侃爷收购 Parler、Snap 暴跌 30%、宏观展望与估值之辩

Jason Calacanis (00:00:00): Welcome everybody to episode 101. David Sachs is on vacation, sitting in Brad Gershner from Altimeter Group. Welcome back to the pod. Brad, how are you doing? Jason Calacanis (00:00:10): It's good to be back. Good to be back. Brad Gershner (00:00:11): I mean, first you first you guys, you know, tilted Friedberg and now a little bit on Sakses. get attacked on Twitter. And so you roll me back in when -- Yeah. Jason Calacanis (00:00:20): -- Brad Gershner (00:00:20): we've got a little problem. Chamath Palihapitiya (00:00:21): Whenever the Brigadoon's come out, Brad Gersner come. Jason Calacanis (00:00:24): Brian Dunes. I love that. I think Saks will be okay. But shout out to Saks. Chamath Palihapitiya (00:00:27): You know who probably hates the term Brigadoon's? The nitwits that are in the Brigadoon's. Lickerdunes. Oh, the Brigadoon. Jason Calacanis (00:00:35): It's all gonna end at some point because I think Chamath Palihapitiya (00:00:38): the Brigadoon -- New Jason Calacanis (00:00:39): ownership at Twitter is gonna change, like, the whole span Jason Calacanis (00:00:41): -- David Friedberg (00:00:42): That's a Rogers and hammerstein musical. Right? Brigga Dude? Jason Calacanis (00:00:44): Brigga Dude. Yeah. Yeah. Brigga Dude. Yeah. Yeah. Yeah. But now I think Brigga Doons could stick I've never heard anybody use that for the rebates. David Friedberg (00:00:51): Calling calling the Twitter mob, the Brigadoon's is a good new thing. Chamath Palihapitiya (00:00:54): I like -- Yeah. -- it's pejorative. It's funny. David Friedberg (00:00:57): It'll it uns everything a little bit, tones it down. I like it. Jason Calacanis (00:00:59): It feels goofy. Chamath Palihapitiya (00:01:00): It completely disempowers them. They really want to be taken seriously. but they're just a break a doon. David Friedberg (00:01:07): A bring a doon. Jason Calacanis (00:01:08): I mean, Chamath Palihapitiya (00:01:08): to be Speaker 6 (00:01:08): a break Jason Calacanis (00:01:09): a doon, though, you have to have Jason Calacanis (00:01:10): 4 Jason Calacanis (00:01:10): or more accounts, and you have to reply to each of those accounts as if it's an actual conversation. Chamath Palihapitiya (00:01:15): Jake, can Speaker 6 (00:01:16): you give Jason Calacanis (00:01:16): me a solo, break it down? Chamath Palihapitiya (00:01:17): Yeah. When you retweet something as a social justice warrior as an example, you're trying to join the brigadoon. Ah, Jason Calacanis (00:01:23): got it. Chamath Palihapitiya (00:01:24): It's just a different brigadoon. Jason Calacanis (00:01:26): It's a brigadoon. David Friedberg (00:01:27): Jake, how you're sometimes a brigadoon. Right? Chamath Palihapitiya (00:01:29): Yeah. You're part of Brigadoon, Jake Elton? Jason Calacanis (00:01:31): No. I'm not part of any Bridgeton. Chamath Palihapitiya (00:01:32): You're totally Brigadoon. Come on. Jason Calacanis (00:01:34): I do not. No. Brigadoon. I never I've never bring Jason Calacanis (00:01:37): it done. Jason Calacanis (00:01:38): I've never bring it up. I mean, I may have frick done once or twice for my brother. But that's it, I mean. What Speaker 6 (00:01:47): your winter's ride. Rainman, David Sattens. Speaker 7 (00:01:54): open source it to the fans and make discoveries. Speaker 6 (00:01:58): Love you. Ice ice ice cream that can rob. Well, anyway, Kanye West Jason Calacanis (00:02:04): can't leave an amazing career alone and he is going to buy parlor, which apparently Candace Owen's husband George Farmer had created, so he's gonna buy his own social network. If you don't remember, Parler is, like, a really shitty version of Twitter that never seems to have worked or been stable. It crashed the first ten times I used it. Miraculously, this steaming pile of garbage had raised 56,000,000 in funding. And Kanye is on a social media slash media tour saying horrific antisemitic stuff. He seems to be having a mental breakdown again. There's a big discussion now, I guess. Should people be platforming them to the point that he's doing 3, 4, 5 hour interviews with people? And it does seem like it's acute mental illness slash breakdown. I don't wanna, like, diagnose anybody from afar here, and I'm not qualified to admit. -- did. Well, I mean, he has been public about his struggles with mental illness. Chamath Palihapitiya (00:03:08): It's not a huge leap for any of us that have had family members. have manic episodes. I mean, this -- It's clearly a manic episode. Jason Calacanis (00:03:15): -- Chamath Palihapitiya (00:03:15): pretty much right out of a textbook. Jason Calacanis (00:03:19): So my question for you guys is what you have somebody with great wealth, great creativity. He's obviously a Savant in so many different categories. with a huge social media following plus money plus fame, and then you add social media to the mix, which is an accelerant And then all of these, you know, Tucker Carlson and every other publication, every podcast using this moment, I think in a way to kind of I don't know. Get ratings off of this train wreck. I I find it abhorrent to interview somebody when they're in a manic episode like this. I'll be totally honest. I wouldn't do it. What is your take on this? Chamath Palihapitiya (00:03:54): I have a family member of blood relative that is in severe mental health crisis. If the emails and the text messages that this person sent were public. you you I read these things and they've severely severely impacted me to the point now where I have like a rule that when they're in a manic episode, I just kind of harvest them and archive them just in case something bad happens. But I can't even take the effort to read it and because it takes such a toll. And then I feel really guilty because I think maybe there's a something in there where I could be missing something. So this is what when you're in the middle of a of of of a severe episode, this is what the family and the loved ones of that person is also dealing with. So I have I have no idea what's happening with Kanye, but what I would tell you is when you're in a manic episode, the more the the the thing that you need is for the people around you to try to step in to help you. And it's really freaking hard. And I can tell you that in in I've seen this person in my family say and say things and do things that are just so beyond the pale. Yeah. And it's part of when they're in that moment. And The whole goal is to try to get them out, get them back on their meds, get them rebalanced. It's a really, really complicated thing to deal with. David Friedberg (00:05:23): Well, look. I mean, the guy the guy's buying a social media platform. I think it continues to support the point that I've made a few times, which is I don't think that anyone has a monopoly in social media networks. We've seen every couple of years, competitors emerge, people proclaim monopoly. Those monopolies get destroyed by the next thing, you know, from Friedberg, to MySpace, to Facebook, to Instagram, to Snapchat, to TikTok, And I think that the the reality is the users of those platforms ultimately coalesce around a set of standards they wanna see happen on that platform. And those standards become kind of the editorialized or produced model for how that platform should operate because that's what the users say. They don't want antisemitism. They don't want what they would call kind of challenging an institution. They don't want fake news. Whatever the the classification is. There is an editor or an editorial board that editorializes what is and isn't allowed to be said on that platform. And, ultimately, there is a fringe voice or a voice that feels unheard or feels like it cannot speak on that platform. And what we're seeing now with, I think, Elon acquiring Twitter and Kanye acquiring Parler, and generally a a number of kind of emerging networks like, what's it called, rumbler as a alternative to YouTube. It's a -- Rumbor. -- indication Jason Calacanis (00:06:45): -- David Friedberg (00:06:46): Maybe -- What's it called? Jason Calacanis (00:06:47): Rumble, I think? Rumble. Yeah. David Friedberg (00:06:48): There -- It's it's fine. I think it's it's a really clear supporting fact that there are gonna be alternatives and that these what we thought were monopolies and what kind of became digital town squares and almost infrastructure are really just application layers. They're editorialized, and there are gonna be competitors. And I think there are folks that wanna have a voice that feel like they've been editorialized out of the existing networks, like Kanye, like Trump, like Elon to some degree, and they're you know, those that have resources are changing that. And I think that speaks to a really healthy competitive market. So having folks like Kanye step in and try and create a new platform that has alternative voices. Long term, I believe in freedom of speech, I believe that we should have alternative voices, but I also believe that consumers and customers should be able to choose what platform they wanna be on based on the editorialization that happens on those platforms. And I do believe that the owners of those platforms should have their own rules because it creates a different differentiated product. Chamath Palihapitiya (00:07:44): Jason, is that what you were hoping to get comment on or this idea of the movie meeting frenzy? feeding on Kanye's mental breakdown. Jason Calacanis (00:07:53): Yeah. I I was talking about the media frenzy. That's the thing that I think is pretty abhorrent here. In fact, YouTube just pulled a bunch of the interviews he did recently because there's so much antisemitic stuff in it. And, you know, when somebody's in a mental breakdown like this, which I I think it's pretty clear he's in. You know, they they do this behavior, and, of course, it's hurting them. It's to your point, you know, I'm sure it's hurting his kids or or or ex wives, our ex wife, and you know? David Friedberg (00:08:19): Can can I Jason Calacanis (00:08:20): ask who's to decide, Jake? What's that? David Friedberg (00:08:22): Can I ask who do you think is to decide that? because he's done interviews where he said, I have episodes, and those episodes actually provide me with creativity. And really -- Yeah. Jason Calacanis (00:08:30): Yeah. I think it's up to the post the person who is the host of that show who has to make an editorial decision. And so Tucker Carlson's going for ratings or if somebody else does it and they want the ratings because Kanye is a big name, that's you know, I get it. He's a he's a great get. Right? And if you're somebody who likes to interview people, that's like a lifetime get. That could be the get that, you know, makes people learn about your podcast. I just think it's unethical to do that when somebody is suffering like that to then feature them and to platform them in order to get your own ratings. That's a personal decision. Chamath Palihapitiya (00:09:01): Let me let me ask you a different question, though. So I Jason Calacanis (00:09:03): wouldn't do Chamath Palihapitiya (00:09:03): it. Would you hold him accountable for what he said? Jason Calacanis (00:09:08): Well, this and this is the nuance. You know? And I think we do have to think about that because antisemitism exists in the world. He's got a big fan base. That means if he's got people in his fan base who are also having a manic episode, they could then be inspired by what he's saying to do something horrific and cause real world harm. And and this is where, you know, the accelerant of social media, I think, is particularly dangerous, Jamov. You know? In the old days, if somebody said this stuff on a talk show, maybe they don't air it. where they say it. It's in the newspapers. But when he can have a continuing dialogue across many podcasts a week, he's done, like, 10 podcasts in the last week. He'll he'll he'll go on air with anybody. And then he has whatever tens of millions of followers. He's reaching hundreds of millions of people. All you need is one person who's mentally ill to then go do some horrible thing in the world that we've seen happen many times, and that's what I'm concerned about. You have to understand your the the the a law of big numbers, basically, tomorrow. There's a there's a large number of people. Chamath Palihapitiya (00:10:05): Yeah. Just to give you a sense of it, you know, when this family member of mine you know, we've had We've had to have interventions. We've had -- Yeah. -- police. We've had the government get involved in Canada. we had had their driver's license taken away, then I mean, it is an unbelievably complicated set of interventions. And I am so thankful that she doesn't have massive social media awareness because it would just be chaos. And I would hate that, you know, because of their association to me that this person gets more attention than they should in a moment where what they really need is help. And I think that that is should be the governing principle in moments like this where if a bunch of your family members or your health care providers or whatever can raise their hand and say, hey. Hold on a second. This is completely off the rails. You know, Friedberg to your point. I don't think that editorial freedom matters in that point. I think there's just the more humane idea around get this person off the airwaves and, like, allow themselves to get out of get out of that loop. Jason Calacanis (00:11:20): Settle down. Yeah. Yeah. Chamath Palihapitiya (00:11:22): And and, typically, what happens is that these folks at Lee, again, are just in my experience, will have titrated a medicine well. And then when that titration fails, their ability to regulate their emotions fail, and this is the loop that they enter. And, you know, you really have to find a way of, like, taking all of these mechanisms off the table -- Mhmm. Jason Calacanis (00:11:44): -- Chamath Palihapitiya (00:11:44): so that they can re regulate themselves. Yeah. And I think that as a society, we have to sort of move towards that so that if, you know, family members can call Twitter or Facebook or Instagram or whatever and say, listen. You're the doctor. You know? Here's the here's the doctor's note. Like, have to be able to shut this stuff down because you have to mute all of these other things so that this