AI 错失恐惧、宏观更新与福克斯诉 Dominion 案

Chamath Palihapitiya (00:00:00): You wanna run a marathon at fifty seven years old? 52. 51, 2, 52. I'll be honest. I miss you. Can you come back to the United States, please? I know. Jason Calacanis (00:00:10): I will. I will. I will miss you too. I mean, the poker game can't, by definition, be as much fun if I'm not there. Chamath Palihapitiya (00:00:15): It plays at bigger states, and it's more challenging. but it's not as much fun. Jason Calacanis (00:00:19): There's not as much laughing. What's on the menu tonight for austerity Chamath Palihapitiya (00:00:22): 2023? The Amuz Busch is a Madeline. with, like, a Terina foie gras -- Fantastic. Jason Calacanis (00:00:28): No. On a Friedberg? Chamath Palihapitiya (00:00:30): And then Rutabaga Rutabaga salad and then some duck thing, duck breast. Speaker 3 (00:00:34): Oh, you know I love duck. Chamath Palihapitiya (00:00:35): And then and then butterscotch Panna Cotta. Jason Calacanis (00:00:38): Wow. That is great lineup. And it you know what? I like the idea we're doing some poultry. Chamath Palihapitiya (00:00:42): Chef Sean is firing on all cylinders these days. Jason Calacanis (00:00:45): I he feels very, like, engaged. He was very engaged. Yeah. He's he's kinda going for it. Chamath Palihapitiya (00:00:50): He's been on. Jason Calacanis (00:00:51): Yeah. That was quite nice the other day. Brad, Because it's austerity measures, we had this incredible dish, and we're eating it. And then he said, the caviar is on the bottom. Speaker 3 (00:01:01): And I'd like, oh. Jason Calacanis (00:01:03): So we just we don't put the caviar in time. Chamath Palihapitiya (00:01:05): They just -- Speaker 3 (00:01:06): That -- put it on the bottom. Jason Calacanis (00:01:08): The market's down. Brad Gerstner (00:01:10): That's Chipma style austerity. Speaker 3 (00:01:14): I'm not lying. Am I lying? Oh my god. Chamath Palihapitiya (00:01:16): No. He did say Kaiser caviar's on the bottom, not the top this week. Speaker 3 (00:01:20): Let your winter ride. Brain David Sachs. And I said -- We open source it to the fans and make discoveries with their Jason Calacanis (00:01:35): Alright. SaX is here, everybody. So that means we have a quorum hopefully, the Sultan of Science who is on Wall Street today taking a company public. So congrats to our bestie, Friedberg. Brad Gerstner (00:01:49): Ding ding. Jason Calacanis (00:01:50): He couldn't make it. He's at a dinner. So with us, the 5th beetle as it were, Brad Gershner is here. to talk all things macro. Welcome back to the pod. How's life been? Brad Gerstner (00:02:00): Good to be back. A little Domo Arigato. to you, Jason? because you eat your way through Japan? Jason Calacanis (00:02:06): Yes. I am on my culinary tour. I'll be back Speaker 3 (00:02:10): Sunday, but I am having the time of my life here. Chamath Palihapitiya (00:02:12): Are you running AdWords on your food blog? Speaker 3 (00:02:14): Or -- No. Exactly. Jason Calacanis (00:02:16): That's what it's come back to. I'm back to the web logs, ink days. I'm just trying to make $26100 a day. Chamath Palihapitiya (00:02:21): I noticed your TikTok got 22 likes. Yeah. Jason Calacanis (00:02:23): You know, I'm trying to figure out TikTok. I'm gonna but, you know, right as they shut it down, that's when I'll figure it out. Chamath Palihapitiya (00:02:29): Will that rev share buy you another Japanese pancake or no? Jason Calacanis (00:02:32): Those pancakes, man, are next level. The fluffy pancakes here. Oof. Everything actually with the exchange rate, coming to Japan is so affordable. It's nuts. And this is a crazy week because it's a it's a Tokyo marathon. But everything is so the people are amazing. Chamath Palihapitiya (00:02:47): It's the best country to visit in the world, I think. Jason Calacanis (00:02:50): For me, it's Italy, Spain. I I mean, Italy is right up Chamath Palihapitiya (00:02:53): there too. But I would say Japan is like it's definitely top 2 or 3. What Jason Calacanis (00:02:57): do you love about it? Chamath Palihapitiya (00:02:58): Best food. You know, I went there. I took the I took the kids, like, 5 years ago, the older 3 at the time. but they were younger. And, you know, there's there's a negative birth rate in Japan. And so number 1, when you have any kid but frankly multiple kids, the The Japanese embrace you with so much love because they love seeing these big families. Speaker 3 (00:03:19): Yeah. Chamath Palihapitiya (00:03:20): They're unbelievably kind. We went to Kyoto, Did the professor's walk, saw the Cherry Blossom Festival, basically ate our way through Japan. That was my that was my only vacation trip. I did I've done, like, 10 or 12 trips for work. Once we I went with Reed Hoffman and reed set up this thing where we went through all these different parts of Tokyo and ate at this incredible sushi place. You have to go with somebody who can dial it in -- Yes. -- and and have all the hookups. Jason Calacanis (00:03:48): Brad, you spent much time in Tokyo and Japan? Brad Gerstner (00:03:52): I haven't. I've been there going twice, and that was when I was poor, and I stayed in a really small room and ate really shitty food. Jason Calacanis (00:03:59): Oh, alright. So you're saying in 20 in 2022 when Speaker 3 (00:04:02): you became Oregon? Okay. Great. Jason Calacanis (00:04:05): He's like Brad Coacher. Brad Gerstner (00:04:06): He's like, I'm on for hotel. Speaker 3 (00:04:08): We have robes. He's like, Jason Calacanis (00:04:09): Is there a hostel? Yeah. Alright. And with us, of course, the next department what what what cabinet position are you going for, Saxx? What what which we where should we start floating here? David Sacks (00:04:19): Oh my god. Here you are with the disinformation starting already. Jason Calacanis (00:04:22): It's it's a compliment. Secretary of SaaS is with us. Chamath Palihapitiya (00:04:26): DeSantis had a pretty great article on The Wall Street Journal. David Sacks (00:04:29): That really, I just thought what did it Chamath Palihapitiya (00:04:30): -- When they revoked the special administrative status for Disney, he wrote an article. I think it was Wednesday Tuesday or Wednesday in the in the Wall Street op ed. Jason Calacanis (00:04:39): What was his premise that they was it corporate or is it culture? Chamath Palihapitiya (00:04:42): That wokism is based modern Marxism and we have to defeat it. This is his language, not mine, at every turn. And Disney needs to just be business people and not feed the vocal minorities inside of their company Should they should be subject to shareholder concerns that apply to the majority of shareholders? Well, I think this is why I David Sacks (00:05:07): think DeSantis is doing well with the Republican base. And, you know, if you see polling of the Republican Speaker 3 (00:05:12): primary is he understands that it's not good enough just to have this David Sacks (00:05:13): sort of Reagan s totally hands off government approach because the radical left is advancing its agenda Speaker 3 (00:05:21): not just David Sacks (00:05:21): legislatively, but through corporations, through ESG, really through taking over key private sector institutions. And so he's willing to use government to push back on that agenda on behalf of parents or on behalf of, you know, what he sees as the majority of the country. And so it's a very different approach than, you know, the Republican Party would have been 30 or 40 years ago. This is why, you know, in the parlance of the base, he understands what time it is. And what's required here is not, again, this totally laser affair approach, but rather a much more energetic aggressive approach towards checking these bad ideas wherever they come from. Jason Calacanis (00:06:05): Yeah. It's not the only one. I don't know if you saw this week. Bill Mar went on a bit of a press tour, and he was on with Jake Tapper. And he made a very interesting, I think, point about liberalism versus wokism. And it was quite articulate. He you know, he's he's a pretty good observer of culture. He said they're kind of cashing out the liberals in the party for the sokism and the intolerant nature of the woke movement versus the the liberal movement specifically under the lens of trans rights. But let's put that aside for now. We got a full docket before we get into the culture wars and the presidential elections. Let's start with we'll go private markets to public markets because they obviously dovetail so nicely Item 1 on the docket today. There is just a massive AI, FOMO frenzy going on. economist published a piece this week. about the insane fundraising in the generative AI space. This is stuff like chatgpt, stable diffusion. You've heard these names. And there are now 500 generative AI startups according to this report. That tracks with what I'm seeing in the early stage and not counting the OpenAI 10, Billy, from Microsoft, investment, donation, rev share, round trip, whatever that is. They have so far collectively raised more than $11,000,000,000. The article included this chart, which you can see if you're on our YouTube Chamath. and just tons of folks working in audio image and text. So we're basically looking at the multimedia a re evolution of PCs in the nineties occurring again and and complete platform platform shift. Doug Leone from Sequoia, one of the greatest investors in history of Silicon Valley. Had this to say, and we will comment on the other side of this fifty second clip. from Doug. Speaker 6 (00:07:54): I actually think that AI is the next platform shift in the same way that mobile was the one before. Internet was the one before. So I think AI is real. But I said earlier, we're going to overestimate it in a short term. We're gonna invest in everything in the same way that in 1999, we invested in everything. But then Google came out of that or Facebook came out of that. So I think you have to have a good head on your shoulder where you don't practice formal, where you don't chase every company. AI is real. AI is the next platform. But how do we not invest in everything that walks? How do we make certain investments based on market maps based on thought processes that are more rational and not do every investment just because every other venture firm is doing every investment. Jason Calacanis (00:08:45): Alright, Chamath. What do you think of this massive influx? Chamath Palihapitiya (00:08:48): I think it's important to think about what the incentives are, as Charlie Munger says, show me the incentive, and I'll show you the outcome. I posted it into our group chat Credit Suisse sent all their private banking customers and offer they are now offering 6.5% for a 3 month T bill. 6.5%. And if you go back to what we talked about before when the risk free rate is somewhere north of 5 or 5.5%, and banks are willing to give you 6.5% in the short term. You have to generate more than 3 times that to make an investment make sense when you're investing in the long term. So if 3 month money is going to pay you 6.5 or 7, If you're going to invest for 10, 15 years which is what you need to do typically for a start up, you need to get 20 to 25%. So there's going to be a lot of pressure for venture investors to put the money to work. Because otherwise, their LPs, their limited partners, the people that give him the money, will have this attitude that go somewhere along the following lines. Okay, I've committed to you. Why aren't you investing? Because otherwise I can get paid 6.5% on the front end. And so this is becoming very problematic. What am I paying you for? What am I paying you 2% a year in management fee for? So I think what happens Unfortunately, is the opposite of what Doug says. I think good investors will try to follow Doug's feedback and advice. And the ones that have a track record of distributions of DPI can do more of it than not. But I think most people will be under pressure to deploy the capital and so the 500 odd companies, Jason, you mentioned. We'll get a lot of it and it'll get torched because most of them probably won't amount to much of anything in the short term. You will create way too much correlation and you will have 0 time diversity, which as we've learned is a recipe for terrible returns. Jason Calacanis (00:10:52): Time diversity being, hey. You deployed all this web 2 capital web 3 capital, sorry, crypto, whatever. In this very short period of time, you overpaid. Chamath Palihapitiya (00:10:59): Yeah. You're not fired. Living on fire. Jason Calacanis (00:11:01): Brad, when you hear Shamalff talk about the 6.5% and then you look at private markets, you invest across the life cycle of companies. Obviously, you're in some private companies we all know very well. Famously, Snowflake, I think your biggest win ever. Correct me if I'm wrong in terms of a private. How do you look at this when you're a steward of capital public markets, private markets, and then just Yolo, just put it into, you Speaker 3 (00:11:27): know, some charity bills Jason Calacanis (00:11:27): or, yeah, bonds or whatever. Brad Gerstner (00:11:31): I mean, first, let's just frame, right, the chart that you showed. I think you it said, you know, ex OpenAI, I don't know, something like $10,000,000,000 or Chamath Palihapitiya (00:11:39): $11,000,000,000, Brad Gerstner (00:11:40): have have has been invested into some 500 AI companies. I mean, I have to agree with Doug that this is a platform shift on the same magnitude as the Internet or mobile itself. In fact, that may be bigger than both of those. But, you know, when I look at 10 or Chamath Palihapitiya (00:11:57): $11,000,000,000, Brad Gerstner (00:11:59): you know, let's put it in context. Meta's gonna spend 20,000,000,000 in 1 year alone on a r v r. and this is on an entire platform. So I I don't know. I I Speaker 3 (00:12:11): I I think whenever you have something as tech Brad Gerstner (00:12:15): tonic, as mobile, or Internet, it deserves a lot of investment. And, yes, it's gonna be messy. And, yes, Chamath right. The cost of capital frankly, is limiting the amount of money going into these businesses already. So we see a lot of dry powder sitting on the sideline. There's chasing new ideas. I think one way one way to frame it as well is, like, think about in 2000. We all knew that the Internet was gonna be big. We may have been lucky enough to conclude that search was gonna be big. But if you invest in in Yahoo or InfoC, RayOL or Chamath Palihapitiya (00:12:50): excite Insight, Lycos. Brad Gerstner (00:12:52): You you tore all that money went to 0. Right? So now think about just these large language models. Right? The foundation models, which are driving and enabling all of it, open AI. You've got open AI. You've got an atropic. You've got cohere. You've got character. You got stability. You've got Lambda. It is almost impossible to know within the certainty. Much like it was with the search engines in 992000. who's going to emerge, where the value capture is going to be. It may all end up with Microsoft and Google. I mean, this may end up looking like iOS and Android, at the foundation model level. And so, you know, I think as investors, for example, on the foundation model side, I think it's very difficult to choose just one, particularly when the largest one is frankly captive and a proxy to Microsoft, and they're capping your upside return. So, like, those are difficult investment decisions. That doesn't detract from the fact that I think it is as big as Doug suggests. And I do think there are gonna be applications and tooling layer to come out of this that's gonna produce really big winners. I would say that we are spending an extraordinary amount of time in this space. We haven't made a lot of investments. I think you have to study, you have to get deep. I mean, Chamath, certainly and I have been investing in this space for at least a decade, maybe 15 years, but don't underestimate that the transformer model really did change the game here, and we're now producing impacts much larger. Jason Calacanis (00:14:25): Sachs, last week, you said web 3 and crypto didn't kinda stick with you. You didn't see the use cases, and you in the first inning here or first at bat, you rattled off 3 or 4 really compelling use cases from summaries to, you know, the the assistant guide on your side, concept. Is this a kin in your mind? Speaker 3 (00:14:47): because Brad just said, it could Jason Calacanis (00:14:48): be bigger than mobile. Internet, mobile, AI revolution. If