SPEAKER_02: you want to run a marathon at 57 years old 52 51 2 52 i'll be honest i miss you can you come back

SPEAKER_04: to the united states please i miss you i will i miss you too i mean the poker game can't by

SPEAKER_05: definition be as much fun if i'm not there it plays at bigger states and it's more challenging but it's not as much fun there's not as much laughing what's on the menu tonight for austerity

SPEAKER_07: 2023 the amuse bouche is a madeleine with like a terrine of foie gras fantastic in honor of

SPEAKER_05: freeberg and then rutabaga rutabaga salad and then some duck thing duck breast ah you know i love

SPEAKER_11: duck and then and then butterscotch panna cotta wow that is great lineup and you know what i like the idea we're doing some poultry chef sean is firing on all cylinders these days he feels very

SPEAKER_15: like uh engaged he was very engaged yeah he's kind of going for it he's been on yeah that was quite

SPEAKER_04: nice the other day brad because it's austerity measures we had this incredible dish and we're

SPEAKER_17: eating it and then he said the caviar is on the bottom and i was like oh so we just we don't put

SPEAKER_21: the caviar on top they just put it on the bottom the market's down with the caviar on the bottom

SPEAKER_25: that's chema style austerity i'm not lying am i lying oh my god no he did say guys the caviar's on the

SPEAKER_26: bottom not the top this week all right sax is here everybody so that means we have a quorum

SPEAKER_14: hopefully the sultan of science who is on wall street today uh taking a company public so congrats to our bestie friedberg ding ding he couldn't make it he's at a dinner so with us the fifth beetle as

SPEAKER_37: it were brad gerstner is here to talk all things macro welcome back to the pod how's life been good to

SPEAKER_39: be back a little domo arigato to you jason as you eat your way through japan yes i am on my culinary

SPEAKER_41: tour i'll be back sunday but i am having the time of my life here are you running adwords on your food

SPEAKER_45: blog that's what it's come back to i'm back to the weblogs inc days i'm just trying to make

SPEAKER_46: twenty six hundred dollars a day i noticed your tick tock got 22 likes yeah you know i'm trying to figure out tick tock i'm gonna but you know right as they shut it down that's when i'll figure it out will that rev sure buy you another japanese pancake or no those pancakes man are next level

SPEAKER_14: the fluffy pancakes here everything actually with the exchange rate coming to japan is so affordable

SPEAKER_06: it's nuts and this is a crazy week because it's the it's the tokyo marathon but everything is so affordable the people are amazing it's the best country to visit in the world i think for me it's

SPEAKER_52: italy spain i mean italy's right up there too but i would say japan is like it's definitely top two or three what do you love about it best food you know i went there i took the i took the kids like five years ago uh the older three at the time but they were younger and you know there's there's a negative birth rate in japan and so number one when you have any kid but frankly multiple kids the the japanese

SPEAKER_54: embrace you with so much love because they love seeing these big families yeah they are unbelievably

SPEAKER_52: kind we went to kyoto did the professor's walk saw the cherry blossom festival basically ate our way through japan that was my that was my only vacation trip i did i've done like 10 or 12 trips for work once we i went with reid hoffman and reid set up this thing where we went through all these different parts of tokyo and ate at this incredible sushi place you have to go with somebody who can dial it in

SPEAKER_60: yes and have all the hookups brad you spend much time in tokyo and japan um i haven't i've uh been

SPEAKER_62: there only twice and that was when i was poor and i stayed in a really small room and ate really shitty

SPEAKER_64: food oh all right so uh you're saying in 20 in 2022 when you became poor again okay great he's like

SPEAKER_04: we have rooms he's like is there a hostel yeah all right and with us of course the uh next department uh what what cabinet position are you going for sacks which we should we start floating here oh my god

SPEAKER_74: here you are with the disinformation starting already it's a compliment secretary of sass is with us

SPEAKER_52: de santis had a pretty great article on the wall street journal oh really i missed that one when they revoked the special administrative status for disney he wrote an article i think it was wednesday

SPEAKER_80: tuesday or wednesday in the in the wall street op-ed what was his uh premise that they it was a

SPEAKER_52: corporate or it's a culture that wokeism is basically modern marxism and we have to defeat it this is his language not mine at every turn and disney needs to just be business people and not feed the vocal minorities inside of their company like every other company should they should be

SPEAKER_75: subject to shareholder concerns that apply to the majority of shareholders well i think this is why

SPEAKER_84: i think de santis is doing well with the republican base and you know if you see polling of the republican primary is he understands that it's not good enough just to have this sort of reagan-esque

SPEAKER_86: totally hands-off government approach because the radical left is advancing its agenda not just legislatively but through corporations through esg really through taking over key private sector institutions and so he's willing to use government to push back on that agenda on behalf of parents or on behalf of you know what he sees as the majority of the country and so it's a very different approach than you know the republican party would have been 30 or 40 years ago this is why you know in the parlance of the base he understands what time it is and what's required here is not again this totally

SPEAKER_84: laser fair approach but rather a much more energetic aggressive approach towards checking these bad ideas wherever they come from yeah he's not the only one i don't know if you saw this week

SPEAKER_89: bill maher went on a bit of a press tour and he was on with jake tapper and uh he made a very

SPEAKER_91: interesting i think point about liberalism versus wokeism and it was quite articulate you know he's a pretty good observer of culture he said they're kind of casting out the liberals in the party for this

SPEAKER_89: wokeism and the intolerant nature of the woke movement versus the liberal movement specifically under the lens of trans rights but let's put that aside for now we got a full docket before we get into the culture wars and the presidential elections let's start with uh we'll go private markets to

SPEAKER_91: public markets because they obviously dovetail so nicely item one on the docket today there is just a massive ai fomo frenzy going on economist published a piece this week about the insane fundraising in the generative ai space this is stuff like chat gpt stable diffusion you've heard these names and uh there are now 500 generative ai startups according to this report that tracks with what i'm seeing in the early stage and not counting the open ai 10 billy from microsoft investment donation rev share round trip whatever that is they have so far collectively raised more than 11 billion dollars the article included this chart which you can see if you're on our youtube channel and just tons of folks working in audio image and text so we're basically looking at the multimedia basically revolution of pcs in the 90s occurring again and a complete platform platform shift

SPEAKER_89: doug leone from sequoia one of the greatest investors in history of silicon valley had this to say and we will comment on the other side of this 50 second clip from doug i actually think that ai

SPEAKER_94: is the next platform shift in the same way that mobile was the one before internet was the one before so i think ai is real but i said earlier we're going to overestimate it in the short term we're going to invest in everything in the same way that in 1999 we invested in everything but then google came out of that or facebook came out of that so i think you have to have a good head on your shoulder where you don't practice fomo where you don't chase every company ai is real ai is the next platform but how do we not invest in everything that walks how do we make certain investments based on market maps based on thought processes that are more rational and not do every investment just because

SPEAKER_97: every other venture firm is doing everything best all right chamath what do you think of this massive

SPEAKER_100: influx i think it's important to think about what the incentives are as charlie munger says show me

SPEAKER_75: the incentive and i'll show you the outcome i posted it into our group chat credit suisse sent all their

SPEAKER_54: private banking customers an offer they are now offering 6.5 percent for a three-month t-bill

SPEAKER_52: and if you go back to what we talked about before when the risk-free rate is somewhere north of five or five and a half percent and banks are willing to give you six and a half percent in the short term you have to generate more than three times that to make an investment make sense when you're investing in

SPEAKER_54: the long term so three-month money is going to pay you six and a half or seven if you're going to invest for 10 15 years which is what you need to do typically for a startup you need to get 20 to 25 so there's going to be a lot of pressure for venture investors to put the money to work because otherwise their lps their limited partners the people that give them the money will have this attitude that goes somewhere along the following lines okay i've committed to you why aren't you investing because otherwise i can get paid six and a half percent on the front end and so this is becoming very problematic what am i paying you for what am i paying you two percent a year in management fee for so i think what happens unfortunately is the opposite of what doug says i think good investors will try to follow doug's feedback and advice and the ones that have a track record of distributions of dpi can do more of it than not but i think most people will be under pressure to deploy the capital and so the 500 odd companies jason you mentioned will get a lot of it and it'll get torched because most of them probably won't amount to much of anything in the short term you will create way too much correlation and you will have zero time diversity which as we've learned

SPEAKER_64: is a recipe for terrible returns time diversity being hey you deployed all this web 2 capital web 3 capital sorry crypto whatever in this very short period of time you overpaid you need to spread

SPEAKER_91: brad uh when you hear chamath talk about this 6.5 and then you look at private markets you uh invest

SPEAKER_105: across the life cycle of companies obviously you're in some private companies we all know very well famously snowflake i think your biggest win ever correct me if i'm wrong uh in terms of a private

SPEAKER_91: how do you look at this when you're a steward of capital public markets private markets and then just

SPEAKER_37: yolo just put it into you know some t-bills or yeah bonds or whatever i mean first let's just frame

SPEAKER_39: right the chart that you showed i think you should it said you know x open ai i don't know something

SPEAKER_107: like 10 or 11 billion dollars have has been invested into some 500 ai companies i mean i have to agree

SPEAKER_108: with doug that this is a platform shift on the same magnitude as the internet or mobile itself in fact

SPEAKER_111: it may be bigger than both of those but you know when i look at 10 or 11 billion dollars you know let's

SPEAKER_114: put it in context meta is going to spend 20 billion in one year alone on arvr and this is on an entire

SPEAKER_107: platform so i i don't know i i i i think whenever you have something as tectonic as mobile or internet it deserves a lot of investment and yes it's going to be messy and yes chamath's right the cost of capital frankly is limiting the amount of money going into these businesses already so we see a lot of dry powder sitting on the sideline that's chasing new ideas i think one way one way to frame it as well is

SPEAKER_116: say think about in 2000 we all knew that the internet was going to be big we may have been lucky

SPEAKER_114: enough to conclude that search was going to be big but if you invest in yahoo or infoseat or aol or excite like you know you taught all that money went to zero right so now think about just these large language models right the foundation models which are driving and enabling all of it open ai you've got open ai you've got an anthropic you've got cohere you've got character you've got stability you've got lambda it is almost impossible to know with any certainty much like it was with the search engines in 99 2000 who's going to emerge where the value capture is going to be it may all end up with microsoft and google i mean this may end up looking like ios and android at the foundation model level and so you know i think as investors for example on the foundation model side i think it's very difficult to choose just one particularly when the largest one is frankly captive and a proxy to microsoft and

SPEAKER_120: they're capping your upside return so like those are difficult investment decisions that doesn't detract

SPEAKER_116: from the fact that i think it is as big as doug suggests and i do think there are going to be

SPEAKER_107: applications and tooling layer to come out of this that's going to produce really big winners i would say that we are spending an extraordinary amount of time in this space we haven't made a lot of investments i think you have to study you have to get deep i mean chamath certainly and i have been

SPEAKER_114: investing in this space for at least a decade maybe 15 years but don't underestimate

SPEAKER_124: that the transformer model really did change the game here and we're now producing impacts much larger

SPEAKER_92: sax uh last week you said lab three and crypto didn't kind of stick with you you didn't see the use

