That's been true of a lot of things in technology, including computers. Computers used to be very expensive. Microprocessors, you know, basically, the major innovation is constantly driving down the cost and increasing performance argument at the same time. If you can do that, then you could build the products. Right now, the cost of a query is just too expensive for any normal product, by at least one order of magnitude. The technology has historically been really good at innovating its way out of a cost structure problem. But it doesn't mean just because it happened before, in a fairly small set of verticals, that's going to happen again, but it could, but you would need at least an order of magnitude improvement and cost to productize anything that you're seeing.

SPEAKER_58: And I guess, yeah, I think they're saying like $0.05 a query or something like that.

SPEAKER_14: I think it's actually fully loaded more like $0.10 to $0.12, but you need to bring that down at least one order of magnitude. This happens in genomic sequencing, like I funded a company that brings the cost of whole genome sequencing to sub $100. That would have been like, you know, inconceivable 30 years ago, even 10 years ago, the idea that you do a whole genomic sequence for under $500 sounded crazy. So this happens, this is, you know, a long term trend, I believe that it's possible to get the cost structure to be palatable, but the short term productizing, none of this is going to get productized until the cost structure changes.

SPEAKER_50: Yeah. And there is that selection bias. People are saying, Hey, look, look at this incredible

SPEAKER_58: response. It gave me what I should cook for dinner in a Tarantino script in a play. Isn't it entertaining, but you didn't get the other nine recipes that were absolutely horrific. There are some legal issues.

SPEAKER_149: And then to be specific though, you don't have to get all 99 right to be a product,

SPEAKER_14: but the AI version of it has to know when it's got something right and wrong. Like, so you can be bright with a brilliant recipe, 1% or 10% or 20% of time, as long as you can identify which ones those are. If the human has to go curate the whole hundred and figure out which ones worked and which ones taste terribly, that is not a product.

SPEAKER_112: Right. Yeah. There's still, there's still a lot of work to be done. There are legal issues here.

SPEAKER_120: Uh, and, um, you've, you're pretty well versed on legal issues. This data is obviously, uh, it's

SPEAKER_19: trained on large data sets. It's pretty obvious what they did here. They engulfed, you know, every, uh, piece of data they could get their hands on. They did a web crawl. And so when you ask it, Hey, we, we did this on yesterday's show. We were just like, Hey, tell us how many subscribers there are to AT&T's service, Verizon service. It gave us the right answers, but without citations. And you're like, Hmm, I wonder where this information came from. Some human, some media company probably owns this information and it's, is it plagiarizing it if it rephrases it and gives it back to you? There's a lot of issues here. What do you think the legal issues are going to be around? Can I just point my AI at your data, the New York times, uh, to your data set, uh, getting images and then build derivative works or is the law not exactly designed for this?

SPEAKER_12: You can apply some pretty traditional IP law here. Um, so there is, you know, a concept of fair

SPEAKER_14: use and some of those things we were talking about would probably qualify some wouldn't. Um, and so they can justify a fair amount of what they might be doing under some fair use purposes. Um, it depends on the specific application and the specific output they show. Like what fraction of the body of work is it, you know, except are they giving away all the value?

SPEAKER_42: There's a bunch of criteria for what would qualify as fair use, right? You have the,

SPEAKER_19: what percentage you're using? Um, do you impede on the person's ability to make money in the world? Which in this case it would, right? You, you gave the answer that you'd have to come to the New

SPEAKER_124: York times for, or you'd have to license the image from Getty. And now the percentage of the

SPEAKER_08: original images have historically been really, um, constrained from fair use. Um,

SPEAKER_14: Yeah. Then, then even if you get beyond like the fair use stuff, you do have the right to control. Well, more often than not, the, uh, creator, mostly under European law, but the US is kind of moving this direction over the last 20, has been moving this way. That's 20 years. The creator in Europe has the right to control derivative works. Hmm. Um, there's like a creator, right? Um, in the U S historically you didn't, and like their derivative works and our economic implications to that, but you didn't have complete control, uh, to veto everything. Hmm. The world's kind of moved, giving creators more rights about the construction of derivative works. Hmm. And so that is a bigger, a bit more of a problem that, um, a lot of creators might not love derivative works. They may like, like, not like the wording. Yeah. And to some extent, some versions of IP law, I would say you have the right to control the wording. Yes. And maybe you can do some genres like satire tends to be more protected. Like it gets a little bit more messy, but it's not completely unfettered. Even if you're in the fair worst world, if you're transmuting or transforming, it's not like you have a complete right to just transform other people's works.

