达沃斯现场：米莱走红、亚当·诺伊曼遇阻、流媒体的破碎模式

Jason Calacanis (00:00:00): Alright, everybody. Welcome to the 54th annual world economic forum here in Davos. You guys didn't know this, but as elites ourselves, we were invited to kick off these activities. Chamath Palihapitiya (00:00:12): Surpluses. Yeah. Jason Calacanis (00:00:13): You know, the all in podcast, very popular so they wanted us to come and represent the pod and our audience there. And, it's been amazing if you haven't seen some of great musical performances this year. I mean, they're they're so notable. Let's just start off here. I mean, guys, we were here for this live. Soak it in. I mean, on Chamath Palihapitiya (00:00:34): the I don't replace it. It's just soaking in. David Sacks (00:00:37): There's the air fluke. Jason Calacanis (00:00:42): Wait. There's a great moment where she really starts vibing. Wait for the head shake. Eyebrows are great, but the head shake comes in and about there. There it is. There it is. Chamath Palihapitiya (00:00:54): This I like your mumu. I like your mumu. David Sacks (00:00:56): Have you ever played the air flute or just a skin flute tomorrow. David Friedberg (00:00:59): Just a skin flute. Chamath Palihapitiya (00:01:00): I don't Jason Calacanis (00:01:02): know. It's like a it's like a high school thing. But guys, guys, this isn't it. There there were other, there was a witch doctor or something. I'm not sure exactly what's going on here. I'm gonna just apologize in advance for mocking this. This was incredible. I don't know exactly what's going on here with the blowing of the hair. But I Speaker 5 (00:01:25): We've come a long way from COVID. That's for sure. Jason Calacanis (00:01:28): So they're blowing the COVID on each person's forehead here to spread the COVID They've all taken the mRNA vaccine. But, you know, we each have a speaking gig. Each of us is speaking. And so I thought to kick this off here, gentlemen, instead of us just telling everybody our schedule, I would sing our schedule. And so let me just grab a let me see if I got my guitar here. Hold on. Yeah. My guitar here. Let me just grab it here. Here it is. Okay. Hold on. It's happened to have the David Sacks (00:01:58): guitar here. Guitar or a real guitar? Jason Calacanis (00:01:59): Oh, there's a real guitar. Okay. Real guitar here. So but I thought, you know, everybody is really excited about each of our speaking gigs. So I thought we would just kick it off here. Let me just see if it's in tune. Can I hear that? Oh, okay. Alright. What's that? I think we got it. Sachs is interviewing Putin, my lord, Kumbaya, in the dictator lounge at noon, Akumbaya. Conquering your. And now I'm gonna it's a little audience participation in here, besties. I need you each to sing with me. Chamath Palihapitiya (00:02:46): Okay. Jason Calacanis (00:02:47): It's, we're gonna start here. It's gonna be just listen one time, and then you're gonna repeat. Here we go. So this is Odavos Kumbaya. Ready? 3, 2? Chamath Palihapitiya (00:03:02): Odavos. Kumbaya. Jason Calacanis (00:03:08): Good. Very good. Okay. Now, go to the next verse here. Jamaz and Laura, Pianna, Kumbaya. Hosting Steve. Pannon at 1 pm. Makumbay. 3 birds at 2 pm. Makumbay. Chamath Palihapitiya (00:03:29): Billionaire Jason Calacanis (00:03:30): bunker panel, Lacumba. A teal just bought on Gumbaya. Hunter Biden after party at a 1 AM. Eballs and escorts for everyone brought to you by Barisma. Chamath Palihapitiya (00:03:51): We're good for you, Saxx. And now you all saying. Jason Calacanis (00:04:05): Wow. Speaker 5 (00:04:06): Fabulous. You really are the world's greatest moderator. Chamath Palihapitiya (00:04:10): Winter's side. Rainman, David Sachs. Speaker 5 (00:04:17): And I said, open source it to the fans and make discoveries. Love you. Jason Calacanis (00:04:25): Alright, everybody. Yes. The world economic forum is wrapping up in Davos. If you don't know what the WEF is, I'll just give you the brief overview. 3000 people, 5 days, tons of parties, happens in Davos, Switzerland. It's run by a foundation, they call these non government organizations, NGOs. I can think of it. Kinda like the TED conference topic this year was rebuilding trust. It's politicians, business leaders, economist journalists, all the elites, the mission statement of the WWF improving the state of the world by engaging business, political, academic, and other leaders of Society has shaped global, regional, and industry agendas. It's a money printing machine. I'll give you a funny backstory later if you care to know, but basically they try to shake it down for about $40 a year to go to this thing. Tons of notable moments that we can get to on the docket here. Free break, any highlights for you watching this, you know, get mocked on social media this year. It's it's been a slow unraveling from this being something that people used to flex about going to Davos. Now people are literally apologizing on social media, Sacks, Twitter, etcetera. Explaining why they're going because they're kind of feeling shame and going to this event. So what what are your thoughts on the sort of whole flipping of this from being a flex to requiring an apology in advance. David Friedberg (00:05:49): You guys know Andrew Rossorkin, the journalist for CMDC I think he posted on Twitter, you know, I know I know forgive me. I gotta go to Davos. It's almost like embarrassing now that you are associating yourself with the elite cabal in the Swiss Alps during a time of rising global populism and all the criticism that been rained down on Davos in the last couple of years. And then Davos is trying to adapt by trying to be more cool and appeal to the the populist notions, that have criticized them. Thus, the flute playing, thus, the shamanism you know, and and thus, I think a lot of what Javier Milay has called, general economic support for what he defines as collectivism, which I'd love to talk about, but