SPEAKER_91: cases and you in the first inning here or first at bat you rattled off three or four really compelling use cases from summaries to you know the the assistant uh guide on your side concept is this akin in your mind because brad just said it could be bigger than mobile internet mobile ai revolution if you were to look at those three do you think it's bigger than actually mobile and then we'll get into return

SPEAKER_127: profiles of 6.5 on cash versus what are vcs going to be able to do in this kind of market yeah i mean

SPEAKER_84: so i agree with brad and and doug that this is the next big platform shift whether it's as big as mobile or it's more like social or cloud i mean those have been the big platform shifts over the

SPEAKER_86: last decade or two and i think this is definitely on par with those i think brad's right we don't know where the value capture is going to be maybe it just all ends up accreting to the big companies who can make massive investments in this space you know one difference between the internet ecosystem today and 20 years ago is you do have these giant companies who are not totally incompetent right i mean they are they do have lots of talented engineers and you know like 20 years ago you'd have company you know the big companies would just sit on their hands in the face of a platform shift and they'd just be sitting ducks who get disrupted and that's not going to happen today that being said i do think that any new platform shifts creates opportunities for startups and it may not be efficient the way that these opportunities get pursued in the sense that yeah doug's right that there's me a lot of spray and pray but i think that it is kind of efficient for the ecosystem as a whole right because like any smart engineer with a half decent idea ends up getting funded and out of all of that you get kind of a pre-cambrian explosion where you know the ecosystem evolves a lot of different types of businesses most of them don't work they get wiped out they go extinct but there'll be some good things that get funded so we're more like i think doug and how we see it we don't want to spray and pray we want to be very selective we want to put more money behind fewer opportunities that we think are better and doug leone you know i think he generally gives good advice of the tough love variety and

David Sacks: this is of a piece with that and so i i agree with him that being said there is a certain value to the ecosystem and having all these seed funds to spray and pray right because this gets a lot it

SPEAKER_91: plants a lot of flowers and then you see what blooms i would say yeah to build on that sax this is a perfect inefficiency you know when you see it from the outside you're like well this is super inefficient why so many companies if you free your mind and just say their experiments two or three person experiments 500k to a million and a half in that first stage when i invest right before you do when you do your series a is at five or ten million milestone based funding is back in the tech industry and that was something chamath that we lost for a little while there people would just come out and they would raise a series b out of the gate no product market fit etc now what we're seeing is

SPEAKER_14: people are raising that 12 to 18 months they got their backs up against the wall speaking of tough love which you referenced sacks that tough love of hey you have to hit the next milestone what did you accomplish with the 1.5 million in order to get the 10 million in order to get the 30 million that 500 is going to go 10x there'll be 5 000 of these startups but it'll quickly whittle down wouldn't chamath as people go through this milestone based funding system in silicon valley we haven't given

SPEAKER_75: enough time for a logical framework of investing to develop which also is tied to a logical framework

SPEAKER_54: for entrepreneurship to emerge we're just way way way too early so the thing with all of these language models is that they are grist for the mill and we talked about this before if it was a highly proprietary asset you would have never sold 49 of it to microsoft for 10 billion dollars because you would assume that it was worth a trillion dollars so it's a huge tell on the part of open ai their deep understanding and they understand it better than anybody else that it's a bit of a capped upside so what is uncapped i guess is maybe the better question well if you look at the 1849 gold rush as an example the people panning for gold in my opinion are the people building language models today they're going to come and they're going to go but who's going to win well the pick and shovel providers won levi strauss won so what is the equivalent of that today i think it's at the silicon layer because you need to really re-architect how compute will actually work in a world of all of these models those folks will get paid if you look at amd and nvidia they've been getting paid for years they continue to get paid they probably will continue to get paid even more and so folks that actually take a step into doing something hard and difficult in ai like custom silicon could get rewarded and then there's what i call the white truffles what are these unique alba white truffles these singular sources of data that when used in reinforcement learning make your output just zing and that's where i think facebook is an obvious white truffle quora is a white truffle but there are a lot of startups that could become white truffles if they gather enough data and that's like a pretty reasonable framework and so in that framework if you apply to today there's way few silicon startups and there's way few white truffles instead it's everything is the baloney in the middle which is random people talking about some random model that's just going to again become highly commoditized you have to remember all these models are open source and none of them mean anything in the absence of

SPEAKER_84: the data you give it to train on 100 brad hey okay well i want to add one other piece of news that we saw this week which is open ai announced that it's developer ai they were cutting the tax

SPEAKER_86: on that or basically the metered rate they charged to use it by 90 so i think this is going to be a game changer i think this is based on the chat gpt 3.5 api and of course coming out with 4.0 later this

SPEAKER_135: year i've already had explain to the audience what an api is and why this is important for those

SPEAKER_86: people who don't know this application programming interface it allows a developer of some other application to build on top of you so in other words like a developer wouldn't have to use this chat interface to get access to the large language model you could just submit your request through

SPEAKER_45: the api and so give an example of what of like a popular app and how they might use it yeah so

SPEAKER_86: api so i think like notion actually had a demo that they published where incredible it was a pretty incredible demo maybe we can find it and it would do things they added actions in the demo like generate a task list so you could take like a document or a meeting summary and would spit out recommendations for next steps or tasks it could you know spit out a table basically it's the autocomplete for everything that we talked about right so now notion doesn't need to build their own llm expertise they

SPEAKER_91: just built use the api so when the notion app you say hey i'm building a marketing plan and you say well okay give me a list of things that should be on my marketing plan for my new app it sends a signal

SPEAKER_34: to the chat gpt api which will be on azure microsoft's platform and then it gives you the data back

SPEAKER_86: you don't have to build the language model yeah incredibly powerful notion has all the content that they need but they don't have the ai expertise so now they don't have to generate your or create ai expertise in-house they just use the api it's really powerful and but just to finish the thought here i think that one of the things that's probably misleading about these stats around funding and the that there's like almost 600 starps already there are ai startups is that you know what happens when there's a new wave is that founders are smart right and they know how to market themselves in

SPEAKER_132: the way that is most compelling to vcs and they know that like vcs frankly are a little bit lemming like in terms of their migration to the next wave and wanting to glom on to the next big wave so vcs are now looking for ai if you're a founder and you're you build one feature on top of the you know open ai

David Sacks: api now all of a sudden you're going to market yourself as a ai company you're not going to market

SPEAKER_45: yourself as just a sas company and so that's valid yeah i mean it could be gamed or it could be like

David Sacks: a great pivot you know yeah and it's not it's not totally one or the other i mean it's just that if you have a plausible connection to ai as a founder you're going to start marketing yourself as an ai company and so that's how all of a sudden you can have 600 of these companies you know that

SPEAKER_84: are all of a sudden out there in the wake of of this sort of chat gpt is i think a lot of companies

SPEAKER_91: are recategorizing themselves i literally had this experience not three weeks ago right before i went to japan serial founder and team that we've backed before that had an exit said can i show you something i said yep got on the zoom showed me a little proof of concept using chat gpt and he said this is my idea this is the vertical and i just said okay what do you want he said 500k for 10 i said okay done great let's learn and it's an easy bet for us to make because we know it's a serial team

SPEAKER_158: for open ai the way that it could become a trillion dollar company is actually by cutting

SPEAKER_52: the cost to such a low degree that nobody else can effectively compete with it and then at that point they can become a small small small tax you'd rather just pay it than try to compete with it and i think for open ai that's actually a very brilliant strategy so that's how they they could get to

SPEAKER_54: become very very large in valuation would be to become so pervasively relied upon and where they

SPEAKER_75: take such a minuscule take rate of their participation in you building a company that

SPEAKER_07: could be really effective for them like cloud computing right like we're going to just take such a small tax yeah well that's not a small tax that's a large tax that's the picks and shovels

SPEAKER_86: play in a way to create the developer ecosystem for ai and to your point i mean i think you raise a good point that you know what was their motivation to take such a dilutive round you know the 10 billion that was evaluation at 30 30 yeah and does that imply that they're not confident i mean that the flip side of it could be maybe they know they want to compete on the basis of rapidly you know becoming the developer platform and so they're going to subsidize that developer platform you know with

SPEAKER_166: negative gross margins for some period of time and maybe that's why they need a lot of capital and

SPEAKER_75: they were in kind of a reflexive loop of just cost of getting better versus the amount of money they

SPEAKER_52: had to get better and so maybe they were forced to do it and then in that point how would you justify you would say well the other 50 is still hugely valuable so that's enough for us and i think that

SPEAKER_105: that's that's very logical as well brad you have your finger on the pulse of lps uh limited partners who back funds like chamath's sax is mine and yours we heard 6.5 percent on your money for no risk

SPEAKER_92: well you and chamath's position is hey you have to triple that if you want to be a private market

SPEAKER_91: investor that's about 20 20 rule of 72 that means every three and a half years you got to double

SPEAKER_14: if you're doing that for a 10-year fund you're looking at a 5x fund because kind of table stakes then i think just back of the envelope math what are lps thinking right now are they looking at this world and saying i should be all in cash or are they saying yeah everybody thinks we should be all be in cash therefore there's not going to be enough money in private therefore there's an opportunity there

SPEAKER_91: we know the 6.5 rate you know that's not going to be here forever it may be here for a little while but we need to we need to keep investing in venture uh or are they just cutthroat about it like let's

SPEAKER_62: pause venture investing private market investing uh it's a great question first when i look at the three-year treasury bill it's like 4.7 not to quibble here so i think chamath's getting a little goosey goosey on the 6.5 but the the fact of the matter is what does that mean goosey goosey

SPEAKER_176: you're super special you're vip jp oh maybe there's like some sort of like uh bond rate

SPEAKER_179: that included corporates or something maybe it was i'm getting like 5.2 from robin hood on my robin

SPEAKER_183: account for j trading so it's what is in that what is in that jason they probably got some junk bonds

SPEAKER_184: and they're ripping you off whatever whatever it is i'm getting five points it sounds pretty good

SPEAKER_186: until you're not you are until you're not it's a hundred hundred percent t-bill parentheses and junk

SPEAKER_116: bond fund look at the fine print jacob you know lps have a 10-year view they understand like most people i mean listen if you look out at the 10-year the reason the 10-year is you know that we have real

SPEAKER_114: interest rates at about one and a half percent so that's the 10-year less expect expected inflation when you look out is because people expect inflation to come down and they expect rates to come down so if you were an lp and you said i'm not going to invest in venture in the next two vintages which may be the best two vintages we've seen in a long time because prices are adjusting etc and i'm going to move it all into some rate bet first it's just very difficult to do they don't move their allocations around that quickly now a wealthy family as an lp could move their allocations around really quickly but if you're texas or you're ohio or you're a sovereign wealth fund you're betting on the arc of value creation i would say this the consequence is they're narrowing their aperture

SPEAKER_107: as to the venture funds they want to allocate capital okay explain that unpack who they're

SPEAKER_191: narrowing the aperture to well too we've talked a lot on this pod about uh the power law

SPEAKER_116: and the truth of the matter is whether we're talking about ai or software or anything else

SPEAKER_194: that you know people are are going to be funding it's 10 of the investments that are going to yield

SPEAKER_107: 90 of the returns and so they're looking at that and saying who are the top 10 firms in silicon valley i either want to get allocation to those firms who are seeing the best deals converting the best deals and are selective like sacks talked about or we just don't want to allocate so i think you know what

