FTX 崩盘对话 Coinbase CEO 布莱恩·阿姆斯特朗，兼谈选举结果与宏观

Jason Calacanis (00:00:00): Sachs, the United States, is maybe not gonna send weapons to Ukraine indefinitely, and they're asking them to sit down and negotiate something that people on the left started to do and got I got smash for something you've been pushing for. So I guess mini victory lap for you, Saxx. What what's the end game here? David Sacks (00:00:18): Well, yeah. I mean, I've been talking common sense about this for months just saying that we need to be open to diplomacy because total defeat for Russia also means a a match some risk of nuclear war. I mean, these things go hand in hand. That's the paradox of this war is that if Russia faces the prospect of a total defeat, that's when they're most likely to escalate this conflict into something much, much worse. So therefore, we need to be open to diplomacy. But it was good to hear administration officials over the past week say things that I've been saying for months and that I've been accused of being like a Putin sympathizer for. So apparently, there's a bunch of Putin sympathizers in the administration. And just to read you some of these remarks, actually, I wanna play, like, a fun game with you guys instead of just Jason Calacanis (00:00:59): -- Oh, really? David Sacks (00:01:00): Yeah. Instead of just mentioning these quotes, I wanna play a game called Milley or Sachs. So I want you guys to guess -- Okay. Jason Calacanis (00:01:08): -- David Sacks (00:01:08): whether it was general Milley who said the quote or whether I said the quote. Jason Calacanis (00:01:12): Okay. David Sacks (00:01:12): Does that sound like a fair fair game? Chamath Palihapitiya (00:01:14): Yes. Fair game. Let's put let's David Friedberg (00:01:15): put some Jason Calacanis (00:01:16): game show music here. Yeah. Leon Sacks. David Sacks (00:01:20): I'm gonna read you, like, 4 or 5 quotes, and you guys are gonna say whether it was Millie -- Yeah. Jason Calacanis (00:01:23): -- David Sacks (00:01:24): or a Saxu said it. Jason Calacanis (00:01:25): First quote, who said it? General Millie, or Saks? David Sacks (00:01:28): One of the lessons that should have been learned from world war Jason Calacanis (00:01:31): 1 David Sacks (00:01:32): is that European powers refuses to negotiate compounded the human suffering and led to millions more dead. Millier Sachs. Jason Calacanis (00:01:38): Sachs. I'm going Sacks. I'm going Sacks. It's a very historic -- David Sacks (00:01:42): Millie said that. David Friedberg (00:01:43): No. Come on. Next one. Chamath Palihapitiya (00:01:44): Next one. Go. Go. Go. David Sacks (00:01:45): Okay. A regional war turned into the 1st world war because all parties made maximalist demands and assumed others were bluffing, it can happen again. Sack Millie or Sacks? Jason Calacanis (00:01:54): I'm going Sacks because of bluffing. You said bluffing. That bluffing is a word that you would use. David Sacks (00:01:58): Alright. That was Sacks. Jason Calacanis (00:01:59): That was Sacks. Max and Melissa. Okay. David Friedberg (00:02:01): never say maximalist. Chamath Palihapitiya (00:02:02): Yes. He Jason Calacanis (00:02:03): would never say bluffing. Yeah. Go ahead. David Sacks (00:02:05): Whether there's opportunity to negotiate when peace can be achieved, seize it. David Friedberg (00:02:09): Millie. Millie or Seth? Jason Calacanis (00:02:10): Millie. Millie. It's very it's pithie. It's pithie like Millie. Alright. David Sacks (00:02:12): That was Millie. Jason Calacanis (00:02:13): Yes. Alright. I'm 2 in 1. 2 in 1. Me and you're super welcome. I'm 2 for 1. David Sacks (00:02:17): It's deeply irresponsible response well not to try for diplomacy when the states are so high. Chamath Palihapitiya (00:02:21): Sacks. Sacks. That's an emotional statement. Ago Millacs. David Sacks (00:02:25): They were Sacks. Jason Calacanis (00:02:26): Who sucks? Damn it. Doing 2, 3, and 1, first come off. David Sacks (00:02:29): There has to be a mutual recognition that military victory is probably in the true sense of the word may not be achievable through military means, and therefore, you need to turn to other means. Jason Calacanis (00:02:39): Oh, that's Milley. It's a word salad. I go Milley word salad. Chamath Palihapitiya (00:02:41): Hold on. Hold on. It's a Jason Calacanis (00:02:43): Milli word salad. It's too too convoluted for Saxx. Saxx. I'll go Milli. I'll go Milli. David Friedberg (00:02:48): I think it's Milli. David Sacks (00:02:49): That's Milli. Jason Calacanis (00:02:50): Yeah. Yeah. Lord salad Millie. That's it. I caught up. Now I'm 32 tied with Shamoff. David Sacks (00:02:55): Last one. Jason Calacanis (00:02:56): Last one. Okay. David Sacks (00:02:57): It must be our objective now to help achieve a cease fire and negotiate a peace rather than to track the conflict. Jason Calacanis (00:03:04): Wow. It's so formal, Nilly. So formal feels like somebody said that on the steps of like a building outside. It's very formal. It's well spoken. It's crisp. Can we hear it one more time? May we hear it one more time? David Sacks (00:03:18): It must be our objective now to help achieve a cease fire and negotiated peace rather than for the conflict. Jason Calacanis (00:03:25): Really? It's a little too formal for a podcast, but in a tweet, it wouldn't be. So it could be a sex. tweet, but I'm thinking this whole podcast. I gotta go Millie. I gotta go Millie. Sacks. Goddamn it. David Sacks (00:03:38): Damn it. Jason Calacanis (00:03:39): You can't tell Millie from Saxx is what we've learned. David Friedberg (00:03:43): What a Speaker 6 (00:03:43): great game. Jason Calacanis (00:03:44): Right now, we're gonna play the next game. This is called Bernie Madoff or SBL. Ernie Nadeoff or SPF. Speaker 7 (00:03:58): to let your winners ride. Rainman, David Sanders. open source it to the fans and make discoveries. Love US, honey. Queen of Kim Bob. Jason Calacanis (00:04:13): Alright, everybody. Welcome to the all in pod. with us again the dictator in a beautiful purple sweater sweater, Karen? Man, it's the fall season, so the trader will be it. Chamath Palihapitiya (00:04:24): The inside the inside of this is Suede. Jason Calacanis (00:04:27): Oh, Lord. Very nice. Very nice. So multiple animals killed for your pleasure. Chamath Palihapitiya (00:04:32): Got it. Suede. Jason Calacanis (00:04:34): Yeah. Got it. Alright. David Sacks (00:04:35): What animal do they kill to make soy? Is that, like, a type of leather, or what is that? Chamath Palihapitiya (00:04:39): I hope it's an endangered one. Jason Calacanis (00:04:44): Yeah. Well, actually, that version of Sway that he's wearing is from a white rhino. So they just take the hide, and they throw everything else away. Oh my god. so horrible because Speaker 6 (00:04:53): it's horrible. God. Just can Speaker 8 (00:04:56): we take this out of the show? Chamath Palihapitiya (00:04:58): These are ivory buttons. Speaker 6 (00:04:59): Very much. No. No, Juman. I pretty much Jason Calacanis (00:05:03): -- David Sacks (00:05:03): I think it's baby seal fur around the call. Speaker 6 (00:05:05): They seal. No. David Sacks (00:05:07): How many baby seals were kill to make your outfit. Jason Calacanis (00:05:09): Alright. Also with us is the Sultan of Science, David Friedberg, racing from the airport. How was JetBlue mint? I heard you upgraded to mint. David Friedberg (00:05:17): No comment. Jason Calacanis (00:05:19): Well, you don't wanna talk about the $1200 upgrade you did to your JetBlue ticket? Wait. Chamath Palihapitiya (00:05:23): You don't wanna talk about JetBlue Mint? Jason Calacanis (00:05:24): Why? Are you embarrassed to fly commercial? Chamath Palihapitiya (00:05:27): What did you eat? David Sacks (00:05:30): Are you embarrassed to fly Jay Cal? Speaker 6 (00:05:32): Yeah. Actually, what I didn't meant? I know, like, I'm the president. I'm like, Jason Calacanis (00:05:37): hold on, mint coming through. Speaker 8 (00:05:39): Then I then I start spreading out. David Sacks (00:05:41): I think take out class is, like, the seat by the bathroom. In the back. Jason Calacanis (00:05:45): Hey. Denny, you save a 150 bucks each way. Chamath Palihapitiya (00:05:48): What is is JetBlue Mint the name of, like -- JetBlue Mint is their 1st class Speaker 6 (00:05:52): coast to coast? Jason Calacanis (00:05:54): It is so delightful. Speaker 7 (00:05:55): They -- What David Friedberg (00:05:56): is that jetblue, man? Jason Calacanis (00:05:57): They just have figured out a way to make, like, sleeper seats, you know, that are very nice and -- Oh, that's great. -- upgraded service where they they put, like, a little wall between you and everybody else. It's kinda like having a private plane if you didn't. And Saks is here. The whole cruise here, basically. We'll have a surprise, bestie guestie jumping in in the middle of this. I'm not gonna tell you who. David Friedberg (00:06:17): nothing's going on this week. Jason Calacanis (00:06:18): Nothing is going on this week. I mean, there's so much to talk about. Let's just start with the elections. David Sacks (00:06:23): And then we have to start with Maya Colpa Jason Calacanis (00:06:25): Usually, this is like throwing red meat to Saxx. But, I mean, at this point alright. So DeSantis won by double digits in Florida. He got a huge amount to the vote, but all the Trump High profile Trump back candidate seemed to have lost doctor Oz, Dan Cox. Just it was a shellacking, I guess. or the red wave became like a puddle or like an eye dropper or something. But some of the Trump back candidates did win. Some of the Peter Teal collect Jade Vance won. So I guess that's a big win for That wasn't Chamath Palihapitiya (00:06:56): a Trump candidate, though, because if you remember when Trump went to stump for Jade Vance, He forgot his name. I got his name wrong. So Trump. Jason Calacanis (00:07:04): So anybody said Trump on your side. Chamath Palihapitiya (00:07:06): You don't need friends. Anybody that Trump actually cared about turned out to be just a complete dud and lost. And everybody that kind of, you know, had to keep him somewhat around just so that he didn't throw bombs actually did decently. But, I mean, Trump is a just a a weight on the neck of the Republican party, and it's time to just get rid of him. Sachs, what happened to your red wave? David Sacks (00:07:32): Yeah. Listen. I got this wrong. I think there's a few reasons for it. I think when you get an election wrong and you have to admit it and figure out what you've what you what your mistake was. Otherwise, you're not gonna improve. I mean, number 1, I was looking at, you know, the RCP polling this real clear politics where they take an average of all the different polls. They were adding a factor to it. They were showing, by the way, plus 3 or plus 4 in the senate for Republicans. But they were adding a factor to it based on the underweighting that the pollsters did in the last election cycle. And it turns out that the pollsters, I think, did a pretty decent job correcting their poll And so the RCP overweight turned out to be just basically completely wrong. The other thing that I got wrong was I was just looking at the fundamental I mean, 3 quarters of Americans think we're on the wrong track, and we're in a recession. So based on that, you would think that this would be a great year for Republicans. And in fact, the out of power party usually wins in a midterm, and Biden's popularity is a historic lows at, like, Jason Calacanis (00:08:30): 41 42%. David Sacks (00:08:32): So everything sync was teed up for the Republicans. So what went wrong? I think a couple of things. Number 1, 2 days before the election, Trump basically comes out and pre announces that he's running. Speaker 6 (00:08:42): Oh, David Sacks (00:08:42): yes. You know, this basically plays in to the narrative that Biden has already created, that this is a this is not a referendum on Biden. It's a referendum on democracy. And Basically, Trump made it into a choice election. Who do you like better? Biden or Trump. And the fact of the matter is if you look at the exit polling as unpopular as Biden is, Trump is even more unpopular. So that did absolutely nothing to help the Republicans. And I I think it really hurt them at the margin The other thing that turned out I think the other big thing that helped Democrats was Dobbs, and I never thought that it wouldn't be a factor. But if you looked at the polling before the election, Jason Calacanis (00:09:18): 15% David Sacks (00:09:20): of likely voters said that it was their number one issue. If you looked at exit polling after the election, it was 28%. So Dobbs turned out to be twice as