you were to look at those 3, do you think it's bigger than actually mobile and then we'll get into return profiles of 6.5% on cash versus what are VCs gonna be able to do in this kind of market? David Sacks (00:15:03): Yeah. I mean so I I agree with Brad and and Doug that this is the next big platform shift, whether it's as big as mobile or it's more like social or cloud. I mean, those have been the big platform shifts over the last decade or 2. And I think this is definitely on par with those. I think Brad's right. We don't know where the value capture's gonna be. Maybe it just all ends up accreting to the big companies who can make massive investments in this space. you know, one difference between the Internet ecosystem today 20 years ago is you do have these giant companies who are not totally incompetent. Right? I mean, they are they do have lots of talented engineers. And, you know, like 20 years ago, you'd have company you know, the big companies would just sit on their hands and face of a platform shift, and they just be sitting ducks who get disrupted. They're not that's not gonna happen today. That being said, I do think that any new platform shifts creates opportunities for startups. And it may not be efficient the way that these opportunities get pursued in the sense that, yeah, Doug's right that There's gonna be a lot of spray and pray. But I think that it is kind of efficient for the ecosystem as a whole. Right? Because like any smart engineer with a half decent idea ends up getting funded. And out of all of that, you get kind of a cambrian explosion where you know, the ecosystem evolves a lot of different types of businesses. Most of them don't work. They get wiped out. They go extinct. But there'll be some good things that get funded. So we're more like, I think, Doug and how we see it. We don't wanna spray and pray. We wanna be very selective. We wanna put more money behind fewer opportunities that we think are are better. and Doug Leonie, you know, I think he generally gives good advice of the tough love variety, and this is of a piece with that. And so I I agree with him. That being said, there is a certain value to the ecosystem and having all these seed funds to spray and pray. Right? David Sacks (00:16:53): because this gets a lot it plants a lot of flowers, and then you see what blues? Jason Calacanis (00:16:57): I would say, yeah, to build on that, Zach. This is a a perfect inefficiency. You know, you when you see it from the outside, you're like, well, this is super inefficient. why so many companies. If you free your mind and just say their experiments, Chamath Palihapitiya (00:17:08): 2 Jason Calacanis (00:17:08): or 3 person experiments, 500 k to a 1000000a half in that first stage when I invest right before you do when you do your series a is at 5 or Chamath Palihapitiya (00:17:16): 10,000,000. Jason Calacanis (00:17:17): Milestone based funding is back in the tech industry. And that was something Chamath that we lost for a little while there. People would just come out and they would raise a Series B out of the gate. No product market fit, etcetera. Now what we're seeing is people are raising that Chamath Palihapitiya (00:17:31): 12 Jason Calacanis (00:17:32): to 18 months. They got their backs up against the wall. Speaking of tough love, which you referenced, Saxx, that tough love of, hey. You have to hit the next milestone. What did you accomplish with the 1,500,000 in order to get the 10,000,000 in order to get the 30,000,000? That 500 is gonna go 10 x. There'll be 5000 of these startups, but it'll quickly whittle down, Wunichamath as people go through this milestone based funding system in Silicon Valley. Chamath Palihapitiya (00:17:57): We haven't given enough time for a logical framework of investing to develop which also is tied to a logical framework for entrepreneurship to emerge. We're just way, way, way too early. So the thing with all of these language models is that they are grist for the mill. And we talked about this before if it was a highly proprietary asset, you would have never sold 49% of it to Microsoft for $10,000,000,000 because you would assume that it was worth a $1,000,000,000,000. So it's a huge tell on the part of OpenAI. They're deep understanding and they understand it better than anybody else. that it's a bit of a capped upside. So what is uncapped? I guess is maybe the better question. Well, if you look at the 1849 gold rush as an example, The people panning for gold, in my opinion, are the people building language models today. They're gonna come and they're gonna go, but who's gonna win? Well, the pick and shovel providers 1, Levi Strauss 1. So what is the equivalent of that today? I think it's at the silicon layer. because you need to really re architect how compute will actually work in a world of all of these models. Those folks will get paid. If you look at AMD and NVIDIA, They've been getting paid for years. They continue to get paid. They probably will continue to get paid even more. And so folks that actually take a step into doing something hard and difficult in AI like custom silicon could get rewarded. And then there's what I call the white truffles. What are these unique alba white truffles? These singular sources of data that when used in reinforcement learning make your output just zing. And that's where I think Facebook is an obvious white truffle. Quora is a white truffle but there are a lot of startups that could become white truffles if they gather enough data. And that's like a pretty reasonable framework. And so in that framework, if you apply it to today, there's way few silicon startups, and there's way few white truffles. Instead, it's everything is the baloney in the middle, which is random people talking about some random model that's just gonna again become highly commoditized. You have to remember all these models are open sourced, and none of them mean anything in the absence of the data you give it to train on. 100%. Jason Calacanis (00:20:20): Brad, hey. Okay. You know -- Jack, Adam. David Sacks (00:20:22): Yeah. Well, I wanna add one other piece of news that we saw this week, which is OpenAI announced that developer AI, they were cutting the tax on that or basically the metered rate they charge to use it by 90%. So I think this is gonna be a a game changer. I think this is based on the chatgpt 3.5 API, and, of course, you're coming out with 4.0 later this year. I've already had Chamath Palihapitiya (00:20:46): -- Jason Calacanis (00:20:46): Explain to the audience what an API is and why this is important for those people who don't know. David Sacks (00:20:51): this application programming interface, it allows a a developer of some other application to build on top of you. So in other words, like a developer wouldn't have to use this chat interface to get access to the large language model. You could just submit your request through the API. And so Chamath Palihapitiya (00:21:07): -- Jason Calacanis (00:21:07): Give an example. Speaker 3 (00:21:09): of what of, like, Jason Calacanis (00:21:10): a a popular app and how they might Speaker 3 (00:21:11): use -- Okay. Jason Calacanis (00:21:12): Yeah. So -- -- API. David Sacks (00:21:13): So I think, like, Notion actually had a demo that they published where Chamath Palihapitiya (00:21:17): -- Speaker 3 (00:21:17): Incredible. David Sacks (00:21:17): it was a pretty incredible demo. Maybe we can find it. And it would do things they added actions in the demo like generate a task list. So you could take, like, a document or a meeting summary and would spit out recommendations for next steps or tasks. It could, you know, spit out a table Basically, it's the autocomplete for everything that we talked about. Right? So now Notion doesn't need to build their own LLM expertise. They just built use the API. Jason Calacanis (00:21:45): So when the Notion app, you say, hey. I'm I'm building a a marketing plan. And you say, well, okay. Give me a list of things that should be on my marketing plan for my new app. it sends a signal to the Chat JPT API, which will be on Azure Microsoft platform. And then it gives you the data back. You don't have to build the language model. Yeah. Incredibly powerful. David Sacks (00:22:03): Notion has all the content that they need, but they don't have the AI expertise. So now they don't have to generate your or create AI expertise in house. They just use the API. Jason Calacanis (00:22:12): I want -- It's David Sacks (00:22:13): really powerful. And I but but just to finish the thought here, I think that one of the things that's probably misleading about these stats around funding and the dialers, like, almost 600 starts already. There are AI startups is that, you know, what happens when there's a new wave is that founders are smart. Right? And they know how to market themselves in the way that is most compelling to VCs. And they know that, like, VCs, frankly, are a little bit lemming like in terms of their migration to the next wave and wanting to glom on to the next big wave. So VCs are now looking for AI. If you're a founder and you're you build one feature on top of the, you know, OpenAI API. Now all of a sudden, you're gonna market yourself as a AI company. You're not gonna market yourself as just a SaaS company. Jason Calacanis (00:22:57): And that's valid. Yeah. I mean, it could be games or it could be, like, a great pivot. You know? David Sacks (00:23:02): Yeah. And it's not it's not totally one or the other. I mean, it's just that if you have a plausible connection to AI as a founder, you're gonna start marketing yourself as an AI company. And So that's how all of a sudden you can have 600 of these companies, you know, that are all of a sudden out there in the wake of of this sort of Chamath GPT is I think a lot of companies are recategorizing themselves. Jason Calacanis (00:23:26): I literally had this experience not 3 weeks ago. Right before I went to Japan, serial founder and team that we've backed for that had an exit, said, can I show you something? I said, yeah. Got on the Zoom, showed me a little proof of concept using Chat CPT. And he said, this is my idea. This is the vertical. And I just said, okay. What do you want? He said 500 k for 10%. I said, okay. Done. Great. Let's learn. And it's a easy bet for us to make because we know it's a serial team. Chamath Palihapitiya (00:23:53): For OpenAI, the way that it could become a $1,000,000,000,000 company is actually by cutting the cost to such a low degree that nobody else can effectively compete with it. And then at that point, they can become a small, small, small tax. You'd rather just pay it than try to compete with it. And I think For OpenAI, that's actually a very brilliant strategy. So that's how they they could get to become very, very large in valuation would be to become so pervasively relied upon and where they take such a minuscule take rate of their participation in you building a company, that could be really effective for them. Speaker 3 (00:24:26): Like Jason Calacanis (00:24:26): cloud computing. Right? Like, we're gonna just take such a small tax. Chamath Palihapitiya (00:24:29): Yeah. No. That's not a small tax. That's a large tax. David Sacks (00:24:31): less the picks and shovels play in a way to create the developer ecosystem for AI. And to your point, I mean, I think you raised a good point that, you know, what was their motivation? to take such a dilutive round, you know, the 10,000,000,000 at what was evaluation at 30? 30. Yeah. Yeah. And does that imply that they're not confident. I mean, the the flip side of it could be maybe they know they wanna compete on the basis of rapidly, you know, becoming the developer platform. And so they're gonna subsidize that developer platform, you know, with negative gross margins for some period of time. And maybe that's why they need a lot of capital. Chamath Palihapitiya (00:25:04): And they were in kind of a reflexive loop of just cost of getting better versus the amount of money they had to get better and so maybe they were forced to do it. And then in that point, How would you justify? You would say, well, the other 50% is still hugely valuable, so that's enough for us. And I think that that's that's very logical as well. Jason Calacanis (00:25:22): Brad, you have your finger on the pulse of LPs limited partners who back funds like Jamaz, Saxes Mine, and yours. We heard 6.5% on your money for no risk. Well, you and Shamat's position is, hey, you have to triple that. you wanna be a private market investor, that's about Chamath Palihapitiya (00:25:41): 20%, 20% Jason Calacanis (00:25:42): rule of 72. That means every three and a half years you gotta double. If you're doing that for a 10 year fund, you're looking at a 5 x fund because kind of table stakes then I think just back of the envelope math What are LPs thinking right now? Are they looking at this world and saying, I should be all in cash? Or are they saying, yeah. Everybody thinks we should be all being cash Therefore, there's not gonna be enough money in private. Therefore, there's an opportunity there. We know the 6.5% rate. that's not gonna be here forever. It may be here for a little while, but we need to we need to keep investing in venture, or are they just cutthroat about it? Like, let's pause investing, private market investing? Brad Gerstner (00:26:18): It's a it's a great question. First, when I look at the 3 year treasury bill, it's, like, 4.7. Not to quibble here. So I think Chamath getting a little goosey goosey on to Chamath Palihapitiya (00:26:27): 6.5. Brad Gerstner (00:26:29): But the the fact of the matter is Jason Calacanis (00:26:31): these -- What Chamath Palihapitiya (00:26:31): does that mean? Gucci, Gucci? Brad Gerstner (00:26:33): You know, you get a little -- Well, You're super special. You're VIP, JPMorgan. Oh. David Sacks (00:26:40): Maybe there's, like, some sort of, like, bond rate that included corporates or something. Maybe it was Jason Calacanis (00:26:44): some speed point 2 from Robinhood on my Robinhood count for j trading. So it's it's right. Brad Gerstner (00:26:48): What is in that what is in that, Jason? They probably got some junk bonds and they're ripping you off. Whatever it is, I I'm getting five points. It's sounds pretty good. -- until you're not. You are until you're not. Chamath Palihapitiya (00:26:58): 100 100 David Sacks (00:26:59): percent Tivo, parenthesis, and John Bondi. Look at the fine print, Jacob. Brad Gerstner (00:27:05): You know, LPs have a 10 year view. they understand, like most people, I mean, listen, if you look out at the 10 year, the reason the tenure is you know, that we have real interest rates at about 1 a half percent. So that's the 10 year less ex expected inflation when you look out is because people expect inflation to come down and they expect rates to come down. So if you were an LP and you said I'm not gonna invest in venture and then 2 vintages, which may be the best 2 vintages we've seen in a long time because prices are adjusting, etcetera. And I'm gonna move it all into some rate bet First, this is very difficult to do. They don't move their allocations around that quickly. Now a wealthy family as an LP could move their allocations around really quickly. But if you're Texas or you're Ohio or you're a sovereign wealth fund, you're betting on the arc of value creation I would say this, the consequence is they're narrowing their aperture as to the venture funds they wanna allocate capital. Jason Calacanis (00:28:07): Okay. Explain that. Unpack who they are narrowing the aperture turn? Well, you Brad Gerstner (00:28:11): we've talked a lot on this pod about the power law. And the truth of the matter is whether we're talking about AI or software or anything else that, you know, people are are gonna be funding, It's 10% of the investments that are gonna yield 90 percent of the returns. And so They're looking at that and saying, who are the top 10 firms in Silicon Valley? I either wanna get allocation to those firms, who are seeing the best deals, converting the best deals, and are are selective like Sachs talked about, or we just don't wanna allocate. And so I think, you know, what we saw over the last 2 years, Jason, was an explosion of new funds. an explosion of new you know, first time, second time funds, I think subscale small funds with no DPI, they're gonna find a really, really tough time to Chamath point about DPI raising capital. and you're gonna see