person can then get back into a mode where they re regulate. That should be the priority. Jason Calacanis (00:12:12): Yeah. Compassion for the person. Yeah. Chamath Palihapitiya (00:12:14): It's not it's not forgiving what they say, But it is having maybe a little bit more compassion in that moment to get them back to their to their true selves. I think David Friedberg (00:12:23): this one's a little easy to say, hey, Kanye is having a mental breakdown because he's about mental illness in the past. It's a lot harder to make these, you know, supposed determinations as a reporter or a podcast host if someone says something crazy, and then it's easy to raise your hand and say, hey. They're crazy. Cut it out, or there's some mental health issue going on here. Jason Calacanis (00:12:41): But Friedberg, if he's if he's not having a mental issue right now, then he is a horrible human being who is an antisemite who is spreading just the most vitrealic horrible things you and tropes you could ever imagine at a time when, you know, there's enough division in the country and somebody could get hurt. You know? So either in either case, his accounts have to get paused if he's gonna say anti Semitic stuff on them. No. David Friedberg (00:13:07): No. That that that I mean, there's there's really clear guidelines across all these platforms on what's inappropriate, and, certainly, I think folks will start to adhere to them. Brad Gershner (00:13:15): I guess if I had anything to contribute. Speaker 8 (00:13:17): I mean, I think Chamath said this well about a mental health angle. But what I would say is I actually think that the social platforms have done a reasonably good job. The fact that he's buying parlor, I think, is evidence of the fact that there actually is an editorial layer. Yeah. that's doing a reasonable job is a tough decision. Ever there's always gonna be a long tail of podcasts somebody will you know, somebody will go grift off of, you know, an episode or whatever. Brad Gershner (00:13:47): But I think, you know, Speaker 8 (00:13:48): a few years ago, we were talking about no editorial standards. And I think today, you know, across these platforms, obviously, there's attention. There's attention that's existed for a 100 years plus around free speech. on these platforms. I get that tension. But I think a little credit where credits do, we're seeing we're not seeing these memes spread like wildfire in part because the platforms with the most reach are doing their job. David Friedberg (00:14:17): Snaps down 30% today. Do you guys see this? I think it's it's related in the sense that everyone historically talked about social networks as being these you know, the network effect where, you know, multiple people get on and they link up with you with each other, it's harder and harder to break the network and it gets bigger and more valuable and can generate more revenue. clearly not happened over the years with Twitter to the degree that people thought it should have. And now, clearly, it's not happening with Snap. think it also speaks to this idea of fragmentation. I don't know if you guys wanna talk about snap, but pretty significant decline from Jason Calacanis (00:14:48): -- Chamath Palihapitiya (00:14:49): Well, here's the here's the Jason Calacanis (00:14:50): 60 David Friedberg (00:14:50): there were a 60,000,000,000 market cap, and today, they're trading at Jason Calacanis (00:14:53): 12. Jason Calacanis (00:14:54): They're down 91% from peak to trough. 91%. Yeah. Chamath Palihapitiya (00:14:58): Here's the important thing to note, which is that if you look at the MAU growth of Snap, it's actually been extremely steady. And they've had an incredible march forward, and I think that they're roughly around Jason Calacanis (00:15:10): 350,000,000. Chamath Palihapitiya (00:15:12): Nick, I'll send you the David Friedberg (00:15:14): Yeah. Use. Right? Chamath Palihapitiya (00:15:14): I'll send you the link. Yeah. I think it's, like, the DAO is Jason Calacanis (00:15:17): -- David Friedberg (00:15:17): New count is -- -- incredible. It's incredible. So it's Jason Calacanis (00:15:20): -- David Friedberg (00:15:20): Like -- Yeah. Chamath Palihapitiya (00:15:21): It's a service that is incrementally every day more relied upon than the day before. And it's a service that's providing a set of features that is incrementally more important. to a larger and larger group of people. So how do you then square that with its stock performance? And in my opinion, I'll just be really honest with you. And I don't know Evan Spiegel and I've never trafficked in Snapchat at all. Okay? But it is the most glaring example of corporate misgovernance that has ever happened on the Internet. And the reason is when you look at what happened in the IPO, It basically created a governance structure where the common shareholder had all voting power taken away. So a 100% effectively the de facto voting power stayed with the class that was held by the founders. And so you you do not have a normal check-in balance. And it was egregious. Other companies would have voting programs where it was 20 to 1. And you would sometimes say, oh, it should only be 10 to 1 or it should be 50 to Jason Calacanis (00:16:31): 1. Chamath Palihapitiya (00:16:32): This was like a 100 to Jason Calacanis (00:16:33): 0. Chamath Palihapitiya (00:16:35): And what you have now is no real feedback loop because there is no person who can own enough equity with enough say, to sit across the table from that CEO and say, here's what you're not seeing And here's what you're getting wrong. And I think you're always better off by having those kinds of people be able to get a meeting with you in the first place and have a vested interest where you take them seriously. But how would you receive a meeting. When you're sitting across the table from somebody in the back of your mind, you're like, wow, this person has literally no say in what I do after this meeting ends. Literally none. You can't vote even. Jason Calacanis (00:17:20): -- David Friedberg (00:17:20): that's different than alphabet and meta 10 to 1? because they I think they both have dual class, right, at roughly 10 to one voting? Chamath Palihapitiya (00:17:26): You you actually Jason Calacanis (00:17:27): -- Chamath Palihapitiya (00:17:27): I think 0 is, in my opinion, a deep sign of disrespect. Brad Gershner (00:17:33): I think you can I think you can agree, you know, that there is a separation between, you know, the voice of the common shareholder in these companies and Speaker 8 (00:17:45): and the direction of the companies. Brad Gershner (00:17:46): But I think it obscures what's going on. Chamath, I totally agree with you. If you look at usage, the number of customers walking into the store, Snap's gone from 265 to Jason Calacanis (00:17:56): 360 1,000,000 Brad Gershner (00:17:58): DAUs. Twitter, a Jason Calacanis (00:17:59): 190 Brad Gershner (00:18:00): to 240. Meta from 1.8 to 2 over the course of the last 3 years, all growing. More people are walking into the store and using the service. The story here is all about pricing. how much is each of those users worth? I mean, Apple is the apex predator of this entire market. We wouldn't be having this conversation But for the fact that Apple's changes with IDFA literally pick pocketed the industry $2,000,000,000 this year under the auspices of privacy. And so if you look at these companies usage up, pricing or ARPU down. Okay? Recently Apple's come under a bunch of pressure, so now they're out with Scab 4, which is their update to the the the ad policy post IDFA, that allows you to target advertisers or individuals with Jason Calacanis (00:18:56): 10000 Brad Gershner (00:18:56): attributes instead of a 100 attributes. So we're gonna see some realignment. I expect that the real question is what happens to ARPU next year? But to me, the story here is that the usage and the health of these core platforms is remarkably sticky. David Friedberg (00:19:13): Yeah. Brad Gershner (00:19:13): For all the things we say about the Instagram I mean, TikTok has had explosive growth, 30% growth each of the last 3 years. But even the incumbent platform's really sticky usage, this is about how they're monetizing those users and the real story is Apple. Jason Calacanis (00:19:28): Yeah. And if you for people who don't know ID, FA is the identifier for advertisers. Some people refer to it as made mobile ID. Add ID. I'm sorry. And so what that does is it lets you track a user anonymously Chamath Palihapitiya (00:19:42): across that. Have you ever have you ever owned Jason Calacanis (00:19:44): and have you ever owned? any clicks to a sale. Chamath Palihapitiya (00:19:47): Right. Have you ever owned Snapchat stock? No. Why not? Brad Gershner (00:19:52): Certainly, governance is a key component of it. But the second thing is Chamath Palihapitiya (00:19:57): Like, do you have do you have any belief that you could even get a meeting with the CEO and management where they would listen to you? appropriately? Brad Gershner (00:20:06): We've certainly got meetings with management before. So, yes, I believe we could. whether or not that impacts, you know, how they build product, how they how they run the business, you know, the influence, etcetera. But, again, I I I think That's not really the problem here. But the point I would totally agree with you on Chamath, we've had 10 years of where the cost of capital was 0. 10 years of hyper growth for these social networks. Right? In each of the last 5 years, Facebook has hired more people in each of the last 5 years than they had 10 years after the company was founded. Okay. So as we've seen this growth begin to turn over, I have seen the companies really slow to react. to right size their behavior that they had over the course of the last decade to put themselves in a position to compete for the next decade. So it's one thing just to throw your hands in the air and say, well, this is all apple. We couldn't do anything about it. But we we really haven't seen leadership in terms of cost control. We really have we all know these companies -- That did you. Jason Calacanis (00:21:17): Yeah. Of the the major companies, Brad, snapped into a 20% riff. They had 6000 employees or so, and they cut 20%. Facebook is the one that's perplexing because They seem to be vastly overstaffed as you talked about, and they have been massively they've had a massive decline in their stock price, and they are the one who was affected most by. What Apple did in terms of app tracking transparency is I think that there's a perception, though. Chamath Palihapitiya (00:21:44): I I mean, I'm still stuck on this issue. I really think that stock prices tend to ebb and flow based on sort of like friction or momentum. And when there's momentum, more and more people can easily underwrite it and when there's friction, fewer, and fewer people can underwrite it. And so I think that if you are a CEO of a public company, you have to think about How many headwinds do I have and how many tailwinds do I have all the time? And some of them are in your control and some of them are not. At least in the case of meta as with Apple and Google, they meta is forced to copy the best decisions of these bigger companies. Why? Because they were one of those biggest. Now they may have been the smallest of the biggest. But it's going to be very hard for Meta eventually to not converge on those same set of decisions. And the most important one is what Brad just alluded to. which is that there was a point in 20162017 where you literally could not give away Apple stock. And the big turn of the dial and you know Some say it was Carl Icahn. Who knows? Was this theoretically this famous dinner that Carl Icahn had with Tim Cook where he laid out a plan and it's like, listen, you need to start managing cost better, managing OpEx better, return a ton of cash, buy back the stock and you'll be a darling, and Tim Cook was rewarded. And he's he's been rewarded with an incredibly performing company. And so, you know, Google is slowly inching towards that plan. Microsoft is in that plan. And so the only big four horsemen that hasn't really gotten script yet is meta, but they will. It's just we're just debating when. And so there's a perception that, you know, meta will copy what the rest of these big guys do. But these other long tail companies, the headwinds are just greater And so when you, you know, don't have a company that can be broadly owned by intelligent thoughtful investors, That's a headwind. Right? When you give nobody votes, that's a headwind. And so that's why you see a company that's continuing to grow impact not being able to translate that into economics. Chamath Palihapitiya (00:24:03): And if I were the board of that company, that should be a wake up call. Because eventually, that flow into the morale of the employees and the ability to retain and then the ability to invest in the future. And I think the simple answer is enough with all these gymnastics around control. If you looked at Elon, the most incredible thing from day one was there's common stock. You know? And his whole thing was like, I'm just gonna do the best. And you know what? If I'm not the best, I'm gonna be out. He's Jason Calacanis (00:24:31): never literally said he is Jason Calacanis (00:24:33): -- Speaker 6 (00:24:33): Do you Jason Calacanis (00:24:33): guys want to vote me out vote Chamath Palihapitiya (00:24:34): me bought me up. He's never ever played these games. So in this funny way, control is a symbol of a lack of ability to run the business. Masterful mastery of a business, you can translate that to being I'm just gonna have common stock. Jason Calacanis (00:24:49): Well, I mean, and David Friedberg (00:24:49): if you think of historical argument, by by the way, tracking back to the high voting class for founders was that they would be challenged by the investors in the market, and you can see the things that Carl Ican and others ask for. They say, we wanna see you cut OpEx. We wanna see you pay dividends. We wanna see you buy back stock. and we wanna see you grow. And so the trade off then in the mind of a founder that that that that started this business and scaled it to billings and revenue, is, well, that means I've gotta make short term decisions over long term decisions. I've