significant as what the early polling was showing. And if you remember, Jason, go back to the episode we did on abortion. I said the shrewd play for Republicans here was the Roberts compromise. What did Roberts wanna do? He basically was gonna allow the 15 week restriction on abortion but not have the headline of Roe V Wade overturned. And that basically is what DeSantis implemented it in Florida. He basically restricted abortion after 15 weeks. It's the purple state compromise. It's where I think the purple states and where most of the country is gonna end up. And the sooner Republicans get their heads wrapped around that fact, the better they're gonna be long term. Speaker 6 (00:10:05): And to Jason Calacanis (00:10:05): ask you one question there, Saxx. Yeah. Who stacked the supreme court deliberately to turn over a review in. David Sacks (00:10:11): Listen. I mean, there this was a long term priority of revolving and closet. David Friedberg (00:10:16): That's just that's another question, Jake. Jason Calacanis (00:10:17): Well, no. I mean, we do have to recognize that Trump said he would do that. He did it, so this is doubly Trump's fault. David Friedberg (00:10:22): Every party nominates justices that align with their values. They've been at cycles. Jason Calacanis (00:10:26): Yeah. But Trump said he's going Trump said he would specifically do it in order to Chamath Palihapitiya (00:10:31): turn over the road. Jason Calacanis (00:10:32): -- Chamath Palihapitiya (00:10:32): doesn't choose who dies in the supreme court and when. Yeah. David Friedberg (00:10:35): Right? There were doubts that there were -- Yeah. David Sacks (00:10:37): It it's also more complicated than that because what this Dobbs' decision did is throw the issue back to the states. And the fact of the matter is that now it's up to each of these states to determine whether they're gonna come out in this issue. So if you look at there were ballot initiatives in red states like Kansas and like Kentucky. David Friedberg (00:10:55): Kentucky. That's David Sacks (00:10:56): right. That's what I'm saying is there are pro life ballot initiatives in red states that lost. And so you can see all over the country that the Republicans tried to go too far or they do try to go too far when they try to impose a total ban. What it seems to be popular is this what I'm saying is the purple state compromise. It's what -- Yes. Jason Calacanis (00:11:15): -- David Sacks (00:11:15): DeSantis did in Florida. It seems like most of the country we talked about this on that episode. Yeah. Most of the country is in the messy middle. They want abortion to be safe, legal, rare, and early. They're willing to support it in, say, the 1st 15 weeks. Speaker 7 (00:11:30): But David Sacks (00:11:30): then after that, there need to be some restrictions that I'm saying, most of the country supports that. Now it's also the case that Democrats though are staking out a pretty extreme position too because most of the Democrats we're taking the position that abortion should be legal up into the 9th month, which is not even that's more radical than even Roe. Roe said that you can restrict it after 23 weeks. So, you know, what we said on that podcast, Jason, was the party that gets the middle first on this issue is the one that's gonna do well. Chamath Palihapitiya (00:11:58): Not just this issue. David Sacks (00:11:59): Yeah. And I and I think, yes, I think it's true on this, and I think it's true on other things. So look, I think the Republicans can correct here pretty easily if they listen to folks like DeSantis and Youngkin and Kemp, people who understand that they have there's a compromise here. And the ones who basically insist on pushing a total ban are gonna go down in flames. Chamath Palihapitiya (00:12:21): There's a couple of things I think that are worth looking at now that we have all the exit polling and the results. the democrat strategy of helping to promote these extremist MAGA candidates in primaries turned out to be a huge winning strategy because every single one that they helped put up against the Democrat, the Democrats won. But number 2, so what that shows is the extreme right cannot field a winning candidate. But on the other side, all of these extreme left leaning Democrats also did not do very well either. And so you're back to David what you said, which is We have been saying for a while, the winning strategy is that messy middle. It's the moderate person that kind of like tax to the center. And this is what you see everywhere around the country, all of the ballot initiatives. Every time you had an extremist ballot initiative, whether it was a complete ban on abortion in a red state or whether it was tax the rich policy in a blue state. They failed. And so I think the message that you have to take away is the extreme left doesn't work. The extreme right doesn't work. Right. If you look at, for example, like Kathy Hochul almost lost in New New York State because of who? Because of like AOC and all of that extremist progressive rank and file, of that party. So people need to really understand and look at the data on the ground. If you wanna win in 24, you gotta be in the middle and you gotta clean up all Jason Calacanis (00:13:51): of this extremist rhetoric. Friedberg? Any thoughts? David Friedberg (00:13:54): I think the Georgia senate runoff race that we had in the 2020 election cost the US Jason Calacanis (00:14:02): $10,000,000,000,000. David Friedberg (00:14:04): And I think it because if you'll remember, that was the race that when the Democrats won tipped the power in senate to the Democrats, and all this legislation for the last 2 years was passed, including a lot of the this fiscal stimulus and spending that very likely may have faced significantly more opposition than could have been faced where the Democrats have the White House and the Senate and the House. And so that single seat and and the loss of that seat in the runoff to the Democrat Party, I think, ended up allowing a lot of loose behavior over the last 2 years that's gonna cost this country for a very long time. And in part, perhaps we could argue a lot of the inflationary pressure And now the debt load, the US debt load increasing by $10,000,000,000,000 in the last 2 years since that election, by the way. And so I think one of the most important things that perhaps people don't cognitively recognize, but feel in some way is that having a balance of power is really important in this country. And so to some degree, while there may be issues that folks can argue about and disagree about, there may be candidates that are vile to us. I think, ultimately, folks are recognizing the benefit and the value in having a good legislative debate and a good check and balance in this country. And so I think there's a lot of what Saks is saying that that ties into to that kind of emotional conditioning that's probably underway. Jason Calacanis (00:15:29): Okay, Saks. Trump said he was going to announce. He went after DeSantis called him de sanctimonious. Obviously, the the Trump endorsements here didn't help. Roe V Way didn't help the situation. What is gonna happen here is the Republican party finally going to cut ties because they wanna start winning or Is Trump gonna just announce next week and cause massive chaos? What's gonna happen in the Republican Party in the coming weeks? because we're 14 months away from Iowa. Right? I mean, this is -- So -- Now the next issue? David Sacks (00:16:00): The question comes down to do Republicans wanna start winning elections? Yes or no? And Freebrook brought up the the the right point. In the last election cycle, he's right, that the reason why we got $10,000,000,000 of unnecessary spending is because of that Georgia runoff seat. We're about to have another one where Purdue won that seat on election night. And then Wernock won it in the runoff. Why did things go against Purdue because Trump had a 6 week hissy fit after the election. The Georgia runoff happened on January 5th and then all culminated in the ride on January 6. So the fact of the matter is, Trump has been having this extended hissy fit and living in denial since the loss in 2020. And as a result of that, we lost the Georgia runoff. I think we did worse than we had to in this midterm. I think we're gonna lose the Georgia runoff again if Trump continues with these antics. And so it really comes down to Republicans. Do you want to win? David Friedberg (00:16:55): And look, David Sacks (00:16:56): I know that there's, call it, Jason Calacanis (00:16:57): 40% David Sacks (00:16:58): of the country passionately loves Trump But here's the problem. He's capped at 40%. Independence and moderates, centrist will not give the guy another look. And so you cannot win a major national election in this country with 40% of the vote no matter how passionate that 40% is. You know what 40% is? 40% is Charlie Crist. The guy who DeSantis beat, who wiped out in Florida, that was a sixty 40 election. That is what a 40% of the electorate looks like. Chamath Palihapitiya (00:17:29): Land slide. David Sacks (00:17:30): It's a landslide. Exactly. So the bottom line is that who your messenger is in politics is incredibly important. And Trump just gives his enemies way too much to work with. Now if he weren't a Republican, it might be different. Take federalmen, for example. Okay? This guy, federal man, Okay. He's being portrayed as this man of the people. He's got the goatee and the the tattoos and the hoodie or whatever. Who is he really? He's a truck fun kid who never had a job until his mid forties. But the press completely gives him a pass on that. They would never do that for a Republican. If federal men were a Republican, the press would expose him in 2 seconds. Now that's a complaint, but the fact the matter is Republicans is subject to accept it. These are the rules of the game. If you're a Republican candidate for office, you have to be perfect. You have to be focused. You have to be disciplined. You have to be DeSantis. You cannot give your opponents something unnecessary to work with. Every fight DeSantis Picks has been a smart fight that he's won. And same thing with Lund Youngkin as well. He doesn't give his opponents things to work with. And unless Republicans realized these are the kinds of candidates we need to nominate in this media environment, we're gonna keep losing elections. Jason Calacanis (00:18:37): Yeah. Jamath, any final bucks here as we wrap up election. Chamath Palihapitiya (00:18:40): I'm going to DC next week, doing the rounds, high 5, and fast sloppy. David Sacks (00:18:45): Yeah. Just to finish the thought, one other quote from New Hampshire governor Kristen Nuno, who's kind of a he's a Republican who's been in space with Trump, he said. Listen. The message of this election is first fix crazy, then fix policy. If you're coming across like you're crazy, their voters won't reject you. Now that doesn't mean you can't stand for principal. Ron DeSantis says that Florida's where woke goes to die. He says, we will fight woke in the boardrooms. We'll fight in the classrooms. This is certainly not a liberal position. These are pretty conservative positions he's taking, but he does it in a calculated fund way. Chamath Palihapitiya (00:19:21): I'll I'll say this right now. He is a winning candidate and the scale of Reagan if the Democrats also don't figure out how to clean up their act because the other message that's so interesting that I took away is the legislative agenda that works is actually what Biden has always believed. The problem is that Biden seems to get distracted or confused or hijacked by the left wing of his party. And they introduced all these unbelievably crazy iterations of progressive policy that just are not popular. Even in blue states, just look at the number of bills that failed. So -- Right. Jason Calacanis (00:20:00): -- Chamath Palihapitiya (00:20:00): he also has to fix what he's doing, by the way, Jason Calacanis (00:20:03): because if he doesn't think that could fail, the a US judge in Texas. I'm not sure you you can tell me if this is legit or or not. Chamath Palihapitiya (00:20:11): No. They stayed the the but Speaker 7 (00:20:12): we should talk about that Chamath Palihapitiya (00:20:13): in the context of the economy, actually. David Sacks (00:20:15): That was predictable. That was predictable. That was predictable. That was pretty simple. Now it's completely unconstitutional for a presence on half a $1,000,000,000,000 without Congress's approval. Bill on Jamal's point here, DeSantis won Miami Dade County, which went for Hillary by 30 points. Okay? He showed