Chamath Palihapitiya: You can't take the star Wars characters, the Marvel characters, and then say, oh, I'm going to change them 30% and make my own, uh, version of the Marvel universe. You can't do that.

SPEAKER_14: Uh, you need to write, you need a license to do that. Um, and same thing in music, right? You can't just remix a song and publish it. No, you actually need like the original artist or the derivative rights owners permission to remix a song. Yeah. And it does seem fair if somebody put that effort in. And then if you look at images, well, you can debate it. I mean, like, this is a really interesting intellectual topic in IP law of like, how much should you get control of derivative works? Um, and it has ranged by different musics. Music and images are much more restrictive historically than let's say novels. Um, like writing a derivative work from a novel has generally been more, a little

Chamath Palihapitiya: bit more liberalized. So if I wanted to write my own mafia story, okay, great. I make the Sopranos.

SPEAKER_82: It, it's still not completely liberalized, but the world has harmonized more in IP law over the

SPEAKER_14: last 20 years than most people realize. And it's, it's harmonized more towards the European side of history than the American side. You know, and, and if you were to look at

SPEAKER_142: DALI or any of the image creation services, it's pretty clear that, uh, these are going to have a

SPEAKER_19: dramatic impact on the original author's ability to make money. Um, and that I think is where people tend to get upset. If a satire occurs and you do space balls, you know, uh, Mel Brooks is famous send up to star wars. There's no conceivable way that people are not going to consume star wars because

Chamath Palihapitiya: space balls exists. And there's no confusion on the part of the consumer. They know that this, you know, furry dog is not Chewbacca. They, they get it. It's not meant to be confusing, but I, I was reading a sub stack the other day. Uh, I think it was Casey Newton's and he was putting illustrations in there made by Dolly. And I was like, huh, just five or 10 years ago, uh, people who were using in journalism, a, an image or an illustration would pay, it would have paid that they would have paid somebody 250 bucks, a hundred bucks, 500 bucks, depending on if they were offshore or insured or, you know, uh, you know, the deal they struck with them hundreds of dollars. And I was like, I'm actually entertained by these images, right? I thought this is a pretty good caricature of whatever person they did. You can just tell Dolly, make me a picture of Zuckerberg with a headset burning money. And it's like, here's an image or here's a hundred images. Three of them are good. Go sort with them. You don't need to pay an illustrator. This stuff could have a big impact on the creative industry. Do you believe, or do you believe, uh, it's not going to eliminate jobs?

SPEAKER_149: That is always the question. Well, that's a good question. I don't really know like whether it's

SPEAKER_14: going to completely, you know, how big is that industry? How much it's going to substitute? I do think the commercial commercialization that isn't, uh, isn't a student observation and important to highlight, which is as things like open, uh, open, uh, open as general products, insofar as they are monetized, it puts a lot more stress on all of the legal regimes insofar as they're widely available, but for free, yes, there's some substitution of commercial, um, but, uh, commercial monetization options for the creator. However, as long as, as long as open AI or the derivative, um, layer on top is not monetizing, it won't be quite as severe, a legal problem. But when someone starts selling products on top, then they're going to have a significant, there's going to be a significant

SPEAKER_142: amount of litigation about that. This is what I always tell people, entrepreneurs, when they are

SPEAKER_58: abusing, uh, you know, fair use, you know, people have taken this podcast all in and they cut it into like 10 segments and they post all 10, six minute segments. I'm like, Hey, you know, if you want to do one clip, no problem. But if you're reposting the whole thing kind of feels like you're, you're kind

Chamath Palihapitiya: of interfering here, but don't F with people's paper. Once you start messing with people's ability to earn, that's when they, it feels unfair. So I always think about the fair and the unfair in fair

SPEAKER_142: use, right? When it feels unfair, that's when creators maybe look for a legal solution.