gotta make the I I gotta give up some of my long term opportunities to trade for my short term opportunity. That's the that that was the argument I think originally for the voting class. And you can read this in Google's founder's letter as well. Does that not apply any Chamath Palihapitiya (00:25:34): founders at Google don't even show up at the company? Why do they have to have super voting control? They don't probably even know what going on inside the company. Jason Calacanis (00:25:43): Yeah. But let's talk about David Friedberg (00:25:44): that argument. Like so sorry. Look. No. Speaker 6 (00:25:46): I I just want I I just wanna hit David Friedberg (00:25:47): on Zuck's point because Zuck has said, look. You know, this this VR AR, metaverse, stuff in the future, it's everything. This is where I want to invest our resources. It's where we wanna spend time. Chamath Palihapitiya (00:25:58): But look what happened. They they made a miss they said we're going in this direction. Investors, really smart, thoughtful, supportive investors including Brad were like, hold on. Check your check your role. and they capitulated. Now to your point, did super voting control come into play there? No. Of course, he could have said, you know what? Guys Pound sand, I'm gonna do what I want. Instead, he's like, I'm a smart guy. These guys are smart guys, so I'm gonna make the smart decision. So in my opinion, all of these things are red herrings. These are in directions. Right? So this idea of I'm just gonna take my toys out of the sandbox like a crying baby is what super voting control means to me as a shareholder. David Friedberg (00:26:35): Brad, do you think the era of super voting control for founders taking companies public is over? Jason Calacanis (00:26:40): Nope. Should it be? Speaker 8 (00:26:42): You know, I I Brad Gershner (00:26:43): I think it's again, when Facebook was doing really great and Snapchat was doing great, nobody complained about super voting stock. Okay? So I I think that, you know, my preference would be that I partner with a company where I know the founder, whether irrespective of their votes, right, listens, cares, and has the mental flexibility to make course corrections. Right? And the and the reality, what I'm trying to point to, we have lived through a decade of excess. Everybody knows all these companies could do exactly the same revenue. David, this is the push back to your point unlike what the Google argument was. Exactly the same revenue. with vastly less investment in terms of people, etcetera. Right? A 20% risk at Meta would literally only take them back to where their personnel expense was in 2021. Yeah. Nobody argued in Jason Calacanis (00:27:43): 2021 -- Jason Calacanis (00:27:45): They said they were gonna do this too, Brad. Right? And just hasn't happened yet. Brad Gershner (00:27:49): This is this is part of the problem, Jay Cal. Everybody so why 10%, why 10%. You've doubled this the number of people working in the business over the last few years. Right? There's nothing magical about 10%. The real question is, what is the optimal number of employees to produce the best outcome for our customers and our advertisers? And what Bill Gurley has pounded on, and we've all talked a lot about, there has been in a zero cost of capital world. a unilateral march, 2 more, more of everything, invest in everything, hire more people. Silicon Valley would do itself a favor These big companies vacuumed up every single engineer in Silicon Valley. They ought to return that pool to the start ups that are actually inventing the future They don't need this money in place. I mean, last night, I read a report, came across Bloomberg. The e the Elon's talking about 75% reduction at Twitter. Jason Calacanis (00:28:45): Yeah. So that would leave Twitter just to give people some context here. That was in that that originated in the Washington Post. That would take them from around 75100 workers to maybe 21800. And Brad Gershner (00:28:55): so he's starting from 1st principles. How many people do I need to build the next generation of Twitter? That's the question. Start with a blank sheet of paper and ask that question. You'll come up with very different answers. Jason Calacanis (00:29:10): Back to Chamath Palihapitiya (00:29:10): the governance question. I think that you you can correlate these kinds of governance overreaches with 0 interest rates. That dog doesn't hunt when rates are at 4 or 5%. I don't care who you think you are, but when you try to go public in over the next 4 or 5 years, if rates are sustained Jason Calacanis (00:29:31): 3, 4, 5%. Chamath Palihapitiya (00:29:32): That will be the check on all of these people's overreach because you will have liquid alternatives that on a risk adjusted basis seem better. And when rates are 0 and everybody was forced to own tech, We all gave up our standards. We all stopped saying, you know, oh, you know, the things that we used to think were important before, like one person, one vote. you know, a check between the board and the CEO, a check between the executives and the shareholders. They'd all went out the window. Jason Calacanis (00:30:05): No discipline. No hygiene. Right? Chamath Palihapitiya (00:30:07): Be because when interest rates are at 0%, you have to remember. Right? How does how does the the structural basics of of the financial markets work, it is meant to make money On behalf of every single entity in person and thing in the world, from a pension fund to a university, to a research lab, to a government, to an individual. But in that ability to make money, when we took interest rates to 0, 40% of what we all used to own bonds yielded nothing. And so we just completely whipsawed to the other side and said, we need to own anything that grows. So tech got a disproportionate amount of attention, but in that we lost our standards. And we are now going to go through the hangover of dealing with it. And so You know, Snap will be an example of where investors are going to abandon that company because because it's just there's no point There's no governance. There's no ability to have a conversation. It's in the too hard bucket. So people will just leave it. It'll be stranded, and it'll be a refugee in the public markets. I think Meta will be fine eventually because I think that they will revert to the mean. And the mean is Microsoft Google and Apple, and we already know what that playbook looks like. So I think what Brad predicts is more likely than unlikely. And I think in the future to David Friedberg's point, I think it'll be very hard to justify these things. Bankers will be able to push back Because the buy side ultimately, guys like us who have to buy the stock when these things go public will say, nope. You wanna have these You you wanna have these dumb governance games? Nope. Not for me. I'll just go buy something else. I'll go buy more Tesla where it's one person, one vote. What? You know? So it's it's hard when the best CEO in the world is like, judge me, keep me, fire me. Chamath Palihapitiya (00:32:01): on an equal basis. And everybody else is like, oh, I'm smarter than this guy. And so you know what? Let me make sure that whenever I feel like it, I can throw a temper tantrum and take my toys out of the sand Jason Calacanis (00:32:10): And let's use a there's analogy here. Chamath Palihapitiya (00:32:12): Doesn't work. Jason Calacanis (00:32:13): Look at look at Steve Jobs. ousted from his own company. Company made a huge mistake asking him. Some people argue it was a learning experience for Steve to get better at his job. He comes back, and he absolutely turns a company around. So there's an example. Chamath Palihapitiya (00:32:26): Thus far, you've proven that the 2 most impactful and important CEOs of the last 50 years had the courage to basically say, let my performance do the talking. not my protective nanny control. Jason Calacanis (00:32:38): Correct. And Steve's performance was light in that first period. He he had some problems. And -- And he looked at Chamath Palihapitiya (00:32:44): Chevy's still one. But this is what the greats do. The greats know how to perform, not, you know, use some no trade clause to make sure that you can just sit there and underperform forever. Jason Calacanis (00:32:54): do we think, Brad, when we get to the sort of macro look at this? Let's assume we're in this this 4 or 5 or 3, 4, 5% interest rate for some extended period of time. Let's call it a decade. What what does the tech industry look like? Because it does seem if Elon does with Twitter, what seems to have been leaked here correctly according to all reports. And there's a 20% riff at Facebook, and we start to see people take the medicine. Is that the ultimate setup for now, hey. These companies are being run to throw off cash? And we have some way out of this what people think is gonna be a very hard landing. Speaker 8 (00:33:33): Well, I mean, you know, first, just let's talk about, you know, where rates are. You know, today, you know, we're at 4, 3 on the on the 10 year. I mean, Technologies performed incredibly well for a long period of time with rates in this in this range. So Brad Gershner (00:33:48): the adjustment period is very difficult. Right? And so when when you look Speaker 8 (00:33:54): at the convexity and going from 0% interest rates to four and Brad Gershner (00:33:58): a half, like, that has been a shock to the system. It has been destabilizing to multiples. Multiples were basically infinite last year, and now multiples have come back to reality And so I don't question. In fact, I actually think free capital was a weapon of economic destruction. Right? Free capital hurt good companies from being great companies. They hired too many people. Their margins were too low. you know, SoftBank Funding, all of these rideshare companies around the world to compete with Uber meant that Uber, even though they're a market leader, did not have market leadership economics. And so the ringing out of the system, of that excess, that grift, that stupidity, that gonna be good for the fundamentals of these business, but the transition from, you know, that low rate environment to the high rate environment is dislocating for investors. it's dislocating for management at these companies, and it's gonna be dis this is not, you know, a a 6 month phenomenon. We're gonna have 2 years of ringing out. Right? Because there's no bail out here by the Fed. There's no v shaped recovery for these companies. This is now going to be I heard somebody say this week. If the last 10 years was about beta, the next 10 years is about alpha. Not all companies are going to do well. Not all companies are going to bounce back. This is going to be about what companies have the courage to build great products and to drive a great business model. that allows them to compete and continue to invest at high rates in the next wave of innovation, whether it's AI, etcetera. And so, you know, to me, the markets JCal have largely put in a box at this point inflation and rates. Right? Rates have come up 65% in the you know, from 2.7 to 43 in the last 60 days. and the market's basically sideways. It's down 5 to 10%. Rates are up another 10% in the last 2 weeks, and Google and Apple are up. That tells me that the market's gotten, you know, gotten its its arms around rates and inflation. What the market really is worried about now are 2 things. Number 1 is earnings, and number 2 is the long tail of risk. Brad Gershner (00:36:12): On earnings, there's kind of a conventional wisdom emerging from a from from many folks that 32100 at the bottom or maybe 27100 at the bottom that we're gonna go from 225 and in S and P earnings back to 200. That seems to me to be, you know, again, a lot of people making that bet. I don't see any evidence in q3earnings, UnitedHealthcare, United Airlines, Schlumberger, Tesla, etcetera. Their earnings are up a year over year basis. They've guided now to q 4. Their earnings are gonna be up on a year over year basis. And the consensus expectations in q 1 are that earnings are gonna be up on a year over year basis to go from 225 bound down to Jason Calacanis (00:36:55): 200. Brad Gershner (00:36:57): We it it it can't just be a slowing of the rate of growth of earnings. you have to reverse course entirely. So we have to see something we're not seeing yet. So on an earnings growth, that's where the mark there's some tension in the market. Then finally, what I would say is there are a lot of big brains in the world who look at this level of dislocation. Rates going on the 2 year or on the front end of the curve for 0 to 4a half. And Druckenmiller or Soros would say negative reflexivity. Shit break when you have this much volatility in the world. The world is not equipped to deal with these exponential moves. And so there's a lot of concern in the world whether it's about Ukraine, Taiwan, UK bonds, the Japanese yen, nobody knows what it will be. But they're just saying demand to hire more of safety because the propensity, the likelihood that shit breaks when you have this much dislocation is higher. Jason Calacanis (00:37:49): So -- The proverbial black swan could come any minute and could cause another downdraft. Brad Gershner (00:37:56): But last year, we were all sitting here and said asymmetry to the downside. multiples at all time high, interest rates at all time low. We saw that starting to roll over. We saw smart people, Elon Basis, etcetera, start to sell into it. As I sit here today, yes. We're going to have harder times ahead economically, but it feels to me like a lot of it is priced in. I don't think we have huge asymmetry and skew to the downside. I think that's like fighting the last battle. It's not to say in this distribution of probabilities, one of those events can't occur. But from my vantage, when stocks the average stock down 20%, stocks like Meta down 50 to 60%, a lot of stocks down Jason Calacanis (00:38:36): 70, 80, 90, Brad Gershner (00:38:37): that doesn't seem like the time to call the big short. That seems like a time to be like new Chamath to positive. Jason Calacanis (00:38:45): should we go to TVpi, DPI, and talk about the privates? Chamath Palihapitiya (00:38:49): Well, I David Friedberg (00:38:49): just wanna say one thing about your prior question, which kinda ties in to some of