that a competent executive, a a an energetic, youthful operator who actually runs the state well. Okay? can win over modern independence and Democrats. Chamath Palihapitiya (00:20:42): No. He's a winner. Speaker 6 (00:20:43): That David Sacks (00:20:43): these are the types of candidates Republicans areft. Jason Calacanis (00:20:45): Yeah. David Sacks (00:20:45): He's a winner. Chamath Palihapitiya (00:20:46): He's a winner. We got a Jason Calacanis (00:20:47): we got call breaking in here. We have a special bestie guestie. You know, it's been a big news week. It's not just the elections. FTX crypto exchange went belly up. And we thought, well, let's bring somebody in who's super credible in crypto, and that's friend of the pod. David Friedberg (00:21:00): He's credible because he's wearing a tie. Jason Calacanis (00:21:02): Yeah. Hey, Brian Armstrong. How are you doing, brother? Chamath Palihapitiya (00:21:03): Brian Armstrong, you look fantastic. Jason Calacanis (00:21:05): Yeah. What are you testifying today? David Friedberg (00:21:06): I'm doing great. It's not it's not Moncler, and it's not Laura Piana, but, you know, normally, I just I just wear the black t shirt and the hoodie, but, you know, when times like this, I gotta go talk to media and policymakers, regulators, and it's a it's a good time to, you know, spruce up the image. David Friedberg (00:21:24): This is a week to break out the tie. Jason Calacanis (00:21:26): Yeah. Hey. Listen. Men's Wearhouse, it never looked better. You look great. Thank you. David Sacks (00:21:30): I see a red tie, and I think fisley responsible. Jason Calacanis (00:21:34): Shire. I guess, Brian, just to kick it off. FTX in spectacular fashion blew up this week, and it's pretty gnarly. you run-in exchange as well, what's your take on what happened with FTX, and then what is your position in terms of making sure your customers understand that Coinbase is not gonna have a similar faith to all the other exchanges that seem to be blowing up every couple of months. David Friedberg (00:21:57): Yeah. Well, first of all, I mean, I think we were all shocked at somebody like Sam who seemingly is so smart and and capable ended up in this really the situation where it appears that have done something quite unethical and illegal. So you know, my job right now this week has been to go out there and just help people understand that Coinbase is not like that. We've been pursuing a different strategy for the last 10 years. We're a public company. We're we're regulated. Our our financial statements are audited. They can show that, you know, customer funds are segregated. They're backed 1 to 1. We're not investing customer assets without their explicit direction. And so that's been the first step is just to make sure people understand that. then after that, we need to kind of think about how we go forward as an industry here and both take a long term perspective, make sure the good companies in the space aren't allowing 1 or 2 bad actors to kinda mess it up for everybody else. And it it feeds into the whole regulatory story too because companies like Coinbase are already regulated, but we're regulated like a traditional financial service business, but we don't have clarity about the crypto specific regulations like what's a commodity, what's a security, And that lack of regulatory clarity, I believe, has pushed a lot of this business offshore to these less regulated exchanges. That's part of what caused the blow up today They they were based in the Bahamas, you know, and they just there's not sophisticated financial regulators overseeing what they were doing. Chamath Palihapitiya (00:23:19): Brian, there's a lot to unpack, but Maybe we can just take a step back and for the uninitiated or for the person who's only been just following this very superficially, Can you just, in a nutshell, explain what happened? David Friedberg (00:23:34): Yeah. So my understanding is and, again, this is from I've talked to, and I spoke with Sam and see see see briefly during this, but I didn't get details from them. I got it from other people. Jason Calacanis (00:23:43): You spoke to them this week. David Friedberg (00:23:44): Yeah. I mean, this was all going down. I mean, I I spoke to Sam about you know, he was trying to raise emergency financing and things like that, and I spoke to Ceizee about why he was considering buying the asset. I thought it was a bad idea. But my understanding what happened at this point, again, I don't have all the facts. This is just my my understanding is that you know, FTX was in a position where they had this market maker Alameda that was investing in risky things. And fine. Like market makers, hedge funds, they're designed to take more risk. It appears at this point that back during the last shakeup in the crypto industry where, you know, Terra Luna and Voyager and Celsius and 3 arrows went under, it appears that Alameda took a big loss at that time as well. They may have even been underwater. And instead of just saying, hey. You know, this hedge fund's gonna blow 2, which would have been unfortunate. People would you know, if Sam would have lost money, it's embarrassing, but it's not illegal for a hedge fund to blow up. It happens with some regularity. instead of just letting it blow up, it seems like at this point, he took customer funds. Chamath Palihapitiya (00:24:47): But you have to explain he all he owns both. that's for the people that may not understand that. Right. So it's a related car. David Sacks (00:24:54): He owns his own exchange called FDX, and he owns his own hedge fund called Alameda. Chamath Palihapitiya (00:24:58): which operates inside of FTX as well as in other places. Right? But again, Alameda seems to have blown up. Sorry, Brian, back to you. David Friedberg (00:25:07): Yeah. So it seems they they had this solvency issue. And instead of just letting it blow up, Sam basically said, hey. We have a bunch of customer assets over here at FTX. or he somehow basically made a loan from FTX into Alameda to try to prop it up. I don't I don't know why he did that. I mean, That that's the moment in my mind where he crossed the line into probably committing fraud. And I I think he probably lied to users, lied to investors. And he went around and tried to bail out these different companies like like Voyager and BlockFi and to sort of prop up this thing, and and maybe he thought he could trade his way out of it. something. I I I'm not sure, but that seems to be where the mistake was made. David Friedberg (00:25:46): Brian, can I ask one question, which I which I think will help frame the contagion risk set of questions that everyone's having. When people have an asset, we we all talk about customer deposits and customer assets held at these exchanges. But those assets and those deposits are very often some form of coin. I have some amount of Bitcoin, some amount of Ether, some amount of Ether, some amount of something else. is it the case that there is an assumption of total asset value that's held in its in a portfolio of coins that doesn't necessarily match the individual user's accounts. And then when one coin goes down in value nominally to dollars, that the whole value of the portfolio goes down, and now you can't actually make the customers whole. So in the statements that have been made, by these guys and other exchanges that we have enough liquidity to cover customers' accounts that the assumption might be we have enough liquidity if you assume the current market price for a whole bunch of different coins. But then if one coin tanks, the total liquidity tanks, and they don't actually have it matched up correctly because now the customer account value didn't go down as much as the exchange of the total asset value. Does that make sense? David Friedberg (00:26:56): It does. And Jason Calacanis (00:26:57): -- David Friedberg (00:26:57): Is that part of the contagion risk that's going on here? Is that they're not match truly between customer accounts and the exchanges, you know, holding of of coins? David Friedberg (00:27:06): So not exactly. Okay. So if you're a regulated financial service business, that's but you're not a bank. You know, we're we're regulated as a trust company, a money transmitter, etcetera. You're required to hold customer assets 1 for Jason Calacanis (00:27:18): 1. David Friedberg (00:27:19): in it's denominated in the the asset. So in other words, if you say you the customer has 1 Bitcoin, you have to hold 1 Bitcoin. If they say they have a $100, you have to hold a $100. And so that's the case with Coinbase. You don't have to take our word for it, by the way. You can look at our audited public financial statements as a public company with a independent, you know, Big 4 accounting firm who went to go verify all of that. And that's what various custodians and exchanges, that's what they all should be doing. If by the way, if you're regulated as a bank, you can actually go invest some of those, but there's very strict regulation around that and capital requirements and whatnot. And we're we're not a bank. So we we hold 1 to 1. Now if you're an investment fund or a hedge fund or or something like that, then you can try to take positions in different coins and different assets and they could go up and they could go down, you know, you may you may lose your investors' money, but there's no such thing as the customer assets being involved in that. There needs to be clear segregation of those customer funds and from from what an investment fund would be or corporate funds, And that's where they got in trouble. They they basically co mingle the customer funds with their hedge fund. Jason Calacanis (00:28:24): Classic front. David Friedberg (00:28:24): Yeah. Can you explain the contagion, by the way, just so we can everyone's been talking about the contagion and understanding what's next. So that's that's what I just wanna yeah. because I think people are gonna be asking that a lot this weekend. David Friedberg (00:28:34): Yeah. So I I do think there's there is some contagion risk here. I think there's other firms that had first of all, there's firms that had money just sitting in FTX, and that's now going through bankruptcy court. So that's been bad. I mean, Multicoyne came out publicly and said that they had 10% of their portfolio sorted on FTX. There's other firms that Alameda may have had loans with, and those firms are probably struggling. I, you know, I don't wanna say who, but we have received a couple of inbound calls from other people trying to get emergency financing. There's people who may have just totally different from FTX and Alameda. They may have just had their own portfolio they took margin or leverage on to buy crypto, and now as the prices have come down a little bit, they're getting stopped out. So that's all been very challenging. And I I again, just for the sake of clarity, I I should say that Coinbase did not have any material exposure to f Alameda FTX or FTT token, David Sacks (00:29:27): which talk about this issue of customer deposits because this is Jason Calacanis (00:29:30): really the David Sacks (00:29:30): crux of the issue from a legal standpoint. Right? I mean, I remember when I was doing PayPal, like, 22 years ago, And the company was, like, 6 months away from running out of money. I remember the lawyers told us really clearly, you cannot use customer deposits to fund the operating expenses of your business. In other words, If this business ends up going bankrupt, you'll still have all the customer money there and they'll be able to get it back. And, you know, it was really clear like, hey, if you use customer funds, to pay for the burn of the business to operate the business. That is a do not pass go go directly to jail type offense. And so, like, that's really the heart of this. Now I read in some articles covering this that the way it worked is that Alameda had a bunch of these f t t or f these f t x tokens called f t f called f t t. And they basically use that as like a marker as collateral. So that they they basically borrowed, what is it, like, 6,000,000,000 of customer funds from FTX. and then they use their own token to then as collateral. So Jason Calacanis (00:30:32): -- Chamath Palihapitiya (00:30:32): Backstop it. Yeah. David Sacks (00:30:33): Exactly. And then what happened is, apparently, like, cz got wind of this. and he owned a whole bunch of these tokens. And he signaled that he was gonna dump it, and the price basically went down. And so now all of a sudden the collateral for the customer loans was insufficient, and then there was a run on the bank. Chamath Palihapitiya (00:30:50): And -- By the way, this has happened this happens in the public a lot as well. So like when you see heavily shorted names or when you know that certain hedge funds are on the brink, other hedge funds will go in and essentially force a margin call and a stop out because then it's what causes all of these runs. And if you look actually inside a game stop, the reason why you got all this gamification in the game stock at and a bunch of these other names was in part because of this dynamic. Folks that are highly levered, folks that don't have the right matching of risk And what happens is they're solvent but a liquid. And then if you run the instrument into the ground, they both become insolvent and illiquid all at the same time Jason Calacanis (00:31:34): in the whole thing explodes. Chamath Palihapitiya (00:31:36): So, Brian, the question is, now that we know what happened, which is all of these crazy inter party related transactions and, you know, all of this stuff seems very illegal, there was a bankruptcy filing today. And up until today, it seemed like this issue was really about FTX International and Alameda, and it didn't touch FTX US, which for a lot, a long time, tried to position itself as well run and regulated as Coinbase to be you know, they tried to say that. But now if you look inside the Wall Street Journal, all the articles say that this is actually FTX group, so the whole thing seems to be imperiled. Can you just help us explain that? Because there now that's a lot of US people that were following the rules thinking that this thing was matched 1 to 1 that may be also affected. David Friedberg (00:32:26): Yeah. So look. I I don't know who inside FTX's and its orbit of companies actually knew that the the fraud had been taking place. I I it would not surprise me. I I have no idea, to be honest, but I it would not surprise me if FTX US people and employees had no idea that this was happening. I I am imagining if Sam was doing when he when he started doing this, he probably wanted to keep it to a small group. Otherwise, this is the kind of thing that leaks and the whole thing blows up. Now that being said, I don't necessarily think FTX US is worth anything as a business right now because of the brand being so tainted. And there probably was not great separation of these entities in the sense of, you know, like, did they have truly separate boards and beneficial owners and governance and Sam seems to have you know, it appears that they didn't FDX didn't really have a CFO or maybe even, like, a real board or anything like that. And so it's hard to imagine. Chamath Palihapitiya (00:33:23): We found on there was an article that appeared that said that the head of compliance at FTX was also the head of compliance at a poker site called Ultimate Bet, which in the 2010s did this exact thing apparently. Some version of this where They went in and they looked at whole cards of poker players, and then a few employees inside the business would basically play against these folks knowing what the whole cards were ran this cheat, stole 1,000,000 of dollars. Somehow, that person found a way to be out of compliance in FTX. Yeah. 10 years later. which is incredible. But back to this question. So so now what happens now is you have the international business and the US business and Alameda research all rolled up into this one frozen entity. Right? With now regulators having to So do you know what happens in a process like this? Like, is it that the the DOJ and the SEC get priority? Or is there some international monetary like, who who's who unwinds all David Friedberg (00:34:24): of this? How how do people get their money back if at all? Yeah. So I'm not an expert at this, but my high level understanding is that the bankruptcy courts will essentially and I believe they filed bankruptcy in the which is an interesting thing. I didn't know why they did that versus Bahamas. But, anyway, the the bankruptcy court will basically go through and try to find any assets of value. So I mean, They must they still have some tokens and value. They have a venture portfolio. They you know, I think Sam owns 9% of Robinhood. There's various things that they may own. And then they'll kind of auction those off to various bidders on distressed assets and then try to distribute those funds to the customers. I I don't know the exact process beyond that, though. David Friedberg (00:35:02): mean, if you remember, the Madoff wind down took many years. And for years, he was trying to find assets, and then he found a market, sold them. There's just the trustee. I think he's still active. And then, you know, it's tried to redistribute the funds. Obviously, so many more customers here than they're ones with Madoff, but it can be a very long and winding process to identify all the assets then run the market sale process on them, then figure out who gets what first and then distribute. Chamath Palihapitiya (00:35:26): There was an interesting thing that Larry Summers did, I think, for Bloomberg. where he was asked whether this was Lehman or Enron, and he said it seems more like an enron than it is a Lehman. And Brian, I'm just curious how you think about it. Like, is this sort of a fraud perpetuated by a group of executives to essentially take advantage of a situation? Or do you think that this is more like a Lehman situation which is a well run business, I guess, that just, you know, got caught in a liquidity trap? David Friedberg (00:35:58): I think it's my guess is it's a little more like Endron in the sense that, I mean, yes, they were over levered and that kind of thing, but the minute that they moved customer funds in some way, shape, or form to backstop the hedge fund, that that was in my mind fraud and, you know, that's more like Enron. Chamath Palihapitiya (00:36:15): Do you think now that we have to open the gates on regulation like the whole point of crypto in some ways was, you know, trust nobody. And you know, decentralization is the key. But here what we see is a lot of people were tricked into trusting FTX and having their deposits there and it was a centralized exchange which caused all these problems. So it's like It almost violates the principles of what the whole product market fit was supposed to be. So what what should sort of the observer expect? And what do you expect as a business in terms of how governments now react to all of this? David Friedberg (00:36:51): Yeah. Well, I think it's really important to distinguish between the centralized players in crypto, which are custodian exchanges, etcetera. Coinbase has a big business there. And the decentralized players, which are, you know, self custodial wallets, DeFi protocols, web 3, that whole world. So The centralized players should be regulated. And today, they're regulated already likes like kind of traditional financial service businesses. But they don't have the the regulation clear when it comes to the crypto aspects. So for instance, in the US, we we actually don't still have clarity about what is a commodity, what's a security, should which one should CFTC regulator versus SEC, that kind of thing. And that lack of regulatory clarity and, frankly, the the climate of regulation by enforcement, the negative rhetoric from, you know, chair Gensler, in particular, has created this sort of chilling effect in the US that has pushed a lot of that centralized actors' activity offshore. In fact, 95% of the trading volume in crypto is now outside the United States and it's come down a since the beginning of this year even. Now the decentralized players, self custodial wallets Defy, Web 3, this is where crypto really has an opportunity to make a more fair and free and transparent system because you can go look at any smart contract to see exactly what it's doing. Anybody can audit the code. If you have a self custodial wallet, you you can just trust yourself. You don't have to trust any other intermediary out there. And that's where you get true decentralization. And I think that's actually now those areas still have a couple of their own challenges. You know, sometimes people will lose their password or their phone, and they'll lose their own money. So you if you're if you're trusting yourself, you still have the you have to trust, you know, that you're gonna do that piece correctly. But there's a lot of good things we can do there around making social recovery mechanisms and MPC wallets and things like that. Jason Calacanis (00:38:37): We remember just a couple of months ago, Gary Gantzler started saying, hey. These things are all securities. And you went and visited the SCC a couple years ago or you tried to, they wouldn't meet with you. You were very public. You did a a tweet storm. We talked about this on my other pod that, hey. Like, we wanna meet. We wanna talk about that. Now we're still in a position where The SEC's position is these are all securities, which means the anything that's trading, it would have to be limited to accredited investors, etcetera. What should the United States do here? And how close are we to getting clarity? because I know you're trying to talk to the SEC directly about can we just get some clarity here? Can people buy these tokens or not? What is the status of are they tokens? Are are they securities or are they not here in the United States? David Friedberg (00:39:20): Yeah. So luckily since then, we have had a lot of productive dialogue with both the SEC and the CFTC and treasury and all kinds of people in Congress, And I do think the US is making some steps in the right direction. There was actually there was a bill going through congress recently called the DC, CPA or the staff now Bozeman bill Although it's having some challenges now, frankly, due to this FTX blow up because SPF was one of the people sort of pushing that bill forward. But regardless of that, the the sort of system that we should have is there should be a clear designation between what is a crypto commodity and that can be regulated by the CFTC and what is a crypto security. Now this is one of those legal and by the way, what is also a stablecoin and artwork and other things that are not those things. The challenge lies in that there's kind of a fuzzy line between what is a commodity and what is a security and a lot of this law is based around the Howie test, which says a security is an investment in a common enterprise with an expectation of of profit. And so it's basically a a point based system. And in the absence of really getting a clear list between the CFTC and the SEC are in this turf battle, I would love it if, you know, they could basically put out a list get their heads together and Jason Calacanis (00:40:33): put out a list. Hey. CFTC is gonna do these. FCC is gonna do these. A bunch maybe are in the middle. Let's let the courts figure that out or whatever. But that just hasn't happened, and it's a it's a missed opportunity in the US. So if the Howie test is not perfect given the dynamic nature of cryptocurrencies and all the innovation, if in Armstrong was gonna say, hey. This is in the best interest of Americans, balancing, you know, some amount of security and safety for people making bets on this currency. and allowing innovation. What would you say is the best definition, the best way for us to regulate crypto coins. Putting NFTs aside, putting Douse aside just specifically -- Yeah. So, Jason, Chamath Palihapitiya (00:41:13): hold on. Hold on. Let me just tweak your question. Sure. Hold on. because we because we should switch to SPF as well and just talk about the person. But to me, it seems the whole issue if you come back. Like, what is the first string that you pulled that unraveled the sweater? was the fact that these tokens were created out of thin air. They had no meaningful value. Somebody prescribed a value. And all of a sudden, everybody else in the economy all of a sudden said, yeah. I'll take that as collateral. Look. You cannot do that in the regular world. I can't call JPMorgan and say, I've invented this thing. It's called a share in x yz. And I'd like you to margin loan, you know, give me a loan against it. So, Brian, explain like there's a ton of these tokens that have been engineered. Right? And there's been a ton of these tokens that have been sold. So what should people do that own these things thinking that there was going to be some safety or value or you know, like how do you think about all of these tokens that are that that could be as basically as as fragile and shitty and worthless as FTT. David Friedberg (00:42:14): Yeah. Well, there there is this concept of, like, an exchange token, and and there's a couple other