SPEAKER_234: Yeah, to some extent, if you want, if you apply it through all the legal cases, uh, you know, sort of

SPEAKER_06: lawsuits ever litigated in the United States that, uh, that, uh, translated into reported decisions. Mostly if you just applied that prism, it didn't really think through the doctrine super carefully,

SPEAKER_14: you get to the right answer. And I need some odd percent of the time is just how unfair does this

SPEAKER_45: feel? Right? Exactly. Uh, okay. I had a thesis. I was watching our friend, Sam Altman, you know, uh, align himself with Microsoft and Bing. And obviously Google bought DeepMind and I'm just

Chamath Palihapitiya: looking at the results I was getting. We did like a little chat GPT or the first result in Google, AB test here on the show. And it turned out that in almost every case, Molly and I couldn't tell the difference or sometimes picked chat GPT's answer over the first result in Google. Because you have SEO, you have content for me, all these things. And, and let's just say chat GPT does a good job of

SPEAKER_19: cleaning up a result and presenting it in a nice format. I thought, you know, I wonder if Microsoft has bought the rights to put chat GPT into Bing. And if they had done that, if they did have that inside

Chamath Palihapitiya: track, uh, this would be the first legitimate, uh, threat to Google search. And I'm not saying it's going to kill Google search overnight. People are very accustomed to it, but, uh, if you get an answer and you don't start clicking around on the page, the chance of you clicking on an ad go away.

SPEAKER_19: Lo and behold, the information yesterday reports that Bing is working portally on incorporating chat GPT into, uh, its results. Could chat GPT or similar technologies that just give you an answer. Are they a threat to the Google cost per click CPC franchise?

SPEAKER_14: I don't think so. Let me walk you through why, please. Um, not on a substantive level, maybe on a marketing level. So substantively, Bing's produced results that are indistinguishable from Google on 80% of queries forever. Like Google has internal studies that show this. Um, the biggest difference is one, there's a perception, a marketing perception that Google's queries and results are better. Okay. And then there's long tail. And then there's long, long tail queries where in fact, Google still probably is superior. Chat AI is not going to solve super long tail queries. By definition, like you need a training set and the more long tail the query is, the worse the training sets going to get. Um, so that it really doesn't solve that problem. However, there's a nice marketing level that I like to this, which is one of the reasons why people have always been frustrated and trying to compete with Google is trying to reframe this to consumer has never worked. Consumers just vote with their feet. Like they like the UI, they somehow trust Google, blah, blah, blah, blah, whatever it is. By like framing around some AI, something, something, something, maybe you can retrain consumers to kind of give Bing a fresh look and try and then be like,

SPEAKER_47: Oh, this works actually pretty well. I like it. So I actually think it's a good idea. Uh, it's a pretty clever idea of a Microsoft, but I don't think it's substantively that useful.

SPEAKER_67: Yeah. I, I, I might take the other side of the argument. I think that Bing might just start

SPEAKER_58: putting the chat GBT answer at the top and say like, Hey, you know, um, you know, here's your, here's your 10 blue links instantly. And we're going to start writing the answer to your question.

SPEAKER_244: We think this is the right answer. And they would be emboldened to do that because they don't

SPEAKER_06: need to make money from Bing. It's they don't lose much money. Yeah. No, it is an encumbrance like solution or a dilemma kind of solution, which I generally think is a good strategy. Um, Google kind of does this anyway, for the last five, 10 years, Google has been like putting

SPEAKER_14: these answers, you know, these boxes. Yeah. Yeah. They've been doing this anyway for like popular queries. So it's not quite as disruptive as it would have been like 10, 15 years ago.

SPEAKER_58: Yeah. It's a, it's just fascinating to think like their margin, right? If you, because you Google

SPEAKER_112: docs, Google office was specifically designed to screw with Microsoft's franchise. Now you've got Bing, they tried to screw with the franchise. They got to eight, 9% market share to Google's 90% or whatever it is. Theoretically, it's just such a really interesting way to think about screwing

SPEAKER_142: with a competitor. Uh, what, what companies, as we sort of wrap here, uh, what companies are you specifically funding? What are you looking for in terms of quality of founders,

SPEAKER_112: quality of deals specifically? I'm going to, I'm going to break this down into components. People who raise that too high evaluation, um, have a messed up cap table in some way or terms,

Chamath Palihapitiya: but they got product market fit and they're willing to take the medicine. There are understand the dynamics. How do you engage in that discussion or do you, because it's a tough discussion, but if they come to you and say, listen, I know I raised at a hundred,

SPEAKER_19: I had no revenue. Now I've got 3 million in revenue. I think I'm worth this number. We're okay with it. Would you come in at 25, 35 million and, and do a, do a deal, join the board and help us clean up this mess. We understand we're, we're, we flipped, you know,

SPEAKER_29: the, the valuation and, uh, we need to write the ship. How does Keith Raboy deal with a situation