SPEAKER_116: we saw over the last two years jason was an explosion of new funds an explosion of new uh you know first

SPEAKER_107: time second time funds i think subscale small funds with no dpi uh they're going to find a really really tough time to chamas point about dpi raising capital okay you're going to see the scale player scale

SPEAKER_92: so part of that uh is clearing out the inventory from the last cycle two news stories this week about

SPEAKER_91: companies you know maybe struggling sequoia got off the board of citizen if you don't know citizen that's that app that tells you where crimes are happening in your city very popular in san francisco it's literally goes off every 90 seconds it's pretty dystopian that company citizen which is a pretty cool app uh has raised 130 million to date sequoia led the series a in 2017 uh they did a pay to play around if you don't know what that is um basically if you don't invest you get crammed down how does the cram down work well your shares in the company went down 10 to 1 and you probably got moved to uh

SPEAKER_169: common shares as opposed to preferred which has a series of protections they get their money out first

SPEAKER_148: yada yada but sequoia refused to participate according to this ft story again sequoia did not

SPEAKER_91: comment on this it's it's kind of something you don't do as a vc when something goes bad at a company and you leave the board you generally don't want to say uh bad things or taint the company uh any more than leaving the board does so a bunch of cram downs happening and then dovetailing with that instacart according to the wall street journal had a big q4 as it prepares to go public instacart if you

SPEAKER_14: remember we talked about it on the show cut its internal valuation 75 percent last year from 39 billion to 10 billion according to sources instacart's q4 results uh according to the wall street

SPEAKER_91: journal up more than 50 percent even though order volume grew only 16 why they turned advertising on the app just like uber and amazon a lot of these commerce folks folks are building ad business inside of theirs uh so what do you think about what's happening as we clear out this private uh anybody

SPEAKER_127: have thoughts on instacart or the cram down rounds you can go either way with this and then we'll go to

SPEAKER_84: public i wouldn't focus too much on those two companies i think we're going to see in the second half of 23 and all of 24 is a lot of medicine being taken a lot of down rounds a lot of structure it's going to be a tale of two cities the hot area you know ai is going to continue to receive new

SPEAKER_86: investment and all these companies that you know that receive peak valuations in 2021 are gonna have a day of reckoning either you know if they're lucky maybe they have a flat round or modestly up round but a lot of them are going to have down rounds or restructurings and this is going to be going on

SPEAKER_202: for the next year and a half what's your philosophy sacks on leaving a board this is a really dicey issue when you give up on a company what's the best practice there how do you do it without damaging the

SPEAKER_105: company obviously the founder relationship is going to be hard what have you learned about

SPEAKER_178: this as a private market investor well i i think i think that sometimes we like flip uh board members

SPEAKER_86: internally at craft just because people have different amounts of capacity that's not a statement at all about the way craft feels about the company it's just a reflection of our individual bandwidth or whose expertise are needed at a time but when the firm itself quits a board i think there's no way to read that other than you know a statement of protest and i don't know what happened with that company but it seems to me that you know again it could be a sign that uh the venture

SPEAKER_205: firm isn't happy with the way that they're being treated the cram down uh chamah that's that's a bitter

SPEAKER_92: pill to swallow why would founders do this cram down instead of just adding a little more to the top

SPEAKER_91: uh and is there a way to do this without you know going scorched earth or poisoning the well as it were we i mean again putting this app and sequoia aside this is happening all over the ecosystem so is

SPEAKER_135: there a way to do this gracefully or is it just going to be messy i think it's going to be really

SPEAKER_158: messy i mean to state the obvious no no venture capital investor ever quits the board voluntarily of a great company that's doing well that would be dumb so as david said sort of like the proof is in the pudding there and at the same time there are a lot of companies who don't want to see the writing on the wall and will do all kinds of gymnastics to try to stick a landing on a contorted financing and sometimes those things have real consequences to other investors who just don't think it's the right thing to do i wouldn't read too much into this except that good founders have a responsibility to do what's right for themselves and their employees nobody else and the thing to keep in

SPEAKER_54: mind investors really no i think you i think you absolutely have to prioritize the people doing the actual work and if and if you actually did prioritize them what you would probably say to yourself is oh my gosh there are people who i work with who i look in the eye every day because investors you'll see once a quarter but i have my fellow employees that i'm as a founder that i look in the eyes every day who've been toiling with me for umpteen hours a day every day for years and they are now totally underwater what is the right thing to do for them and i think if you just answer that question you wouldn't do all these contorted things you would just reset the valuation you would refresh the equity pool you would issue options back out to those employees and you would move on it's all these

SPEAKER_07: other things that get in the way of answering that simple simple question where people it up

SPEAKER_45: and i've done that before exactly if you don't have a team and you don't have a motivated team you

SPEAKER_72: have nothing i've done that before i don't want to rehash one of my more miserable experiences but i was

SPEAKER_86: dealing with a company that had a grossly inflated valuation it was a total problem case we voluntarily

SPEAKER_215: slashed evaluation in half and reissued options to the employees to keep them motivated no big deal yeah

SPEAKER_57: yeah exactly and it's not that it's no big deal but it requires some amount of fortitude and like

SPEAKER_75: you know understanding your priorities i guess what do you think you know like

SPEAKER_220: first i think it's revealing that we think what happened here is so out of the ordinary

SPEAKER_114: i mean you flash back to 2001 to 2004 sequoia i don't think funded a single loser in their portfolio right like that's a time where you walked away from the ones that weren't winning and you fed the ones that were because you have limited capital and you don't know when you're going to raise your next capital this idea that you have unlimited capital you can give money to anybody no matter what

SPEAKER_107: they're doing with respect to their plan i think is a function of the last 10 years but to jama's

SPEAKER_116: points the idea of tough talk you know either out of ceos or out of board members has been in short

SPEAKER_114: supply in silicon valley this idea that saying the truth just speaking the words about needing to get fit or needing to lower the valuation that somehow that is founder unfriendly is nonsensical the truth is founder friendly by definition and i think to jama's point the less complicated you make this

SPEAKER_224: right you reset the valuation you re-up the option pool and then everybody has a choice to make and if the people who are on the board and backing the company choose not to re-up for whatever reason they

SPEAKER_225: no longer believe in the path forward for the company that's incumbent upon the founder to go find

SPEAKER_92: people who will that's not abandonment as it's being framed in this story it is a trade and i think maybe if you look at public market investors brad nobody gets upset by a trade trades a trade

SPEAKER_91: but in the private markets there's a lot more emotion involved a lot more relationship material and this founder friendly concept of like you're abandoning me it's like no the the trade here it makes no sense

SPEAKER_92: for this firm and for this fund and for these lps right well sometimes sometimes the founder needs

SPEAKER_230: to have the courage to look in the mirror and say what i'm doing is not working i had a plan i missed

SPEAKER_231: the plan by 70 percent i'm lighting capital on fire this is a charity not a business it's best to say it didn't work shut it down and move on and do something else okay so of course you're referencing

SPEAKER_135: salesforce so we'll pivot to that i'm joking uh it's not that bad uh but i think this is a good time

SPEAKER_91: to maybe talk about the public markets and inflation and what we're seeing in macro so can i set up a

SPEAKER_178: question for brad actually sure go ahead yes yeah so so on a previous podcast i laid out my theory of

SPEAKER_86: how you could just use the two-year bond rate relative to the fed funds rate to understand where the bond markets sort of prediction market about inflation is going and a month ago the two-year bond rate was at 4.1 percent relative to 4.5 fed funds rates in other words the bond market was

SPEAKER_132: betting that interest rates would go down between now and two years from now relative to where the fed had it so therefore it believed that inflation had been conquered now fast forward just one month

David Sacks: later and the two-year bond rates at about 4.9 percent you know the fed funds rates about four and a half percent that is a massive swing basically 80 basis points swing in the i guess the two-year bond rate and so the markets seem to be saying all of a sudden not just that they expect rates to be higher

SPEAKER_132: longer but also that the fed needs to keep raising and that is a big change so brad what is the basis for that and what do we now believe about inflation i think just a few weeks ago we were thinking that this problem was licked and the market took off like a rocket it ripped now all of a sudden it seems like

David Sacks: investors are really worried that inflation is not over so where does this stand right now well i think

SPEAKER_62: when we started the year you know the the 10 year was close to three two where now we're closer to four

SPEAKER_108: percent the 10 minus two is as negative as it's been in the last uh probably 10 years so the market is

SPEAKER_114: clearly saying you know we saw some inflation prints that came in hotter i think it's now consensus which you guys have been saying on the pod that you know although the second derivative is slowing that it's sticky right we're gonna get stuck at this four four and a half three and a half and it's the slope of the curve downward is going to be slower um we've gone from thinking we're going to have 225s to

SPEAKER_107: now thinking wow three or four you know and so i think everybody is now bracing for more inflation

SPEAKER_116: but remember when we started here on january 1st the consensus wisdom was we were going to retest the s p at 3200 we're going to have an earnings recession and that inflation was going to continue

SPEAKER_114: to run hotter the only surprise in my mind so far this year is how well the equity markets have held up

SPEAKER_240: in the face of a tenure that's gone parabolic right and an actual earnings recession right and you you

SPEAKER_116: know you you posted you know in our thread chamath about just quality of earnings you know even the earnings beats are pretty low quality and so i think you know we now are going to have a couple

SPEAKER_39: inflation prints coming up over the course of the next couple weeks that are going to be important

SPEAKER_116: my hunch is you know everybody has tilted again on you know what we saw in the last couple prints

SPEAKER_114: my suspicion if you look at morgan stanley and goldman sachs the consensus view is that we're still heading in the direction of four percent faster than i think people emotionally think so i would say there's maximum uncertainty in the world the fear that inflation is uncapped the way larry summers was articulate in november and december is less today than it was but what's emerged is this idea that we're going to have higher rates for longer and we're going to have higher inflation for

SPEAKER_231: longer now the the question i'd throw back at you is the market abhors uncertainty the market's done

SPEAKER_116: totally fine during periods where we had three percent inflation and five and a half percent rates right when with the internet boom that was you know 2000 to 2005 rates were a hell of a lot higher

SPEAKER_114: than the rates are today so i don't think that higher rates and higher inflation means that we can't you know invest in venture-backed companies that have huge secular growth the world doesn't end but what

SPEAKER_230: i do think it means is like if there's massive uncertainty in the world if allocators of capital

SPEAKER_231: don't know whether rates are going to double again whether inflation is going to double again then

SPEAKER_116: everything just shuts down and that's really bad for the economy i don't see that happening right now but i do think that the prints over the course of the next eight weeks are going to be important

SPEAKER_91: you have any macro thoughts here at the same time this is happening we saw rents broke in the last month so rents got cheaper yeah my governing principle i think i probably said it too many

SPEAKER_158: times but i'll say it again rates are going to be higher than we like and they'll stay here longer than we want so if you use that as a principle whenever the consensus things were done it's been pretty profitable to be on the other side of consensus and so i still kind of maintain that we're probably going to have a five and a half percent fed funds rate which means that i don't know

SPEAKER_00: maybe credits weeks will offer me seven and a half percent soon on three-month t-bills but we're