firms out there that have them. And that's something we haven't done. And I I do I think I think you're right. Like, the the actual utility of those things is a little questionable. And so if someone's gonna sort of mark those up on a on a low supply and then a low float and then somehow leverage that. That that that's gonna get yourself into trouble. But look. I don't wanna throw out the entire concept of people creating tokens. I think there's actually a lot of good stuff there. And it it comes down to this idea of if if you're trying to raise money for your company and a to through a token, that's fine. That should be a security. And there should be a regulated way to do that in the US. Like, go register it with the SEC, you know, let it trade on broker dealers, that's that's what we've been wanting to do for a long time. And the SEC is taking their time getting there. They don't you know, Gensner, to be honest, he doesn't seem that excited about the idea of this whole industry existing. And so, anyway, but it should it should exist, and it should be happening in a regulated way. So if people wanna issue a token that's raising money for a company, let's regulate it as a security. If they wanna issue a token that's truly on a decentralized protocol or it has some other purpose like voting in a DAO or or rewards or something like that, then that's probably not a security. And let's be honest about that and allow those things to trade in a different environment, a different regulator under the CFTC. Chamath Palihapitiya (00:43:32): We're probably running out of time with you because you said you had a hard stop. So let's ask the $1,000,000 question. Tell us about SPF. Like, What's who is this character? Jason Calacanis (00:43:41): When did you first suspect? David Friedberg (00:43:42): Yeah. What's your read on the psychology? Jason Calacanis (00:43:44): That this wasn't legit. David Friedberg (00:43:45): Do you think that it was his altruistic intent? that allowed himself to convince himself to do this, or giving this was, like, malicious the whole way, or what what's your sense of the guy? David Friedberg (00:43:56): So, again, I'm speculating here. I mean, I I've spent time with I've I've met him a bunch of times, and I have to say, I I did not see this coming. Like, he He appeared to me to be a very bright, credible, competent person, perhaps a bit young, perhaps, you know, a bit reckless at times, but not unethical and not not committing fraud. I I definitely did not see that. You know, if I look back to see, were there any warning signs that I should have thought twice about it. You know, one of the things I noticed was that in 2021, you know, Coinbase had a good year. We we did 7,000,000,000 in for a 1,000,000,000 of positive EBITDA. We went we became public as a company. At that time, FTX did about 1,000,000,000 in revenue. And I knew how much money we had for our venture budget and just, like, different investments we wanted to make. And I and I knew their revenue. And had to scratch my head a bunch of times, and I was like, where is this guy getting all this liquidity? Because he was, like, buying 9% of Robinhood. He was putting, like, a $1,000,000,000 into this. He was donating to all politicians. And I was like, I I it did not make sense to me where he was getting all this cash. People would just kept telling me, oh, his market maker Alameda is just printing cash. I guess, like, okay. I guess, you know, it seems like a conflict of interest to own an exchange to market maker. That's why we haven't done it, but more power to them, I guess. And so I was surprised I didn't speak up. I cannot I can't explain the psychology of it at this point whether he's a pathological liar or if he's started off good and somehow under the pressure of this whole thing went bad. But the minute you can you can go watch the interviews. He's he's he's lying to people about why he's he's, you know, a bailing out voyager and and BlockFi and these and and he he knew at that time that Most likely, he knew at that at that time that they were not solvent. Alameda was not solvent. David Friedberg (00:45:40): And so that's where he crossed a major line in my book. David Friedberg (00:45:44): And we see it time and time again. Elizabeth Holmes, Bernie Madoff. I mean, once the lie gets too big, you can't get out of it anymore if that's the case. Really incredible. Jason Calacanis (00:45:54): And the most important thing at this point, Brian, is that the United States makes a decision on do we wanna be in crypto? Do we wanna say in this and create a regulatory framework that entrepreneurs like yourself can deal with. That is the most important thing to happen in the next year, but you're saying the SEC is not motivated. I guess, why are they not motivated? They're just CYA. No. They're motivated now. Chamath Palihapitiya (00:46:16): This is a political issue now. So they but let's hear Brian. Yeah. Jason Calacanis (00:46:19): Answers here. What do Speaker 7 (00:46:20): what do David Sacks (00:46:20): you think about that? Who who did you have to give all this money to because he was touted as one of the future biggest donors to the Democratic Party. Chamath Palihapitiya (00:46:27): Democratic party. Jason Calacanis (00:46:28): -- David Sacks (00:46:28): want signals. So if you want signals, I would say there's pretty big signals here. Number Jason Calacanis (00:46:32): 1, David Sacks (00:46:33): he says he's gonna donate a a $1,000,000,000 democratic party, and he kept touting this, like, effective altruism, whatever, the saving the world stuff. Now why do you need to do that unless your reputation laundering and trying to buying political protection? Speaker 6 (00:46:48): Come on. Okay. David Sacks (00:46:48): You don't think that was a little bit of a signal? Chamath Palihapitiya (00:46:51): Well, you're I'll tell I'll tell you an I'll tell you an even more explicit signal. we he pitched us in that $17,000,000,000 round, and I did a Zoom with him. And after the Zoom, I'm like, this doesn't make much sense, but I'll have my team do some work. We did some work and we sent him a two page deck and we said, here are our recommendations for taking the next step. One was the formation of a board. The second was the creation of dual class stock. The third was some reps and warranties around affiliated transactions and related party transactions. And the person that worked there called us back in literal I'm I'm not I'm not kidding you said, go fuck yourself. was, quote, unquote, the response to us. We're like, okay. So that was the easy decision. But Jason Calacanis (00:47:35): -- David Friedberg (00:47:35): Message receives. Chamath Palihapitiya (00:47:37): Message receipt, but I still thought, okay. I'll just put that in the bucket if these guys are unbelievably arrogant and smug. But, Brian, I thought what you thought, which is Maybe it's because they've print they've created some money making machine in the Bahamas. And so they they have that level of it of confidence. You know, I'd it but then to see this thing to the extent of which is now we're only scratching the surface, guys. You know, that we're gonna find that stuff every day. Jason Calacanis (00:48:04): The the response war is gonna be crazy. But, Brian, to the question I asked before about the SEC and what should happen. You said I wanna pick up on what you said, which is the SEC doesn't seem motivated. Why is the SCC in your mind not motivated? Well, I David Friedberg (00:48:17): think you're right that they I hope that they use this as a moment to come together and help, you know, local companies in the US being built here to end up in a better place. And I do believe you know, David, I think, said it's it's right. It it is a political issue at this point. There's gonna be a major impetus to get the clarity here in the US and hopefully to help build the companies here in the US that are gonna serve the rest of the world and in in every major financial hub. So we're committed to building that together with all the regulators around the world. And crypto is here to stay. This is a temporary setback, but I'm I'm here to keep building and make this thing happen. Jason Calacanis (00:48:54): Alright. We really appreciate you taking the time, Brian. David Sacks (00:48:56): Sam, do you wanna get to the left? Jason Calacanis (00:48:58): Yeah. BNB is the line. Yeah. David Sacks (00:48:59): I mean, story after story here about, you know, SBF was gonna create this $1,000,000,000 philanthropy to, you know, save the world, improve humanity's long term prospects. number 2 donor to the entire Democratic Party and on and on and on. And, like, quite frankly, what this shows is you wanna know what effective altruism means. It means that you steal other people's money while bragging about saving the world while taking a big chunk for yourself. That's what it means. David Friedberg (00:49:28): There was a research paper in 2011, and this research team looked at drug addicts and drug abusers for 1000 people and they found that the biggest addicts had the highest intelligence, that you were twice as likely to become an abuser or an addict the the if you were any kind of intelligent quintile quintile that they were measuring. And I someone explained this to me at the time that the smarter you are, the more you can convince yourself that when you're doing bad things, you're actually doing good things. even if you're doing bad things to yourself or bad things to other people that you really may actually care about, you can convince yourself that there's some reason to keep doing it. he seems like a brilliant guy. I think that to some extent, he may actually I don't know the guy, but he may actually believe that the You know, the the ends did justify the means, and he thought that he was doing good for the world. And this was something that had to be done in some way. And, oh, it just got a little bit away from me, but it's it's still -- I Chamath Palihapitiya (00:50:29): think the I think the problem is bigger than FTX. And I'll say the uncomfortable part out loud, and nobody needs to necessarily comment if you don't want to. But there were an enormous number of venture firms that hawk their their way into just completely doing zero work here. I mean and the the tip of the beer is this thing well, who's the guy that works at founders on Bulgar, Buljar's Zibuljar. Zibuljar. Deli, thank you. Yeah. Yeah. Yeah. That tweet that he had where he basically took the snapshot of the Sequoia transcript was one of the funniest things that I've ever seen. I mean, this was a Jason Calacanis (00:51:10): $215,000,000 Chamath Palihapitiya (00:51:12): decision. And Sequoia documented it and put it on their own website. And I think that's an example of something that was happening, which is people just looked the other way and didn't even wanna do the layer of work. David Friedberg (00:51:24): Shamal, let me just string together a couple of things we've talked about over the past few episodes. And I think you'll agree with this point. But generally speaking, there seems to be a very heavy lack of governance in investing given the amount of capital and the velocity of capital in Silicon Valley, particularly in private markets of late. And a lot of the stuff that's been talked about where last week, we talked about super voting shares, and the founder does whatever they want, and there's no governance, and there's no board, and there's no oversight. And particularly with this FTX situation, we're clearly there wasn't a board that that was, you know, getting the necessary information that had the necessary influence that had the necessary controls. the meta conversation, but all of these threads tie together the concept that maybe there's not a lot of governance and not a lot of diligence going on. And the amount of money that's flowed into Silicon Valley has allowed a lot of this losing people crazy behavior. Speaker 6 (00:52:14): How do Chamath Palihapitiya (00:52:14): you agree David Friedberg (00:52:14): with the consequence of it? Jason Calacanis (00:52:15): Let's thank Brian Armstrong. for joining us. I know it was a very busy day and what a great candidate insightful. Thanks, Brian. Yeah. David Sacks (00:52:21): Thank you, Brian. Jason Calacanis (00:52:22): Thank you. Candid and insightful. Finish your Dutch month. Chamath Palihapitiya (00:52:26): I just want to say the second uncomfortable thing out loud, which is there was a lot of venture firms in Silicon Valley in this period of both not doing any work or diligence who also took the extra step and actually created classes and would teach teams