SPEAKER_06: like that? I think in the, in the case you just described, we'd consider it. Um, but I think that, let me break down why, uh, cause I think it's important. The founder needs to take ownership

SPEAKER_14: of the problem and be very clear that, okay, we've got this kind of historical mass and we've already started to solve it. And we realized that the future isn't like the past and we need somebody who wants to work with us to, you know, hit escape velocity or succeed. And we're willing to using your terms, like accept the medicine that's required to make that work. That's a conversation that's worth having. What's definitely not going to work is like coming in, you know, kind of sort of the guns blazing, like, Oh, you know, I raised it this and I want more money. That's going to be like, not even a meeting. It's going to be an instant pass. Um, so I think being upfront, why is it an instant pass for you? Because I'm not going to deal with the brain damage. I'm just like too busy. I don't have enough energy to like fight about it. It's just like, if you haven't realized the problem and you're not taking ownership of the solution, then I don't want to deal with it. So, but there are people who realize that the world is different and they want to build a company successfully in a more normalized world without steroids. And if they've already taken baby steps or serious steps to solving the problem, and they recognize what it's going to take to succeed in a tangible, concrete way, that's a conversation worth having, because it might make sense for us, it might make sense for me, and it definitely would make sense for the company. But I have, I just don't, I have scarce attention, scarce energy, and I got to focus it on people who, you know, have already recognized their own responsibility.

Chamath Palihapitiya: Yeah. Accepting reality, accepting reality is a key part of being an entrepreneur. If you can't accept that the reality has changed, given what we've witnessed, it's now a year of down market. If you haven't taken the medicine by now, if you don't accept that, that the steroids is why you

SPEAKER_112: bat such a high batting average, and they're not available anymore. You're, you're, you're, yeah, you're not fundable. Let's just call it what it is.

SPEAKER_14: Yeah. So to be clear, reality distortion is an important trait for founders to have, because you are basically conveying something that doesn't exist and willing it into reality and taking people along journey, customers, employees, investors. That is a trait, but it can't be the only trait. The other trait has to be somewhat paranoid and grounded, and you have to be able to dial both up and down in appropriate, you know, proportions.

SPEAKER_142: Yeah, I, I had a, just to, I'll, uh, make this a, uh, amalgamation of experiences. I had people

SPEAKER_58: earlier in this year, um, saying they want to do an inside round. Congratulations, Jason, you get to lead it. Um, and we're only raising the valuation 25%. So it's a great deal. Same group of founders. I'm mixing up a couple of comments here, come back. Hey, we are willing to do a flat round, uh, with our

SPEAKER_19: internal investors. Congratulations. You can lead a check out. And then just, you know, now in the fourth quarter, so this is like a, uh, a play in three acts first, third of the year, second, third of the year, third part of the year, same companies. Hey, we're willing to do a down round. We were at, you know, X, and now we're going to be at 50% of X. We're willing to do an inside round of that number. And I just told the founders like, if you had just gotten ahead of this by one increment, the deal

Chamath Palihapitiya: would have closed already. If you had just done flat round in the first part of the year or down round in the second part of the year, the cash would be in the bank. Now you're in the debt spiral. You've got three weeks of cash left, three months of cash left. It's really hard for somebody to get behind

SPEAKER_19: this. And if you can't get external investors to validate the valuation, you were at a hundred times revenue. Then you went to 50 times revenue. Now you're at 10 times revenue, 10 times revenue seems logical to me. You're a million in revenue. You want to go for 15, 10, 12. I'm here for it. But you should have just done that a little earlier. It is an incredibly frustrating experience for me, especially when I

SPEAKER_239: was begging them to accept reality earlier. And I felt-

SPEAKER_14: No, the sooner the better. It just shows certain traits, like being able to see the world with reality, being able to calibrate decisions. But also it's important because investors are going to see a lot of companies like this. And so if you're the last company asking for a corrected valuation, people have already made other decisions and other commitments. So you want to be first. If you're going to be like, Hey, I realized I have an economic problem. I do have upside potential in this company. I believe in it. The hypothesis is correct. I have evidence that that's true. But our cap table or cap structure is just not appropriate to get us where we need to get to. If you want to be first in line going to investors and saying, Hey, the world's changed. I'm changing. I've got everything lined up. I just need to do X, Y, and Z and help me with this. That's a great argument, but you can't be the hundredth company making that argument because people have already committed to three or four. They're not going to commit to the fifth.