what Brad said, but you you asked the question about, does this mean that these companies are now gonna kinda cut costs and start spitting cash. I think there is certainly a market incentive to do that to keep share prices up. And the companies that can do that are are certainly taking action with the headcount reduction across some of the big guys. What I think is gonna be interesting and what a lot of people are watching is how many of the small and mid cap guys can actually do that. And those that can't will it will become pretty evident pretty fast. and they're gonna end up in the shitter. Jason Calacanis (00:39:30): Your talk is Jason Calacanis (00:39:31): -- -- Jason Calacanis (00:39:31): a Peloton or something like that? David Friedberg (00:39:33): Doesn't matter across pass, across consumer, across d to c, across hardware, everyone is now saying, can you actually earn? And at this point, you should have enough scale that you should be able to earn. And if you cannot, the market will punish you for it. And that's certainly what seems to be the incentive and the pressure in the on the buy side to the the executives across all these organizations today. So I think that's a big trend of what's happening right now. is everyone's going through their portfolio, spending time with management and asking, can you earn? Can you actually get this business to generate cash? what is the path, show it to me, prove it to me in the quarterly results. And if you can't, then you're not fitting in a bucket that I can own you. Brad Gershner (00:40:13): The only irony there of Friedberg is that that comes as a surprise. God forbid we should actually expect companies to prove unit economics and and to make profits. Yeah. Speaker 6 (00:40:24): But when you David Friedberg (00:40:24): when when your interest rate is 0, you divide by 0. You get infinity. So, you know, you were able to kind of explain everything away into the future. now you actually have an interest rate at 5%, I gotta be, you know, making a I'm I'm not gonna pay a lot more than 20 times earnings, and I wanna see that that's really my earning. I wanna see that you can actually earn. Chamath Palihapitiya (00:40:41): There is a person at Brad's Investor Day who Brad interviewed, and I won't say his name, but he's a star of stars. He's a bit of a goat. And he had I don't know. I'll just say the generalized version of what Speaker 8 (00:40:53): he said. -- leave it up. Chamath Palihapitiya (00:40:56): And said the following, which is so true. It's like we've gone through an entire decade of under training an entire generation of people in Silicon Valley. You know, we have under undertrained and under mentored the product managers, the engineers, the senior executive management, the CEOs, many of these people, unfortunately, are not they don't have the skill set to execute at a high level at any point in the cycle except when rates were 0 like many business models. And now that rates are not at 0, these people are turning out to be extremely underdeveloped and unable to run these businesses. And when he said that it really struck a chord because he's right. And, you know, he was also saying it just got even more exacerbated in this era of remote work because now there even less opportunity to mentor and to coach and to talk one on 1, and people think that this is a boon and it's not. So, you know, we we are going to deal with also the aftermath of an entire generation of highly under skilled companies. because the executive and senior leadership and CEO ranks of many of these companies are not in a position to win. Jason Calacanis (00:42:07): If I may, there was an interesting moment this week when we talk about this discipline has been lacking in the last couple years. A $101,000,000 funding led by Coto, Lightspeed Venture Partners, at a $1,000,000,000 valuation for stability AI, this is a for profit company built off the backs of the open source project, stable diffusion. They have no revenue. They have no product. They've been around for, you know, a millisecond. Any thoughts on this type of funding happening pre product, pre revenue on an open source project? David Friedberg (00:42:45): mean, there's still there's always gonna be Jason Calacanis (00:42:47): -- David Friedberg (00:42:47): Yeah. It's a free world. Chamath Palihapitiya (00:42:48): Not my David Friedberg (00:42:49): mind's gonna be these these asymmetric bets that people think if it works, it's worth a 100 x. Yeah. And they'll price it as they price it. I think the I think I think what we were just talking about is a little different, which is how do public markets rationalize evaluation? these businesses need to start earning for the public investors to be able to represent to their investors that they're doing their job and making sure that they're holding management accountable demonstrating earnings potential. But these early stage bets, you can see valuations range depending on the asymmetric outcome potential of the Jason Calacanis (00:43:20): -- Chamath Palihapitiya (00:43:20): And you know what the upper and you know what the upper bound is? The upper bound is that when rates were 0 and governments were printing money more than they could get their hands on, the top 5 tech companies represented a quarter of the S and P Jason Calacanis (00:43:32): 500, Chamath Palihapitiya (00:43:33): but there was a pretty steep fall off. And everybody else represented the next, you know, about 10% of the market cap. So the point is that we had bounded outcomes when rates were 0. The average market cap of a successful company was around 3 or Jason Calacanis (00:43:48): $4,000,000,000. Chamath Palihapitiya (00:43:50): So I'm not gonna judge this company at all, and those investors are very smart investors. Lightspeed and co2. What I will say is at the end of the day, there is a terminal buyer of these companies. And we had a period of time that we can look back on to understand that when the party is absolutely rip roaring, The alcohol is free. You know? Everything everything is going well. Yeah. We know what the upper bound is, which is the average company if you were able to get out would be worth about 3 to 4,000,000,000. And then there was a very, very steep dispersion where then there was 4 companies that were a quarter of the market cap and a few in between. So if you do a deal at a 1,000,000,000, the overwhelming odds is that the terminal exit is going to be somewhere between a 3 x and a 4 x, x of dilution, and x of all of the other capital that comes in, and all of those features that may be attached. So I think everybody should be allowed to make different kinds of bets. And you'll see over time which kind of deal can generate which kind of return. And this will be a this will be a really interesting data point. Jason Calacanis (00:44:55): The the the common thinking was these kind of deals were not gonna happen in this kind of a market. So when you saw this kind of deal happen or some other that we've talked about privately, What do you think is happening in terms of discipline of private markets? Chamath Palihapitiya (00:45:11): I think I think I think maybe you should tee this up with Brad because I think that what I have to say follows on Jason Calacanis (00:45:16): -- Jason Calacanis (00:45:16): Okay. Jason Calacanis (00:45:16): -- Chamath Palihapitiya (00:45:16): with him, but there's a there's a there's a macro view of the venture industry that, again, it's like everybody wants to never look at the past. Everybody wants to assume that this time is different. And there's some work that he did, which is really instructive, Jake, help answer this question, I think. So -- Yeah. Maybe you should ask him, and then and then I'll jump in afterward. Jason Calacanis (00:45:35): And then this is the TV TV PI study. Yeah. So, I mean, Brad, in relation to my stable diffusion and and -- Yeah. -- DPI. Maybe you can Jason Calacanis (00:45:44): -- Speaker 7 (00:45:44): Well, you know, we we we shared Speaker 8 (00:45:45): this with our investors at our Investor Day. that that you guys are out this week. Brad Gershner (00:45:49): And there's a modern industry. It's only been around since the mid nineties. Right? So the history of venture you know, is you gotta look at it when you look at returns. It's to say, Chamath Palihapitiya (00:46:01): By the way, what an incredible chart you guys put. This is so good. Yeah. Let's describe the chart for people Jason Calacanis (00:46:07): who yeah. Chamath Palihapitiya (00:46:08): The truth hurts. Brad Gershner (00:46:10): So breakdown. Let's go ahead, Jake. Al, do you wanna -- Well, Jason Calacanis (00:46:13): I mean, just so if just for people who know, we on Spotify and on YouTube, you can search for all in showed 101, and you could see this chart if you're watching the video. If you're listening, the video describes 1997 to 2020. There's an orange line across it with the DPI average. So why don't you define DPI for a minute? Brad Gershner (00:46:32): What we did is we took the top tile data from Cambridge Associates who invest in all across the entire venture industry is is widely used as kinda industry data. And we just asked a simple question of the top quartile, top 25% of venture capital firms. Right? What were in those vintage years of the funds. So funds raised in Jason Calacanis (00:46:54): 97, 98, 99. Brad Gershner (00:46:56): What were the average cash on cash returns. Right? TVPI is what your mark is. That's where you're carrying the mark's total value to paid in capital. Jason Calacanis (00:47:08): So this could be just so we're clear because it's a little confusing to people. You have a company on your books that on paper is worth 10,000,000,000. You had put in at a 1,000,000,000. And on paper, you've got this 10 x return. Right? Brad Gershner (00:47:20): Correct. Right. DKI is actually cash distributed to your investors. So that's cash on the barrel head. So The reason if you look on this chart Sorry. Chamath Palihapitiya (00:47:28): And just to just to build just to be very clear for everybody. The whole goal is to be able to convert your TVPI, so what your theoretical book is worth into DPI, which is here's money back to my investors. And what you want on this chart is the blue line to catch up to the gray line. So you want the gray line to be as high as possible and eventually over time you want the blue line to come Jason Calacanis (00:47:54): up. Correct. Right. So the blue line here, if we're looking at 2010, just for one example, you have a 4 x for the TVPI. You 4 x to everybody's money. But the blue line only got up to, it looks like, three 5 x maybe or something in that range. Speaker 7 (00:48:09): Let let me Brad Gershner (00:48:09): just point out because that's an interesting year, Jason. Yeah. We were coming out of the Jason Calacanis (00:48:13): 2008, 2009 Brad Gershner (00:48:15): period. Everybody was desponded. They said I'm sure they said what you just said about stable diffusion. Don't invest in anything. Everybody's stupid, but they were incredible companies. that were invested out of that vintage. Right? Snowflake and Mondo out of our vintage shortly thereafter. So maintaining this duality that, yes, the world sucks, but the the secular curve of innovation continues. So that is a vintage where people actually got things sold, got them public, distributed the cash back to investors. The real question is this, on the vintages between Jason Calacanis (00:48:50): 2011, 2012, Brad Gershner (00:48:52): and now, How how much of those gray lines? How much of those marks? Look. Those are historical marks. Marks have never been this high. How much of those marks will actually return turn into cash on the barrel head? And how much of those will actually just be mean reversion? It'll all get marked down, and the returns at the top quartile will look much like the returns did in the period between 2000 and Jason Calacanis (00:49:19): 2007. Brad Gershner (00:49:20): My hunch is that by the time the cash is actually distributed. The returns are gonna revert to that orange line mean, which means there are 100 of 1,000,000,000 of dollars in markdowns sitting in LPs and GPs portfolios that are likely to come because nobody really thinks that the deals done in Jason Calacanis (00:49:42): 15, 16, 17, 18 Brad Gershner (00:49:44): are gonna be that far above the mean return. Jason Calacanis (00:49:46): And so people also understand this. These are vintage years. So these are funds formed in that year. And so these trails, a venture fund takes about 10 years. They're they're formed without concept in mind. to become realized. So if you're looking at, you know, the year Jason Calacanis (00:50:01): 2016 2017, Jason Calacanis (00:50:03): these are but five year old funds at this point. Right? David Friedberg (00:50:06): Correct. Jason Calacanis (00:50:07): Yeah. So they they they do need time for these companies to grow. How much of this, Chamath and Friedberg, do you think, is attributable to entry price because entry price during Jason Calacanis (00:50:17): 2017, 18, 19, 20 Jason Calacanis (00:50:19): is gonna be extraordinarily high entry price, i. e. the value of the company when investors invested in 28, 2008 to 2011 when I had a lot of my hits was pretty low. I invested in Uber, Thumbtack, And Jason Calacanis (00:50:34): -- Brad Gershner (00:50:34): Do you invest in Uber? Com, those Jason Calacanis (00:50:37): 3 Jason Calacanis (00:50:37): were $15,000,000 combined. The 3 evaluations. Yeah. Did you Brad Gershner (00:50:41): you invest in Uber? Jason Calacanis (00:50:42): yeah, maybe 3rd or 4th investor. I can't remember. Amazing. I did get in there. I got in there slightly before you did. Like, maybe you should hear Chamath Palihapitiya (00:50:51): You you should write a book on Angel Investment. Jason Calacanis (00:50:53): I should. Yeah. Chamath Palihapitiya (00:50:54): You should call it Angel. You should call it Angel. Very good. Very good. Jason Calacanis (00:50:57): But I let's talk about entry price because entry price does matter Brad. or maybe chop off if you wanna take entry price for free, Bert? Chamath Palihapitiya (00:51:03): Well, look. There's this I think I think what that setup is, that's probably a chart. that most VC organizations don't even look at. Because if you looked at that chart, you'd have to take a real investing approach to things. So if you were looking at that chart as a GP, there are 2 takeaways. The first takeaway is oh my gosh. What is the sum of the invested dollars above this orange line since Jason Calacanis (00:51:34): 2012? 