SPEAKER_52: going to have higher rates and i do think brad's right though in the sense that as long as we

SPEAKER_54: know that then that's it and we can forecast it into the future without it changing too much it'll be okay but right now what you're seeing is a lot of make-believe going on in in the stock market so

SPEAKER_256: nick if you want to just throw up that image so this is a really this is the chart of uh cash flow versus

SPEAKER_54: earnings yeah so this is something that i saw in bloomberg which i thought was really interesting and if you focus on the period of 2020 to 2024 what you see is the white line which is net income adjusted for

SPEAKER_52: depreciation amortization and the blue line is cash flows from operations so what does that mean

SPEAKER_100: and this is for uh s p 500 firms this is the best 500 companies in the world yeah and the white line

SPEAKER_54: is what you tell wall street in terms of what you make on paper the blue line is what actually appears in the bank account so why could there be a gap between what you tell somebody you made i made a dollar versus what's in the bank 50 cents well the reason is that there's all kinds of accounting tricks that you can use accruals inventories and all of these things allow you to present a healthier earnings report than is actually true and so right now we have the worst earning situation so the worst gap between what we are telling people versus what is actually in the bank account that we've had for 30 years since 1990 and so it just brings into focus the fact that we may be in the last few innings of trying to make sure this all looks okay in which case one faction of the investing world who thinks that this earnings recession is actually at hand would be kind of right and then what they would say is that once we all realize that these earnings are fake and you reset down 15 that's where you get to

SPEAKER_52: the mid 3000 in in the s p 500 right now it's around 4000 i don't know if that's true or not but there's

SPEAKER_54: more and more evidence that would support that the way that they see the world could be credible the other side says hey listen this is a bump in the road we're getting a handle on things and it's stabilizing so even though it's higher than we'd like it's not going to change that much so now just think about 10 15 years from now and let's go and those are the folks that want to rip the money into growth stocks

SPEAKER_89: and tech stocks again how does the consumer play into all this record low unemployment like it's one percent in utah three and a half percent for the country two and a half jobs for every american who's

SPEAKER_91: unemployed and then these rents coming down but consumers have seemed to have burned off all that extra money they had so brad when you look at the consumer driven economy that the world lives in

SPEAKER_158: that's not true because you have to understand stimulus is still entering the economy it's just harder to measure so for example take social security you have cost of living adjustments in

SPEAKER_54: social security that's lifting payments by 10 and 15 because it's backdated for what was going on last year and remember last year we had two three four five percent inflation rates so there is more and more money coming into people's pockets that we don't realize and we're all on the hook for that as u.s taxpayers so i think it's very dangerous to kind of look at one data point and try to pick

SPEAKER_75: off what's happening in consumer land because there's all kinds of hidden ways in which money gets back

SPEAKER_262: to people brad you have thoughts on the consumer because you know i test it does seem like consumers

SPEAKER_92: are still spending money but the cost of goods in some cases is coming down i mean how do you look at the consumer and try to make sense of what's going on here because it does seem the united states is in its own little bubble here world of just over employment still even though we're seeing these

SPEAKER_224: layoffs in town well that i would say number one uh that the pop we've seen in rates which impacts consumers by way of higher mortgages higher variable expenses on their credit cards was offset over the last few months by lower energy costs so their cost of gasoline went down add in the things that chamath's talking about and i'm not sure you took a lot of money out of people's pockets

SPEAKER_114: i would say this that again what we're talking about here retail sales have continued to do really well e-commerce sales in january were quite strong that would all be consistent with the soft landing

SPEAKER_107: but here we are you know again talking about macro i think when you spend this much time talking about macro doing what we do you know like last year i'll be the first to raise my hand and say you know like our friend bill gurley would say it leads you in the wrong direction the fact of the

SPEAKER_114: matter is it's totally unknown and unknowable where we're going to go over the course of the next three or four months i think there's a better ability to predict maybe over the course of the next couple years um but the fact is if you would have told any i was just with a bunch of uh investors you probably represent a trillion dollars of public market demand 10 uh or so long

SPEAKER_108: only investors if you would have told any of them that the tenure was going to be at 396 they would have told you that the nasdaq would be down 10 to start the year and it did just the opposite

SPEAKER_107: so i think you got you know you're you have a bunch better chance particularly if you're playing at home right then trying to to guess the direction of that find five companies that you think are going to grow uh and earn more money irrespective of the direction of rates and inflation

SPEAKER_270: own those uh and enjoy your life i'm looking at the world and going sax my lord i'm seeing great

SPEAKER_91: founders great companies and five to ten million dollar valuations and i can buy five ten fifteen percent of these companies uh this feels like the best uh it's been for me as an angel investor seed investor or seed fund for a long time this is fantastic a great deal flow the deals are taking six weeks to close we're having very thoughtful discussions people are taking a real focused approach to how they deploy the capital it is not yolo people are building models again people are showing their cac they're being thoughtful about how they spend the money they're being thoughtful about salaries and hiring so what what's your you seem to think that you know what we're seeing here is challenging or a problem what are your thoughts on how it's affecting your

SPEAKER_14: day-to-day business as somebody who's a company builder well let's separate two things so there's the

SPEAKER_86: tech ecosystem and there's the economy as a whole the fact of the matter is that tech already had its bubble in 2021 it had its crash in 2022 and now we're largely on the other side of that there's still a lot of companies like we talked about they're going to need to restructure who raised during the bubble and may not have come to grips with that but if you're talking about new investment new rounds new companies are starting with a clean sheet of paper and a blank slate you're right things seem good and normal right people are making intelligent investments and obviously the innovation cycle doesn't have anything to do with the macro picture i mean technology wants to evolve and it's great engineers and product people who drive those ideas forward and they're not thinking about interest

SPEAKER_132: rates i never thought about the fed funds rate at all when i was a founder running companies so let's just put that aside and acknowledge that great great innovation is going to keep happening no matter what the macro economic picture looks like that being said i mean just for the you know listeners of the show who aren't startup founders i tend to be a little bit gloomy about the macro picture right now because yeah it's true that what brad said that we've had good economies with five percent rates before but i think you also have to look at the pace of change or the rate at which the the fed funds rate

SPEAKER_86: has been going up and if you look at the chart of rate increases it is a very steep chart of rate increases and i just think that for the last decade or so we've been operating in this like zero interest rate or zerp environment with lots of monetary stimulus and i think a lot of companies a lot of parts of the economy got addicted to that stimulus they got hooked on drugs now all of a sudden you're putting them through withdrawal very very quickly and obviously the withdrawal pangs are going to be worse if you can't taper off slowly so it looked like just a few weeks ago that the fed was done raising rates now we know that they're not we don't really know when they're going to stop so i tend to be a little bit gloomy with respect to the the big macro picture because i just don't see how you can change rates this fast and i mean you look at like real estate for example we just saw the first year over year decrease in the housing market in a while and again that's all driven by rates the cost of

SPEAKER_00: mortgages going up and two big defaults and the first two big defaults yeah so i i think that there's going

SPEAKER_86: to be some pain ahead now you know ironically from the standpoint of the tech ecosystem we may have already taken our medicine and we may already be on the other side actually that is a good way to

SPEAKER_275: to look at is we took the medicine it's painful and maybe maybe that's the segue to uh talking about

SPEAKER_114: benioff i would say we haven't took it we're taking it we're starting to take our medicine

SPEAKER_64: well it makes sense that benioff with his you know very loving family kind of approach to running the

SPEAKER_105: company might actually it might take him a little while to become a big cutthroat so as everybody knows benioff and salesforce have had a lot of turnover a lot of senior executives have

SPEAKER_91: left voluntary or involuntary but shares were up 11 on thursday after reporting their q4 earnings

SPEAKER_92: they're up 14 year over year small net loss but the company bought back 2.3 billion dollars worth of its stock we're going to see more of that for sure and they're going to be increasing its share buyback

SPEAKER_14: buyback program to 20 billion dollars going forward and like meta which suddenly got fit and got religion

SPEAKER_105: benioff is now basically with all these activists i guess on on his ass he says uh and this is the quote

SPEAKER_92: from the earnings call we're more closely scrutinizing every dollar of investment and resource and very focused on driving operational excellence and automation across our business focusing on 4k errors short long term expense restructuring employee productivity there it is product innovation and building relationships with shareholders profitability is our truly our number one strategy and that's my number one strategy that's the number one thing we talked about at the start of

SPEAKER_277: every meeting we have in this company quite a turnaround your thoughts brad i don't think the story

SPEAKER_220: is that you know that benioff you know made these cuts and that activists are around the rim what was

SPEAKER_114: significant was his comments uh that he made and i tweeted about it today you know he said every ceo in silicon valley has looked at what elon musk has done and asked themselves do they need to unleash their own elon within them and you know listen we've been talking about this for nine months

SPEAKER_116: the reality is if you look at the employee count at salesforce in 2015 they had 19 000 employees as of last year they had 80 000 in seven years they 4x the number of employees they were a mature company by 2015 their employees cagered at 23 percent you know we don't talk about it in this way but

SPEAKER_230: these large companies these employee bases they're not unions but they may as well be right why would

SPEAKER_231: they be i just think there's there there is during this age of excess where it was just easy for people to hire more people and build more things not to make tough choices etc right we just had an explosion like we've never seen in silicon valley in the number of employees in these businesses meta

SPEAKER_116: went from 10 000 to 80 85 000 google went to 185 000 and at those levels it's very difficult to govern them

SPEAKER_231: and when the ceos went to make decisions in the businesses there would be protests revolts within the business 30 or 40 000 people would sign petitions even say no we're not coming back to the office no

SPEAKER_111: we're not going to work three days a week no you can't name our ai bot uh what you want to name it because it offends us and so to me what's more significant is over the last six months we've seen

SPEAKER_116: courage gain momentum in silicon valley right what's deeply underappreciated about meta and the changes they made it would be one thing if it was just window dressing we cut 10 percent of the workforce kind of tighten our belt a little bit but zuckerberg got on his call and he said we only have two

SPEAKER_231: priorities in 2023 one is efficiency and he went into depth about once they started cutting people how the company got faster the product release cycle sped up the employees got happier and now it's an

SPEAKER_116: end in itself to de-layer the business that's what we're hearing out of benioff as well and i think it's you know people can quibble with how elon went about the change which you and you and uh david are very familiar with at twitter but the reality is he lit a fuse in silicon valley that is giving courage whether it's private companies series b companies pre-ipo companies public companies i've had that conversation more times uh than you can imagine over the course of the last six months and i think it's a really important change because i think it breathes new productivity into all these businesses and

SPEAKER_231: importantly it unleashes these engineers back into the ecosystem to start the next wave of companies

SPEAKER_86: yeah so jason i mean you and i got to tag along with elon during that transition phase at twitter

SPEAKER_132: and the thing that i took away from it was just how much agency you know ceos have that they're not using i mean elon went in there and he basically changed whatever he saw that he didn't like i mean unsentimentally and quickly and you know and so you look at all these other companies you talk to ceos sometimes and they act like they're prisoners of their companies like i can't change this i can't change that syndrome yeah yeah it's like you know i've got all these employees and all these layers and but i can't you know there's always somebody i'm afraid of the bad pr or you know whatever it is and i you know the thing i came away realizing is just how much agency particularly founder ceos have that they just don't use you know they're always like hemming and hawing and wringing their hands and acting like they're tied down by this or that and the reality is they can do whatever they want just about um you know within the bounds of what's what's legal and and i think they're starting to