the scale player scale. Jason Calacanis (00:29:06): So part of that is clearing out the inventory from the last cycle two new stories this week about companies, you know, maybe struggling. Sequoia got off the board of if you don't know citizen, that's that app that tells you where crimes are happening in your city. Very popular in San Francisco. It's literally goes off every 90 seconds. It's pretty dystopian. That company, Citizen, which is a pretty cool app, has raised a 130,000,000 to date. Sequoia led the series a in 2017, They did a pay to play around if you don't know what that is. Basically, if you don't invest, you get crammed down. How does the Cramm down work? Well, your shares in the company went down 10 to 1, and you probably got moved to common shares as opposed to preferred, which has a series of protection They get their money out first, yadayada. But Sequoia refused to participate according to this f t story. Again, Sequoia did not comment on this. It's it's kind of something you don't do as a VC when something goes bad at a company and you leave the board. you generally don't wanna say bad things or taint the company any more than leaving the board does. So a bunch of crackdowns happening. And then dovetailing with that, Instacart, according to The Wall Street Journal, had a big q Four as it prepares to go public. Instacart. If you remember, we talked about it on the show cut its internal valuation Chamath Palihapitiya (00:30:30): 75% Jason Calacanis (00:30:32): last year from 39,000,000,000 to 10,000,000,000 according to sources. Instacart's q Four results according to The Wall Street Journal, up more than 50%, even though order volume grew only 16%. Why? They turned advertising on the app just like Uber and Amazon. A lot of these commerce firms folks are building ad business inside of theirs. So what do you think about What's happening as we clear out this private? Anybody have thoughts on Instacart or the cram down rounds can Speaker 3 (00:31:04): go either way with this, and then we'll go to pub. David Sacks (00:31:05): I wouldn't focus too much on those two I think we're gonna see in the second half of twenty three and all of twenty four is a lot of medicine being taken, a lot of down rounds, a lot of structure, it's gonna be a tale of 2 cities. The hot area, you know, AI is gonna continue to receive new investment. And all these companies that, you know, receive that receive peak valuations in 2021 are gonna have a day of reckoning either, you know, if they're lucky, maybe they have a flat round or modestly up round. but a lot of them are gonna have down rounds or restructurings. And this is gonna be going on for the next year and a half. Jason Calacanis (00:31:39): What's your philosophy, Saxon, leaving a board? This is a really dicey When you give up on a company, what's the best practice there? How do you do it without damaging the company? Obviously, the founder relationship is going to be hard. What have you learned about this as a as a private market investor? David Sacks (00:31:54): Well, I I think I think that sometimes we, like, flip board members internally craft just because people have different amounts of capacity. That's not a statement at all about the way craft feels about the company. It's just a reflection of our individual bandwidths. Or whose expertise are needed at that time. But when the firm itself quits aboard, I think there's no way to read that other than, you know, a statement of protest. And I don't know what happened with that company, but it seems to me that, you know, again, it could be a sign that the venture firm isn't happy with the way that they're being treated. Jason Calacanis (00:32:29): The cram down, Chamath. That's that's a bitter pill to swallow. Why would founders do this cram down instead of just adding a little more to the top. And is there a way to do this without you know, going scorched earth or poisoning the well as it were. We I mean, again, putting this app and Sequoia aside, this this happening all over the ecosystem. So is there a way to do this gracefully, or is it just gonna be messy? Chamath Palihapitiya (00:32:55): I think it's gonna be really messy. I mean, distate the obvious no no venture capital investor ever quits the board voluntarily of a great company that's doing well. that would be dumb. So as David said, sort of like the proof is in the pudding there. And at the same time, there are a lot of companies who don't want to see the writing on the wall. and we'll do all kinds of gymnastics to try to stick a landing on a contorted financing And sometimes those things have real consequences to other investors who just don't think it's the right thing to do. I wouldn't read too much into this except that Good founders have a responsibility to do what's right for themselves and their employees. Nobody else And the thing to keep in mind -- Jason Calacanis (00:33:50): Investors, really. Chamath Palihapitiya (00:33:51): No. I think you I think you absolutely have to prioritize the people doing the actual work. And if you actually did prioritize them, what you would probably say to yourself is, oh my gosh, there are people who I work with, who I look in the eye every day. because investors you'll see once a quarter. But I have my fellow employees as a founder that I look in the eyes every day who've been toiling with me for umpteen hours a day every day for years and they are now totally underwater. What is the right thing to do for them? And I think if you just answer that question, you wouldn't do all these contorted things. You would just reset the valuation. You would refresh the equity pool. you would issue options back out to those employees and you would move on. It's all these other things that get in the way of answering that simple, simple question where people fuck it up. David Sacks (00:34:45): I've and I've done that before. Jason Calacanis (00:34:46): You Sacks, if you don't have a team and you don't have a motivated team, you have nothing. David Sacks (00:34:50): I've done that before. I don't wanna rehash one of my more miserable experiences, but I was dealing with a company that had a grossly inflated valuation. It was total problem case. We voluntarily slash evaluation in half and reissued options to the employees to keep him motivated. Jason Calacanis (00:35:05): No big deal. David Sacks (00:35:06): So yeah. Yeah. Exactly. And It's Chamath Palihapitiya (00:35:07): not that it's no big deal, but it it requires some amount of fortitude and like you know, understanding your priorities, I guess. Brad Gerstner (00:35:16): But, Jabar, that's it. Speaker 3 (00:35:17): What do David Sacks (00:35:17): you think? Yeah. Brad Gerstner (00:35:18): You know, like, first, I think it's revealing that we think what happened here is so out of the ordinary. I mean, you flash back to 2001 to Chamath Palihapitiya (00:35:28): 2004, Brad Gerstner (00:35:29): Sequoia, I don't think funded a single loser in their portfolio. Right? Like, that's a time where you walked away from the ones that weren't winning, and you fed the ones that were because you have limited capital and you don't know when you're gonna raise your next capital. This idea that you have unlimited capital, you can give money to anybody no matter what they're doing with respect to their plan, I think is a a function of the last 10 years. But to Tomas's point, The idea of tough talk, you know, either out of CEOs or out of board members has been in short supply in Silicon Valley. This idea that saying the truth just speaking the words about needing to get fit or needing to lower the valuation that somehow that is founder unfriendly is nonsensical, the truth is founder friendly by definition. And I think to Tamaz's point, the less complicated you make this Right? You reset the valuation, you re up the option pool, and then everybody has a choice to make. And if the people who are on the board and backing the company choose not to re up for whatever reason. They no longer believe in the path forward for the company that's incumbent upon the founder to go find people who will? Jason Calacanis (00:36:38): That's not abandonment as it's being framed in this story. it is a trade. And I think maybe if you look at public market investors, Brad, nobody gets upset by a trade. It trades a trade. But in the private markets, there's a lot more emotion involved, a lot more relationship material, and this founder friendly concept of, like, you're abandoning me. It's like, no. The the trade here, it makes no sense for this firm and for this fund and for these LPs. Right? You -- Well, Brad Gerstner (00:37:04): sometimes sometimes the founder needs to have the courage to look in the mirror and say what I'm doing is not working. I had a plan. I missed the plan by 70%. I'm lighting capital on fire. This is a charity, not a business, it's best to say it didn't work, shut it down and move on and do something else. Jason Calacanis (00:37:23): Okay. So, of course, you're referencing Salesforce, so we'll pivot to that. I'm joking. It's not that bad. But I think this is a good time to maybe talk about the public markets and inflation and what we're seeing in macro. David Sacks (00:37:35): So Can I set up a question for Brad, actually? Jason Calacanis (00:37:37): Sure. Go ahead. Yes. Yeah. David Sacks (00:37:38): So so on a previous podcast, I laid out my theory of how you could just use the 2 year bond rate relative to the fed funds rate to understand where the bond market's sort of prediction market about inflation is going. And a month ago, the Chamath Palihapitiya (00:37:56): 2 David Sacks (00:37:56): year bond rate was at 4.1% relative to 4.5% Fed funds rates. In other words, the bond market was betting that interest rates would go down between now and 2 years from now relative to where the Fed had it. So therefore, it believed that inflation had been conquered. Now fast forward just 1 month later, and the 2 year bond rate said about 4.9% you know, the fed funds rate's about 4 a half percent. That is a massive swing, basically, 80 basis point swing in the, I guess, the to your bond rate. And so the market seem to be saying all of a sudden, not just that they expect rates to be higher longer, but also that the Fed needs to keep raising, and that is a big change. So, Brad, what what is the basis for that? And what do we now believe about inflation? I think just a few weeks ago, we were thinking that this problem was licked, and the market took off like a rocket. It ripped. Now all of a sudden, it seems like investors are really worried that inflation is not over. So where where does this stand right now? Brad Gerstner (00:39:02): Well, I think when we started the year, you know, the 10 year was close to 3.2 or now we're closer to Chamath Palihapitiya (00:39:08): 4%. Brad Gerstner (00:39:10): the 10 -2 is is negative as it if it's been in the last probably 10 years. So the market is clearly saying, you know, we saw some inflation prints came in hotter, I think it's now consensus, which you guys have been saying on the pod, that, you know, although the second derivative is slowing that we're it's it's sticky. Right? We're gonna get stuck at this 4, four and a half, three and a half, And it's the slope of the curve downward is gonna be slower. We've gone from thinking we're gonna have 225s to now thinking we'll have 3 or Chamath Palihapitiya (00:39:41): 4 Brad Gerstner (00:39:42): You know? And so I think everybody is now bracing for more inflation. But remember, when we started the year on January 1st, the consensus wisdom was we were gonna retest the S and P at 32100. We're gonna have an earnings recession and that inflation was gonna continue to run hotter. The only surprise in my mind so far this year is how well the equity markets have held up in the face of a tenure that's gone parabolic. Right? Chamath Palihapitiya (00:40:07): And an actual earnings recession. Brad Gerstner (00:40:09): Right. And you, you know, you you posted, you know, in our thread, Chamath, about just quality of earnings you know, even the earnings beats are pretty low quality. And so I think, you know, we now are going to have a couple inflation prints coming up over the course of couple weeks that are gonna be important. My hunch is, you know, everybody has tilted again on, you know, what we saw in the last couple of prints. My suspicion, if you look at Morgan Stanley at Goldman Sachs, the consensus view is that we're still heading in the direction of 4% faster than I think people emotionally think. So I would say there's maximum uncertainty in the world. The fear that inflation is uncapped the way Larry Summers was articulate in November December is less today than it was. But what's emerged is this idea that we're going to have higher rates for longer and we're gonna have higher inflation for longer. Now the the question I'd throw back at you, is the market abhors uncertainty. The market's done totally fine during periods where we had 3% inflation, and 5 a half percent rates. Right? When when the Internet boom, that was, you know, 2000 to 2000 and 5 rates were a hell of a lot higher than the rates are today. So I don't think that higher rates and higher inflation means that we can't, you know, invest in venture backed companies that have huge secular growth. The world doesn't end. But what I do think it means is, like, If there's massive uncertainty in the world, if allocators of capital don't know whether rates are gonna double again, whether inflation is gonna double again, then everything just shuts down. And that's really bad for the economy. I don't see that happening right now, but I do think that the prince over the course of the next 8 weeks are gonna important. Jason Calacanis (00:41:58): Shumati, you have any macro thoughts here. At the same time this is happening, we saw rents broke in the last month. So rent's got cheaper. Chamath Palihapitiya (00:42:05): Yeah. My governing principle, I think I've probably said it too many times, but I'll say it again. Rates are gonna be higher than we like, and they'll stay here longer than we want. So if you use that as a principle, whenever the consensus thinks were done. It's been pretty profitable to be on the other side of consensus. And so I still kind of maintain that we're probably gonna have a 5 and a half percent fed funds rate, which means that yeah. I don't know. Maybe Credit Suisse will offer me 7 and a half percent soon on 3 T Bills, but we're gonna have higher rates. And I do think Brad's right, though, in the sense that as long as we know that then that's it and we can forecast it into the future without it changing too much, it'll be okay. But right now what you're seeing is a lot of make believe going on in in the stock market. So, Nick, if you wanna just throw up that image. So This is a really Jason Calacanis (00:43:04): interesting chart of cash flow versus earnings? Yeah. Chamath Palihapitiya (00:43:08): So this is something that I saw in Bloomberg, which I thought was really interesting. And if you on the period of 2020 to 2024. What you see is the white line, which is net income adjusted for depreciation and amortization, And the blue line is cash flows from operations. So what does that mean? Jason Calacanis (00:43:24): And this is for S and P 500 firms. Chamath Palihapitiya (00:43:28): This is the best 500 companies in the world. Yeah. And the white line is what you tell Wall Street in terms of what you make on paper. The blue line is what actually appears in the bank account. So why could there be a gap between what you tell somebody you made? I made a dollar. versus what's in the bank. 50¢. Well, the reason is that there's all kinds of accounting tricks that you can use accruals, inventories, And all of these things allow you to present a healthier earnings report than is actually true. And so right now we have the worst earning situation. So the worst gap between what we are telling people versus what is actually in the bank account that we've had for 30 years since 1990. And so it just brings into focus the fact that we may be in the last few innings of trying to make sure this all looks okay. In which case, one faction of the investing world who thinks that this earnings recession is actually at hand would be kind of right. And then what they would say is that once we all realize that these earnings are fake and you reset down 15%, that's where you get to the mid 3000 in in the S and P 500. Right now, it's