2011. Chamath Palihapitiya (00:51:38): Right? Because all of that stuff could just basically get whacked if we mean revert. And the answer is about 5 or $600,000,000,000 of paid in capital. So then you would say, oh my god. Well, if there's $500,000,000,000 of impairment coming down the pipe, maybe more. Maybe it's going to be 750,000,000 because the other thing to keep in mind is Over time, the the orange line has a tendency to go down not up. Right? because as you add more and more of these things and slumps like performers, you have a general decay function in every asset class as it scales in size. So this this orange line theoretically goes down, which means more of those gray bars get destroyed. Okay. So there's Let's just call it 600,000,000,000 or Jason Calacanis (00:52:22): 700,000,000,000. Chamath Palihapitiya (00:52:23): The most important thing you would want to do is now look inside your portfolio and try to answer the question uh-oh. How likely am I to see that impairment? And, Jason, this is a proxy of answering your question. The the important question for a venture fund which then has a downstream implication to the to the entrepreneurs. Now what do I do knowing that all of these gray bars could get destroyed? And Nick, go to the next chart. While I calculated it for you guys, so I'll give you the answer. Here's a simple thing. And, you know, this is publicly available data. Now why did I do this? Because when Brad showed me that chart, my immediate mind went to how do I make sure I'm not susceptible to losing a ton of money? Well, what happens in markets is that when things go down, the things that are highly correlated go down the most. because they are the things that are the most highly trafficked, which means that they are the things that have the most investors, which means that in an upmarket, they have the propensity to have the highest prices. So we put we, you know, pulled all this data from pitch book, and we just started to I just took a smattering of firms here. And recent Index, GrayLock, Benchmark, Sequoia, GC Founders Fund Tiger, XL, Kleiner Khosla, and us, you could pick anybody because this data is publicly available. and I started to calculate the overlap coefficient. So how how correlated are you with other people's portfolios? trying to estimate at the upper bound and at the lower bound, what will happen? So, Jason, this is a a a proxy of answering your question what about entry price? Well, if you have a very low correlation which touch would we have, you're less you're less exposed to bad entry price Jason Calacanis (00:54:07): because it wouldn't have been a bidding war to get into these companies. Chamath Palihapitiya (00:54:09): Exactly. You picked your right spot you you went into areas that were earlier so you were able to risk manage a little bit better. But if you have a highly correlated portfolio, Now your marks become very susceptible. So my guess is if you take the Jason Calacanis (00:54:23): $700,000,000,000 Chamath Palihapitiya (00:54:25): and you calculate it for all the VCs and you look at their correlations, and their overlaps, you can probably guesstimate where that $700,000,000,000 of impairment will come to. And you can lay it out across any organization that you're interested in trying to find a solution for by just stack ranking them and by looking at the at the at these correlations. And this is, by the way, to be clear. Nothing about the quality of the organization or the people, but this is just simple portfolio mathematics and how portfolios tend to play itself out. in moments like this? Jason Calacanis (00:54:55): Well and there's some interesting data in here as well. I I a Friedberg you probably are aware of, where some fund, like, let's say, Founders Fund and Khosla have a close relationship because Keith Roy was at Khosla, and then he moved to Founders Fund. So you see that nice dark purple there where they have a high correlation investments. Interestingly, Index seems to just follow benchmark and Bill Curley's investments and plow into the That seems like the highest correlation now. Chamath Palihapitiya (00:55:19): Here's the thing. If you had to steel man the defense of that strategy, Jason, I would say in an upmarket, Benchmark is a $500,000,000 fund or I get no allocation. If I was a smart LP and I did this work, I'd be immediately knocking on indexes doors saying, can I put money in you? Because in of my mind, it's basically getting leverage on benchmarks portfolio. Jason Calacanis (00:55:38): Yeah. You figured out how to follow them. Yeah. Chamath Palihapitiya (00:55:40): Yeah. But when the cycle reverts, You know, you're not the only one that wants to copy benchmarks portfolio everybody does. And if these correlations are too high and the overlaps are too high, then you start to get into a cycle where you put yourself in a position to actually suffer from the market beta much more Jason Calacanis (00:56:00): -- Speaker 6 (00:56:00): Yeah. Chamath Palihapitiya (00:56:00): even when you can benefit from the market beta in an upcycle. Jason Calacanis (00:56:03): Friedberg, do you want to analyze his chart and Jamat's thinking here, his diary? David Friedberg (00:56:11): I don't know. I mean, I just think this has become a pretty competitive market and a lot of the value's been competed away. Jason Calacanis (00:56:20): Well, I mean, I think -- For a for a layperson, please. Yeah. David Friedberg (00:56:23): The the long term value creation of technology of new technology is gonna remain high. The market's gonna pay for that. So, you know, new market value creation, new market cap, is gonna continue to be built every year. What's happening when venture has a low multiple is that number 1, the good companies end up the founders end up owning more of the company. and they end up, you know, having a higher percentage ownership when the company ultimately gets sold or goes public because they were able to get VCs to compete against one another. and as a result pay a higher valuation and as a result buy less of the company. And then number 2 is that because the VCs that couldn't get into that company had a bunch of money to manage. They went and put money into crappy companies. So, you know, it's a lucrative business. You guys everyone's in that business because it's a lucrative business, and that certainly it takes a decade to realize whether or not you're good at it. So, you know, you have this period of time as Brad shows that maybe a decade before the LP market learns who is and who isn't bad. And meanwhile, those folks who got competed out of the good deals, you know, they don't look very good, and the folks that are left in the good deals own less of the company and their returns get diminished. And, you know, I think, ultimately, this market is probably gonna end up being a multi decade cycle of capital in and capital out. We're probably at Palihapitiya being managed in venture funds right now, and it'll likely decline for the next decade. Jason Calacanis (00:57:59): Brad, how would yeah. Brad, how would LPs look at Chemut's analysis there? And how do they look at the clubby nature and overlap you know, writ large in our industry. And and then whatever other insights you have. Brad Gershner (00:58:11): Yeah. No. I I I mean, I think very much disagree with with with David that all the returns are getting competed away. The the the huge difference between the venture market and the private equity market or the public market is that the venture market is unquestionably a power law market. Okay? Jason Calacanis (00:58:29): 90% Brad Gershner (00:58:30): of the gross profits and the returns go to 10% of the deals and 10% of the investors. Right? So we just show the average of the top quartile. But if we show benchmark 1 or Jason Calacanis (00:58:40): 2 Brad Gershner (00:58:41): or benchmark 6 or 7, it's ridiculous. Right? The cash on cash returns -- Yeah. Jason Calacanis (00:58:45): -- Brad Gershner (00:58:46): over 20 items on those funds. Jason Calacanis (00:58:49): Let's just pause and explain that to folks. Yeah. Most venture firms here are getting 2 x on average. That's the average. And is that average for the top quartile or all VC firms? Brad Gershner (00:58:59): It's the top quartile of VC Firms. Jason Calacanis (00:59:01): Their average is 2 x. Chamath Palihapitiya (00:59:03): Yeah. This is the upper 20 the 25% vest. Jason Calacanis (00:59:06): -- Jason Calacanis (00:59:06): were you include the 75 bottom, David Friedberg (00:59:08): what would be trash? Brad, let me ask you a question. What if instead of looking at the top quartile, you just looked at the top 10 venture firms. Yeah. Because the number of venture firms has exploded over the last decade and a half. Brad Gershner (00:59:20): But see -- And so Jason Calacanis (00:59:21): -- Chamath Palihapitiya (00:59:21): By the way, I think the point that you're not getting is the top 10 changes every vintage. And and the problem is if you are aching the wrong portfolio in that vintage, you'll get run over. David Friedberg (00:59:31): Right. Chamath Palihapitiya (00:59:31): And so the real goal of this And I I also tend to disagree freebroke with what you say. I don't think the returns are getting competed away. I actually think it's more alpha than ever Correct. And you gotta be a good picker. And if you're a momentum investor, you just need to be aware on the way in that you are going to put your portfolio under tremendous pressure in drawdowns? Brad Gershner (00:59:54): I think the other thing the other thing it does This idea of the industrialization of venture, the soft banks, the Tigers. Like like, it's a myth. You can't industrialize that. You can you can build an index fund to the public market because you can buy every company. You might even be able to build an index like fund in private equity because everybody can go bid for every company. but venture the founder chooses you. That early GP chooses you. And so if you try to build an index fund, that misses the best deals. And I think there's adverse selection. The bigger you get, the less likely you're to convert the best deals. now you're really in trouble. David Friedberg (01:00:35): Brad, do you think an index of 1st time VCs outperforms kind of that you know, top quartile index. So, you know, there's some LPs that select in to just solo GP, first time fund manager, first time fund or, you know, maybe second time with solo GP. But it's kind of like, you know, first into the market before you really scale up, that's where so many of the returns are found. Brad Gershner (01:01:00): A lot of funds like MIT, they look for emerging managers because you're you tend to be younger, hungrier, you have experience, you've got a lot on the line. But, certainly, if you look at the hundreds of startups in VC land over the course, of of the last several years, 99% of them are probably garbage and will fail and and won't work. So that all stars will be all stars and and the rest won't. Somebody asked me, I use this analog. They said hundreds of new people have come into venture. And I said, yeah. It's like kinda like a marathon. You're right. We have 500 runners, and now we have a 1000 runners. But from my vantage, It's the same 5 to 10 runners competing for the podium week in and week out. In that top 10, in that power law, it doesn't change a lot. Yes. there have peep then people break in. We know how hard it is to break in to Silicon Valley. Nobody invited Altimeter to the dance. Nobody invited Social Capital to the dance. Nobody invited Jason Calacanis to the dance. Chamath Palihapitiya (01:02:04): It was the opposite. They locked my doors Jason Calacanis (01:02:06): to sit there and like, yeah. -- doors. Brad Gershner (01:02:08): Trust me, man. Jason Calacanis (01:02:09): We're fucked. Brad Gershner (01:02:10): Because it's a highly lucrative business dominated by some incumbents that had huge brands. They didn't wanna share the fruits of that. We showed up. We worked hard. We build incredible teams. We had conviction. Right? And we were we also had good fortune. Right? Yes. We were smart. We were we we placed some good bets, but you also have to get lucky in this business. We were lucky to be born at this point in time. Lucky to start when we did in Silicon Valley. I'm gonna finish just with this one point. This whole experiment of venture capital is less than thirty years old. The modern age of venture capital is 30 less than thirty years old. We're going through this period where everybody wants to shit all over the industry. You know, TVPI is gonna come down all this other stuff. I think that Venture, I my dad when he went to start a business had to borrow money mortgaged the house. Think about the friction for somebody with a young family. If the cost of failure was losing your house putting your family in harm's way versus some young startup in Silicon Valley today, Where the consequence of failure, particularly if you if you conduct yourself with integrity is that you learn a lot. Right? There's no losing a house. There's no cataclysmic outcome for your family. So to me, when you look at the economic unlock that we have in this country by reducing friction to invention. By reducing friction to experimentation, I am incredibly bullish on the future of venture I think founders are the engine that drives the world forward. Right? That's where we get electric cars. That's where we get rock markets that land themselves. That's where we get mRNA vaccines. And so there will be cyclicality. There will be industrialization. There will be big funds and small funds. But the reality is that this ecosystem is a massive competitive advantage for this country. Brad Gershner (01:04:02): I think when we look forward at the information age over the next 30 years, the power of this ecosystem is more strategic advantage to this country even the natural resources. Chamath Palihapitiya (01:04:12): I'll say I'll say something orthogonal to this, which is in order for that to happen, just to build on the point, Brad, of of your guest