David Sacks: realize oh wait a second like i actually can do that you know i can walk into my company one day and if there's a team that's not performing that's giving me answers that don't make any sense i can

SPEAKER_291: start over i'm just gonna start over yeah i mean if you can't get it done then we need to have

SPEAKER_92: somebody who can do it and it's it's incredible like we were doing an analysis on this week in startups of the you know employees per company and the revenue per employee per head count and i got

SPEAKER_14: roasted for having this con even having this conversation and now here we are chamath people are looking at efficiency we're looking at you know really uh how efficient can these companies uh be run is there a limit to where this is going and and if we were to look at this as a process where are

SPEAKER_91: the fangs the amazons the googles facebook's where are they at in terms of percentage to being at elon if you if you were to put twitter and elon as the the goal where are these companies and i don't know that that is the goal maybe maybe he's cut too much who knows we'll find out i think

SPEAKER_105: it's a it's a it's a pretty radical experiment experiment he's doing there yeah yeah i don't think

SPEAKER_81: that's a reasonable or an achievable goal for a public company okay i mean i think the thing we have

SPEAKER_54: to keep in mind is elon is also capable of doing that because he paid 44 billion dollars of his own money to buy something that he owns outright that no longer has revenue pressure to outside stakeholders different circumstance revenue went down 70 percent at twitter well that only affects him and and his ability to pay whatever he borrowed in order to buy that company and as long as he's willing to fund that somehow he's literally allowed to do whatever he wants that's no longer the case when you're borrowing money from other people to build your business which is what every other capital market participant does public market participant does and private market participant so i think that that distinction is just a little bit important because it probably means that there is a shadow of what elon is doing that's probably the threshold of what's possible and it's probably you know sort of 50 percent headcount reduction that's probably the the bound in which things break because i think the thing to keep in mind is that over time this stuff is like collagen in the body it just like it creates these interconnected webs of just very difficult stuff that you sin you that you cannot tease apart so even if you try to go in and cut 50 of a company like facebook or google or microsoft or apple or amazon it would be so difficult because all of a sudden the coordination that happens at that scale i think would get lost so i'm not sure if it's possible you kind of have to do what they're doing which is cut five percent then cut ten percent then cut five percent then cut five percent and i know it frustrates people on the outside looking in but i think it's the it's probably the only way it can be done without torpedoing the company what does that do on a culture basis then because that is the big

SPEAKER_92: critique hey you're creating now this culture of fear i guess the opposite of that is you're creating

SPEAKER_34: a culture of performance and expectation so how do you think about it on a culture basis because that

SPEAKER_75: keeps coming up from founders to david's point it depends because i think companies when they're smaller i mean i can tell you when i was a part of the facebook senior management team we would rank all the

SPEAKER_54: employees so we had a very good sense of who was the best and the most performant all the way down to who was not and we were able to do that probably up to two or three thousand employees that's not possible at fifty thousand and nor is it fair so because you don't know who these folks are the real contributors are you have to do what elon did which is literally go person to person and say who is unbelievably performant or critical yeah in the absence of doing that you just don't know who to let go and so you have no choice except to bleed down the question that i have and brad maybe there's a smart analyst on your team that can do it is right and it's more of a statement as well can you imagine the totality of stock-based comp that's been given out by all these companies since 2015

SPEAKER_52: when they were kegering their employee bases by 25 a year i bet you it's a trillion and a half

SPEAKER_61: dollars at least do you think it's that you think it's in that order of magnitude 100 this has been

SPEAKER_121: the greatest grift in the history of silicon valley for sure let's pause for a second can you explain

SPEAKER_91: what we're talking about here stock-based compensation obviously is the stock given to employees it's generally not counted well let's do in the accounting right let's do it this way let's just say

SPEAKER_54: that you believe in capitalism okay yep so if you if you believe in capitalism let's say the the four of us start a company and there's a dollar of profit and we each own 25 of the company got it normally what you would say is each of us get 25 cents right reasonable we own 25 each there's a dollar of profit we each have 20 so that means that in four years right we each will have made a dollar because so let's just say it costs a dollar to get off the ground or four dollars to

SPEAKER_141: get off the ground all in summit budget believe we all would have been made whole we all would feel

SPEAKER_54: great and then now every year afterwards that 25 cents we get is profit now let's say that jason you add a fifth person and brad and david and i can't say anything about it okay and that fifth person now gets a fifth of it right and so now all of a sudden our 25 cents goes down to 20 cents then let's say you add five more people now all of a sudden our 25 cents went to 20 and then it went to 10 cents yeah and at some point brad and david and i raise our hand and say hey this is not the deal we signed up for and you say well too bad because revenue would not be what it is and profits would not be what it is without these extra six people and that's effectively what everybody debates when they own a stock the shareholders want that number to be as small as possible and i think what brad is observing is that in silicon valley what has happened is there's been poor accountability for what all of those extra people do and profits haven't written risen fast enough to make the existing three people on the cap table feel okay about it and that instead of talking about three people and six and a dollar

SPEAKER_164: you're talking about trillions of dollars and hundreds of thousands of extra shareholders uh brad

SPEAKER_260: millions of extra show and then we have some charts here so we can do some fun with numbers i think

SPEAKER_224: taking a step back i think it's very important to realize that stock as a form of compensation to create alignment excitement in the early stage of venture capital is part of the true magic of silicon

SPEAKER_107: valley you know you're starting a company you ask somebody to go on this adventure take a bunch of risk they often have to cut their pay they could get at google by half to join your adventure it's only fair that you give them stock in the company and they share in the ups and if the company smokes it

SPEAKER_124: uh they get rich for taking that incremental risk on their behalf and on their family's behalf what's

SPEAKER_107: happened over the last 15 years is something totally different which is this stock as a form of early

SPEAKER_114: stage compensation right continued and there's a feature in silicon valley as companies came public one way to kind of hide an expense in a business is to bury it in sbc so let's say google wanted to

SPEAKER_107: hire somebody for four million dollars which they're doing today in ai but instead of paying them four

SPEAKER_116: million in cash which would all count against their operating profit they give them 500 000 in cash and three and a half million dollars in stock and let's say they make all that stock investable immediately jason in this year it's obvious to you and i that's just cash the person turns around and sells it it's a real expense of the business real expense to the shareholders but when they report their earnings and they report adjusted ebitda they adjust out the three and a half million dollars

SPEAKER_192: that they gave by way of sbc why did stock-based comp sbc get excluded from accounting what is the

SPEAKER_91: history of that and is that going to change now are people going to say and shareholders demand in this new economy in this new you know sort of reality hey you know what you can't play fun with numbers here stock-based comp has to come out what would you like to see brad it's fairly

SPEAKER_322: esoteric but they're back in the mid 2000s 2004 2005 there was a an accounting there was a big debate

SPEAKER_116: about this warren buffett was famously saying listen it doesn't matter whether you pay in stock whether you pay in cash whether you pay in cans of beers like it all costs the same he's right and so there was a debate we had a statement an accounting statement fasb 123 and in that statement it said gap ebitda must include the cost of stock uh base compensation so all of a sudden if i'm reporting gap ebitda i gotta include the cost of stock comp which it does today but what but but what did everybody do but what happened they started adjusting it out right because they said hey

SPEAKER_123: this isn't real expense right because we're not it's not cash we're giving out the door so

SPEAKER_329: what do they call it did they come up with a term for this suggested

SPEAKER_224: the crime here is that when rates fell to zero and everybody was making money on tech stocks

SPEAKER_116: nobody wanted to rock this boat and everybody just said you know like adjusted ebitda kind of ignored i can i can model it into my future dilution so we model up share count uh over the course of the

SPEAKER_231: next three years but this literally over the last five years went parabolic because i just shared with you the number of employees exploded the amount of share base compensation exploded because of competition for those employees coinbase i think just reported sbc which hold hold your hat sax was 70 of revenue not 70 of their earnings 70 of their revenue just for coinbase we're talking about here

SPEAKER_116: that's for coinbase and so you know last week there was something that i thought was pretty brave i believe booking.com on their earnings call really called this out and what they said is listen we've been playing by the rules we understand that stock-based comp is cash

SPEAKER_231: and they say every every metric we report includes the impact of stock-based compensation and if you look over the last 15 years if i'm an owner of booking.com i was only diluted by about five percent if i was an owner of salesforce or xpedia i was diluted by about 25 that's 25 of my ups were given away right but yet those things were adjusted out when they reported earnings and so you know what's become in vogue today is cfos get on their calls and they say no no no don't worry we're going to buy back a lot of shares so we won't have much dilution okay but if you take my two billion of profits that chamat just talked about and it goes right out the door just to buy back the shares you just issued you're effectively round tripping that money then it just proves the point it's cash it's an expense to shareholders and my biggest problem with it is it's led to the bloat because if companies actually had to account for this as cash right as opposed to being able to do it they wouldn't hire as many people they wouldn't pay as much in stock comp and i'll end with this because i want to end with the solution every comp committee on every board frankly their heads spin when you start talking about this subject they bring in a comp consultant and the comp consultant they is really the cya for the comp committee because they want to approve a comp plan that's been recommended by the management team and they just want to know is this what everybody else is doing okay so everybody's doing it so the comp consultant looks around says yeah all your peers are doing this this is why charlie munger said i'd rather throw a pit viper down the front of my shirt than hire a comp consultant right what is going on on these comp committees if you give bonuses to anybody in your business that are that is based on an adjusted ebitda metric rather than free cash flow per share per share is the key here it's negligence it's negligence so if comp committees just walk in and they say the gold standard as a public company is 50 basis points annual dilution that's apple that's booking.com visa mastercard or even below that that's the gold standard once you're in the public markets and we will never incentivize our employ our employees on the basis of anything that excludes stock comp and it has to be on a per

SPEAKER_116: share basis that would be a massive leap forward for public company account seems reasonable anybody

SPEAKER_343: have any other thoughts on that stock based comp no all right sacks where do you want to go you

SPEAKER_91: want to go fox i'm going to do fox let's do fox i mean fox is kind of crazy uh okay so rupert murdoch had been uh deposed here with this dominion voting system lawsuit they're suing fox for 1.6 billion in damages over claims made on air that we all know around technology enabled election fraud we remember this wild period at the end of the last election cycle with this incredibly false claim that the

SPEAKER_105: election was stolen something you know both sides of the aisle said did not happen however it seems that the hosts on fox knew it wasn't happening knew it wasn't true but were engaging

SPEAKER_92: in entertainment of allowing these people to come on air and say the election was stolen so murdoch said i would have liked us to be stronger in denouncing it in hindsight and when asked if he could have stopped the host from highlighting these allegations these false

SPEAKER_105: allegations on air that were obvious to everybody he said i could have but i didn't he said the truth

SPEAKER_348: he's not allowed to lie in court yeah just on air but not in court i mean sacks to be fair like um

SPEAKER_14: you uh really care about freedom of speech you really care about the libel laws you really care about the gop obviously you bring it up every week here so when you looked at and but you were very clear