around 4000. I don't know if that's true or not, but there's more and more evidence that would support that the way that they see the world could be credible. The other side says, hey, listen. This is a bump in the road. We're getting a handle on things and it's stabilizing. So even though it's higher than we'd like, it's not going to change that much. So now just think about 10, 15 years from now in let's go. And those are the folks that want to rip the money into growth stocks and tech stocks again. Jason Calacanis (00:45:19): How does the consumer play into all this? Record low unemployment like It's 1% in Utah, 3a half percent for the country, 2a half jobs for every American who's unemployed. And then these rents coming down, But consumers have seemed to have burned off all that extra money they had. So, Brad, when you look at the consumer driven economy that the world lives in, Chamath Palihapitiya (00:45:40): That's not true because you have to understand stimulus is still entering the economy. It's just harder to measure. So for example, take Social Security you have cost of living adjustments in Social Security that's lifting payments by 10% 15% because it's backdated for what was going on last year. And remember last year, we had 2, 3, 4, 5 percent inflation rates, so there is more and more money coming into people's pockets that we don't realize. And we're all on the hook for that as US taxpayers. So I think it's very dangerous to kind of look at one data point and try to pick off what's happening in consumer land because there's all kinds of hidden ways in which money gets back to people. Jason Calacanis (00:46:18): Brad, do you have thoughts on the consumer? Because, you know, i Test. It does seem like consumers are spending money, but the cost of goods in some cases is coming down? I mean, how do you look at the consumer and try to make sense of what's going on here? Because it does seem the United States is in its own little bubble here world of just over employment. Still, even though we're seeing these layoffs in town. Brad Gerstner (00:46:42): Well, the I I would say, number 1, that the pop we've seen in rates, which impacts consumers by way of higher mortgages, higher variable expenses on their credit cards, was offset over the last few months by lower energy costs. So their cost of gasoline went down, add in the things that Chamonte's talking about, and I'm not sure you took a lot of money out of people's pockets. I would say this that, again, what we're talking about here, retail sales have continued to do really well. Ecommerce sales in January were were were quite strong. That would all be consistent with this off landing. But here we are, you know, again, talking about macro. I think when you spend this much time talking about macro doing what we do. You know, like, last year, I'll be the first to raise my hand and say, you know, like, our friend Bill Girly would say, it leads you in the wrong direction. The fact is that matter is it's totally unknown and unknowable where we're gonna go over the course of the next 3 or 4 months, I think there's a better ability to predict maybe over the course of the next couple of years But the fact is if you would have told any, I was just with a bunch of investors who probably represent a $1,000,000,000,000 of public market demand 10 or so long only investors. If you would have told any of them that the tenure was gonna be at 3 96, they would have told you that the NASDAQ would be down 10% to start the year. and it did just the opposite. So I think you got you know, you're you have a much better chance, particularly if you're a plan at home. Right? than trying to to guess the direction of that. Find 5 companies that you think are gonna grow and earn more money irrespective of the direction of rates and inflation, own those and enjoy your life? Jason Calacanis (00:48:18): I'm looking at the world and going, Saks. My Lord, I'm seeing great founders, great companies, and $5,000,000 to Chamath Palihapitiya (00:48:24): $10,000,000 Jason Calacanis (00:48:25): valuations. And I can buy 5, 10, 15 percent of these companies. This feels like the best It's been for me as an angel investor, seed investor or seed fund for a long time. This is fantastic. Great deal flow. The deals are taking 6 weeks to close. We're having very thoughtful discussions. People are taking a real focused approach to how they deploy the capital. It is not Yolo. People are building models again. People are showing their cap. They're being thoughtful about how they spend the money. They're being thoughtful about salaries and hiring. So What what's your you seem to think that, you know, what we're seeing here is challenging or a problem. What are your thoughts and how it's affecting your day to day business as somebody who is a company builder. David Sacks (00:49:11): Well, let's separate 2 things. So there's the tech ecosystem and then there's the economy as a whole. The fact of the matter is that TechReady had its bubble in Chamath Palihapitiya (00:49:19): 2021. David Sacks (00:49:20): It had its crash in 2022. And now we're largely on the other side of that, there's still a lot of companies like we talked about that are gonna need to restructure who raised during the bubble and may not have come to grips with that. But if you're talking about new investment, new rounds, new companies are starting with a clean sheet of paper and a blank slate. You're right. Things seem good and normal. Right? People are making intelligent investments. And, obviously, the innovation cycle doesn't have anything to do with the macro picture. I mean, technology, wants to evolve. And it's great engineers and product people who drive those ideas forward. And they're not thinking about interest rates. I never thought about the Fed funds rate at all when I was a founder running company. So let's just put that aside and acknowledge that -- Great. Jason Calacanis (00:50:07): That's a great idea. Chamath Palihapitiya (00:50:07): -- David Sacks (00:50:07): innovation's gonna keep happening no matter what the macroeconomic picture looks like. That being said, I mean, just for the you know, listeners of the show aren't startup founders. I tend to be a little bit gloomy about the macro right now. Because, yeah, it's true that what Brad said that we've had good economies with 5% rates before. But I think you also have to look at the pace of change or the rate at which the the Fed funds rate has been going up. And if you look at the chart of rate increases, it is a very steep chart of rate increases. And I just think that for the last decade or so, we've been operating in this, like, 0 interest or or zerp environment with lots of monetary stimulus. And I think a lot of companies, a lot of parts of the economy, got addicted to that stimulus. They got hooked on drugs. Now all of a sudden, you're putting him through withdrawal very, very quickly. And, obviously, the withdrawal pains are gonna be worse if you can't taper off slowly. So it looked like just a few weeks ago that the Fed was done raising rates. Now we know that they're not. We don't really know when they're gonna stop. So I tend to be a little bit gloomy with respect to the the big macro picture because I just don't see how you can change rates this fast and not I mean, you'd look at like real estate, for example. We just saw the 1st year over year decrease in the housing market in a while. And, again, that's all driven by rates. The cost of mortgages going up. Chamath Palihapitiya (00:51:41): And 2 big defaults and the first 2 big defaults. David Sacks (00:51:44): Yeah. So I I think that there's gonna be some pain ahead. Now, you know, ironically, from the standpoint of the tech ecosystem, we may have already taken our medicine and we may already be Jason Calacanis (00:51:55): on the other side of it. That is a good way to to look at it as we took the medicine. It's painful and Chamath Palihapitiya (00:52:00): -- Jason Calacanis (00:52:00): What if you were Brad Gerstner (00:52:01): doing, Jason? Maybe maybe That's the segue to talking about Benioff. I would say we haven't took it. We're taking it. We're starting to take our medicine. Jason Calacanis (00:52:10): Well, it makes sense that Benioff with his, you know, very loving family kind of approach to running the company. might actually it might take him a little while to become a bit cutthroat. So as everybody knows, Bennyoff and Salesforce have had a lot of turnover, a lot of senior executives have left voluntary or involuntary but shares were up 11% on Thursday after reporting their q 4 earnings. They're up 14% year over year. small net loss. But the company bought back $2,300,000,000 worth of its stock. We're gonna see more of that for sure. and they're going to be increasing its share buyback program to Chamath Palihapitiya (00:52:54): $20,000,000,000 Jason Calacanis (00:52:56): going forward. And like Meta, which suddenly got fit and got religion Benioff is now basically with all these activists, I guess, on On his ass, he says and this is the quote from the earnings call. We're more closely scrutinizing every dollar of investment and resource and very focused on driving operational excellence and automation across our business focusing on 4 key areas, strong learn, tremendous expense restructuring, employee productivity. There it is. product innovation and building relationships with shareholders. Profitability is our truly our number one strategy and my number one strategy. That's the number one thing we talked about. At the start of every meeting, we have in this company quite a turnaround. Your thoughts Brad. Brad Gerstner (00:53:43): I don't think the story is that, you know, that Benioff, you know, made these cuts and that activists are around the rim. What was significant was his comments that he made, and I tweeted about it today. You know? He said every CEO in Silicon Valley has looked at what Elon Musk has done and ask themselves, do they need to unleash their own Elon within them? And, you know, listen, we've been talking about this for 9 months. The reality is if you look at the employee count at Salesforce, in 2015, they had 19,000 employees. As of last year, they had Chamath Palihapitiya (00:54:20): 80,000. Brad Gerstner (00:54:22): In 7 years, they 4 x the number of employees. They were a mature company by Chamath Palihapitiya (00:54:28): 2015, Brad Gerstner (00:54:29): their employees catered at 23%. You know, we don't talk about it in this way, but these large companies, these employee bases They're not unions, but they may as well be. Right? I Jason Calacanis (00:54:41): didn't get that. Why would they be unions? Brad Gerstner (00:54:43): I just think there's there there is During this age of excess where it was just easy for people to hire more people and build more things not to make tough choices, etcetera. Right? We just had an explosion like we've never seen in Silicon Valley in the number of employees in these businesses. Meta went from 10000 to 80 85,000. Google went to a Chamath Palihapitiya (00:55:06): 185,000. Brad Gerstner (00:55:08): And at those levels, it's very difficult to govern them. And when the CEOs went to make decisions in the businesses, there would be protests, revolts within the business, 30 or 40,000 people would sign a Jason Calacanis (00:55:22): petition -- -- even. Chamath Palihapitiya (00:55:23): -- Brad Gerstner (00:55:23): say, no. We're not coming back to the office. No. We're not going to work 3 days a week, know you can't name our AI bot, what you wanna name it because it offends us. And so to me, what's more significant? is over the last 6 months, we've seen courage gain momentum in Silicon Valley. Right? What's deeply underappreciated about Meta and the changes they made. It would be one thing if it was just window dressing. We cut 10% of the workforce, kinda tighten our bed belt a little bit. But Zuckerberg got on his call, and he said we only have 2 priorities in Chamath Palihapitiya (00:55:59): 2023. 1 Brad Gerstner (00:56:01): is efficiency, and he went into depth about once they started cutting people, how the company got faster, the product release cycle sped up, the employees got happier and now it's an end in itself to delay the business. That's what we're hearing out of Benioff as well. And I think It's you know, people can quibble with how Elon went about the change which you and you and David are very familiar with at Twitter, but the reality is he lit a fuse in Silicon Valley that is giving courage, Iowa. whether it's private companies, series b Companies, pre IPO companies, public companies. I've had that conversation more times then then you can imagine over the course of the last 6 months. And I think it's a really important change because I think it breathes new productivity into all these businesses and, importantly, it unleashes these engineers back into the ecosystem to start the next wave of companies. David Sacks (00:57:00): Yeah. So, Jason, I mean, you and I got tag along with Elon during that transition phase at Twitter. And the thing that I took away from it was just how much agency you know, CEOs have that they're not using. I mean, Elon went in there, and he basically changed whatever he saw that he didn't like. I mean, unsentimental and quickly. And, you know, and so you look at all these other companies. You talk to CEO sometimes. and they act like they're prisoners of their companies. Like, I can't change this. I can't change that. Jason Calacanis (00:57:34): Stockholm syndrome. Yeah. David Sacks (00:57:35): Yeah. It's like, you know, I've got all these employees and all these layers and but I can't you know, there's always some reason I'm afraid of the bad PR or, you know, whatever it is. And I you know, the thing I came away realizing is just how much agency, particularly founder CEOs have that they just don't use. You know, they're always, like, humming and hong and wringing their hands. and acting like they're tied down by this or that. And the reality is they can do whatever they want just about, you know, with it in the bounds of what's what's legal. And and I think they're starting to realize, oh, wait a second. Like, I actually can do that. You know, I can walk into my company one day. if there's a team that's not performing, that's giving me answers that don't make any sense. Jason Calacanis (00:58:17): I can start over. David Sacks (00:58:18): Wait. I'm just gonna start over. Jason Calacanis (00:58:19): Yeah. Reboot. I mean, if you can't get Chamath Palihapitiya (00:58:21): it done, then we need Jason Calacanis (00:58:22): to have somebody who can do it. And it's it's incredible. Like, we were doing an analysis on this week in startups of the, you know, employees per company and the revenue per employee, per head count. And I got roasted for having this com even having this conversation. And now here we arch them off. people are looking at efficiency. We're looking at, you know, really, how efficient can these companies be run Is there a limit to where this is going? And and if we were to look at this as a process, where are the fangs? The Amazons, the Googles, Facebook. Where are they at in terms of percentage to being at Elon if you if you were to put Twitter and Elon as the the goal, where are these companies? And I don't know that that is the goal. Maybe maybe he's cut too much. Who knows? We'll find out. I think it's a it's a it's a pretty radical experiment he's doing there. Yeah. Chamath Palihapitiya (00:59:17): Yeah. I don't think that's a reasonable or an achievable goal for a public company. Speaker 3 (00:59:23): Okay. I Chamath Palihapitiya (00:59:23): mean, I think the thing we have to keep in mind is Elon's also capable of doing that because he paid $44,000,000,000 of his own money to buy something that he owns outright. that no longer has revenue pressure to outside stakeholders. Different circumstance. Revenue went down 70% at Twitter. Well, that only affects him and and his ability pay whatever he borrowed in order to buy that company. And as long as he's willing to fund that somehow, he's literally allowed to do whatever he wants. That's no longer the case when you're borrowing money from other people to build your business, which is what every other capital market participant does, public market participant does, and private market participants. So I think that that distinction is just a little bit important because it probably means that there is a shadow of what Elon is doing that's probably the threshold of what's possible. And it's probably, you know, sort of 50% headcount reduction. That's probably the the bound in which things break because I think the thing to keep in mind is that over time, this stuff is like collagen in the body. It just like it creates these interconnected webs of just very difficult stuff that you send you that you cannot tease apart. Block So even if you try to go in and cut 50 percent of a company like Facebook or Google or Microsoft or Apple or Amazon, it would be so difficult because all of a sudden the coordination that happens at that scale I think would get lost. So I'm not sure if it's possible. You kind of have to do what they're doing, which is cut 5%, then cut 10%, then cut 5%, then cut 5%. And I know it frustrates people on the outside looking in, but I think it's the it's probably the only way it can be done without torpedoing the company. Jason Calacanis (01:01:12): What's that do on a culture basis then? Because that is the big critique, hey. You're creating now this culture of fear. I guess the opposite of that is your creating culture of performance and expectations. So how do you think about it on a culture basis? because that keeps coming up from founders to David's point. Chamath Palihapitiya (01:01:25): It depends because I think companies when they're smaller. I mean, I can tell you when I was a part of the Facebook's and your management team, we would rank all the employees. So we had a very good sense of who was the best and the most performant all the way down to who was not. we were able to do that probably up to 2 or 3000 employees. That's not possible at 50,000 and nor is it fair. So because you don't know who these folks are, the real contributors are, you have to do what Elon did, which is literally go person to person and say, who is unbelievably performant or critical. Yeah. In the absence of doing that, you just don't know who the go. And so you have no choice except to bleed down. The question that I have and, Brad, maybe there's a smart analyst on your team that can do it is. Right? And it's more of a statement as well. Can you imagine the totality of stock based comp that's been given out by all these companies since 2015 when they were cagering their employee bases by 25 percent a year, I bet you it's a trillion and a half dollars at least. You think it's that you think it's in that order, magnitude? 