that you're think, we have an entire generation of financially innumerate General Partners at Venture Firms. And Venture needs to be a pillar of growth in society. And I think people need to have more financial tools and underpinnings to do their job. Why? Because over these next 10 years, when maybe you have 500 to 3 quarters of a $1,000,000,000,000 of value destruction, and it's because you didn't think about portfolio construction properly. That entrepreneur that needs your money, you will have to say no to them or renege on a deal or let them down. And the reason is that you didn't think about that on the way in. And so these are practical skills that every other part of the financial asset infrastructure has to learn. We are top the hard way. You know, we are taught in the public markets how to think about dispersion, correlation, alpha, beta. You're taught in private equity how to do it. You're taught in every other asset class, and we romanticize venture to think that none of that matters. But in a moment like this, you will see how much or how much it doesn't matter. And if you're gonna live up to the to the actual commitment you make to an entrepreneur, you better get financially smarter is what I would say. Jason Calacanis (01:05:38): Alright. Let's move on. Do you wanna go to stock picking or lift versus Newsom on this prop Jason Calacanis (01:05:44): 30? Chamath Palihapitiya (01:05:45): I wanna hear that Friedberg Diet Travel Stock picking. Jason Calacanis (01:05:47): You do? Okay. Yeah. Chamath Palihapitiya (01:05:48): I wanna hear I wanna hear. Jason Calacanis (01:05:49): Well, anyway, there's a bunch of people talking about index funds versus buying individual shares and being a stock picker. Elon and Cathy Wood got into this on Twitter, and we all know the arguments for passive versus active. And there's large active funds out there that are just programmatically buying and Elon and many think. that active would be better for society or a bit more active. FreeBird, what's your take? David Friedberg (01:06:18): A business is a over time supposed to be a machine that takes money in and puts money out, and then there's money left in the machine. It's like a box. Money comes in. Money goes out. And over time, the objective of the money coming in, which is sales or revenue exceeds the money going out and the box grows. Right? The assets grow. And the best way to look at that is in the financial statements of that business. You know, the income statement, the balance sheet, the cash flow statement. But we and then there's this narrative that can be layered on top of those metrics, that measurement of how well that business is performing over time, and that narrative is what drives a lot of investment decisions today. Right? I see whether it's an analyst writing an analyst report or a portfolio manager or an individual picking a stock, everyone's got a reason why they're buying the stock. And they say, here's my thesis. And what happens is everyone looks at that box, looks at that business, looks at that thesis from a different angle, and there's always something you're missing. So there, you know, there's some element that is driven by imperfect information. And in some cases, it's just heavy bias. you know, you look at a stock, you're like, hey. I really like Disney Plus. I really like the subscriber growth, but the question fundamentally is over time, what is the revenue generation and the profit generation potential of that one thing you're looking at? And what are the 100 other things that are gonna contribute to that business that box taking in more money or spending more money, is that box gonna run into a regulatory problem? Is it gonna run into a customer Is it gonna run into a content problem? Is it gonna run into competition? The number of issues and opportunities that any one of these businesses can and will face is infinite. And every participant in a market is looking at some different set of those opportunities or threats, and every participant in that market is making a difference value judgment. And so very often, people will buy a stock because they see their sliver. David Friedberg (01:08:23): They convince themselves that based on the sliver of the perspective that they have, that this is something I wanna own. They don't do the work on what's the income statement, balance sheet, cash flow gonna tell me over time about the quality of that business. and they don't do the work on what the valuation of the business is relative to comparables, relative to future earning potential. And I just wanted to have this diatribe because I see so many individuals doing stock picking. And over time, because of this myriad of things that could go wrong and will go wrong, or may go right or won't go right or the regulatory thing or the market thing or whatever interest rate thing hits that stock, and the stock price goes down. Eventually, everyone gets hit on the head, and everyone reverts to mean or below mean, meaning the average of the index over time or underperforms that index over time. And so, I I mean, for me, I spent 2 years I I I know we all went through some sort of investment banking training. I spent 2 years out of college without a I had no finance, econ, or business background. I I worked in Investment Banking, learned how to read an income statement, balance sheet, cash flow, learned to understand how business performance ultimately translates into financial outcomes and spent a lot of time on valuation and figuring out just because you like the story of a stock, you like the story that the CEO is telling you, doesn't necessarily mean that you're paying a fair price. So if you if everything they do goes right, this price could still drop. And I think that this is a really important set of lessons for people that are individuals that are doing stock picking, which is to number 1, you're sure you Jason Calacanis (01:09:57): don't have to -- -- and this diatribe is specifically targeted towards day traders, retail. Correct? David Friedberg (01:10:03): don't know if it's just them. I think it's just generally, like, make sure you understand how to read an income statement balance sheet and cash flow statement. Number 2, make sure you know how to assess valuation. make sure you know that when you're buying a stock, you know what the total value of the company is based on the price you're paying, and how do you justify that that total value makes sense relative to your model of the future outcomes for that business. And then number 3, recognize and be cognizant of the fact that whatever one thing you're seeing that you think you've got some edge or some advantage on because no one else is seeing it, there's ninety nine other things that you're not seeing. And this is where everyone learns this lesson over time, and everyone gets bonked on the head at some point in making these decisions. And it's why every stock picker or nearly every we could talk about the greats at some point here and where alpha can be generated and so on. But, generally, most stock pickers over time underperform the index. And it's just particularly with the retail movement over the last couple of years, I I see a lot of thesis. Here's my reason for buying the stock. that excludes understanding the financials, understanding the valuation metrics, and also excludes the whole litany of things and all the diligence that goes into thinking about all the other angles you might be missing. Speaker 6 (01:11:13): So that Jason Calacanis (01:11:13): was more bottle or fever? Generally? Chamath Palihapitiya (01:11:17): It turns out that it's hard to be good at anything. Insert the blank takes tens of 1000 years of practice. In investing, I think what I have learned is that It's very easy to get caught up in the mania. I have also learned in the last decade that You know, we really benefited from 0 interest rates. It was a tie that lifted all boats. And I have learned how to think about correlation and the difference between alpha and beta and how to construct portfolios that I think can be all weather portfolios. To Friedberg's point, those are nuanced long tail skills that you'll only take up if you're really passionate about the craft. It's not dissimilar to a person. I'm just gonna use golf as an example who learns how to hit a fade versus a draw and who learns how to really manipulate, you know, their wedges in very specific ways. And these are all long tail scales that come in when you decide you wanna master something. And it's just important to note that that mastery is required to be really good because otherwise, there'll be times where you'll go out on the golf course and you'll brush it. But then, you know, there'll be other times and most other times where you can go and get run over because it's hard. So that's my only comment is that this is like everything else not nearly as easy as it looks like. Jason Calacanis (01:12:43): Brad, you pick stocks for a living. Should retail how involved should retail investors pay? Should they just buy in David Friedberg (01:12:49): the ads? Chamath Palihapitiya (01:12:49): Or -- I I David Friedberg (01:12:50): don't think it's fair to say retail. What I think my point was really about Jason Calacanis (01:12:53): -- Chamath Palihapitiya (01:12:54): No. His point is everybody. David Friedberg (01:12:55): Okay. Sure. Everybody. My point is saying a thesis And excluding all these other factors that are critical in making a decision about what you're buying and whether you're paying the right price means that you have to make sure that you're expanding your point of view on whether or not a stock is worth buying at the market price today. And I think having that broader perspective is what I see missing in 99% of the chatter on Twitter, 99% of, you know, folks talking about what thing to buy and why they're buying it. And, David, you're critically important. Chamath Palihapitiya (01:13:24): You're saying that most investing that you see is very narrative driven and that narrative can sometimes be so powerful that it overpowers all the other elements that one should be doing to get a full picture of why you should be buying something. Is that David Friedberg (01:13:41): think that's a fair summary to mouth. Yeah. Yeah. And I think it's, you know, it's and it's it's it's just about how so much of what goes on on CMBC on a a a lot of Reddit boards, not all of them. There's very sophisticated folks there doing very sophisticated financial analysis and looking at all the angles of a stock assessing the valuation. But so much of these conversations exclude what you're paying and what you're getting and exclude the broader context of all the things that could and may not happen with a particular business. And as a result, at some point, one of those things bogs you on the head. You lose 50%, and you're like, oh my gosh. And sometimes Chamath Palihapitiya (01:14:19): and sometimes if you try to inject that logic into those channels, you'll get brigadooned. Brigadoon. Jason Calacanis (01:14:26): It'll be absolutely Brigadooned. Brett, what do you what do you think in terms of people's access to markets, I guess, would be another way to look at this and people's propensity to just you know, gamble, let's call it, or maybe not make thoughtful decisions. Brad Gershner (01:14:39): I kinda think if our friend Bill Gerley was here, he'd be like, this is a 5 minute conversation about the statement of the fucking obvious. Yep. Yep. You know? this is a stock picking is hard, really? Is that the theme of this section? Yeah. Stock picking stock picking is hard. Very little alphas ever been generated in this stainable way even by the greatest people of all time. I think, you know, maybe something that is a little bit useful to add 2 things. Not all good companies are good investments. Price of entry matters. Okay. So I hear a lot of people say, well, I'm gonna buy that because it's a good company that don't even know what that means. David Friedberg (01:15:20): Exactly right. That's Brad Gershner (01:15:21): the relative point. Good good relative to the price of entry. But the second thing is the single greatest power we have as investors, the gray greatest single source of alpha. right, other than stock selection. So choosing the right company. Time arbitrage. Okay. So do you have the ability to own something that is a growing asset over a long period of time? So that if you got number 1 wrong, You bought it at the wrong time. Shit happened in the world. They missed a quarter, etcetera. You're not forced to lock in those losses because you over allocated to that. So This idea around portfolio management is a principal component of overall stock picking is is just absolutely critical. So I think, you know, I don't really I I love the fact I put myself through college. I put myself through law school, through business school day trading stocks out of the back of the classroom. I'm grateful I live in a country that let me feel like I had some alpha and that I could do that, and I could go read the newspaper and sort it out. And I wasn't building sophisticated financial models. So, like, you know, I think there are ways that folks can do this. There are a lot more ways to lose money than there are to make money in a sustainable and durable way. Right? And so as investor, what we try to do you know, we've got 90 percent of our portfolio in our top 5 or 10 companies. k? I'm not an index. And the deal I have with RLP is I'm very transparent with them. They know that we're gonna own companies in size, and it's that portfolio concentration in our time arbitrage holding companies for 3 years or longer. that is a strategy they choose to believe in and sign up to. But I know a lot of greats who would never subscribe to that strategy. So know your strategy, execute it, allocate a reasonable amount of capital. So when all of these unknowns that they Friedberg talks about come along, you can react accordingly. And, you know, the final thing is if it's not fun for you, Right? Brad Gershner (01:17:34): Like, if you're actually not passionate and curious about, like, studying this stuff and learning about it, not everybody is, then don't do it. Jason Calacanis (01:17:41): Right? Then don't do it. Brad Gershner (01:17:42): Then just put your money into Speaker 6 (01:17:43): next month. Jason Calacanis (01:17:44): -- Speaker 6 (01:17:44): gonna be Jason Calacanis (01:17:44): good at it Brad Gershner (01:17:44): if you're gonna love it. -- who is. David Friedberg (01:17:46): The analytical depth and rigor that the great's employ to be successful at picking stocks, at picking businesses, and investing in them, and selling them at the right time over time. it does not make for good TikTok content. It does not make for good short form content. And I think that's why we've seen this dumbing down and this kind of short form thesis driven narrative approach to content creation around markets and stocks. that ends up causing a lot of people a lot of harm. You know, you watch the Jim Cramer's of the world. I I don't mean to disparage anyone individual. But that sort of content that's like, this is a great company. We should buy it. Like, let's go. And the the the depth and rigor takes a lot of time and a lot of effort to really do right. And then you get hit in the head, you know, when we and that's that's what I've observed lately in a in a really kind of flurried way, particularly across social media and so on that's That's why I just wanted to talk about a topic today. Chamath Palihapitiya (01:18:45): Just to build on top of what you're saying, Warren Buffett made this very famous bet in 2000. It was him versus a bunch of hedge fund managers, and they were able to pick a basket of hedge funds. And he said, I'm not even gonna pick myself. I'm gonna pick the S and P 500. And the low cost ETF, the Vanguard ETF, and he said, we'll check in, like, 20 years later. Anyways, you know the punchline of the story. Buffett won. He won like a million bucks that he donated to charity, and these hedge fund folks lost And so to build on your point, Jason, time and time again, the smartest investors in the world, i e, guys like him have shown us that the most predictable way to make money if that is your goal is to own the S and P 500, which is, you know, a dynamic index of the 500 best companies in the world. So there are these people doing all the hard work for you, and they have very strict criteria of who's an S and P 500 company or not. Now, yes, if you cherry pick other companies that are not, Or you concentrate in some, will you generate better returns? Absolutely. But systematically over time, that thing has blurged forward at 8% a year. you know, 9% a year. If you invest dividends, you can approach 10% a year. And so if if you really wanna just grow your wealth, that's a very simple, steady, eddy way to do it. And to take a small amount and then go and experiment with it to learn, makes sense. But I think it's important to make sure you're going their eyes wide open to try to actually learn. Brad Gershner (01:20:05): Buffet, of course, says the index works really well, but then he's got 50% of his public portfolio in Apple over the last few years. So he clearly believes in alpha as well. But, you know, back to Friedberg's point since we brought up Buffet. know, somebody asked monger why can't why why can't people just copy what Buffet does? And he said because nobody likes to get rich slow. Nobody likes to get rich slow. If you wanna what did a 0% rate environment remind us all over the course of the last few years? Everybody had a grift. Everybody had to get rich quick scheme. I don't care whether it was -- NFTs. -- crypto flipping or whether it was house flipping or whatever it was. Everybody thought, you know, this was easy. And frankly, looked at guys, so I guess oftentimes and said, you're the dumb ones. you're playing the game that's really hard. Why don't you just, you know, flip some crypto? And I think we're back to a world that if you really want to, you know, By the way, yourself Jason Calacanis (01:21:04): -- Chamath Palihapitiya (01:21:04): How dumb did you feel? I felt so stupid. All these tokens, minting, minting, billionaire, billionaire, billionaire, billionaire, Belly man. Belly man. And I just I just sat on the sideline to your point. Right? It just made you it made me feel so stupid. Jason Calacanis (01:21:18): I felt super not just like, I I what it who's the customer and how much do you charge him? And when you can't get that basic answer of who the customer is and and how much it them to buy the product or service. It's like Jason Calacanis (01:21:28): -- Chamath Palihapitiya (01:21:28): The Brad's the Brad's point, I think the punch line is. And then, you know, at the 11th hour, it's like there's a tendency to just capitulate and say, okay. Forget it. I'm in. And that's when all the money gets torched. Jason Calacanis (01:21:37): Real quick, there's a proposition here in California where we vote on specific ballot measures, not every state has this, but we have prop 30 coming out. This is a 1.75% tax on income earned incomes earned over 2,000,000 for the next 20 years in California, which by the way had a $100,000,000,000 surplus that would go towards clean energy. This was proposed originally about environmental groups, but Newsom has come out to battle against this, which would seem counterintuitive because he's so pro environment. What this would do is spend about 80 percent of this $100,000,000,000 in new tax revenue over the next 20 years. 80% would go towards charging for EVs and motivating customers to buy EVs, Jason Calacanis (01:22:20): 20% Jason Calacanis (01:22:20): would go toward to combat the crazy amount of wildfires we're having here He Gavin Newsom that is called this a cynical scheme devised by a single corporation lift to funnel state income tax revenue to their company. Lyft has provided almost all of the 40 almost 48,000,000 in funding for this prop 30. And the reason is because California is gonna require 90% of ridesharing miles to be traveled by 0 emission vehicles in 2030. You know, on top of that, that California is gonna not let you sell anything other than EVs in 2035 if this continues. Now you've got a bunch of people on the other side of this doing anti prop 30, including the California Teaches Association because they want the money. Reed Hastings over at Netflix. Maritz over at Sequoia, Sam Altman over at OpenAI. Well, what do you think of this Friedberg? I'm curious. Chamath Palihapitiya (01:23:17): Sorry. What side are they on, Jacob? The Cyrest Jason Calacanis (01:23:21): Altman no. They're they're saying don't do this because they are trying to control taxes and cash flow. Yeah. They're on Newsom side. newsome side, hey. This is a grift by Lyft because Lyft is concerned that they're gonna have to, you know, bear the brunt of 90 percent of miles. So I guess the I don't know if it's original sin, but the the that one of the levers here is Lyft has got the majority of their rides or in California. Uber has stayed out of this because they don't have as much exposure because the number of rides in California is a smaller percentage of their overall revenue. Brad Brad, you have some thoughts too here, I think. It's a Friedberg or Brad. Brad Gershner (01:23:58): I'm just looking at the board of directors that lift and and thinking to myself, good god. What are these people thinking? Spending 40 to $50,000,000 on this, it seems that they've totally lost the script, the company has way bigger problems, way bigger problems to focus on, Right? Then, you know, this measure have a little faith in the system that if we don't get to a place where this is reasonably practical over the next 10 years, then I'm sure we will evolve Jason Calacanis (01:24:29): -- Chamath Palihapitiya (01:24:29): Mhmm. Jason Calacanis (01:24:29): -- Brad Gershner (01:24:30): right, the legislation around this. You know? Kudos to Dar and the team at Uber, for not running scared on this, right, for not trying to push this through. These corporate governance initiatives, guys, does referendums in this state I mean, this is just bad politics, bad policy. I mean, we got Valerie Jared on the board of this company. You got political sophistication on the board of this company. I wanna be you know, I wish I was a fly on the wall. I wanna know the conversation that went down and who raised their hand and said, this is the highest and best use of $40,000,000 of our money. Jason Calacanis (01:25:00): Crazy. Yeah. Brad Gershner (01:25:01): Right? Jason Calacanis (01:25:02): Makes no sense. Friedberg, you have thoughts on if I mean, you've talked before about how you think the free market should solve Chamath Palihapitiya (01:25:07): these things. What is the what is the governance structure at Lift guys. Brad Gershner (01:25:11): I I knew that was coming. I knew it was coming. Didn't have superior Jason Calacanis (01:25:14): voting shares. Yeah. Chamath Palihapitiya (01:25:15): Anybody look? I don't Brad Gershner (01:25:16): know the answer to that. David Friedberg (01:25:17): So I think that the tax rate in California is high enough now that we all have friends, friends in our poker group who have left for the state of Texas or the state of Florida, where there are lower tax rates and where they feel like they're getting more value for their tax dollars. There's certainly a calculus going on with Newsom I believe in, you know, the impact that having higher tax rates would have on what is clearly not just a theoretical but an actual evidenced, you know, exodus from the state of wealthy and high income earners. This could be, like, you know, at some point, there's a tipping point that looks a lot like France where you raise the rates high enough enough wealthy people leave, and the net tax dollars actually go down. like what happened in France when they introduced their wealth tax, then they reversed it, then everyone came back. I will say, I don't More important long term point, I don't see a world where we don't have over 60% tax rates on the wealthiest people in this country at a federal level. If you look at if you assume a 5% long range, call it 15, 20 year horizon for for interest rates, even 4%. On $30,000,000,000,000 of outstanding debt, and you assume that the voter base will never vote to reduce Social Security or Medicare entitlement programs And, obviously, the defense budget won't get cut. We are not gonna see a situation in this country on a federal basis where we can actually meet all of our fiscal obligations without incremental tax revenue. And I think it is much more likely that, you know, look, whatever happens with the state initiative happens. But I think it's very likely that over time, the only way for the United States to to bridge its fiscal gap is gonna be to raise income to increase the tax rates. I don't see another solution because I don't think that the federal government or in our kind of democratically elected Congress, we're gonna see a system that's gonna say, hey. Let's go for austerity measures. Let's reduce entitlement programs. both sides will say that. It's just not gonna happen. David Friedberg (01:27:18): So tax rates higher tax rates, I think, are coming. Well, you know, maybe California will skip over this particular generation, but I don't see how the United States continues to thrive over the next 15 to 20 years without tax rates that will today seem exorbitant Well, Chamath Palihapitiya (01:27:33): in the last 20 years, we blew through a debt to GDP that was, I think, 57%, and it basically doubled. And so, David, to your point, when we wanted to feel prosperous, what we did was we financed it. We went out and we, you know, put out a ton of debt, in order to make sure that our entitlement spending or our defense spending or whatever the things were that we needed as a population to feel like we were growing and moving forward as a society we had. So that is the practical nature of what happens. And look, a lot of people think that there is some upper bound to debt to GDP. And I'm actually of the opposite view, which is I think that, you know, the quote unquote invisible hand justifies us moving debt to GDP to higher and higher rates. So the first time the United States went past the 100%. We thought it was the end of the world. It turned out Brad Gershner (01:28:24): it wasn't. Chamath Palihapitiya (01:28:25): will eventually go past 200. Somebody will clamor and, you know, be anxiety riddled, but they'll take some SSRIs. They'll be okay. We'll keep moving forward. then we'll get to 300%. We'll keep moving forward. So we are in a debt spiral that is a feature not a bug of how democratic societies work. As a companion to that, I do agree with you that taxation kind of is a pendulum. It it ebbs and flows. And, you know, we're in the part where it's gonna go higher before it goes lower. But I wanna tell you a story which is that in the beginning of this summer or sorry, this fall, I was in the Middle East and then I was in Asia and they have very different taxation schemes, right? And many of them have Jason Calacanis (01:29:09): 0 Chamath Palihapitiya (01:29:09): account corporate gains tax and, you know, sometimes 0 income tax. But then the opportunities for them to be able to invest and drive returns is also commensurately lower, meaning there's not as much alpha in most of the opportunities that they see. Whereas if you go to California, you have to pay 60 percent tax, but then, you know, you could be an angel investor in Uber, you know, and all of a sudden, take 25,000 and turn it into a 100,000,000, which is un ungodly. It's incredible. So I think that In my opinion, actually, like, there's actually this beautiful symmetry where even if taxes are high, your earnings potential is commensurately higher. such that the net that you're left with is the same as if you were in another place where taxes may be 0, but you're just not gonna get exposed to the same ways to make money. And I think, obviously, there's corner cases where that's not true. But I don't think sweating taxes is a really important waste. It's important way to spend somebody time. I just think it doesn't matter. Jason Calacanis (01:30:09): Brad, funnel, work. Brad Gershner (01:30:10): I would just say, the beautiful thing about federalism is we get to a b test in real time different points of view. And so we're seeing it the biggest a b test maybe in the history Speaker 8 (01:30:23): of federalism between the state of California, the state of Texas, and Brad Gershner (01:30:27): the state of Florida. And it's not just