SPEAKER_92: you were not happy about the election denial all that like false claims that trump made and these insane people he put around himself so how do you look at these foxos and listen you've been on tucker and

SPEAKER_14: other things knowingly spreading lies about something as important as the election and then doing it in the most cynical ways we we sit here and every week we roast the media the mainstream media you particularly go after the dams and the left and the media elites how do you feel about these media elites who are part of the gop machine lying incessantly uh about something as important

SPEAKER_91: as the election integrity of the united states of america first of all you're trying to tee this

SPEAKER_84: up as some giant don't call me jay cal no i'm not no i'm not you said from the beginning i need

SPEAKER_354: to remind you said in the beginning you didn't believe in this exactly let's go back to november

SPEAKER_86: of 2020 on this show because there may be a lot of parts of the audience that weren't watching back

SPEAKER_132: then i was really clear that i said sydney powell and lindwood and rudy giuliani i thought they were wackos and this whole idea that the dominion voting machines had somehow been rigged and somehow it

David Sacks: involved hugo chavez was a wild conspiracy theory so i said at the time hundred percent and i also said that i thought that once the supreme court denied certiorari to trump i said that he had his right

SPEAKER_132: to have his day in court and to challenge the election in court but once that the court threw out his claims and the supreme court denied certiorari that that whole thing needed to stop

David Sacks: and it didn't stop and that's why the republicans lost that uh purdue runoff seat in georgia on january 5th and you had january 6th so you know i've been warning against this for a long time jay cal now with respect to fox i think you need to basically get a little bit more nuanced in what you're saying there because i think within fox there were actually two groups of hosts so there is one group of hosts that i think you could say were trump loyalists and they basically not only platformed the sydney powell lies but also endorsed them and rupert murdoch admitted that they went too far and actually endorsed and so you had hannity and a couple other hosts do that even though hannity had some text messages that indicated he didn't believe it so i think he came across the worst however there were within fox skeptics of the sydney powell theory and so i'd put tucker carlson

SPEAKER_132: in that camp i put laura ingram in that camp and tucker had sydney powell on his show on i think it was november 19th i think this was 16 days after the election it was a 20 minute interview in which he

David Sacks: grilled her and he kept coming back to what is your evidence what is your proof and if you were paying

SPEAKER_132: attention he demolished her i mean i remember that notable yeah exactly so i mean honestly no one looks great when all of your text messages come out and you can nitpick about this or that text but the bottom line is i think tucker did his job you know yes he platformed sydney powell but he

David Sacks: platformed her in order to dismantle her and you kind of have to be pretty dopey not to see that she

SPEAKER_143: was dismantled after the appearance of tucker fox be liable for knowingly platforming these people

SPEAKER_14: and endorsing them in some way or is it their freedom of speech in your mind as an attorney here or somebody with that uh you know legal degree where does it stand like put aside if this was if this was cnn doing it msnbc will switch what publication if this was the new york times and they knowingly lied knowingly platformed some kooks with a conspiracy theory what should the price they pay for and and then how does that affect the freedom of speech that we all think i think universally on this podcast especially and in silicon valley or at least we used to that freedom of speech is really important do you have the freedom to lie and platform kooks like this let me answer you directly

SPEAKER_132: jason i think this would be a better world if fox reliable but i don't think they're going to be because that's not the legal standard i believe that if a television network knowingly spreads and

David Sacks: endorses uh baseless accusations against somebody which they know or should know is basically untrue

SPEAKER_86: i think they should absolutely be liable for libel or defamation but that is not what the law requires under new york times versus sullivan you're required to show that that they knowingly spread

SPEAKER_132: misinformation but in addition you have to show that they had actual malice which is that their intent was malicious and i think you know rupert murdoch is a wily old dog because he admitted on the stand everything but the thing that was most important for the plaintiffs to prove which is actual malice he admitted that they platform things that they you know knew or should have known were false he admitted that he should have put a lid on it sooner he admitted that he knew it wasn't true but he said the reason they did it is because they're afraid of their audience or a portion of their audience going to some rival network so basically what he said is in not so many words is that his motivation was greed and in our system of law that is a complete defense against claims of defamation now i think what we need here is to rewrite the defamation laws i think the supreme court needs to overturn new york versus sullivan clarence thomas is basically uh intimated that he would support that i think that would be a great thing to do i think actual malice should not be the requirement for libel i think if a television network or a publication puts out information they know is false they should absolutely be liable for it and that is enough to show and if we did that by the way it wouldn't just be fox in this particular case it'd be cnn and msnbc we have to completely revise their coverage and all of these tech reporters who do nothing but defame the tech industry the entire tech press just about is a slow moving defamation lawsuit elon musk would probably be the

SPEAKER_368: lawsuits he could bring if we were to overturn new york times versus the richest richer guy yeah

SPEAKER_369: because all they do is to fame elon musk every week with claims that are ridiculous so david let's

SPEAKER_100: revise the whole thing yeah but okay so hold on there you go folks very very intellectually honest i like it david so what you're saying is you expect the dominion lawsuit to fail can it be appealed all

SPEAKER_75: the way to the supreme court can this be the case that rewrites new york versus sullivan good question

SPEAKER_373: that's a good question i'm not sure i mean i think that'd be great if it did just be clear listen i

David Sacks: think that if fox were somehow found guilty i think one and a half billion there's a kind of a ridiculous amount of damages i don't think dominion was damaged to one and a half billion but do i think that it would be a good thing if this lawsuit were challenged all the way stream court and they

SPEAKER_132: overruled new york times versus sullivan let's fund the lawsuit let's fund the lawsuit i would fund that lawsuit i mean the next thing i want to do is not is sue msnbc and cnn for all the nonsense they spread

SPEAKER_259: every night yeah just to be clear i have a couple things that i would want to go and um get correct

SPEAKER_380: clean up i just want to be clear here though brad david's guy tucker he did the right thing that's the most important part of the story isn't it david that you're still you're not you're not being

SPEAKER_373: nuanced you want to throw tucker under the bus i think tucker did his job i think tucker did his

SPEAKER_132: job yes yeah i think the guy who looks a little worse is anity because anity in the text admitted he didn't believe the story but as a trump loyalist he endorsed the theory that's no good brad uh you

David Friedberg: uh you know you you come on the show every couple of episodes and pitch in here as our fifth beetle

SPEAKER_64: would you like to touch the third rail what are your thoughts and uh would you like to get some incoming email from all your lps about your position on fox news and i mean i i i i think that i mean

SPEAKER_393: we just i just feel like i sat through a university of chicago law school class it was awesome

SPEAKER_116: and i think we have some good issues here that we still got to tick off on jcal yes okay well we got

SPEAKER_192: to talk just for a second about china as it relates to tick tock because because all right here we go this

SPEAKER_116: hawley hearing that's coming up so we've got a hearing in congress let's start with you are a

SPEAKER_91: shareholder a significant shareholder in bite dance the parent company of tick tock we have to

SPEAKER_398: say that i'm correct correct correct and you absolutely you started that position use tick tock

SPEAKER_399: and my kids use reels and everybody you and i've had a spirited debate on yes you're a shareholder

SPEAKER_116: okay about this so i so i haven't you want me to tee it up you want to see it but hold on a second here like because just like sax had to defend himself before he even got started otherwise you wonder my

SPEAKER_231: credibility i have to do the same thing i'm a much bigger shareholder of meta who stands to do incredibly well if tick tock in the us is banned so you have a spreadsheet wait you win either way

SPEAKER_398: i've got a hedge on good okay you know if tick tock in the us gets banned but you know the con the

SPEAKER_231: context here is the tick tock ban debate is heating up right and it's all in a march up to the holly hearing i think it's on march 23rd and there's real like we we spent a lot of time at the start of this

SPEAKER_116: pod on inflation i think a much bigger issue right now i was just with all these investors the main issue on their mind was global decoupling between china and the united states we're gonna see a level of chinese hate leveled out of out of congress both sides i mean we heard it chamath at dinner at your place not so long ago that this hearing is drawing more demand for speakers from both sides of the aisle than any such conference uh in a long time but there's a lot of there's a lot of heat now around

SPEAKER_231: tick tock should it be banned and when i when i look at the situation if you frame it for bike dance

SPEAKER_114: because chamath talked about this a couple weeks ago it's been reported bite dance's revenue is

SPEAKER_231: about 120 billion dollars it's been reported their profits are about 25 billion dollars that is almost identical in size to meta meta is worth about 450 billion so 120 billion top line it's also been leaked that in that tick tock is about 14 billion of that and that u.s tick tock is three to four billion

SPEAKER_114: u.s tick tock three to four billion of 120 and it loses money so there's a lot of debate should we

SPEAKER_111: ban it should we not ban it is it going to go public and what should happen what do you think what do you

SPEAKER_116: want to happen as a shareholder listen i think it's an american i think this is a puppet debate over a much bigger conversation that's going on one of the things i've urged the company to do over the course of the last several years is parental controls my kids use tick tock they use reels and what i want is to be able to set effective time limits and i also want tick tock has incredible uh video content

SPEAKER_231: in math in science and history i want to be able to set a slider and say 20 of the videos that get

SPEAKER_116: shown over this one hour period have to include some of these math and science videos for my 12 year old then he can elect and not watch at all or watch it they announced those product changes yesterday um so they're teeing up those product changes i don't happen to think there's a nefarious

SPEAKER_231: plot but i also understand that people might not want this and so like listen i think we should have a debate i think that the ceo of tick tock should show up he should speak the the truth at the holly hearing and if the u.s congress wants to ban tick tock in the u.s or force a spin or a sale i think we should do it and stop debating it but the much larger conversation is whether we have a hard or a soft

SPEAKER_120: decoupling with china and i think this is just canary in the coal line all right so let me just

SPEAKER_410: tee up also uh and chamath i'll get your reaction on monday the white house gave government agencies

SPEAKER_92: 30 days to remove tick tock from all federal devices all federal agencies must delete tick tock from phones and systems and prohibit internet traffic from reaching the company this is following moves by

SPEAKER_91: canada and the eu and taiwan and uh obviously there is a bigger house committee uh focus on china that held its first meeting this week so there is the bigger picture but let's start with the smaller picture number one chamath do you think it's a security risk to have a chinese company have this kind of access and influence with tick tock specifically and what do you think the remedy should be for that and then we'll get big picture i want to get sacks involved in this as well should it be banned should they have this kind of access to americans and influence should it be banned

SPEAKER_52: no because i believe in a free market will it be banned yes because it's the most obvious

SPEAKER_158: cultural way to pick a fight with china without actually picking a fight with china so yeah i think it's going to be the most obvious victim of all of this and so i don't know my advice to my friends who are shareholders not just brad but others is sell sell it move on it's in the warren buffett what

SPEAKER_92: warren buffett calls the too hard bucket sacks uh do you think that this is a national security issue do you personally believe tick tock should be banned or do you like me believe that we should just do a

SPEAKER_91: reciprocation test in order for tick tock to be allowed here in the united states then twitter

SPEAKER_307: facebook meta instagram linkedin etc need to be allowed in china and you have this many days to

SPEAKER_84: reciprocate or else it's banned i don't think jimoth is right that tick tock is going to be gpc roadkill and