100%. Brad Gerstner (01:02:37): This has been the greatest gift in the history of Silicon Valley for sure. Jason Calacanis (01:02:41): Let's pause for a second. Can you explain what we're talking about here? Stock based compensation obviously is the stock given to employees. Chamath Palihapitiya (01:02:48): It generally not counted. Well, let's do it in Jason Calacanis (01:02:51): the escrow dosing. Right? Chamath Palihapitiya (01:02:52): Let's do it this way. Let's just say that you believe in capitalism. Okay? Jason Calacanis (01:02:56): Yep. We'll do. Chamath Palihapitiya (01:02:57): If you if you believe in capitalism, let's say the the 4 of us start a company. And there's a dollar of profit, and we each own 25% of the company. David Sacks (01:03:06): Got it. Chamath Palihapitiya (01:03:08): Normally, what you would say is each of us get 25¢. Right? Reasonable. We own 25 percent each. There's a dollar of profit. We each have 20. So that means that in 4 years, right, we each will have made a dollar because so let let's just say it costs a dollar to get off the ground or $4 to get off the ground. Jason Calacanis (01:03:25): All in summit budget, Brad Gerstner (01:03:26): we believe. Chamath Palihapitiya (01:03:26): We all would have been made whole. We all would feel great. And then now every year afterwards, that 25¢ we get is profit. Now let's say that, Jason, you add a 5th person. And Brad and David and I can't say anything about it. Jason Calacanis (01:03:40): Okay. Chamath Palihapitiya (01:03:41): And that 5th person now gets a fifth of it. Right? And so now all of a sudden, hour 25¢ goes down to 20¢. Then let's say you add 5 more people. Now all of a sudden, our 25¢ went to 20, and then it went to 10¢. Yep. And at some point, Brad and David and I raise our hand and say, hey, this is not the deal we signed up for. And you say, well, too bad because Revenue would not be what it is and profits would not be what it is without these extra six people. And that's effectively what everybody debates when they own a stock. The shareholders want that number to be as small as possible. And I think what Brad is observing is that in Silicon Valley, what has happened is there's been poor accountability for what all of those extra people do and profits haven't written, risen fast enough to make the existing three people on the cap table feel okay about it. And that instead of talking about three people and 6 and a dollar, you're talking about 1,000,000,000,000 of dollars and 100 of 1000 of extra shareholders. Brad, millions of extra shows. Jason Calacanis (01:04:52): And and then we have some charts here so that we can do some fun with numbers. Brad Gerstner (01:04:55): I think taking a step back, I think it's very important to realize that stock as a form of compensation to create alignment, excitement in the early stage of venture capital is part of the true magic of Silicon Valley. You know, you're starting a company, you ask somebody to go on this adventure, take a bunch of risk, they often have to cut their pay. They could get at Google by half to join your adventure. It's only fair that you give them stock in the company, and they share in the ups. And if the company smokes it, they get rich for taking that incremental risk on their behalf and on their families behalf. What's happened over the last 15 years is something totally different, which is this stock as a form of early stage compensation. Right? Continued. And there's a feature in Silicon Valley as companies came public. One way to kind of hide an expense in a business is to bury it in SBC. So let's say Google wanted to hire somebody for $4,000,000, which they're doing today in AI. But instead of paying them 4,000,000 in cash, which would all count against their operating profit, they give them 500,000 in cash, and $3,500,000 in stock. And let's say they make all that stock vestibule immediately, Jason, in this year. In obvious to you and I. That's just cash. The person turns around and sells it. It's a real expense of the business, real expense to the shareholders. But when they report their earnings, and they report adjusted EBITDA. They adjust out the Chamath Palihapitiya (01:06:30): $3,500,000 Brad Gerstner (01:06:31): that they gave by way of SBC. Jason Calacanis (01:06:33): Why did stock based comp SBC get excluded from accounting? What is the history of that? And is that going to change now? Are people going to say, and shareholders demand? in this new economy, in this new, you know, sort of reality, hey. You know what? You you can't play fun with numbers here. Stock based comp has to come out. What what would you like to see, Brad? Brad Gerstner (01:06:54): It's fairly esoteric, but they're back in the mid 2000s, 2004, 2005. There was a And a county, there was a big debate about this. Warren Buffett was famously saying, listen. It doesn't matter whether you pay in stock, whether you pay in cash, whether you pay cans of beers, like, it all cost the same. Chamath Palihapitiya (01:07:13): He's Brad Gerstner (01:07:13): right. And so there was a debate. We had a statement and accounting statement, FASB Chamath Palihapitiya (01:07:19): 123. Brad Gerstner (01:07:20): And in that statement, it said GAAP EBITDA must include the cost of stock. based compensation. So all of a sudden, if I'm reporting GAAP EBITDA, I got to include the cost of stock comp, which it does today. But what what what did everybody do? Although Chamath Palihapitiya (01:07:38): -- But what happened? Brad Gerstner (01:07:40): They started adjusting it out. Right? Because they said, hey. This is a real expense. Right? Because we're not it's not cash. We're giving out the door. So -- -- solid. Jason Calacanis (01:07:49): they come up with a term for this? Yeah. Chamath Palihapitiya (01:07:51): They just call it adjusted. No. They just call it adjusted. -- Brad Gerstner (01:07:54): adjusted EBITDA. And Jason Calacanis (01:07:55): the crime -- Yeah. Chamath Palihapitiya (01:07:56): -- Jason Calacanis (01:07:57): the crime Brad Gerstner (01:07:57): the crime here is that when rates fell to 0 and everybody was making money on tech stocks, nobody wanted to rock this boat. and everybody just said, you know, like adjusted EBITDA kind of ignored, I can I can model it into my future dilution. So we model a share count Jason Calacanis (01:08:16): over the course of Brad Gerstner (01:08:17): the next 3 years, but this literally, over the last 5 years, went parabolic because I just shared with you the number of employees exploded, the amount of share based compensation exploded Jason Calacanis (01:08:31): Because of competition for those employees, we would assume. Brad Gerstner (01:08:33): Coinbase, I think, just reported SBC, which hold your hat, Saxx, was Chamath Palihapitiya (01:08:39): 70% Brad Gerstner (01:08:41): of revenue. Not 70 percent of their earnings. 70 percent of their revenue Jason Calacanis (01:08:48): Just for Coinbase we're talking about here? Brad Gerstner (01:08:49): That's for Coinbase. And so, you know, last week, there was something that I thought was pretty brave. booking.com on their earnings call, really called this out. And what they said is Listen. We've been playing by the rules. We understand that stock based comp is cash. And they say every every metric we report includes the impact of stock based compensation and if you look over the last 15 years If I'm an owner of Booking .com, I was only diluted by about Chamath Palihapitiya (01:09:23): 5%. Brad Gerstner (01:09:25): If I was an owner of Salesforce or Expedia I was diluted by about 25%. That's Chamath Palihapitiya (01:09:32): 25 Brad Gerstner (01:09:33): of percent of my ups were given away. Right? But yet, those things were adjusted out when they reported earnings. And so, you know, what's become invoked today is CFOs get on their calls. And they say, no. No. No. No. Don't worry. We're gonna buy back a lot of shares, so we won't have much dilution. Okay? But if you take my 2,000,000,000 of profits that Chamath just talked about and it goes right out the door, just to buy back the shares you just issued. You're effectively round tripping that money, then it just proves the point. It's cash. It's an expense to shareholders. And my biggest problem with it is it's led to the bloat because if companies actually had to account for this as cash, Right? As opposed to being able to do it. Yeah. They wouldn't hire as many people. They wouldn't pay as much in stock comp. And I'll end with this because I wanna end with the solution. Every comp committee on every board frankly, their heads spin when you start talking about this subject. They bring in a comp consultant, and the comp consultant, they is really the CYA for the comp committee because they want to approve a comp plan that's been recommended by the management team, and they just wanna know is this what everybody else is doing? Okay? So everybody's doing it so the comp consultant looks around and says, yeah. All your peers are doing this. This is why Charlie Munger said I'd rather throw a pit viper down the front of my shirt than hire a comp consultant. Right? What is going on on these comp committees? If you give bonuses to anybody in your business, that are that is based on an adjusted EBITDA metric rather than free cash flow per share. Per share is the key here It's negligence. It's negligence. So if Calacanis just walk in and they say the gold standard as a public company is 50 basis points annual dilution. That's Apple, that's Booking .com, Visa, Mastercard, or even below that. That's the gold standard once you're into public markets, and we will never incentivize our employ our employees on the basis of anything that excludes stock comp, and it has to be on per share basis, that would be a massive leap forward for public company account. Jason Calacanis (01:11:54): Seems reasonable. Anybody have any other thoughts on that? Stock based comp? No. Alright. Saks, where do you wanna go? You wanna go Fox? David Sacks (01:12:01): I'm willing to do Fox. Chamath Palihapitiya (01:12:02): Let's do Fox. Jason Calacanis (01:12:03): I mean, Fox is kind of crazy. Okay. So Rupert Murdoch had been deposed here with this Dominion voting system lawsuit. They're suing Fox for 1,600,000,000 in damages over claims made on air that we all know. around technology enabled election fraud. Speaker 3 (01:12:21): We remember this wild period at the end of the last election cycle with this Jason Calacanis (01:12:26): incredibly false claim that the election was stolen. Something you know, both sides of the aisle said did not happen. However, it seems that the hosts on Fox knew it wasn't happen knew it wasn't true but were engaging in entertainment of allowing these people to come on air and say the election was stolen. So Murdoch said I would have liked us to be stronger in denouncing it in hindsight and when asked if he could have stopped the host from highlighting these unallocated these false allegations on air that were obvious to everybody. He said I could have, but I didn't. Chamath Palihapitiya (01:13:03): He said the truth. He's not allowed to lie in court. Jason Calacanis (01:13:06): Yeah. Just Chamath Palihapitiya (01:13:07): on air. But not in court -- Jason Calacanis (01:13:08): I mean, Saxx, to be fair, like, you really care about freedom of speech. You really care about the libel laws. You really care about the GOP, obviously. You bring it up every week here. So when you looked at and but you were very clear you were not happy about the election denial, all that like false claims that Trump made and these insane people he put around himself. So how do you look at These Foxos and listen, you've been on Tucker and other things, knowingly spreading lies about something as important as the election and then doing it in the most cynical ways. We we sit here and every week, we wrote the media, the mainstream media, you particularly go after the dems and the left and the media elites? How do you feel about these media elites who are part of the GOP machine? lying incessantly about something as important as the election integrity of the United States of America. David Sacks (01:14:05): first of all, you're trying to tee this up as some giant Dunk on me, Jay Cal. Speaker 3 (01:14:08): No. I'm not. Jason Calacanis (01:14:08): No. I'm not. You said from the beginning -- I David Sacks (01:14:10): need to remind the audience. Chamath Palihapitiya (01:14:11): -- Jason Calacanis (01:14:11): you didn't believe in this. David Sacks (01:14:13): Exactly. Let's go back to November of 2020 on this show because there may be a lot of parts of the audience that weren't watching back then. I was really clear. Then I said, Sydney Powell and Luke Wood and Rudy Giuliani. I thought they were wackos and this whole idea that the Dominion voting machines had somehow been rigged and somehow involved Hugo Chavez was a wild conspiracy theory. So I said at the time -- 100%. And I also said that I thought that once the supreme court denied certioria Trump I I said that he had a his right to have his day in court, and to challenge the election in court. But once that the court threw out his claims and the supreme court denied certiori, that that whole thing needed to stop. and it didn't stop. And that's why the Republicans lost that Purdue runoff seat in Georgia on January 5th, and then you had January 6th. So You know, I've been warning against this for a long time, Jake, out. Now with respect to to Fox, I think you need to basically get a little bit more nuanced in in what you're saying there. Because I think within Fox, there were actually 2 groups of hosts. So there is one group of hosts that I think you could say were Trump loyalist. And they basically, not only platformed the Sydney Powell lies, but also endorsed them. And Rupert Murdoch admitted that they went to far and actually endorsed. And so you had Hannity and a couple other hosts do that. Even though Hannity had some text messages that indicated he didn't believe it. So I think he came across the