how to create these tokens. Okay. And those artifacts, those video links and artifacts are sometimes on their website. They're still on YouTube. They're inside of Twitter. And what these folks would do when we talked about this, the game that they played was they would get a team, they would create a token, They would also buy equity at some crazy valuation. The equity was locked up, but the tokens were not. and then they would put them on an exchange and sell them to unsuspecting people and they would be able to dump these tokens. And if you look inside of That trend, what you're gonna see and Brian just mentioned this, those were the sale of securities except it was done in a completely unregulated way. So if the SEC is really and the DOJ is really gonna take this FTT token issue seriously and what happened to FTX, They're gonna start to look at a bunch of other tokens and token sales and you're gonna end up looking at some very well known venture firms inside of Silicon Valley. Jason Calacanis (00:53:43): This is gonna be super gnarly, and we talked about it before on this pod. There are people who knew better. So you get a bunch of kids who are living in the Bahamas in a house and and they're you know, winging this thing. That's one level of responsibility, and they'll go to jail. But when we talk about venture capitals, capital allocators who've been at it for decades, to Chemot's point, and they're teaching people how to do this. And they're hiring attorneys and creating offshore, Panama, you know, BVI whatever places to put these coins and then teaching people how to do it and then flipping them potentially. This is we're just peeling back the onion on this. I have a feeling that this is gonna be the turning point in all of this deal. -- Chamath Palihapitiya (00:54:22): guys, let's be honest, is not the only token that has been engineered by Silicon Valley Venture Firms. And it is also not the only token that's gone to 0. That was engineered by Silicon Valley Venture Firms. Jason Calacanis (00:54:34): Well, I mean, who knows engineered by? But, yeah, adjacent to at the very least -- Chamath Palihapitiya (00:54:39): Oh, Jason. Jason, there's videos today on some of the most well known venture firm sites on how to do this. Jason Calacanis (00:54:47): Oh, wow. I'm gonna have to see those. Yeah. So they're based on you're you're going Shamoff is they're instructing people on how to do this. And that is part Chamath Palihapitiya (00:54:56): of the deal flow. -- capability. It's what it's what it's what they it's what they did. Jason Calacanis (00:55:00): Can I David Friedberg (00:55:00): ask your guys a point of view on just one big macro philosophical question? I'm obviously not big in the crypto world and haven't been, but so much of the positioning has been that these networks get decentralized through the cryptographic verification systems that obviously enable you know, them to operate effectively and truthfully and correctly and without centralized control or manipulation. But, ultimately, while these networks themselves may be decentralized, the user's point of access often ends up being centralized as a point on the network. And it is that point on the network that accrues the same level of influence, power, control, and value as what we saw in the prior centralized network model. You know, we had biology on last year, and, you know, I tried to get to this point with him. We had to cut the thing the show the conversation short, but I still not heard from anyone. And I've spoken with Brian separately about this point. And and the the the the concept I use is, like, Look Media. If you put all the YouTube videos on on a decentralized network, and anyone can access them, and they're distributed everywhere, you still need to have a really good application. And whoever makes the best application is gonna get all the usage. And then all the users will use that application, and that becomes effectively the point of control and influence and value once again. And so it seems to me, like, in this case, the exchange was being used as a centralized wallet. Certainly, you can do, you know, exchange through the exchange But but mechanistically, these guys were storing their coins, their their cryptocurrency inside of FTX's wallets. And one their TX had control over their assets, and so the network centralized. And so does the decentralized model a it's a question I'd love to just ask you guys in your point of view on. David Friedberg (00:56:45): Does this decentralized model actually ever manifest where everyone has their own wallet? I know there's all these new protocols and these distributed wallets and DeFi things, but Jason Calacanis (00:56:53): -- David Friedberg (00:56:53): I don't know enough. Yeah. Jason Calacanis (00:56:55): I don't know enough. -- better. But then I want to -- This David Friedberg (00:56:58): points out to me. Just you basically recreate an exchange. without a regulator. And, of course, someone ripped you off, and it blew up. Like, I mean, how's it any different than what we had in version 1.0? And is it really a model where decentralized works are ultimately because of the network effect in the in the economy of scale. Jason Calacanis (00:57:13): -- answer. Yes. Shamann, answer. Yeah. David Friedberg (00:57:14): Alright. We we got Jason Calacanis (00:57:15): the question. Yeah. Good, Shamann. Chamath Palihapitiya (00:57:17): No. I mean, I I haven't I have I don't know the answer to Friedberg question because I don't I don't know this space well enough. I mean, you know, I my my biggest purchase ever was bitcoin in Jason Calacanis (00:57:30): 2011. Chamath Palihapitiya (00:57:32): You know, I've bought a bunch of these tokens that have massively depreciated in value. I think lots of investors have. You know, I kind of fell into it as well. Like, I thought, wow. This is incredible. I get to buy these tokens. They do all of this cool stuff. represent all this value. And my experience has been the opposite of that. I've lost a lot of money in these things. And so, you know, I really hope that regulators not just obviously. I hope that regulators do their do the best they can to get investors' money back in f t x. But I really also hope they figure out all these other tokens as well because you can just rank them in terms of market cap start at the top and work your way down. And you will see that these were unregulated securities, Jason, that were manufactured and sold by our brethren. People who understand the law around accredited investors and this stuff very well. Yeah. They understand that implicitly. Yeah. Do you guys think crypto investing is dead, or what do you think How do you think people think about that risk profile now inside of Jason Calacanis (00:58:39): -- I think that investing in the tokens is gonna end. Investing in the corporation is gonna begin. And any of the tokens are gonna be super regulated. Building on what you said Chamath about the ultimate bet, is it possible that Alameda, the trading hedge fund, was looking at the f t x data, which they had insights into. And essentially, that's the same as seeing the whole cards in the ultimate bet. And so they're making their trades based on what they see the consumers are making their trades, front running their trades or otherwise -- Chamath Palihapitiya (00:59:05): That's not illegal. You know? Citadel does this in the regulated market. That's what payment for order flow is. It's Right. It's the ability to front run retail volume. And so, you know, in dark pools, that is legal. by the law in the United States, and that's what allows Citadel and, you know, I think Jane Street and Susquehanna. You know, all these folks basically run these dark pool exchanges for regulated securities like options and bonds and and stocks, and they get this order flow and they run it by a millisecond, and they they just take small dig. Okay? Jason Calacanis (00:59:39): But they can't print the FTT tokens and and otherwise manipulate the market to the level that I think SBA could. Chamath Palihapitiya (00:59:45): I I just think that there is there is there's these really strict walls and segregation Jason Calacanis (00:59:50): -- Chamath Palihapitiya (00:59:51): Mhmm. -- as you heard Brian talk about. when you have those businesses in these regulated markets. The problem here is that this is totally Jason Calacanis (00:59:57): -- Wild West. -- Chamath Palihapitiya (00:59:59): unregulated, Wild Wild West. So who knows what's going on? Really? Jason Calacanis (01:00:03): And we're pushing the business Saxx off of the shores of the United States, as he said, 95% of this is happening offshore. What do you think should happen in regulatory wise Saxx? in terms of America and competitiveness? Or do we not to be need to be competitive in this -- No. David Sacks (01:00:17): I think we should be. I mean, what if what if crypto and DeFi is the future of finance. I mean, it's an important technology that I think Jason Calacanis (01:00:24): -- David Sacks (01:00:24): Right. -- we should enable through some sort of constructive regulatory framework think the regular should listen I think the regular should listen to Brian and help him with the appropriate framework. But to be clear, look, what's Sam did is way worse than people going on in exchange and speculating. I mean, look. I I think that people who speculated in the buying, it's only these tokens they're they were using it like a casino. Okay? Like, that's different than a customer putting their money on FTX and having their money get stolen. That's a big difference. So I think there's levels here. Now, Shamaz, to your point about who's minting these tokens You're right. Maybe that's like another category. But I do think that the reason why this is on a different level is because it wasn't Sam's money to give away. Jason Calacanis (01:01:11): There is such an easy solution to a whole voluntary process. I'm just Chamath Palihapitiya (01:01:14): I'm just straight I agree with you on that point. But I think don't underplay when there's an organized process to create an illegal security with special rules for them that allows the liquidity for one class of asset and not liquidity for -- Yeah. David Sacks (01:01:31): You're right. So that's a separate bucket. I don't think it's the same as what Sam did. And I don't think -- No. No. I agree. Chamath Palihapitiya (01:01:37): I agree. No. I'm thinking. I think that Jason Calacanis (01:01:38): should be a time subgift. David Sacks (01:01:39): That's something that needs to be looked at, and we need a constructive regulatory framework for that. Jason Calacanis (01:01:43): There is such a simple silver bullet for all of this, which is these things need to be there needs to be proper governance People have to have skin in the game, insurance, people signing off on the taxes, boards, onshore here in the United States, and then we need to have and I'll keep saying this, a way for Americans to become sophisticated investors. Only 6% of this country fall into the qualified purchaser and accredited. If you wanna trade in these things, or you wanna trade in NFTs or private companies, we should have a driver's license like test, a firearm like test. Jason and Chamath Palihapitiya (01:02:17): I are Speaker 7 (01:02:18): on the Jason Calacanis (01:02:18): same side. -- sophisticated test and let the product into it with an education. Chamath Palihapitiya (01:02:22): The problem is when you have guys like this, it sets that desire back by a decade, if not more. Jason Calacanis (01:02:28): Okay. It really sucks. I agree. Because every single -- So frustrating. -- Chamath Palihapitiya (01:02:32): every single person inside of Washington right now who's anywhere near this from a regulatory perspective or a policy perspective is meeting on Monday morning. Yeah. And the meeting topic is how do we defend the mom and pop folks that lost money here. Jason Calacanis (01:02:48): Yes. Chamath Palihapitiya (01:02:48): That's the only thing. So we took this out of you know, because I I remember I remember I texted into the group chat. Hey, guys. Well, what what do we think the the legal ramifications are that drive prosecution? And one of our friends said legal ramifications These are political ramifications. David Friedberg (01:03:03): Yeah. Chamath Palihapitiya (01:03:04): Which means that this is gonna go to the utmost level and it's gonna have the most scrutiny and they're gonna act really quickly. is They're gonna drop Jason Calacanis (01:03:11): the hammer instead of having a path to accreditation. I agree with you. They're gonna drop the hammer because they're