why why don't we just say that? So I think, yeah, there's generally been like a response from the community that attends to avos, but There's there's a lot of conflict here with the fact that folks are flying in on private jets and telling everyone to stop producing carbon. The folk the fact that they're all dining and spending lots of money and telling everyone that we should move to more towards socialist conditions and higher taxation. It's all a lot of irony wound up in this whole thing. It's almost like a like a like a Simpsons show. It's what it's what it's become. Jason Calacanis (00:07:02): Well and the theme rebuilding trust is kind of insulting at its face. At least to me, like, we we don't trust you. You don't need to rebuild trust with us. We're not going to trust you. There's no way for you to do that, especially what happened with COVID, Sacks, did you have any sort of reaction to this year's Davos and just how people are reacting to it. You heard Freight Breaks sort of thoughts on it. David Sacks (00:07:27): Well, Davos has become a parody of itself. And that's why you saw these clips go viral of these ridiculous antics of the priestess doing. I don't know what she was doing, but The only two sets of remarks that actually were taken seriously on their own terms was the speech by Malay from Argentina and then also comments by Jamie Dimon. And the reason why they went viral is because they were actually saying sensible things that contradicted the sort of established wisdom or consensus, David. I mean, they were effectively subtweeting the other elites at Davos. I mean, Milay gets up there. And I think he was introduced by Klaus Schwab, and he immediately starts denouncing collectivist experiments and says that the West is in danger because its elites have been co opted by a vision of the world which leads inexorably to socialism and thereby to poverty. So Milay basically says it's right in front of Klaus Schwab. I mean, he's describing the the people at Davos. That's why that took off and went viral. Jason Calacanis (00:08:34): It was incredible. I mean David Sacks (00:08:35): Yeah. Jason Calacanis (00:08:36): Yeah. David Sacks (00:08:36): In a similar way Chamath Palihapitiya (00:08:38): Kenny flew their commercial. David Sacks (00:08:40): I didn't know that. Yeah. Yeah. Kudos to him. Jamie Dimon gave this interview. I think it was on CNBC. Where he basically went full to mouth. You know, he basically admitted that Trump had been right. And that, you know, a lot of the criticism of Trump and all the drug very comments for years. We're we're basically just lazy. And he said that, you know, Trump was largely right on NATO, on immigration, on Sacks or form. He grew the economy Speaker 5 (00:09:10): well. Immigration. David Sacks (00:09:11): Immigration. He was mostly right on China, he said. Diamond said he didn't always like how Trump said sayings or talked about people, but he said his policies were largely sound and only look better in time since we've abandoned them. And and he's basically saying that, you know, look at where we are right now, and he questioned that kinda everything is hunky dory narrative that the Biden campaign is pushing out. So he really went off script there. And like I said, I think Chamath said it first here on this part 3 months ago, and now Jamie Dimon is is accepting that. So that was a huge subtweet, you could say, of all the elites of Davos and the accepted wisdom and, you know, the narrative that they're all pushing out. So, you know, that was the other big interview that went viral. And I think that's really saying something that, you know, that the elites now have parodied themselves to the point where this has become a joke and the only talks or remarks out of Davos that people pay attention to are the ones talking sense to the people at David because they're not listening. Chamath Palihapitiya (00:10:20): Chamath your thoughts? Look, everything has a Jason, and I think that when There was a much more singular hierarchy of status. David played a very important role to signal to other people that you had made it. But, you know, these things come and go. And I think that this is sort of in the the back half of its usefulness and half life. What is it probably more than anything else now? A glorified enterprise software sales conference, where the reason to go to these conferences for a lot of these companies I suspect is that it allows you to close very big deals, multimillion dollar licenses of this, that, and the other thing where you can get the leaders of that counterparty across the table from you and hammer out a deal. And I think you pay $40 a ticket for the right to get everybody together to do that. So I think they want to pretend that it's a lot more than what it is, and I think what it is is that. And I think whenever you have the ability to convene people to close business, that's valuable. Beyond that, I think it's sort of in the eye of the beholder. And it used to be that the beholder thought that this was important. And now I think we realize it's much of nothing. It's shaman and air flutes and all kinds of stupidity, which is why people have the courage to go and mock it. And I think that Malay's comments and Jamie Dimon's comments exemplify that. The only other thing I would say is that I had heard, although I haven't seen it, so I don't know, is that Alex Karp apparently did a very thoughtful speech about anti Semitism. And it is also which is also very countercultural to the established logic that the the surplus elites at Davos want to believe which is the anti Israel Pro Palestine line. I haven't heard of those, so I don't know Yeah. How impactful that was. But those are the three things that I've that I've just seen on Twitter. Chamath Palihapitiya (00:12:19): Just Jason Calacanis (00:12:19): The Malaysian speech, I think, is the one that everybody is keying on and and