SPEAKER_86: gpc stands for great power competition you're going to start hearing that term more and more it's going to become the organizing principle of american foreign policy and i just think that tick tock is tick tock is all caught up in that and you know personally i'd like to understand what it is exactly that they're doing with tick tock and instead of just having these vague accusations i'd actually really like to understand the underlying surveillance that might be doing yeah i'd like to know a lot more about that but in any event i just think you're going to get caught up in this this again gpc that's going to be the the dominant organizing principle of our foreign policy i think that people are coming around to realizing that it's china not russia that is the central global competitor

SPEAKER_132: and adversary the united states it's the only country in the world that's a potential pure competitor to the u.s this economy is roughly the same size of the u.s it's got four times the population it's the one

SPEAKER_86: that we really need to watch out for i think there's growing realization in washington that the ukraine

David Sacks: war is a little bit of a misdirect and that we need to basically get back to doing what we were doing before the war which is pivoting to asia and by the way thinking about that just for a second

SPEAKER_75: in i think david you're totally right because the game theory now to me makes a lot more sense in the frame in the framing of gpc so for example if you think about what the chips act does right the chips act basically says we are going to near shore or onshore every capability we need so that we can make and manufacture all the critical semiconductors for all of our interests technological business

SPEAKER_54: military etc but what is that really what that is is an option to not have to defend taiwan and why is that important it's because today if taiwan were invaded by china we get pulled into a conflagration that we don't know how it ends we don't know what the beginning middle of end of it looks like it's extremely dangerous and precarious so spend a couple trillion dollars create financial incentives build a bridge to korea and to japan so that they bring onshore and into mexico all the capabilities we need with western europe who are already our allies already along with japan and korea and now all of a sudden we have complete optionality and now we can deal with the greater chinese hegemony in a much more balanced way so i think the gpc framing is shared by the way between the

SPEAKER_52: democrats and the republicans so this is why it's so much bigger than one single company that's why i

SPEAKER_92: think i think tick tock's roadkill brad if we frame it as a competition we're not framing it as a war we're in competition and part of that is going to be this decoupling is this decoupling helpful to

SPEAKER_14: america is it helpful to humanity is it better that we decouple a bit this interdependency maybe got a

SPEAKER_91: little too deep as we saw during covet with uh supply chains well i mean in a great in a great power

SPEAKER_220: struggle it is what the words imply right so i don't you know part of the reason you want to have

SPEAKER_224: trade uh with china and part of the reason we don't want to have a hard decoupling is the you know a long-standing theory that company countries that trade together are less likely to go to war so you know i think if you listen to what's coming out of this you know these uh select committee

SPEAKER_116: this week that held its first hearing is on the on the extremes you hear people saying hard decoupling right and in the middle you have people saying listen we need to define a circumference around national security and we need to decouple as to all things that are within that circumference now i will tell you that the debate is about how large is that circle so it starts off as for example sophisticated computer chips out of nvidia so china you know can't compete with us in the ai arms race but it's quickly emerged into you know batteries energy food supply chains it the circumference has now become almost as large as the economy itself i would argue that it's not just the chips act it's also ira which is another trillion dollars of funding for uh basically onshore and supply chains vital uh materials to build batteries etc you know so i think it's a very reasonable policy by both

SPEAKER_245: parties to pursue it's clear that we're going to have some decoupling i think it's a it's a it's going

SPEAKER_116: to lead to an interesting question on the part of china you know she was out last week saying you know i'm going to make a speech about peace with russia you know this is more david's territory but my hunch is that there may be you know if china re china thinks there's going to be a hard to coupling from an economic perspective this is bad for global economic growth this is bad for china's

SPEAKER_164: growth i don't think it's bad for growth i think it's bad for inflation explain well because i think that

SPEAKER_75: will have many versions of everything everywhere so we will some more redundancy yeah more redundant we're going to rely on central and south america in a meaningfully bigger way and what that'll mean is that there'll be more jobs in economic prosperity for those countries they'll feed the united states

SPEAKER_52: china will feed it less and as a result there'll be more inflation because you won't have the cost

SPEAKER_54: advantages by the way china is not just going to sit there and take this lying down they've already punched back a few times so for example in the middle of the summer china introduced a tariff and slowing the export of certain materials and technology to make solar wafers now why is that critical well again talked about this before but we are going to take the marginal cost of energy to zero in this country and the levelized cost of energy particularly via solar is the cheapest it's ever been and so what china sees is oh my gosh if the united states has abundant free energy now a huge component of what drives costs is gone yep so now the united states could partner with el salvador mexico honduras you know argentina brazil is happening here too yeah no but i'm just saying

SPEAKER_158: it's close by yes right and if you can deliver zero cost energy to those places now the manufacturing

SPEAKER_54: capability could exist there my point is it's such a complicated chess piece so china is not taking any of this lying down but i think that what david's framing is totally accurate this is the beginning of a gpc and it's an economic tit for tat that we're going to play out we tax chips they tax solar panels we go after tick tock just as a confusion maker right yeah there's going to be a

SPEAKER_105: lot of qualities back and forth here i can tell you the the there's a very easy test for if china

SPEAKER_91: sees tick tock as a strategic asset and that's it's going to create more shareholder value brad if they were to spin it out and make it a publicly traded american company with american shareholders it would create more shareholder value for bite dance therefore if they don't spin it out that means they're not acting in the interest of shareholders and shareholder value they're acting in the interest of their national security pretty clear reciprocation and collaboration would be a much better model i

SPEAKER_105: think for for working with the chinese and hopefully we can find some things that we can collaborate on

SPEAKER_352: brad raised the the chinese peace proposal on ukraine which i think is an interesting topic can we

SPEAKER_86: you guys want to go there for a minute sure uh yeah all right can i take a shot explaining what the chinese were doing i think it was a clever diplomatic maneuver by the chinese to try and grab the moral high ground here they're basically saying listen we're interested in peace we're going to put

SPEAKER_132: forward a proposal the americans fell into the trap of basically dismissing it right away throwing cold water on it the u.s state department has done this twice before remember back in march of last year naftali bennett from israel tried to negotiate a peace deal and he himself said that it was the west the americans who rejected it he thought it had a 50 50 chance of succeeding you then had the peace process in istanbul turkey with erdogan presiding over it you had the the istanbul communique which again they were very close to having a peace deal and blinken and the u.s threw cold water on it so what's happening here is that the u.s is not playing its traditional role as peacemaker where we try to go in and mediate these conflicts we're doing the opposite of that we're throwing cold water in the peace process now why are we not acting as the mediator i'll tell you why because we are a co-belligerent this is an american proxy war that we're fighting against russia so we have no interest in mediating a peace process and moreover we're not trusted to mediate a peace

SPEAKER_435: process because we're one of the effectively one of our strategy by xi jinping yes to take the global

SPEAKER_14: moral high ground i i agree with that i said it on twitter a couple weeks ago like this this is amazing that he's starting the peace process we want regime change we want to deplete and we want to ankle putin they want to keep him in the game the more death spots there are the the worse the better it

SPEAKER_91: is for them they would like to keep the legion of doom uh going they don't want to see regime change

SPEAKER_441: and democracy in russia eventually i don't think that's how they view it but listen jake how you're

SPEAKER_132: jake i was very close to getting it but here's where i would disagree with you a little bit okay

SPEAKER_86: let me explain okay go ahead so from the chinese point of view the war in ukraine is like

SPEAKER_132: mana from heaven okay they love this war number one okay because it's interfering with the us's pivot to asia we were basically in the process of redeploying all of our force all of our military to containing them in east asia and now we're bogged down in europe okay so that's number one number two we are massively depleting our stockpiles of of weapons we've used something like nine years of stingers and five years of javelins and we're running out of ammunition i can't believe we're running out of artillery the russians actually have a six to one artillery advantage which is why they're actually doing much better in this war than people are acknowledging we should come back to that the last thing is that the chinese now are benefiting from the economic sanctions on russia because russia is now selling them oil and gas and all their minerals at a big discount subsidy yeah so it's been this has been a wonderful thing from the chinese standpoint so this is the problem with us thinking in this marvel movie way of the world in which we're the super friends and we're against the legion of doom okay is because there is no natural alliance in the real world between china russia and iran these are three very different regimes with different types of governments who naturally would not get along they would be adversaries naturally they'd be suspicious of each other as china and russia were during the cold war but we have pushed them closer together this is the problem with having this overly moralistic view of foreign policy over to you jason what do you think

SPEAKER_11: tell us is there a question is there a question what's the question yeah i mean you frame it as the legion of doom so just explain well it's the axis of evil the the the 50 percent of let me tell you

SPEAKER_455: hold on no no hold on lex luther and brainiac would not be working together if it weren't for us

SPEAKER_92: declaring a war on both of them at the same time actually pakistan iran and and china work together on nuclear technology so they do when it's convenient for them work on things like nuclear bombs so uh there is an affiliation but you're correct they're they're they're the 50 of the planet

SPEAKER_14: of humans on this planet who live under authoritarians and so they they're authoritarians they're always going to think in their own interest they're always going to think in their own interests above above their own peoples let alone the people of another country they don't care they don't care about human rights they don't care about the rights of humans and they certainly don't care about the rights of humans in another country and the west is uh on a noble mission to spread democracy in the world and that is a noble thing worth fighting for and is worth defending free countries from despots i know that you are a fan of these folks sacks apparently and you think they should be able to run amok i will take the other side of it i think the west should act in unison the only criticism i have is that we're not acting in unison i would like to see the west

SPEAKER_462: instead of sending bide into ukraine hold on where did i say hold on as i said you've talked enough you

David Sacks: just accused me of somehow being fans of these people where did i ever say that i was a fan of

SPEAKER_186: xi and china or putin or the ayatollahs in iran hold on you said we provoked putin putin invaded

SPEAKER_04: another country hold on you said we caused it i said hold on a second hold on a second i am arguing

SPEAKER_132: for a geopolitical strategy that benefits the united states i'm on team america and your policy of driving these people into an axis of evil is foolish for the reason i said which is we are going to power up the chinese economy so they are a much more formidable enemy to the united states that is the last thing we need to do now with respect to hold on a second we finished you had a chance

David Sacks: with respect to ukraine and putin there there's no question that putin invaded okay he is the

SPEAKER_132: aggressor however the question you have to ask is why and the fact of the matter is that first of all we fomented a coup in ukraine in 2014 this is your democracy spreading that you like is all of a sudden we got these ngos and we got victoria newland from the state department in there basically fermenting these coups it doesn't work out quite the way you think jacal that's problem number one okay then we try to run nato right up to russia's border okay and you expect them just to accept that because we're a benevolent superpower that's not the way the real world works putin was tremendously threatened by that and it wasn't just him it was all russian elites read the bill burns memo from 2008 that means that he explains that even the liberal elements within russia were tremendously threatened by nato expansion that is what basically poisoned diplomatic relations between the united states and russia and it was a major cause of this war now listen just because you don't think it's provocative doesn't mean that the russians don't think it's provocative you have to be able to put yourself in the other guy's shoes for just one second and the fact of the matter is there were diplomatic steps that we could have taken to defuse this crisis in this war and we didn't do it and now look what's happened hundreds of thousands of people have been killed and ukraine's been destroyed it's been absolutely destroyed and let me tell you right now it looks like they're losing this war so i don't see where your superhero policy has gotten us except to make china richer and more powerful and to destroy ukraine