constituents. Some grandma and grandpa or some people put their college education to this and lost everything. We just need a test. Let people prove they're sophisticated and let them participate if and only a workout license. David Friedberg (01:03:27): Jake, haven't you been a opponent for letting people invest in startups that are just mom and pops and and democratizing access? Jason Calacanis (01:03:35): I'm only allowed to do that with accredited investors. I would like there to be a test, and I actually teach your course, Angel University, six times a year for charity. I do it for charity. It's a 4 hour course where you learn about diversification. You learn about the asset class. You learn about 70, 80% go to 0. We teach you out the power wall. I try to teach people about this stuff so that they can participate intelligently. It would it would be the equivalent free of break, and thank you for asking the question. The it would be equivalent if we had a poker test. And to play in the world series of poker, You had to go to a 5 hour seminar, and you had to take a practical test, and you had to say, you know, a flush beats a straight. And you had to just prove that you had some level of knowledge of how to play the game. It's such an obvious path to removing these problems while staying competitive as a country. Instead, we're letting people do this offshore like cz with no rules or whatever rules he chooses. It's just infuriating. It's so stupid. Our politicians I think Washington are so dumb. David Friedberg (01:04:29): Can I just say something? I think the challenge is there's always a spectrum of understanding, and you'll always end up seeing the people on the wrong end of the spectrum getting taken advantage of. There's this notion of adverse selection. Distributions are not equal. People will end up you know, kind of opting in to spend money on things or making investments that they think are good investments, but they're actually getting taken advantage of because they're not savvy enough where they miss an important angle or important perspective about the person or the thing that they're giving their money to. And there will always be some number of those. And the way that regulation has worked historically is not by first saying, hey. Let's figure out the right way to create a framework for operating. It's that some sort of people got advantage. That story then becomes the regulatory framework. And that story has repeated itself for 500 years across Capital Markets. Jason Calacanis (01:05:16): We're talking about a multilayered thing here. We want to see crypto have a framework We want it to blossom here in the United States. And then there's multiple level of people who are causing chaos in this ecosystem in this very promising technology with their goddamn grips, whether it's VC's gifting or SPF or incompetence, We just need to clean this framework up. If people sometimes people I understand in DC listen to this podcast. If they're listening, it's essential that America be competitive it's essential that everybody participate in Risk Capital and get educated. Let's clean it up and make a framework that allows all Americans to participate and educates them and then stops these grifters from doing stupid things. If people were educated, that's the first step. And it's the Speaker 6 (01:06:00): best step. You talked Chamath Palihapitiya (01:06:00): about the economy? Sure. Jason Calacanis (01:06:02): You wanna talk about Facebook with 11,000. You wanna talk about the market popping? Chamath Palihapitiya (01:06:07): So at the beginning of October Jason Calacanis (01:06:08): -- Chamath Palihapitiya (01:06:08): Yeah. -- I think what we basically said kind of, generally speaking, is markets up. Right? Jason Calacanis (01:06:13): Markets up. Chamath Palihapitiya (01:06:14): Yeah. From nibbling to being constructively positive and basically being Jason Calacanis (01:06:17): -- Yep. -- Chamath Palihapitiya (01:06:18): positioned long. Here's this really interesting setup. We have a bunch of very positive news that I think we all have to process. First positive news was that inflation ticked down. Now here's what I'll tell you. There's a caveat here. I talked to a bunch of pretty smart sharps on Wall Street. And oh, 2 things. Number 1 is they all gave credit to David Saxx and they said Saxx was totally right. Double dip recession is coming. But then they said, tell Saxx that we think that these are the sharps. We think that there's a double hump in inflation coming, which means it's coming down to come back up. And there's a bunch of reporting vagaries that may cause that. So keep that in the back of your mind. But positive news number 1 is inflation ticking down. Number 2, Jason, we talked about this. A federal judge basically stayed Biden's attempt at giving student loan relief. Now that would have been a $500,000,000,000 transfer payment from the government into the hands of individuals. It is deflationary to not give that money to people. It's effectively taking stimulus away from folks. Number 3, it looks like we're headed towards a split government, which means that we are not probably gonna see any more stimulus over the next 2 years. Number 4. Ukraine wins and curves on. I hope I'm pronouncing that right. Number 5, the United States announced yesterday through The Wall Street Journal that they had essentially said no to Ukraine's request for advanced drones. And they said to Ukraine, essentially, you need to go and negotiate an end game here. And number 6, China has started to relax as COVID policies, and g is pivoting to economy first. So if you took all Jason Calacanis (01:08:07): the votes take 7. Don't forget 7. Facebook, which would not take the medicine. They refused Brad Gershun's letter, cut 11 thousand people 48 hours ago. Chamath Palihapitiya (01:08:17): I don't I don't think Speaker 8 (01:08:18): Facebook matters that much, to be honest with Jason Calacanis (01:08:19): you. It matters that big tech is and they're taking -- No. Chamath Palihapitiya (01:08:22): It matters to us. So it it doesn't matter to the economy. to be completely honest. Jason Calacanis (01:08:25): I think it does if people are gonna start cutting jobs. But okay. Keep going. Chamath Palihapitiya (01:08:29): My my point point is these seven things are macro level things that affect everybody. Yep. And I think if you take them together, what it says is that, wow, there's there's the potential for a lot of great positive developments over the next 6 or 9 months. Mhmm. And I don't think that that was adequately priced in the market. But here's the problem. And this is what's why we've been rallying. The problem is that most of this rallying has been because of a bunch of short covering by folks that who were pretty pessimistic and negative after the last few inflation prints. So this is not really net new buying that we saw over the last couple days. So you take it all together. I'm like, it's still gonna probably trend up a little bit. But then again, you know, we talked about this, Jason. When the vix gets into the low twenties or the high teens, that's probably the short term and then it turns around. And, unfortunately, we're near the low 20s, high teens. So that's kind of my thought on things right now. Jason Calacanis (01:09:26): Okay. Freeberg, you got any thoughts on the inflation print? David Friedberg (01:09:28): Yeah. So I think there's 2 things, one of which I'll give credit to a guy named Carl Choo. I hope I pronounced Karl's name right. He's from William Blair. He puts out these excellent research reports. And we used one of his graphics a few weeks ago, so I put it up here. And, basically, he showed that with the the Nasdaq move we saw this week. So you can see this here. You basically track the move in the 10 year treasury against the the one day move in the Nasdaq. And he said that it it really indicates a unique sentiment shift, whereas in other times, you've seen big moves in the Nasdaq that weren't really seeing significant moves in in the treasury rate at the same on the same trading day and that this is such an outlier what happened this week. The only other time that we've seen anything like it was when the Bank of England issue happened back at the end of September, in the last, you know, twenty times that we've seen this big of a move in the Nasdaq in a single day. And so we saw a 31 basis point move in tenured treasuries in a in a single day at the same time that we saw what a 7 point move in the NASDAQ. So he said, because you you don't normally see the bond market and the equity market trading this way together. it really speaks to a big shift in sentiment. Now at the Jason Calacanis (01:10:38): same time -- What is that shift in sentiment? David Friedberg (01:10:41): That there is gonna be less of a driver for the Fed to raise interest rates at this point because it seems like the inflation print indicates that inflation is coming under control. faster than what folks had otherwise anticipated. And so there may not be as many rate hikes as quickly as folks were anticipating, which will you know, benefit benefit equities and and the bond market traded that that with that perspective as well. Now the counter narrative which I just put a tweet by a guy who I've never heard of before, but someone shared this with me. His name's Gordon Johnson. And he said the CPI surprise may actually be due to a technical print that within the CPI, one of the biggest indicators is health insurance cost, And, you know, it it the the health insurance cost plunged by 4% October to September But it says health care costs didn't actually magically collapse. There was just an accounting difference in how they're shifting how they're accounting for health care costs that that took place during the month. And if you did not if you assume that that was flat month over month, you would end up actually with a 6.7% year over year print which was higher than expected. So there is a counter narrative going on in the market. I don't know how significant this guy is or how much of a voice he has. But I don't know if we're out of the woods yet, but some folks are saying that the market is saying we're feeling a lot better, but there are still analysts that are indicating that maybe there is still risk to be had ahead of us. Chamath Palihapitiya (01:12:07): I think the sharps tend to be on that second second perspective. David Friedberg (01:12:11): And by the way, I'll say in this week, I heard 5 and a half points even after that print. So is where we're gonna get to. Jason Calacanis (01:12:17): I think consensus we have here is is that we're in the end game now, maybe, what, two quarters, three quarters, four quarters of choppiness, Chamath? What would your gut tell you if you -- Chamath Palihapitiya (01:12:26): I I've been telling all of our startups that you need to plan to have money through the first quarter of Jason Calacanis (01:12:32): 2025. Chamath Palihapitiya (01:12:34): You must. Jason Calacanis (01:12:35): Yeah. Chamath Palihapitiya (01:12:35): Okay. You absolutely must. And the -- That's 8 quarters. -- of cash. Jason Calacanis (01:12:40): Okay. Chamath Palihapitiya (01:12:40): The way that I frame that out to them is 9. Yeah. 8 or 9 quarters of cash. ideally, 9. And the reason is that we have all of this positive news in the offing, but but the but the problem is, again, There is still a lot of risk to the downside. We haven't seen David's second, you know, dip in the recession. Right? So that double dip is going to be expensive. And again, the sharps think that inflation will come back at some point in the next six months. That will keep the Fed's foot on the gas. Maybe it's 2 or 3 more 50 basis point hikes. The point is, Jason, you could be at 5 and a half. Again, we said this last week. We're gonna get to a point that's probably higher than what people expect, that's probably around 5 a half, and will stay there longer than people want that's probably through the middle part of Jason Calacanis (01:13:31): 24. Chamath Palihapitiya (01:13:32): And if you don't prepare for that worst case scenario, you're doing yourself a disservice. I think the market can start to rebound in the second half of twenty four. But if you're a company you need to balance and and plan for the first quarter of 20 5. Because, you know, again, most venture investors are gonna wanna see 6 months of data on the ground that things are better before their sentiment changes. Yeah. And we're just starting to see the drawdowns. We're just starting to see the impacts in people's portfolios. That will drive behavior change. I