worst. However, there were within Fox skeptics of the Sydney Powell theory. And so I put Tucker Carlson in that camp. I put Laurie Ingram in that camp. and Tucker had Sydney Powell on his show on I think it was November 19th. I think this was 16 days after the election. It was a 20 minute interview in which he grilled her, and he kept coming back to what is your evidence, what is your proof. David Sacks (01:16:04): And if you were paying attention, he demolished her. I mean, Jason Calacanis (01:16:07): I remember that. Notable. David Sacks (01:16:08): Yeah. Exactly. So, I mean, honestly, no one looks great when all of your text messages come out, and you can nitpick about this through that text. But The bottom line is I think Tucker did his job. You know, yes, he platform Sydney Powell, but he platformed her in order to dismantle her. And you kinda have to be pretty dopey not to to see that she was dismantled after the appearance of Tucker. Chamath Palihapitiya (01:16:28): -- Jason Calacanis (01:16:28): Fox be liable for knowingly platforming these people and endorsing them in some way, or is it their freedom of speech in your mind as an attorney here or somebody with that, you know, legal degree, where does this stand? Like, put aside if this was if this was CNN doing at MSNBC, we'll switch what publication. If this was the New York Times and they knowingly lied, knowingly platformed, some coupes in the conspiracy theory. What should the price they pay for? And then how does that affect the freedom of speech that we all think, I think universally on this podcast, especially and in Silicon Valley or at least we used to, that freedom of speech is really important. Do you have the freedom to lie in platform? cooch like this? David Sacks (01:17:13): Let me ask you directly, Jason. I think this would be a better world if Fox is reliable, but I don't think they're gonna be because that's not the legal standard. I believe that if a television network knowingly spreads and endorses baseless accusations against somebody, which they know or should know is basically untrue. I think they should absolutely be liable for libel or defamation. But that is not what the law requires. Under New York Times versus Sullivan, you're required to show that that they knowingly spread misinformation. But in addition, you have to show that they had actual malice, which is that their intent was malicious. And I think, you know, River Murdoch is a wily old dog because he admitted on the stand, everything but the thing that was most important for the plaintiff's approve, which is actual malice. He admitted that they platform things that they, you know, knew or should have known were false he admitted that he should have put a lid on it sooner. He admitted that he knew it wasn't true. But he said the reason they did it is because they're afraid of their audience or a portion of their audience going to some rival network. So, basically, what he said is, and not so many words is that his motivation was greed. And in our system of law, that is a complete defense. against claims of defamation. Now I think what we need here is to rewrite the defamation laws. I think the Supreme Court needs to overturn New York versus Sullivan. Clarence Thomas is basically intimated that he would support that. I think that would be a great thing to do. I think actual malice should not be the requirement. for libel, I think of a television network or a publication puts out information. They know as false. They should absolutely be liable for it. and that is enough to show. And if we did that, by the way, it wouldn't just be Fox in this particular case. It'd be CNN. David Sacks (01:18:55): And MSNBC, we have to completely revise their coverage. And all of these tech reporters who do nothing but defame the tech industry, the entire tech press just about is a slow moving defamation lawsuit. Elon Musk would probably be the richest man in the world just based on all the defamation lawsuits he could bring if we were to overturn New York Times versus solving Jason Calacanis (01:19:15): the richest richer guy? David Sacks (01:19:17): Yeah. Because all they do is defame Elon Musk every week with claims that are ridiculous. Chamath Palihapitiya (01:19:23): So David -- So David Sacks (01:19:24): let's let's revise the whole thing. Chamath Palihapitiya (01:19:25): Yeah. But -- Okay. So hold on. Jason Calacanis (01:19:26): There you go, folks. Very, very intellectually honest. I like it. Chamath Palihapitiya (01:19:30): David, so What you're saying is you expect the Dominion lawsuit to fail. Can it be appealed Speaker 3 (01:19:36): all the way to the Chamath Palihapitiya (01:19:36): Supreme Court? Can this be the case that rewrite New York versus Sullivan? Good question. David Sacks (01:19:42): That's a good question. I'm not sure. I mean, I think that'd be great if it did. Just to be clear, listen. I think that if Fox were somehow found guilty. I think 1 and a half 1,000,000,000 is a kind of ridiculous amount of damages. I don't think Dominion was damaged to 1 and a half Chamath Palihapitiya (01:19:54): 1,000,000,000. David Sacks (01:19:54): But do I think that it would be a good thing if this lawsuit were challenged always to import and they overruled New York Times versus Sullivan -- Let's Speaker 3 (01:20:02): fund the lawsuit. David Sacks (01:20:02): Let's fund the lawsuit. Chamath Palihapitiya (01:20:03): Let's fund the lawsuit. I would fund that lawsuit. David Sacks (01:20:05): Man, that's what I'm gonna do is not is is sue MSNBC and CNN for all the nonsense they spread every night. Chamath Palihapitiya (01:20:12): Yeah. I have a couple of things that I would want to go and get corrected. Jason Calacanis (01:20:17): Clean up. I just wanna be clear here, though, Brad. David's guy, Tucker, He did the right thing. That's the most important part of the story, isn't it, David? That you're still a lot Chamath Palihapitiya (01:20:27): -- Speaker 3 (01:20:27): I I David Sacks (01:20:27): think you're not you're not being new new on You wanna throw a tucker under the bus? I think tucker did his job. Jason Calacanis (01:20:32): I think tucker did his Chamath Palihapitiya (01:20:33): -- Jason Calacanis (01:20:33): Tucker did his job. David Sacks (01:20:34): I think I can. -- his job. Yes. Yeah. I think the guy who looks a little worse is Hannity because Hannity in the text admitted he didn't believe the story. But as a Trump loyalist, he endorsed the bullshit theory That's no good. Jason Calacanis (01:20:46): Brad, you would you know, you you come on the show every couple of episodes and and pitch in here as our 5th beetle. Would you like to touch the 3rd rail? What are your thoughts? And would you like to get some incoming email from all your LPs about your position on Fox News and Brad Gerstner (01:21:01): I mean, Speaker 3 (01:21:02): I I Brad Gerstner (01:21:02): I I think -- That's too humiliating. Jason Calacanis (01:21:04): I mean, we we we we Brad Gerstner (01:21:05): we just I just feel like I sat through a University of Chicago law school class. It was awesome. And -- Great. Chamath Palihapitiya (01:21:11): -- Brad Gerstner (01:21:11): I think we have some good issues here that we still got a tick off on Jacob. Jason Calacanis (01:21:15): Yes. Okay. Well Chamath Palihapitiya (01:21:16): -- Brad Gerstner (01:21:16): We gotta talk a a just for a second about China. as it relates to TikTok because because this -- Alright. Jason Calacanis (01:21:22): Here we go. Brad Gerstner (01:21:23): This Holly hearing that's coming up. So we've got a hearing in congress Jason Calacanis (01:21:28): Let's start with you are a shareholder, a significant shareholder in ByteDance, the parent company of TikTok. We have Brad Gerstner (01:21:33): to start it on front. Correct. Correct. Jason Calacanis (01:21:35): And you you started that position. Chamath Palihapitiya (01:21:37): -- Brad Gerstner (01:21:37): used TikTok. And my kids used Reals and -- Every -- you and I have had a spirited debate on Chamath Palihapitiya (01:21:42): -- Jason Calacanis (01:21:42): Yes. You're a shareholder. Okay, sir. Chamath Palihapitiya (01:21:44): -- Brad Gerstner (01:21:44): about this. So I so I haven't -- Do you want me to Jason Calacanis (01:21:46): tee it up? You wanna tee it up? Brad Gerstner (01:21:47): But hold on a second here. Like, because just like Saks had to defend himself before he even got started. Otherwise, you wanted my my credibility. Speaker 3 (01:21:54): You don't like the way I'm trying to do Brad Gerstner (01:21:55): I have to do the same thing. I'm a much bigger shareholder of Meta. who stands to do incredibly well if TikTok in the US is banned. Jason Calacanis (01:22:05): So you can spread wait. You win either way. Brad Gerstner (01:22:08): I've got a head, John. Good. Jason Calacanis (01:22:09): Okay. Brad Gerstner (01:22:10): You know? It has to be true. TikTok in the United States band. But, you know, the con the context here is the TikTok ban debate is heating up. Right? And it's all in a march up to the Holly hearing. I think it's on March 23rd. And there's real like, we we spend a lot of time at the start of this pod on inflation. I think a much bigger issue right now. I was just with all these investors, the main issue on their mind. was global decoupling between China and the United States. We're gonna see a level of Chinese hate leveled out of out of congress, both sides. I mean, we heard it Chamath at dinner at your place not so long ago. that this hearing is drawing more demand for speakers from both sides of the aisle than any such conference in a long time. but there's a lot of there's a lot of heat now around TikTok. Should it be banned? And when I when I look at the situation if you frame it for ByteDance because Chamath talked about this a couple weeks ago, it's been reported. ByteDance's revenue is about a Chamath Palihapitiya (01:23:14): $120,000,000,000. Brad Gerstner (01:23:16): It's been reported, their profits are about Chamath Palihapitiya (01:23:19): $25,000,000,000. Brad Gerstner (01:23:20): That is almost identical in size to Meta. Meta's worth about Chamath Palihapitiya (01:23:23): 450,000,000,000. Brad Gerstner (01:23:24): So 120,000,000,000 top It's also been leaked that in that TikTok is about 14,000,000,000 of that, and that US TikTok is 3 to Chamath Palihapitiya (01:23:34): 4,000,000,000. Brad Gerstner (01:23:37): US TikTok 3 to 4,000,000,000 of a 120 and it loses money. So There's a lot of debate. Should we ban it? Should we not ban it? Is it gonna go public? What Speaker 3 (01:23:47): should happen? David Sacks (01:23:47): What do you think? Jason Calacanis (01:23:48): What do you wanna ask? And as a shareholder. Brad Gerstner (01:23:50): Listen. I think it's Jason Calacanis (01:23:51): a public -- At an American, Brad Gerstner (01:23:52): I think this is a puppet debate over a much bigger conversation that's going on. One of the things I've urged the company to do over the course of the last several years is parental controls. My kids use TikTok. They use reels, and what I want is to be able to set effective time limits. And I also want TikTok has incredible video content in math, in science, in history. I wanna be able to set a slider Let's say 20% of the videos that get shown over this 1 hour period have to include some of these math and science videos for my twelve year then he can elect to not watch at all or watch it, they announced those product changes yesterday. so they're teeing up those product changes. I don't happen to think there's a nefarious plot, but I also understand that people might not want this. And so, like, listen, I think we should have a debate. I think that the CEO of TikTok should show up. He should speak the the truth at the holy airing. And if the US Congress wants to ban TikTok in the US or force a spin or a sale, I think we should do it stop debating it, but the much larger conversation is whether we have a hard or a soft decoupling with China. And I think this is just canary in the colon. Jason Calacanis (01:25:04): Alright. So let me just tee up also, and Chamath, I'll get your reaction. On Monday, the White House gave government agencies 30 days to remove TikTok from all federal devices, all federal agencies must delete TikTok from phones and systems and prohibit Internet traffic from reaching the company. This is following moves by Canada and the EU and Taiwan. And, obviously, there is a bigger house committee focused on China that held its first meeting this week. So there is the bigger picture. But let's start with the smaller picture. Number 1, Shamak, do you think it's a security risk to have a Chinese company have this kind of access and influence with TikTok specifically? And what do you think the remedy should be for that? And then we'll get big picture. I wanna get stocks involved in this as well. Should it be banned? Should they have this kind of access to Americans and influence? Chamath Palihapitiya (01:25:52): Should it be banned No. because I believe in a free market. Will it be banned? Yes. Because it's the most obvious cultural way to pick a fight with China without actually picking a fight with China. So, yeah, I think it's going to be the most obvious victim of all of this. And so I don't know. My advice to my friends who are shareholders, not just Brad, but others is sell. sell it. Move on. It's in the it's in the Warren Buffett, what Warren Buffett calls the 2 hard bucket. Jason Calacanis (01:26:31): Sachs, do you think that this is a national security issue? Do you personally believe TikTok should be banned? Or do you like me believe that we should just do a reciprocation test. In order for TikTok to be allowed here in the United States, then Twitter, Facebook, meta, Instagram, LinkedIn, etcetera, need to be allowed in China, and you have this many days to reciprocate or else it's banned. David Sacks (01:26:56): I totally think Chamath is right that tiktok is gonna be GPC Roadkill. And GPC stands for great power competition. You're gonna start hearing that term more and more. It's gonna become the organizing principle of American foreign policy. And I just think that TikTok is TikTok is all caught up in that. And, you know, personally, I'd like to to understand what it is exactly that they're doing with TikTok. And said if there's having these vague accusations, I'd actually really like to understand the underlying surveillance that they might be doing. Speaker 3 (01:27:23): They have actually been someone sending calls Chamath Palihapitiya (01:27:25): already. Yeah. David Sacks (01:27:25): I'd like to know a lot more about that. But in any event, I just think you're gonna get caught up in this this, again, GPC. That's gonna be the the dominant organizing principle of of our foreign policy. I think that people are coming around to realizing that it's China, not Russia, that is the central global competitor and adversary in the United States. It's the only country in the world that's potential peer competitor to the US's economy. is roughly the same size as the US. It's got four times the population. It's the one that we really need to watch out for. I think there's growing realization in Washington that the Ukraine war is a little bit of a misdirect and that we need to basically get back to doing what we were doing before the war which is pivoting to Asia. Chamath Palihapitiya (01:28:12): And by the way, thinking about that just for a second. In I think, David, you're Totally right because the game theory now to me makes a lot more sense in the framing of GPC. So for example, if you think about what The Chips Act does. Right? The Chips Act basically says we are going to near shore or onshore every capability we need so that we can make and manufacture all the critical semiconductors for all of our interests technological, business, military, etcetera. But what is that really? What that is is an option to not have to defend Taiwan? And why is that important? It's because today if Taiwan were invaded by China, we get pulled into a conflagration that we don't know how it ends We don't know what the beginning middle of end of it looks like. It's extremely dangerous and precarious. So spend a couple $1,000,000,000,000, create financial incentives, build a bridge to Korea and to Japan so that they bring onshore and into Mexico all the capabilities we need with Western Europe who are already our allies already along with Japan and Korea and now all of a sudden we have