SPEAKER_55: Let's do a quick portfolio hit here. I'm trying to think of the toughest situation you could

SPEAKER_67: possibly put yourself in, in a compression of a market. Let's say tech, real estate, and IPO, open door. How has this been in terms of operating this business and guiding it as an

SPEAKER_142: investor? This is one of your great successes, but man, this has been hard. How are you now?

SPEAKER_08: Yeah. I think some of it... There's a reality, which is Q2, interest rates in the United States

SPEAKER_14: raised at probably the fastest rate ever in a quarter. That affects a lot of things in real estate. Most importantly, mortgages, the price of a mortgage. That's what most people can decide, dictates what most people can afford, which indirectly affects the house price because prices have to come down to stabilize where the market is. So one quarter of massive interest rates hikes at an accelerating pace like that is pretty challenging. However, I'd say after that quarter and before that quarter, in some ways, the company has completely mismanaged communicating what's actually going on. So it just defies my belief that there are actually two Twitter accounts that very accurately by people who are not professionals. One's a surgeon. I forgot what the other one does for a living, but not tech professionals that accurately describe what's going on with open door. Well, at least 10x better than the company does. And so I think a lot of it is communication of being able to frame like the world is in transition, particularly in real estate and interest rates. Duh. Anybody who has a mortgage absolutely knows this. Anybody who's signing a new lease or signing up for a new mortgage, definitely knows this. And being able to communicate that, yes, that transitional quarter was very painful, painful for the company, but the company did the right things, sold the inventory, removed the inventory from its books, blah, blah, blah, didn't try to fake it, didn't try to hide it and mask it. And now the company's performing quite well, actually. And so I think that it's more optics than substance. And there are some real challenges. The company's cost structure was predicated on a certain number of real estate transactions for current year. Typically, an average year in the United States, 5 million people buy and sell a home. The global financial crisis, it went down to 4 million. It can go as high as close to 6. Obviously, the more people that transact in the United States, the better for any company like Opendoor that's in the business of transacting. People have stopped transacting at the rates you would normally see. You can still make money on a per transactional basis, which is what Opendoor's excellent at right now. But there's less people transacting. So the overall revenue for the company is by definition, going to be less if only, let's call it 3.5 million or 4 million people transact instead of 6 or 5.5. People will eventually start transacting again, because they have to, people have to move, people do get married, people get divorced, people die, people have kids, they need more space. These things happen, you can postpone it for 6, 9, 12, 18 months, maybe, but you do have to move cross country at some point if you want a different job. And so in 2023, with at least some predictability or visibility into real estate interest rates and mortgages, I think there's a lot of tailwinds to people starting to transact again. And because Opendoor is doing a good job in pricing the homes, I saw a tweet from one of these accounts I like this morning, and I haven't separately audited the data. What are these accounts? I got to know these accounts so I can follow them. Yeah, I'll send you them. They're great. But like one this morning, actually, it was very clear. They're open doors in like 50, 52 markets. In all but four markets, the company is gross margin, actually positive. So that's in light of all, despite all the changes, all the market, all the friction, all the critique, there's only four out of 52 markets that the company isn't making money. So that's pretty damn good, actually. I just wish the company would be communicating this a little bit more clearly. Yeah, I mean, what is the right way? You should require a surgeon who lives in Oakland to communicate this for the rest of the world. Well, let's talk about communications,

Chamath Palihapitiya: comms, you are fearless. Same for me, we just get out there, we talk about our book, we talk about our businesses, and we go direct. This is the new model, right? You and I may have been at it for a little while, but you go direct, you explain what you're doing. What is the best practice today for founders? Because let's face it, we know the media has been, uh, somewhere between absolutely, uh, I mean, the way I explain it, you might have a different approach is journalism post Trump became advocacy over accuracy. Uh, and I think advocacy journalism is what a lot of young people want to do in the world. They see it as activism. They see it as a way to make the world better by trying to push their narrative and tell their stories and their intent is good in their minds. It's not the journalism that we grew up with or the one I was trained in, which was to objectively put the facts out there and let people make their own decisions. But that's the field, that's the

SPEAKER_19: playing field. How should entrepreneurs, how should boards, how should companies, how should investors approach comms in this new playing field? Well, I think going direct is definitely an option and