mean, this SPF thing is the tip of the iceberg in terms of the money at risk. You know, I went and by the way, I did it in analysis. I shared it in the group chat. Hopefully, we can show this up. Brad has a little chart. Nick, maybe you can throw up the the historic draw downs. So for people that care about early stage technology. Since 2018 through Jason Calacanis (01:14:26): 2021, Chamath Palihapitiya (01:14:30): And including an estimate for 2022, we have injected Jason Calacanis (01:14:34): $1,000,000,000,000. Chamath Palihapitiya (01:14:37): into venture capital. And if you look at historically how money has been lost in periods like this, and you layer that into 2018 to now. What it basically tells you is about Jason Calacanis (01:14:50): $500,000,000,000 Chamath Palihapitiya (01:14:52): of that trillion from Jason Calacanis (01:14:55): 18, 19, 20, 21, 22 Chamath Palihapitiya (01:14:57): is going to be destroyed. We haven't even started to see that yet. Right? And then if you factor in another 100,000,000,000 or so from older vintages, we're talking about a 600 or Jason Calacanis (01:15:07): 700 $1,000,000,000 Chamath Palihapitiya (01:15:11): destruction of paid in capital. So there's still for all the good news, there's still a bunch of these unfortunate pieces of bad news that have to work its way through the system. Jason Calacanis (01:15:21): Yeah. And for people who are looking at the chart right now and you can see the charts on modify or if you search for all in on YouTube, we have a video version there. You just take a look at 1997. The the peak TV PI was, you know, seven and a half seven and a half times, you know, cash on cash money. And what actually got realized was 5 x. Right? So what paper said and what got distributed, for 2 different things. Anecdotally, what I'm seeing in the startup world, Shamalff, is people are taking the medicine and a lot of people are shutting their companies down. They're giving up on raising money and then asking me which portfolio company can I get a job at? Because I on my personal balance sheet, have been, you know, taking a 5 k draw a month, and I had I have 2 kids. I need a job. Can you get me a job at Amazon or another portfolio company? and a lot of aqua hires have started to happen. And so what's happening is the consolidation of talent people who would be a great number 3 or 4 person, but maybe they weren't suited to be the number one person are now consolidating into start ups With these layoffs at Meta and other corporations, we're starting to see very talented people who had peak comp of 300, 700 k a year. are gonna go to startups or there's smaller companies. And and that is also positive. More consolidation of talent, stronger companies. Chamath Palihapitiya (01:16:38): Did you guys hear the story yesterday that Nick, if you could just leave up the name Jason Calacanis (01:16:42): -- Chamath Palihapitiya (01:16:43): told about his friend. His friend basically makes a $140,000 working for a tech startup. And then also makes $280,000 working for Meta. And so and he's been working at both of those companies virtually for the last 2 years. The guy makes Jason Calacanis (01:16:57): $400, $450,000 Chamath Palihapitiya (01:16:59): a year, and nobody knows. And he says he works about 20, 22 hours a week. Jason Calacanis (01:17:03): on both combined. So the 80 hours and and remember, when we started in startups in the night late nineties and into into the turn of the century, The number of hours that was expected at a start up was what, Saks, when you were David Sacks (01:17:16): at Paypal -- -- a week, I would say. Jason Calacanis (01:17:17): 60 60 days. That was back to baseline -- Yes. -- 60. David Sacks (01:17:20): That was baseline. Yeah. Jason Calacanis (01:17:21): Baseline 10 hours a day plus coming on the weekend for a couple hours. David Sacks (01:17:24): Yes. Yeah. For sure. Easily. Jason Calacanis (01:17:26): easy. Probably more. Chamath Palihapitiya (01:17:28): Early days of Facebook, our our our executive management meetings wouldn't start till 9 PM. Yeah. It's this is Jason Calacanis (01:17:35): -- David Sacks (01:17:36): I think Elon's gonna be a trailblazer in a lot of ways on this Twitter thing. You know, first, he did the big headcount reduction, but then he also just this past week said everyone needs to come to the office. And if you don't come to the office, you you don't have to come to the office. You're excuse. If you're an exceptional performer and you've got a good reason, then you don't have to. But the baseline is everyone comes to the office. Chamath Palihapitiya (01:17:56): By the way, just to put this point into focus, Nick, can you just throw up this chart for these guys to see? because I think it's just ridiculous. So this is basically what we're dealing with. which is like if you look at and these are just a couple of examples, but this is meta, Amazon, Snowflake Datadog versus Gilead Raytheon and Exxon. What is the point of this? The point of this is just to show you that we have had a massive rotation away from our industry is the point. Right? Where normally the things that we would work on were just so well received by so many different kinds of investors that unfortunately just isn't the case anymore. And I think it just goes to show you that the reason why this is happening is because people are hedging their bets about how long the economic pain lasts That's why, you know, they'd rather be long healthcare stocks, you know, industrial defense companies and oil companies. Because at the end of the day, they're banking on oil and war and sickness of, Jason Calacanis (01:18:54): you know, versus social media and ecommerce. and SaaS software. And if we look Chamath Palihapitiya (01:18:59): at this chart, just no matter how good, by the way. So this is not an indictment on these companies. David Friedberg (01:19:03): Go watch the the prediction episode. from last year. I think that Jason Calacanis (01:19:06): was -- -- prediction episode. Yeah. We you and I nailed it on crypto. We both said crypto is gonna crater. These four horsemen here, Datadog, meta Amazon Snowflake down 23 to 27%, and then the Gilead Raytheon Exxon cohort, 8 to 28% up, I think Chamath, what this says also is we don't think your management style and how you're running these businesses is appropriate for this moment in time please consider some austerity measures and some thoughtfulness in how you treat shareholders. David Friedberg (01:19:37): vis a Jason Calacanis (01:19:38): vis -- -- director. Well, I mean, I it's just watching the number, you know, how people are running companies. I think we took it too far in Silicon Valley. We took it too far. Whether Let me Chamath Palihapitiya (01:19:48): know, Jake. I I I know that I know it's sort of a pet issue of ours because we have to deal with some incredible hubris and arrogance sometimes on the boards of these companies because folks don't wanna listen to to reasonable advice and we come off as wet blankets. But that chart, to be honest, is is because of what we explained last week, which is the when rates go up, The value of a dollar that you earn today is just meaningly meaningfully more worthwhile than a dollar that you may earn even 2 or 3 years in the future. That's why that chart looks the way that it does. And if you believe that David's forecast of a double dip recession is accurate, which, again, most of the sharps do, And then you also layer in this idea that inflation could come back. You have to be really defensively positioned. You know, you can't take a lot of risk which is why startups have to expect that if that's the dynamic and Jason Calacanis (01:20:44): $600,000,000,000 Chamath Palihapitiya (01:20:45): is gonna get destroyed in venture capital portfolios, How open are VCs going to be for business? They're probably not going to be that open and so you have to plan I think for the middle for the early part of Jason Calacanis (01:20:58): 25. If Amazon and how do you get incremental dollars in these tech companies? Amazon does a riff some austerity measures. They raise prices a little bit if they can. You know, maybe you see more incremental dollars coming today, and maybe that incentivizes people. Look at what happened. we were at $89 for Facebook shares last week, Jamal. When he made the RIFF 107, he went up like 15, $20. What does that tell you? Chamath Palihapitiya (01:21:24): I mean, I think it tells you that a lot of people were short going into that, and they were probably cut offside a little bit by the magnitude of it. I think that that's good. the the issue that a lot of these companies have even in the face of rifts is that you have to reset expectations now on earnings. And if you do that, the problem is that when you flow that through to what people think the S and P will look like in a year, there's some real issues. So this is not free. You know? It's really hard treading. And I just I would I would just encourage people, it feels wonderful to have a few days of like, it's like a in the middle of a huge storm. Right? It feels like we've been getting whipsawed back and forth, and it feels nice. Jason Calacanis (01:22:06): The wind down. -- Chamath Palihapitiya (01:22:07): came out. I would just really encourage people in this moment to to reset your energy, which I think is good. But you gotta go back into that office and you gotta find the money and the wherewithal. I think, to last through 24, if possible. Jason Calacanis (01:22:21): It's grind time. Facebook, by the way, and 27. -- David Sacks (01:22:24): months is Chamath Palihapitiya (01:22:24): off now for David Sacks (01:22:25): me at least 2 years. Jason Calacanis (01:22:26): 2 years. Yeah. 24 months is the new yeah. 8 quarters is the new 6 quarters. Chamath Palihapitiya (01:22:32): And by the way, Tino, the the thing that employees need to do now in this moment is to hold the management teams of your company is accountable because in those q and a's, hopefully, you're not just glad hunting talking about bullshit. You actually go and ask the question, how much money do we have? What decisions are you gonna make to get this company to be, you know, in a position to survive? That is really what's a stake here for the venture capital industry is just survival of as many of these companies as possible through these next two years. Jason Calacanis (01:23:01): The conversation has to shift from, like, culture and features to, like, the bottom line and grinding it out and just proving it to Wall Street and to the investment community your business is worthy of investment as you're saying. The dollars today matter. Alright. It's been a crazy week. Thank you to David Friedberg for showing up. Unfortunately, no time for Science Corner. Apologies to the Friedberg Stance, who are many, and we'll see you in the YouTube comments. 4th, the dictator himself, Jamap Palihapitiya, with just a wonderful sweater. going into the strong November strong showing for November with that purple sweater. I don't know if it's mauve or purple. Whatever you got going there looks wonderful. Thank you. For team Moncler, Sasol himself, David Sachs. David Sacks (01:23:44): People don't understand what you're saying when you say that, Jason. Jason Calacanis (01:23:47): Oh, they know you're an asshole. They they're No. David Sacks (01:23:49): That's what they think you're saying. They don't know understand that. Jason Calacanis (01:23:51): -- know that we're adding the SaaS to it. Yes. So David also is a great executive in Software as a Service in addition to being an asshole. He's put the 2 together and you get Sasol. No. I'm just joking. David's a wonderful person. People are really excited that you and I are friends again. It's a amazing moment. Speaker 7 (01:24:08): I'm doing all. Jason Calacanis (01:24:09): That was your chance to make a joke. So I actually missed it. I threw it up there for you. Speaker 8 (01:24:12): I threw up the softball for you. You're not without friends. Alright. Jason Calacanis (01:24:16): We'll see you all next time. Bye bye. Speaker 7 (01:24:19): We'll let your winter ride. Rainman, David, Saturday. We open source it to the fans, and they've just gone crazy lately. Jason Calacanis (01:24:36): besties are Speaker 7 (01:24:49): We should all just get a room and just have a think you, George, because they're all just useless. It's, like, this, like, sexual tension, and they just need to release them out. Jason Calacanis (01:24:57): What? You're the VP. What? You know what I David Sacks (01:25:00): mean? Pure feet. Speaker 6 (01:25:01): Sweat. Sweat. Jason Calacanis (01:25:02): Where did you get Merkeys are back?