complete optionality and now we can deal with the greater Chinese hegemony in a much more balanced way. So I think the GPC framing is shared, by the way, between the Democrats and the Republicans. So this is why it's so much bigger than one single company. That's why -- Woah. -- I think think TikTok's roadkill. Jason Calacanis (01:29:42): Brad, if you frame it as a competition, we're not framing it as a war. We're in competition, and part of that is gonna be this decoupling. Is this decoupling helpful to America? Is it helpful to humanity? Is it better that we decouple a bit? This interdependency maybe got a little too deep as we saw during COVID with supply chains? Brad Gerstner (01:30:02): Well, I mean, it's in a great in a great power struggle. It is what the words imply. Right? So I don't you know, part of the reason you wanna have trade with China and part of the reason we don't wanna have our part decoupling is the, you know, a longstanding theory that company countries that trade together are less likely to go to war. So, you know, I think if you listen to what's coming out of this, you know, these select committee, this week that held his first hearing is on the on on the extremes you hear people saying hard to coupling. Right? And then the middle of you people say, listen, we need to define a circumference around national security, and we need to decouple as to all things that are within that circumference. Now I will tell you that the debate is about how large is that circle. So it starts off as, for example, the computer chips out of NVIDIA so China, you know, can't compete with us in the AI arms race. But it's quickly emerged into you know, batteries, energy, food, supply chains, it it the circumference has now become almost as large as the economy itself. I would argue that it's not just the chips act. It's also IRA, which is another $1,000,000,000,000,000 of funding for basically, onshore and supply chains, vital materials to build batteries, etcetera, You know, so I think it's a very reasonable policy by both parties to pursue. It's clear that we're going to have some decoupling I think it's a it's a it's gonna lead to an interesting question on the part of China. You know, she was out last week saying, you know, I'm going to make a speech about peace with Russia. You know, this is more David's territory, but my hunch is that there may be, you know, if China China thinks it's gonna be a hard decoupling from an economic perspective, This is bad for global economic growth. Brad Gerstner (01:32:02): This is bad for China's growth. Chamath Palihapitiya (01:32:03): I don't think it's bad for growth. I think it's bad for inflation. Jason Calacanis (01:32:07): Explain? Chamath Palihapitiya (01:32:08): Well, because I think that we'll have many versions of everything everywhere. So we will Some Jason Calacanis (01:32:13): more redundancy? Yeah. More redundancy. Chamath Palihapitiya (01:32:16): We're going to rely on Central And South America in a meaningfully bigger way. And what that'll mean is that there'll be more and economic prosperity for those countries, they'll feed the United States, China will feed it less. And as a result, there'll be more inflation because you won't have the cost advantages. By the way, China is not just gonna sit there and take this line down. They've already punched back a few times. So for example, in the middle of the summer, China introduced a tariff and slowing the export of certain materials and technology to make solar wafers. Now why is that critical? Well, Again, talked about this before, but we are going to take the marginal cost of energy to 0 in this country. And the levelized cost of energy, particularly via solar, is the cheapest it's ever been. And so what China sees is, oh my gosh, if the United States has abundant free energy. Now all of a sudden a huge component of what drives costs is gone. Speaker 3 (01:33:12): Yep. Chamath Palihapitiya (01:33:12): So now the United States could partner with El Salvador, Mexico, Honduras, you know, Argentina, Brazil. Jason Calacanis (01:33:19): Vietnam is happening here too. Yeah. Chamath Palihapitiya (01:33:21): No. But I'm just saying it's close by. Speaker 3 (01:33:22): Yes. Of course. Chamath Palihapitiya (01:33:23): Yeah. And if you can deliver zero cost energy to those places now, the manufacturing capability could exist there. My point is, It's such a complicated chest piece. So China is not taking any of this line down but I think that what David's framing is totally accurate. This is the beginning of a GPC and it's an economic tit for tat that we're gonna play out. We tax chips. They tax solar panels. We go after TikTok just as a confusion maker. Right? Brad Gerstner (01:33:50): Yeah. It's Jason Calacanis (01:33:51): really gonna be a lot of fun. -- ways back and forth here. I can tell you the the there's a very easy test for if China sees TikTok as a strategic asset. And that's it it's gonna create more shareholder value Brad, if they were to spin it out and make it a publicly traded American company with American shareholders, it would create more shareholder value for ByteDance. Therefore, if they don't spin it out, That means they're not acting in the interest of shareholders and shareholder value. They're acting in the interest of their national security. pretty clear reciprocation and collaboration would be a much better model, I think, for for working with the Chinese. And, hopefully, we can find some things I mean, to collaborate on. David Sacks (01:34:32): Brad raised the the Chinese peace proposal in Ukraine, which I think is an interesting topic. Can we do you guys wanna go there for a minute? Chamath Palihapitiya (01:34:41): Sure. David Sacks (01:34:42): Yeah. Alright. Can I take a shot at explaining what the Chinese were doing? I think it was a clever diplomatic maneuver by the Chinese to try and grab the moral high ground here. They're basically saying, listen. We're interested in peace. We're gonna put forward a proposal. The Americans fell into the trap of basically dismissing it right away, throwing cold water on it, the US state department has done this twice before. Remember, back in March of last year, enough Tali Bennett from Israel, tried to negotiate a peace deal. And he himself said that it was the West, the Americans who rejected it. He thought it had a fiftyfifty chance of succeeding. You then had the peace process in Istanbul, Turkey. with Erdogan presiding over it. You had the the Istanbul communicate, which, again, they were very close to having a peace deal. and blink in and the US threw cold water on it. So what's happening here is that the US is not playing its traditional role as peacemaker where we try to go in and mediate these conflicts. We're doing the opposite of that. We're throwing cold water and the peace process. Now Why are we not acting as the mediator? I'll tell you why because we are a co belligerent. This is an American proxy war that we're fighting against Russia, so we have no interest in mediating a peace process. And moreover, we're not trusted to mediate a peace process because we're one of the So it's a PR strategy by Xi Jinping. Jason Calacanis (01:35:56): to take the global moral high ground. I I agree with that. No. No. We're I said it on Twitter a couple weeks ago. Like, this this is amazing that he's starting the peace process We want regime change. We wanna deplete, and we wanna ankle Putin. They wanna keep him in the game. The more desk spots there are, the the worst the better it is for them. They would like to keep the legion of Doom going. They don't wanna see regime change in democracy in Russia eventually. Chamath Palihapitiya (01:36:20): I don't think that's how they view it. Speaker 3 (01:36:21): But Chamath Palihapitiya (01:36:21): -- David Sacks (01:36:21): Listen, Jake Al, you're Jake Al is very close to getting it, but here's where I would disagree with you a little bit. Okay? Let me explain. Speaker 3 (01:36:29): Okay. Go go ahead. David Sacks (01:36:30): So from the Chinese point of view, the war in Ukraine is like, Mona from heaven. Speaker 3 (01:36:37): Okay? David Sacks (01:36:37): They love this war. Number 1, okay, because it's interfering with the US's pivot to Asia. We were basically in the process of redeploying all of our force all of our military to containing them in East Asia, and now we're bogged down in Europe. Okay? So that's number 1. Number 2, we are massively depleting our stockpiles of of weapons. We've used something like 9 years of stingers and 5 years of javelins. and we're running out of ammunition. I can't believe it. We're running out of artillery. The Russians actually have a 6 to 1 artillery advantage, which is why they're actually doing much better in this war then people are acknowledging. We should come back to that. The last thing is that the Chinese now are benefiting from the economic sanctions on Russia because Russia is now selling them oil and gas and all of their minerals at a big Chamath Palihapitiya (01:37:26): discount. -- subsidy. Yeah. David Sacks (01:37:27): So it's been this has been a wonder thing from the Chinese standpoint. So this is a problem with us thinking in this Marvel movie way of the world in which we're the super friends and we're against the legion of doom, okay, is because there is no natural alliance in the real world between China, Russia, and Iran. These are 3 very different regimes with different types of governments who naturally would not get along. They would be adversaries. Naturally, they'd be suspicious of each other as China and Russia were during the Cold War, but we have pushed them closer together This is the problem with having this overly moralistic view of foreign policy. Chamath Palihapitiya (01:38:07): Over to you, Jason. What do you think? Tell us -- Is there Jason Calacanis (01:38:10): a question? What's the question? Chamath Palihapitiya (01:38:12): Yeah. I mean, you frame it as the legion of doom, so just explain. Jason Calacanis (01:38:16): Well, it's the axis of evil. The the the 50% -- Look. Brad Gerstner (01:38:20): Let me tell you. David Sacks (01:38:21): Hold on. No. No. Wait. Hold on. I'll I'll throw it in the sense. Chamath Palihapitiya (01:38:24): -- David Sacks (01:38:24): would not be working together if it weren't Okay. Declaring a war on that because that was the same time. Jason Calacanis (01:38:29): Actually, Pakistan, Iran, and a and China work together on nuclear technology. So they do when it's convenient for them work on things like nuclear bombs. So there is an affiliation, but you're correct. They're they're they're the 50% of the planet of humans on this planet who live under authoritarian. And so they they're authoritarians. They're always gonna think in their own interest. They're always gonna think in their own interest above their own people. Let alone the people of another country. They don't care. They don't care about human rights. They don't care about the rights of humans. And then certainly don't care about the rights of humans in another country. And the west is on a noble mission to spread democracy in the world, and that is a noble thing worth fighting for. And it's worth defending free countries from despots. I know that you are a fan of these folks, sacks apparently, and you think they should be able to run amok I will take the other side of it. I think the West should act in unison. The only criticism I have is that we're not acting in unison. I would like to see the West instead of sending Biden to Ukraine Chamath Palihapitiya (01:39:31): -- David Sacks (01:39:31): Hold on. Speaker 3 (01:39:32): Where did David Sacks (01:39:32): I say? Chamath Palihapitiya (01:39:32): -- Speaker 3 (01:39:32): where did I say Chamath Palihapitiya (01:39:32): -- Speaker 3 (01:39:32): Hold on. Chamath Palihapitiya (01:39:33): -- David Sacks (01:39:33): what did I say? Speaker 3 (01:39:34): You've talked David Sacks (01:39:34): enough. You just accused me of somehow being fans of these people. Where did I ever say that I was a fan of Xi in China or Putin or the Ayatollah's in Iran. Hold on. Speaker 3 (01:39:44): I'm not Jason Calacanis (01:39:44): You said we provoked Putin. Putin invaded another country. David Sacks (01:39:47): Hold on. Jason Calacanis (01:39:48): You said we caused it. David Sacks (01:39:50): I said, hold on a second. Hold on a second. I am arguing for a geopolitical strategy that benefits the United States. I'm on team America. And your policy of driving these people into an axis of evil is foolish for the reason I said, which is we are gonna power up the Chinese economy so they are a much more formidable enemy to the United States. That is the last thing we need to do. with respect to hold on a second. We finished. You had a chance. With respect to Ukraine and Putin there, there's no question that Putin invaded. Okay? He is the aggressor. However, the question you have to ask is why. And the fact of the matter is that First of all, we fomented a coup in Ukraine in 2014. This is your democracy spreading that you like. is all of a sudden we got these NGOs, and we got Victoria Nulev from the state department in there, basically fermenting these coups. It doesn't work out quite the way you think, Jay Kal. That's Problem number 1. Okay? Then we try to run NATO right up to Russia's border. Okay? And you expect them just to accept that because we're a benevolent superpower. That's not the way the real world works. Putin was tremendously threatened by that, and it wasn't just him. It was all Russian elites. Read the Bill Burns member from 2008. Yep. He explains that even the liberal elements within Russia were tremendously threatened by NATO expansion. That is what basically poisoned diplomatic relations between the United States and Russia, and it was a major cause of this war. Now listen. Just because you don't think it's provocative. Doesn't mean that the Russians don't think it's provocative. You have to be able to put yourself in the other guy's shoes for just one second. And the fact that matter is there were diplomatic steps that we could have taken to diffuse this crisis in this war, and we didn't do it. And now look what's happened. David Sacks (01:41:34): 100 of thousands of people have been killed and Ukraine's been destroyed. It's been absolutely destroyed. And let me tell you right now, it looks like they're losing this war. So I don't see where your superhero policy has gotten us except to make China richer Speaker 3 (01:41:47): and more David Sacks (01:41:48): powerful and to destroy Ukraine. That is where your naive idealism has gotten us. Jason Calacanis (01:41:53): Yeah. And I would say If you if if left to your devices and you're not engaging and not presenting in the United front against Putin, he will invade country after country. The west must fight for democracy. We must fight for human rights even if it's uncomfortable. And You seem to think we provoked him to invade this country. He's a murdering dictator authoritarian who has been murdering his own people and other people for his entire career, and he will continue to do so. David Sacks (01:42:22): Let me clarify because you're putting words in my mouth. Okay? When you say that think that we -- We Brad Gerstner (01:42:27): forgot to introduce you. Chamath Palihapitiya (01:42:28): -- David Sacks (01:42:28): what I believe what I believe is that we took actions that in Russian eyes were provocative. Jason Calacanis (01:42:33): Yeah. You said David Sacks (01:42:33): it's okay. I'm saying that from their subjective point of view, they saw these actions as provocative. They said so. Listen. The Russian Chamath Palihapitiya (01:42:41): -- Jason Calacanis (01:42:41): Which is what I said, actually. We provoked it as your No. David Sacks (01:42:45): Yes. I just explained this. Not the worst I would use. Chamath Palihapitiya (01:42:47): Hold on. His position is that in their eyes, they were proofed, Jason. David Sacks (01:42:51): We're talking about promotion. We're talking about an No. Speaker 3 (01:42:54): Why Oh, shit. Oh, boy. David Sacks (01:42:56): You're like what you're doing right now is, like, dishonest. I just explained the language that I would use. Jason Calacanis (01:43:01): Yes. Yes. We provoked them. David Sacks (01:43:04): We took actions that in Russian eyes were provocative. There's a difference. Jason Calacanis (01:43:08): Yes. Provocative, provoked, Yes. The act of promoting that. Chamath Palihapitiya (01:43:11): -- David Sacks (01:43:11): top line. Okay. It's gonna take too much. Jason Calacanis (01:43:13): Okay. Let's move on. We're not we're never gonna agree on this, Sax. Okay? Brad Gerstner (01:43:17): And -- I mean -- By the way, Jason Calacanis (01:43:18): I'd like to remind the audience that nobody on this podcast is an expert on foreign policy. Saks is not Henry Kissinger. you know, I'm not Obama. David Sacks (01:43:25): The last week show Jason Calacanis (01:43:26): hold on David Sacks (01:43:27): a second here, Jake Hallum. Last week show, you had come around to my point of view. You said this war was a mistake. Jason Calacanis (01:43:32): On the very last show, David Sacks (01:43:33): you said it was a disaster. And now you're you're based on -- Hold on. Hold on. You're back to league right back to your Allegion of doom. Jason Calacanis (01:43:40): Nope. I believe the West should present a united front, and we should hold the line with Russia invading other countries. That's my belief. I do not think we should be doing this solo. I think we should not be sending Biden. We should be sending 15 leaders of countries to Ukraine. We should be sending people in and we should be doing a peace process. And I think the military industrial complex, largely driven by the GOP, is what's a faultier. They want to use these weapons. They want to replenish the supply, and they want to regime change. I don't think we should be going for regime change. I think we should be Bridges. So do you My point is a little more subtle because my point is a little more subtle. David Sacks (01:44:16): You're doing it right there. You're basically engaging in this ridiculous rhetoric that we've seen in the media, which is that if you simply want a more realistic American strategy because you believe it benefits America, that you automatically accuses somehow being a Putin sympathizer. Now you're doing what the mainstream media has done. No. I'm not. Jason Calacanis (01:44:33): No. I'm not. I just said to you, it should be the entire west as a group, as a block negotiating with Putin. Chamath Palihapitiya (01:44:39): What do you Jason Calacanis (01:44:40): think? Jason Wang to be part of that. I I welcome Xi Jinping, Germany and the United States. States and France and the UK all getting together and trying to get these 2 parties to settle. Chamath Palihapitiya (01:44:50): What do Jason Calacanis (01:44:50): you think we're doing? Chamath Palihapitiya (01:44:51): What do you think we're doing right or wrong with China right now? Speaker 3 (01:44:55): Right or wrong with each other? Yeah. Chamath Palihapitiya (01:44:57): We think we're doing right and wrong or right wrong or -- Jason Calacanis (01:45:00): I think we should be in discussions with them consistently I don't believe we should be isolating them. I think we should be looking for areas we can collaborate on. The environment, tech technology. Chamath Palihapitiya (01:45:12): You agree with the chips act. You agree with basically onshoring and you're assuring all the critical infrastructure we need. Is that -- I Jason Calacanis (01:45:18): think we should not be dependent on any foreign we should we should have energy security. We should have -- Technology security. Chamath Palihapitiya (01:45:25): -- Jason Calacanis (01:45:25): technology too. Of course. Yes. But I think every country should. I think China should have that. we should have it every country should aspire to be resilient and not be dependent on another country and being dependent on a dictator like Germany was on Putin or we were with China for medicines or for, you know, medical equipment or Chamath, we do not wanna be in that position ever. No. David Sacks (01:45:45): No. That's one question. Just just on Ukraine. Just for a second, Jake. Would you be willing in order to achieve a peace deal for Ukraine, would you be willing to agree to 2 things? Number 1, that Ukraine would be a neutral country instead of part of NATO, and number 2, that we would recognize Crimea being part of Russia. Would you be willing to give those 2 things? Jason Calacanis (01:46:04): I think that's up not up to me. I think it's up to the people of Ukraine and Russia to to sort this out, and it's up for the west to set the table for them to do part of setting the table for them to do it is to make it more painful for them to stay at this war. So if they are told, if you keep fighting over these things and you don't come to a resolution between those 2 parties who have to live with that resolution, that is the uncomfortable thing that will force them. And that could be China, us, and India all working together, all of us working together to force those 2 parties into a solution that works for them. Chamath Palihapitiya (01:46:35): We have Brad for 10 minutes. I wanna move on. I wanna show you guys a tweet about Harvard students, and I want you guys to react to Draymond's comments because they're just fucking incredible. don't know if you guys saw this, but isn't that unbelievable? It says there was a study at Harvard that found that 43% of white students, there are legacy athletes or related to donors or staff. That's unbelievable. Jason Calacanis (01:47:01): Is that public knowledge or is that, like, kind of leaked information I wonder? This is from Dolores Handy. I don't know who that is. Maybe we could click on who the source of that is. Legacy's gotta go. Right? That that concept Should I just go away? Chamath Palihapitiya (01:47:17): Yeah. Is Jason Calacanis (01:47:17): there a valid reason to have legacy? Chamath Palihapitiya (01:47:20): Is there a valid reason to have legacy? Jason Calacanis (01:47:22): It feels unfair. It feels un American that these important institutions give preference to people who are stupider and achieve less if this is an achievement based system. It just feels unfair. Yeah. I Chamath Palihapitiya (01:47:36): mean, well, we know we know that the 1st class had 0% And so we know what the trend line looks like. Yeah. So at some point, we're approaching a 100%. I think we're just debating on what you -- -- question. Right? Brad Gerstner (01:47:46): One of the things I would like to see, Jamath, is one the relative performance 10 years after graduation between the legacies and the kids who had to fucking scratch and fight to get into the place. Chamath Palihapitiya (01:47:58): Oh my god. Yeah. I mean, I think we know the answer. Jason Calacanis (01:48:02): Well, you would think they would be higher performers, the latter group, but you would also think that if legacy got you into Harvard, then the legacy of Brad Gerstner (01:48:10): your your crib Jason Calacanis (01:48:10): is gonna get you into other things. Right? You you'll have the inn in other places. Brad Gerstner (01:48:14): They're the ones who are miserable and walking around, you know, rich and haven't achieved anything. Jason Calacanis (01:48:21): Yeah. Listen. Sachs didn't get into Stanford based on his dad's buying the building. Right? David Sacks (01:48:28): Well, that's for sure. Jason Calacanis (01:48:30): Okay. So here is a video from Trey Mungrey. Speaker 7 (01:48:34): What I do wanna go back to is Black History Month. This is actually the first time he's seen me in a black History Month shirt on Black History Month. And It's very intentional. And I really just threw this shirt off because I didn't have another shirt to throw on. But Black History Month, at some point, can we get rid of it? Like, at some point. Why we why why we gotta keep getting the shortest month to celebrate our history? You know, governors wanna take our history out of schools. and I'm not gonna be the food to go say, yeah. We get celebrated for 28 days. So at some point, I'd like to get rid of it. is you know, we we're making all these changes in the world, can't talk about these people, can't talk about those people, can't say this, can't say that. at some point in time to get rid of black history month. I get rid of black history like they're trying to do, but black history month No. Teach teach teach my history from January 1st to December 31st, and then do it again. And then again, and then again and then again. That's what I like Speaker 3 (01:49:46): to see. Brad Gerstner (01:49:47): poof. Wow. Strong. So good. Love that. Chamath Palihapitiya (01:49:50): Love that guy. Speaker 3 (01:49:51): the actor. Chamath Palihapitiya (01:49:52): He's the fucking best -- Jason Calacanis (01:49:53): Harrison best. Chamath Palihapitiya (01:49:54): -- Brad Gerstner (01:49:54): best. You need to clip the last ten seconds of that that that we all need to tweet that. Jason Calacanis (01:50:00): Yeah. Be relentless. Chamath, there was a a correction we needed to make about the Stripe chart last week. Go ahead. Chamath Palihapitiya (01:50:06): Yeah. So Jason Calacanis (01:50:06): you have the floor. Chamath Palihapitiya (01:50:07): We talked about some striped stuff last week, and my analyst came to me after the show was published, and there was a couple of miss Calcs in the spreadsheet that generated the graphic, which big up to him for calling it out very quickly. Anyways, I just wanted to show you the updated one just so that we could make sure we get that on the record. I guess this would be a purple color. Is that purple? That's actually when you calculate net revenue. And I think what -- did was calculated gross revenue, which is in the red. So we showed this but it actually should be purple. So that's the updated accurate version of the analysis. So there you have Jason Calacanis (01:50:41): What does that mean for stripe versus Agen in terms of just which is a better business just to summarize it. Chamath Palihapitiya (01:50:47): No. I mean, I mean, to be honest with you, it doesn't it it it says what we said before, which is that the the previous valuation was very expectation heavy. And the new valuation is definitely more in line, but still very rich relative to other companies who have large profitability and large growth rates. And I think That's the key takeaway, which is it's very hard to both have huge margins and grow it. mediumly high double digit rates. And the few that can visa, Mastercard, and Adient tend to trade a A very different valuation set than everything else. And so I think that's the challenge for Stripe. If they can do it, they'll be in that class. Jason Calacanis (01:51:30): Okay. For the Sultan of Science doing his back in New York having an incredible dinner in at Carbone right Speaker 3 (01:51:38): now -- Can Chamath Palihapitiya (01:51:38): I say can I say -- -- Jason Calacanis (01:51:39): enjoy the vegetarian Chamath Palihapitiya (01:51:42): I pre tilted him. He text he text into our group chat. Brad Gerstner (01:51:45): Don't do it. Don't do that. Chamath Palihapitiya (01:51:46): And he said, let me know if you want me to dial in And save the episode. My insta reply. Gersner's on fire were awesome. I was told, Speaker 3 (01:51:56): why would you do dear. They've already killed us. -- terrible. Chamath Palihapitiya (01:52:02): He has to go find a safe place. -- Brad Gerstner (01:52:04): replaceable. He's irreplaceable. Jason Calacanis (01:52:06): except, you know, this episode is pretty good. Pretty good. Speaker 3 (01:52:09): Pretty good. Pretty good. Pretty good. Pretty good. Pretty good. Pretty good. Pretty good. Pretty good. Pretty good. Brad Gerstner (01:52:15): You're lying to your soul. Jason Calacanis (01:52:17): Oh my god. It wasn't David Sacks (01:52:18): a bad episode until Jake Hall started again. Oh, least you have 2 where you're kidding me. Jason Calacanis (01:52:24): Just like you strike January 6th. Chamath Palihapitiya (01:52:26): -- strike words in English. That's you can't strike Jason Calacanis (01:52:28): a single word. You struck my single word last week when I call When David Sacks (01:52:32): Jay Hall gets under pressure and a debate, he falls back on all the usual virtue signaling in Jason Calacanis (01:52:37): Oh, yeah. Yeah. Okay. Who did you vote for in 2016 2020? Be honest. David Sacks (01:52:41): See, like you're doing right now. Look at this. Oh, gosh. Jason Calacanis (01:52:43): Did you vote for Hillary Biden? David Sacks (01:52:45): Allegion of doom. They're the legion of doom. Speaker 3 (01:52:46): They're bro Putin. David Sacks (01:52:50): You know, there's actually a meme. There's a meme on Twitter that anyone who disagrees with me is Russian disinformation or Pro Putin. I haven't Jason Calacanis (01:52:57): seen that one yet. That's pretty funny. David Sacks (01:52:59): That's basically it. Jason Calacanis (01:53:00): I don't think you're I don't think you're pro Putin. I I -- Okay. David Sacks (01:53:02): Fine. The correction. Thank you. Jason Calacanis (01:53:04): During this entire year of Ukraine, Ukraine, Ukraine, I say every time, to be clear, you're not saying Putin is right for invading Ukraine, and you're like, no. Of Chamath Palihapitiya (01:53:13): course not. Brad Gerstner (01:53:13): No. Just stop. David Sacks (01:53:14): No. No. Thank you for saying that. No. Thank you for saying that. I that. Jason Calacanis (01:53:17): I I always try to say that. -- make it correction. It's a very nuanced discussion. It's a very nuanced discussion. Like, we could nobody's in favor of this war. Nobody. nobody's in favor of it. Everybody's trying to resolve it. I think we just have different views of what resolution looks like. Chamath Palihapitiya (01:53:32): Did you guys read this crazy article in Bloomberg Business Week about Pras Michel, the founder of the cofounder of the Fuji and his entanglement with the 1 MDB scandal. Did you read this article? Jason Calacanis (01:53:43): No. I have no idea. Chamath Palihapitiya (01:53:44): Here's what the article starts. Jason Calacanis (01:53:46): I like the culture at the end. Let's put the tinfoil hats on and do culture at Chamath Palihapitiya (01:53:49): the end. His phone rings Mhmm. And it's a Chinese woman that says something like, you know, your cousin wants to meet you. He goes to the 4 seasons where he gets to know that says walk around the building twice to make sure you're not followed. Goes back into the Four Seasons, gets a a key card, goes upstairs into a room, where they then escort him to a different room in a penthouse, take all of his phones, and he meets with the vice chairman of security for China. where that guy is asking for an introduction to Trump. It is that's how the article starts. It is incredible reading. The incredible incredible reading. I encourage all of you to read it. It's so what is it called? Juicy. It's so juicy. Jason Calacanis (01:54:31): Spicy. If you wanna read some crazy story. There is a company called Wirecard in Germany, and there's a new Hooker article about the biggest fraud in German history. I highly recommend reading this one. We didn't get to it today, but, oh my god. If we had, like, a long reads post show, it would be incredible. David Sacks (01:54:50): I personally don't think we should promote any stories by the mainstream media. We have no idea whether they're true or not. I'm serious. Jason Calacanis (01:54:56): Chad, we'll see you soon, Brad. Thank you so much for filling in. Speaker 3 (01:54:59): Love you, brother. Chamath Palihapitiya (01:55:00): Thanks, Jason Calacanis (01:55:00): bro. Yeah. Pretty good. Pretty good. Chamath Palihapitiya (01:55:03): Love you, guys. Jason Calacanis (01:55:04): For the rainman, David Sachs, the pacifist of peace, the Sultan of Science, Brad Gershner, the dictator Chamath, I'm the world's greatest moderator. And speaking after corporate event for 50 to 75 times. Jake out. Brad Gerstner (01:55:18): Talk to my speaker bureau. Jason Calacanis (01:55:19): Let's get this group out, people. We'll see you next week. Bye bye. Speaker 3 (01:55:24): Bye bye. We'll let your winter Friedberg. Rainman, David Saffens. We open sources to the fans, and they've just gone crazy lately. We Jason Calacanis (01:55:43): what air winter's right. Speaker 3 (01:55:47): Besty's our car. That is my dog thinking, and I wish driveway setbacks. Oh, man. I might have to be Azure. Chamath Palihapitiya (01:55:57): We should all just get a room into have one big you, George, because they're all just useless. It's like this, like, sexual tension that we just need to release somehow. Speaker 3 (01:56:05): What? You're the bee bee. What? David Sacks (01:56:08): Pure feet. Be your feet. Speaker 3 (01:56:08): Sweety sweat. We need Jason Calacanis (01:56:11): to get mercies are back.