SPEAKER_14: definitely at a minimum, a complimentary part of any coherent strategy in the tech world. Cause I think mainstream media, I'd say it's adversarial attack for ideological and envious reasons. Um, but it's not a complete strategy. I don't think it's a complete substitute. I, I, so I think the company per my point about open door owns responsibility for framing the message, assembling and marshalling the proof points that just can't be denied. Like you do want earned media, like, just like in politics, you have earned media, you know, and you have paid media. You definitely want to think through how do you cut through the clutter with your message that even distorted through the lens of adversarial journalists, it still is going to resonate with a reasonable fraction of people. It doesn't mean everybody. And it's going to get distorted and you have to kind of understand that it's going to get distorted, but it's still not sufficient. I don't believe to be completely dependent upon your own channels. And so that's what I recommend to people is build out. That's why you still do CNBC, right? You still get in there and mix it up. Even, even a better contrast probably is I went on a podcast in the New York times. Um, and we talked about lots of things, tech, politics, et cetera. And, you know, some of my conservative friends were wondering why I would do that. And I was like, well, because there's lots of people in the New York times who've never heard these arguments before. And the only way I can change their opinion is by talking to them. Um, similarly, actually one, to his credit, uh, Pete Buttigieg, like during the campaign went on like Fox many times, that's exactly how you convert people is exposing them to new arguments and new data that they wouldn't have otherwise heard. So I think that's the obligation of a company or people in tech is to frame arguments and go into channels and go into places that have

SPEAKER_219: non-converts, like just preaching to the choir. It doesn't do you that much good actually.

SPEAKER_111: Yeah. The, the idea is to engage, uh, the debate and to have it be a vibrant debate. It's something

SPEAKER_303: you guys, uh, you Stanford guys, you Saks, Teal, you guys love the debate.

SPEAKER_304: Uh, they're, they're, they're very shy.

SPEAKER_303: Why do you got, what was in the, what was in the punch that made you guys such crazy debaters?

SPEAKER_06: Uh, I don't know. I think we were actually, honestly, I think we all were before we got

SPEAKER_134: there and maybe Stanford just selected us. So I'm like, some criteria that was subtle,

SPEAKER_306: uh, but you guys also want to win the debates. It's, it's almost, it's a little like chess for you guys. Are you a chess player too, or you don't have time for that?

SPEAKER_06: No, I don't play chess at all. I don't have any time for this. Like I am so over consumed with too

SPEAKER_14: many activities. And if I did do chess, I would be competitive and I would want to beat David and Peter. So I would get nothing else done for like 10 years of my life.

SPEAKER_142: Exactly. It is that level of, uh, commitment obsession. It is, it is like an obsession and there are so many other things to be obsessed with.

SPEAKER_58: Uh, all right, let's end on a little politics here. I'll, I'll put out the little raw meat, as I like to say, when I, when I talk to Sachs on all in, uh, Trump going to get indicted.

SPEAKER_142: Is he going to win the, uh, primary, uh, you know, he's announced.

David Sacks: I have no idea. I have no idea if he'll be indicted. I don't think it'd be a good thing for the United States if he is indicted. I think one of the better things that one of the things

SPEAKER_14: that Gerald Ford did that was incredibly important for the country was pardoning Nixon. Um, I think it would have been incredibly disruptive and distracting for the, for the country to go through like Nixon, who almost surely committed crimes being indicted. Um, and I think it'd be bad for the country to kind of become Latin Americanized where, you know, you kind of criminalize prior presidents. You saw this kind of happened in Israel and it became very distracting. Um, where they've been using the criminal law there to kind of undermine Nanyanu. And then, you know, he's able to reframe it and win again. I think it's just a bad idea. Um, I don't think Trump will be the nominee. I think the level of enthusiasm for him is declining every day and he's not helping himself. Um, you know, I saw, it doesn't matter what poll you look at any version of it. The first derivative is negative and usually the second derivative is negative. Uh, I don't think there's going to be a lot of energy supporting Trump. I think he's kind of a paper tiger actually, honestly, right now, I think it's all going to collapse. It's going to collapse really fast.

SPEAKER_237: Ah, fascinating.

SPEAKER_77: But that there's your prediction. Um, anyway, I, I've got to, I'm actually going to go back to dealing with founders because they're all running out of money and they need more money.

SPEAKER_55: Go, go do the hard work of being a great capital allocator. We appreciate your time and we'll see you next time on this. Bye bye. Cheers.

SPEAKER_318: All right. Take care.