SPEAKER_92: that is where your naive idealism has gotten us yeah and i would say if you if left to your devices and you're not engaging and not presenting a united front against putin he will invade country

SPEAKER_14: after country the west must fight for democracy we must fight for human rights even if it's uncomfortable and you seem to think we provoked him to invade this country he's a murdering dictator authoritarian who has been murdering his own people i'm saying other people for his entire career

SPEAKER_373: and he will continue to do so let me clarify because you're putting words in my mouth okay when you say that i think that we provoked what i believe what i believe is that we took actions that in russian eyes were provocative yes i'm saying that from their subjective point of view they saw

SPEAKER_132: these actions as provocative they said so listen the russian which is what i said back to you we provoked

SPEAKER_477: it is your position no yeah i just explained that's not the words i would use hold on his position

SPEAKER_186: is that in their eyes they were proved jason we're talking about you're talking about and no what oh shit oh you're like what you're doing right now is like dishonest i just explained the language that

SPEAKER_132: i would use yes yes we provoked them we took actions that in russian eyes were provocative there's

SPEAKER_487: a difference provocative provoked yes the act of provoking lying okay it's going to be too much okay let's move on we're gonna we're never going to agree on this sax okay and i mean i'd like to remind

SPEAKER_92: the audience that nobody on this podcast is an expert on foreign policy sax is not henry kissinger

SPEAKER_373: you know i'm not obama last week's show you had come around to my point of view you said this war was a mistake on the very last show you said it was a disaster and now you're you're basically

SPEAKER_492: no no no hold it now you're backsliding hold on you're backsliding right back to your legion of doom

SPEAKER_91: no i believe the west should present a united front and we should hold the line with russia invading other countries that's my belief i do not think we should be doing this solo i think we should not be sending biden we should be sending 15 leaders of countries to ukraine we should be sending people in and we should be doing a peace process and i think the military industrial complex largely driven by the gop is what's at fault here they want to use these weapons they want to replenish the supply and they want to regime change i don't think we should be going for regime change i think we should be building bridges so my point is my point is a little more subtle

SPEAKER_373: you're doing it right there you're basically engaging in this ridiculous rhetoric that we've

David Sacks: seen in the media which is that if you simply want a more realistic american strategy because you believe it benefits america that you're automatically accused of somehow being a putin sympathizer no you're doing what the mainstream media has done no i'm not i just said to you it should be

SPEAKER_148: the entire west as a group as a block negotiating with putin what do you think what do you think

SPEAKER_34: it's fine for xi jinping to be part of that i i welcome xi jinping germany and the united states and france and the uk all getting together and trying to get these two parties to settle what do you

SPEAKER_00: think we're doing what do you think we're doing right or wrong with china right now right or wrong

SPEAKER_502: with china yeah what do you think we're doing right and wrong or right wrong or i think we should be

SPEAKER_91: in discussions with them consistently i don't believe we should be isolating them i think we

SPEAKER_155: should be looking for areas we can collaborate on the environment tech technology you agree with the

SPEAKER_75: chips act you agree with basically on shoring and you're showing all the critical infrastructure we need

SPEAKER_91: is that i think we should not be dependent on any foreign we should we should have energy security we should have uh medical security of course yes but i think every country should i think china should have that we should have it every country should aspire to be resilient and not be dependent on another country and being dependent on a dictator like germany was on putin or we were with china for medicines or for you know medical equipment or chips we do not want to be in that position

David Sacks: ever let me ask one question just just on ukraine just for a second jake out would you be willing

SPEAKER_86: in order to achieve a peace deal for ukraine would you be willing to agree to two things number one that ukraine would be a neutral country instead of part of nato and number two that we would recognize

SPEAKER_233: for me being part of russia would you be willing to give those two things i think that's up not up to

SPEAKER_92: me i think it's up to the people of ukraine and russia to sort this out and it's up for the west

SPEAKER_14: to set the table for them to do it and part of setting the table for them to do it is to make it more painful for them to stay at this war so if they are told if you keep fighting over these things and you don't come to a resolution between those two parties who have to live with that resolution that is the uncomfortable thing that will force them and that could be china us and india

SPEAKER_34: all working together all of us working together to force those two parties into a solution that

SPEAKER_158: works for them we have brad for 10 minutes i want to move on i want to show you guys a tweet

SPEAKER_52: about harvard students and i want you guys to react to draymond's comments because they're just

SPEAKER_451: incredible i don't know if you guys saw this but isn't that unbelievable it says there was a study

SPEAKER_52: at harvard that found that 43 percent of white students there are legacy athletes or related to

SPEAKER_92: donors or staff that's unbelievable is that public knowledge or is that like kind of leaked information i wonder this is from dolores handy i don't know who that is maybe we could click on who the source of that is legacy's gotta go right that that concept should that just go away yeah is there a valid

SPEAKER_06: reason to have legacy is there a valid reason to have legacy it feels unfair it feels un-american

SPEAKER_92: that these important institutions give preference to people who are stupider and achieve less if this

SPEAKER_105: is an achievement based uh system it just feels unfair yeah i mean well we know we know that the first

SPEAKER_502: class had zero percent and so we know what the trend line looks like so at some point we're approaching

SPEAKER_62: 100 i think we're just debating one question right one of the things i would like to see chamath is what's the relative performance 10 years after graduation between the legacies and the kids who

SPEAKER_194: had to scratch and fight to get into the place oh my god yeah i mean i think we know the answer

SPEAKER_92: well you would think they would be higher performers the latter group but you would also think that if legacy got you into harvard then the legacy and your group is going to get you into other things

SPEAKER_183: right you'll have the end in other places they're the ones who are miserable and walking around you

SPEAKER_99: know rich and haven't achieved anything yeah listen sax didn't get into stanford uh based on his dad's buying a building right well that's for sure okay so uh here is a video from dream on green what i do want

SPEAKER_530: to go back to is uh black history month this is actually the first time you've seen me in a black history month uh shirt all black history month and it's very intentional and i really just threw this shirt on because i didn't have another shirt to throw on but black history month at some point can we get rid of it like at some point why why why we got to keep getting the shortest month to celebrate our history you got governors want to take our history out of schools and i'm not going to be the fool to go say yeah we get celebrated for 28 days so at some point i'd like to get rid of it it's you know we're making all these changes in the world can't talk about these people can't talk about those people can't say this can't say that at some point it's time to get rid of black history month not get rid of black history like they're trying to do but black history month no teach teach teach my history from january 1st to december 31st and then do it again and then again and then again and then again that's

SPEAKER_538: what i'd like to see wow strong so good love that he's the best that was strong you need to clip the

SPEAKER_220: last 10 seconds of that that we all need to tweet that yeah be relentless chamath uh there was a

SPEAKER_92: a correction we needed to make about the stripe chart last week go ahead yeah so you have the floor

SPEAKER_52: we talked about some stripe stuff last week and my analyst came to me after the show was published and there was a couple of miscalcs in the spreadsheet that generated the graphic which big up to him for calling it out very quickly anyways i just wanted to show you the updated one just so that we could make sure we get that on the record i guess this would be a purple color is that purple yeah that's actually when you calculate net revenue and i think what did was calculated gross revenue which is in the red so we showed this but it actually should be purple so that's the updated accurate version of

SPEAKER_307: the analysis so there you have it what does that mean for stripe versus adgen in terms of just which is a better business just to summarize it no i mean i mean to be honest with you it doesn't

SPEAKER_52: it it's it says what we said before which is that the the previous valuation was very expectation heavy and the new valuation is definitely more in line but still very rich relative to other companies who have large profitability and large growth rates and i think that's the key takeaway which is it's very hard to both have huge margins and grow at mediumly high double digit rates and the few that can visa mastercard and adgen tend to trade it a very different valuation set than everything else and so i think that's the challenge for stripe if they can do it they'll be in that class okay for

SPEAKER_11: the sultan of science doing his spac in new york having an incredible dinner in at carbone right now can

SPEAKER_543: i say can i say enjoy the vegetarian i pre-tilted him he texts he texts into our group don't do it don't do

SPEAKER_52: that and he said uh let me know if you want me to dial in and save the episode my insta reply

Chamath Palihapitiya: gerstner is on fire we're also

SPEAKER_549: uh he has to go find a safe place he's irreplaceable he's irreplaceable except you know this episode is

SPEAKER_555: pretty good pretty good pretty good pretty good we love you we love you oh my god it wasn't a bad

SPEAKER_178: episode until jacal started again oh are you kidding me just like you strike january you can't strike

SPEAKER_01: words in english that's you can't strike a single word you struck my single word last week when i

SPEAKER_470: called jacal gets under pressure in a debate he falls back on all the usual virtue singing and oh yeah

SPEAKER_92: yeah okay who did you vote for in 2016 2020 be honest see like you're doing right now look at

SPEAKER_494: this oh god did you vote for hillary and biden legion of doom they're the legion of doom you know

SPEAKER_186: there's actually a meme there's a meme on twitter that anyone who disagrees with me is russian

SPEAKER_290: disinformation or pro-putin i haven't seen that one yet that's pretty funny that's basically yeah i

SPEAKER_191: don't think you're i don't think you're pro-putin i i i always try to make sure people understand

SPEAKER_14: during this entire year of ukraine ukraine ukraine i say every time to be clear you're not saying putin is right for invading ukraine and you're like no just stop no no thank you for saying that

SPEAKER_382: no thank you for saying that i appreciate that i always try to say that it's making a correction

SPEAKER_14: it's a very nuanced discussion it's a very nuanced discussion like we could nobody's in favor of this war nobody nobody's in favor of it everybody's trying to resolve it i think we just have different views

Chamath Palihapitiya: of what resolution looks like did you guys read this crazy article in bloomberg business week about praz michelle the founder of the co-founder of the fugees and his entanglement with the one mdb scandal did you read this article no i have no idea here's how the article starts i like the culture

SPEAKER_54: at the end let's put the tinfoil hats on and do culture at the end his phone rings and it's a chinese woman that says something like you know your cousin wants to meet you he goes to the four seasons where he

Chamath Palihapitiya: gets a note that says walk around the building twice to make sure you're not followed goes back into the four seasons gets a key card goes upstairs into a room where they then escort him to a different room in a penthouse take all of his phones and he meets with the vice chairman of security for china where that guy is asking for an introduction to trump it is that's how the article starts it is incredible reading the incredible incredible reading i encourage all of you to read it it's so uh

SPEAKER_92: spy what is it called juicy it's so juicy spicy if you want to read some crazy story there is a company called wire card in germany and there's a new yorker article about the biggest fraud in german history um i highly recommend reading this one we didn't get to it today but oh my god if we had like a long reads post show it'd be incredible i personally don't think we should promote any stories

SPEAKER_178: in the media we have no idea whether they're true or not let me be serious gentlemen we'll see you

SPEAKER_46: soon thank you so much for filling in love you thanks bro yeah pretty pretty good love you guys for the rain man david sachs the pacifist of peace the sultan of science brad gerstner the dictator chamath i'm the world's greatest moderator and speaker at your corporate event for 50 to 75 times

SPEAKER_588: jake out talk to my speaker bureau let's get this ripped on people we'll see you next week bye bye