tax rates. Right? When when Elon leaves to go to Texas, we have the head of the California general assembly, right, changing her Twitter profile say good riddance and flippening the book flipping the bird to Elon. Right? There is a hostility toward business. that has emerged in California that I think is commensurate and related to the tax rate but also separate. At the same time, we have the mayor of Miami texting us asking us to come down for a visit. We have friends in Texas who are literally politicians who are marketing their state to people in in California. we're gonna be able to political scientists will look back in 5 or 10 years. And they'll be able to answer those questions for you, but I suspect that that makes us a much stronger place for experimentation than countries like France where it's all or none. Jason Calacanis (01:31:20): Yeah. And just to give people an idea to Chomottsport about point about debt to GDP, here's the chart. Early part of our lifetimes, Jason Calacanis (01:31:28): 50%. Chamath Palihapitiya (01:31:30): 1990s, Jason Calacanis (01:31:31): 60, 70% Jason Calacanis (01:31:33): after the great recession, the pandemic, a Jason Calacanis (01:31:36): 120% Jason Calacanis (01:31:37): Japan's at 200%, I think. So there's obviously -- It doesn't Chamath Palihapitiya (01:31:41): it doesn't mean anything. I know that prepayment's -- -- at Jason Calacanis (01:31:44): some point. Chamath Palihapitiya (01:31:44): Yeah. I really don't think so because I think what'll happen is you'll just move the yield you know, the yield to maturity will move out and, you know, we'll issue again, this is the funny thing we talked about this last night at poker like, you know, Trump's idea is some of them were actually very brilliant. They were just packaged through this lens of being a total goofball. So you could take it seriously. But 100 year bonds when rates were 0 now looks like Oh my god. What a brilliant move. Jason Calacanis (01:32:11): Well, I mean, you could take a 50 year worldview about climate, about nuclear energy, about semis. We didn't get to semiconductors again this week. We got so much good stuff. But You know, we do need to take very long multi deck looks at investment. And so why not make a 25 or 50 year bond for semiconductors? Chamath Palihapitiya (01:32:28): Can I actually just do a small PSA? Sure. Quickly. Jason Calacanis (01:32:31): Public service announcement from Tremont, the more you know. Go. Chamath Palihapitiya (01:32:34): I went to Blue Bottle Coffee today and I asked for a latte. Uh-huh. And they gave me a latte with oat milk. Jason Calacanis (01:32:41): That's their default. Chamath Palihapitiya (01:32:42): Which is disgusting. Yes. And I find out that is I find out that is now their default. And brutal. And I said, there's a lot of normal people that don't want to ingest that chemical spew into their body. And so this is just a shout out or, like, just a comment to Blue Bottle. Like, can you please realize that a lot of us are normal? We wanna come to your store and then, you know, not have to ask for the long tail alternative. Can you just serve the thing Jason Calacanis (01:33:07): -- Chamath Palihapitiya (01:33:08): Such a Jason Calacanis (01:33:08): -- Jason Calacanis (01:33:08): for sure signaling. Most of the people drink. -- coffee shop. Yeah. Chamath Palihapitiya (01:33:11): Most of the people drink milk. Okay? I'm not trying to brigadoon you, blue bottle, but I'm not going to go to you anymore as a customer because I find this stuff really dumb. Like, can you just have milk so that I can ask for the oat milk if I want to versus giving me chemicals stuff that I don't want? I don't want that. Yeah. That's end to end to end. Jason Calacanis (01:33:33): -- David Friedberg (01:33:33): complaining about oat milk? Is that what's going on? Jason Calacanis (01:33:35): No. It's this is where we say -- This is where we are moment. Chamath Palihapitiya (01:33:38): It's just like, I just want milk. I want a latte. I mean, I wanna go and support you guys. I wanna Jason Calacanis (01:33:43): -- David Friedberg (01:33:43): Maybe -- -- maybe the cow doesn't wanna make that milk for you after its baby was ripped away from it. Jason Calacanis (01:33:47): Oh, boy. Here we go. David Friedberg (01:33:48): You know? Jason Calacanis (01:33:49): Here we go. It's we and we we survived 90 minutes, and here it comes. David Friedberg (01:33:53): It's the point you know, did the cow agree to be in service to you to make your milk? Chamath Palihapitiya (01:33:58): You think I need to have a verbal contract with cows? David Friedberg (01:34:01): I mean Jason Calacanis (01:34:01): -- Jason Calacanis (01:34:01): Well, I mean, are we gonna do the alafed beef next or not. Who is the who's Chamath Palihapitiya (01:34:06): translator of the cow human protocol? Jason Calacanis (01:34:08): Who who Chamath Palihapitiya (01:34:09): is it you? Beboop. Is it one of your friends? Like, what I Jason Calacanis (01:34:12): don't know. Actually, am working on a neuralink. Chamath Palihapitiya (01:34:14): I'm not sure David Friedberg (01:34:14): I'm not sure that the default assumption that the cow should be there to do whatever you want it to do is a Chamath Palihapitiya (01:34:20): fair assumption. I think that'll change over time, but it'll take some I I think that that's completely fair and reasonable, but what I'm saying is right now while there's an entire David Friedberg (01:34:30): I can't believe he said that. Chamath Palihapitiya (01:34:31): Economy of people. Well, there's an entire economy of people that shouldn't get rolled over because you want to impute the emotions of cows. I'm allowing you your freedom to wanna impute those emotions of cows while I would like to support the dairy industry and buy milk. So can I please do that? No. David Friedberg (01:34:47): I wanna impute the freedom and rights of house, but that's gonna take some time. But sure. Go ahead. Have your milk Chamath Palihapitiya (01:34:52): for now. And you're allowed, but I right now will take the side of the dairy farmer I just want to know. Jason Calacanis (01:34:58): Did anybody get your Chikarron outrage, your Chikarron outrage, your Chikarron on tape? Is this trending on TikTok yet? when you admonished the barista. Chamath Palihapitiya (01:35:11): It's not the reason it's default. I just think it's I didn't make a scene or anything. I -- Sharon. I just got -- Came in. Speaker 6 (01:35:16): I I Chamath Palihapitiya (01:35:17): taste it because I just said, can I please have a latte, assuming that it would come with milk like most most normal places? Jason Calacanis (01:35:23): Yes. Chamath Palihapitiya (01:35:23): And now I have to actually ask Cramil because they think that this chemical composite stuff that's called have you the ingredients adult Jason Calacanis (01:35:31): -- Jason Calacanis (01:35:31): We we had this conversation. Yes. We we got -- As anybody listened, we didn't even get to Mailchimp CEO, Ben Chestnut, who has you know, like, one of the kind great CEOs of our generation and getting, Chamath Palihapitiya (01:35:42): yeah, his memo. Is his last name, really Chestnut? Jason Calacanis (01:35:45): believe it is. Yeah. It's just there's a -- Dennis Chestnut is a great guy. I've met so many times, incredible human, and he's been ousted. David Friedberg (01:35:52): Should we do outros? because you didn't do intros to Jackal. Did you have -- Alright. Jason Calacanis (01:35:55): And so David Friedberg (01:35:55): here's the Jason Calacanis (01:35:56): outro yeah. Jason Calacanis (01:35:56): 44 Jason Calacanis (01:35:58): the Sultan of Science, the queen of Kinois himself, Climbing the stray cat leaderboard as we speak, David Friedberg, follow him on his Twitter handle where you can get all kinds of hot takes from science, to Ukraine at Friedberg is the hand Jason Calacanis (01:36:14): -- Jason Calacanis (01:36:14): Talking about it. -- tweet. I know. That's the joke. Okay. Also with with us again, the anchor. Chamath Palihapitiya (01:36:20): He'll be doing a twitch streaming where he translates the emotions. Jason Calacanis (01:36:23): I'm actually doing -- -- various animals. Jason Calacanis (01:36:26): -- Jason Calacanis (01:36:26): my cooking show, which has a base of oat milk. It's my oat milk top pen beverages tonight on Twitch. Just follow Stray Friedberg. Chamath Palihapitiya (01:36:34): Get it. I don't wanna get Brigadoon by the oat milk lovers, but they have not Jason Calacanis (01:36:37): -- Jason Calacanis (01:36:38): They're coming. -- oat milk ads are coming for you. May you Jason Calacanis (01:36:40): -- Chamath Palihapitiya (01:36:41): Listen, I don't want that chemical stuff in my body, but I'm not gonna stop you from doing it. David Friedberg (01:36:45): I'll do a Diet tribe on chemicals in oat milk next week. Jason Calacanis (01:36:49): But what should we drink? If you did have a choice Friedberg? If you didn't wanna drink the chemicals in Oatly, what would you drink? What would you advise? What do you drink? I'm gonna drink black. -- soy milk, David Friedberg (01:36:57): oat milk, whatever. Jason Calacanis (01:36:58): Okay. you okay. But you're okay. And bringing the -- I tasted Chamath Palihapitiya (01:37:04): I tasted milk? Jason Calacanis (01:37:06): I drink the beautiful glass jar Jason Calacanis (01:37:08): -- Chamath Palihapitiya (01:37:08): No. I'm asking Friedberg of Stroud milk. David Friedberg (01:37:10): Yes. Strouds. Of course. Chamath Palihapitiya (01:37:11): Yeah. Strouds in the glass Jason Calacanis (01:37:12): bottle, $3 returns for each glass bottle. I returned them. I get everything from Goodhead. Have Chamath Palihapitiya (01:37:17): you tried have you tried? Look. David Friedberg (01:37:19): I'll tell you what is gonna happen in the next he's never had milk. In the next 10 to 15 years, most of the milk you buy at the store will be Chamath Palihapitiya (01:37:28): identical to cow's milk, same protein David Friedberg (01:37:30): composition -- And it will be dealt? Jason Calacanis (01:37:33): And that's a slurry. David Friedberg (01:37:34): Well, I mean, you can make fun of Jason Calacanis (01:37:35): it being a mountain David Friedberg (01:37:36): thing, JCal, but you do work in the tech industry. But, yeah, I mean, precision fermentation, is the future of making animal proteins and it's how we're gonna Speaker 6 (01:37:44): do it. Jason Calacanis (01:37:44): you freeburg. I I'm like, yeah. David Friedberg (01:37:46): It's very but by the way, I'm telling this telling you there is an economic model that will work where we're gonna make, you know -- But I'm saying Chamath Palihapitiya (01:37:52): between but wait. Between now and then, can I just two things. Number 1 is There's a taste and a flavor profile I've grown up with that I would like. And I don't think I'm a bad person, so I just like to have that Jason Calacanis (01:38:02): -- Chamath Palihapitiya (01:38:03): Okay. Jason Calacanis (01:38:03): -- Chamath Palihapitiya (01:38:03): not be made to feel guilty about it. Okay. And and and number 2, I don't wanna put chemicals in my body. Okay? So if I can find a natural thing that I like, I please just drink that? Can I just please Blue Bottle have that in my coffee without having to explicitly ask for it? Jason Calacanis (01:38:18): Yes. You you will get that. And number 2 -- -- bottles are -- They're short David Friedberg (01:38:21): bottles owned by Nestle, and they're the largest dairy Jason Calacanis (01:38:24): producer in Chamath Palihapitiya (01:38:24): the world. Jason Calacanis (01:38:25): -- Jason Calacanis (01:38:25): has still has a short on Italy. So let's just keep this going for just 2 more weeks. Brad Gershner (01:38:29): Okay. Great. Jason Calacanis (01:38:29): Let me ask you an ethical moral questions. No. I'm joking. He does not have a short I don't even know if vote leaves public. David Friedberg (01:38:34): I'd rather you ask me an ethical moral question than a political I'm I'm Jason Calacanis (01:38:37): going through it. Yeah. I mean, we got a break from Ukraine this week. Would you have a if the synthetic version of milk or steak was made Like and is a protein that is exactly the same to a cow, would you have a problem morally with eating and or drinking it? David Friedberg (01:38:55): No. So the objective of what's called precision fermentation or some people call it biomanufacturing, you take the DNA from the cow or from the chicken, You put it in a yeast cell or a bacterial cell, and you put it in a fermenter tank, you put sugar water in the tank, and the yeast cell or bacterial cell eats that sugar water, and it spits out that protein. So you've programmed you've programmed that organism to make that protein. And instead of growing a whole cow or growing a whole freaking chicken, you're growing the protein. Jason Calacanis (01:39:22): So no moral issue. No moral issue. I got it. David Friedberg (01:39:24): Because no animal died in the making of the process. You know, you're not taking Chamath Palihapitiya (01:39:27): can I quote Dave Chappelle here? David Friedberg (01:39:29): Gosh. Yuck. Alright. It's gonna take it's gonna it's it's identical to the protein you're beating, otherwise. It tastes the same. It's the exact same compound. Oh my god. There's nothing about it that's different. Jason Calacanis (01:39:41): Yeah. Thanks to the dictator. Thanks to the pseudoscience. And for the 5th bestie coming in and and and and doing a great today on behalf of our friend, the Sasol David Sachs, who is busy in a secret clandestine piece making junk it to Ukraine. I am the world's greatest. Moderator, Christian Calacanis. We'll see you next time on all in. Chamath Palihapitiya (01:40:03): Love you, boys. Speaker 6 (01:40:06): to let your winners ride. Rainman, David Sachs. I'm going home. Speaker 7 (01:40:13): And it said, we opened sit to the fans, and they've just gone crazy with it. Jason Calacanis (01:40:22): what air winter's ride. Speaker 6 (01:40:26): Besty's our car. Don't touch that. That is my dog thinking. I know. driveway. We should all just get a room and just have one think you, George, because they're all just useless. It's, like, it's, like, sexual friendship that we just need to release ourselves. Jason Calacanis (01:40:44): What? You're the big bee. We need to get mercies are back.