correctly. So, you know, obviously, he's the he's the new president of Argentina. And this speech was amazing. It people might not people might might not also know that he was, and economics teacher. And so this talk about collectivism leading to suffering and regulatory capture and bloat, which we'll talk a little bit about, when we talk about Boeing today was incredibly powerful. It's super basic. You know, Jason. Free markets work. There are people popping into either side of it. He went over essentially without saying it the rule of 72 and, like, 200 years of GDP growth and how GDP growth under Calacanis, rises everybody up, and then collectivism, aka Socialism is a bit of a disaster. But it's well worth watching it. There was a really cool thing that a company called Heygen David, heyn. With their AI tool, they just immediately took his speech, put it in his own words, and, published it and translated it as if he was speaking English because he was he was speaking this native tongue. So really worth checking it out and Yeah. It was super notable. It's pretty basic, but it I think I think it's everybody wants to hear this right now, which is if you're picking collectivism and socialism and redistribution of wealth, Argentina has, like, a really good history of watching this foul and now they are in the process of dismantling Chamath Palihapitiya (00:13:49): Sacks something else before free brew says something here, which I think is gonna be very thoughtful. Jason, the other reason why Argentina is a really good example to use is that what does Davos represent at a different level? Well, what it is is old Europe getting together in a way that allows them to continue to coalesce power. And what's interesting is if you had presented the case of any other country, try and collectivism and failing, it wouldn't get nearly the same attention as Argentina. And the reason is that Argentina has so many ethnic Europeans. And I think that's another Jason, which is like when you present people that are telling you it didn't work that frankly look like you speak the same language as you, I think it actually goes further in making the point than if you found somebody in South Asia or Africa that said the same thing to these folks, which they have, which they've not listened to. And so this is why I think Malay so interesting and important because he looks the part of a western leader. And I think that that, unfortunately, is what it's going to take for some of these folks to listen. David Friedberg (00:14:56): Yeah. And everyone's acutely aware. I mean, I'll say 3 things on this. One is just talking to your point, Shamoff, about the history of Argentina and how it relates to this. Position that Malay holds in being able to speak credibly to this. 2nd is what he said, which I think is really important and third is how it relates to the United States. But this was clearly to my from my view, one of the most important media events of the year, I do think that anyone that's listening to us right now should go watch it and go listen to the entirety of the speech. It is so important. I hope everyone really takes in what he said. Just briefly on Argentina, in the mid 19th century, ukemia was a colonial Jason, very agricultural, but a lot of free market pioneerism going on. Businesses were built and an economy flourished in Argentina. This photo I put up here is from 1913 Buenos Aires, which at the time was called Paris of the West. I was about to say it looks like Paris. Jason Calacanis (00:15:49): Right? The architecture and everything. David Friedberg (00:15:50): Beautiful and stunning. But here's here's some statistics. A lot of people don't know. Argentina at this time was wealthier than France or Germany, twice as wealthy as Spain. And had one of the top 10 highest GDP per capita's of any nation on earth in 1913. And so it was this flourishing vibrant economy with a lot of innovation, a lot of arts, a lot of building, a lot of, employment, a lot of immigration, And then as the series of military coups began, I don't know if you guys are aware, but there was a military coup in 1930, 1943, 1955, 1962, 1966, and in every one of these cases, The essence of the coup was one of relativism, which is some people have benefited more than others. As a result, we need to change the way that the government and the social structure is functioning. And it had to be taken by force. And I think this is the big story of Argentina that says so much more than any other nation of the past century century and a half which is that these cycles happen based on not absolutism, but on relativism. And I'll just give you what I mean by that Malay made this point, which is so important from the year 1800 to the year 2020. In the year 1800, we saw 95 percent of the world's population in extreme poverty. By 2020, it was less than 5%. And this was driven by free market, capitalism, democracies that allowed people, individuals to pursue their own self interests. And as a result, deliver products into a marketplace that people wanted and were willing to pay for, and that incentive, that market based system allowed the entire world to move forward. The relativism problem is that some people move forward faster than others. And that causes this great cycle of what some people might call envy or jealousy, And Malay said it best, the west is in jeopardy, which is the key statement he was trying to make in his point that countries are no longer defending free markets. This is a quote, private property and other institutions of liberal libertarianism due to errors in their theoretical framework and ambition for power. Opening doors to socialism and condemning us to poverty, misery, and stagnation, socialism has failed in all countries where it was attempted. Then he started to harp on about neoclassical economic theory and the issues of that. But I wanna show you one last image, which speaks so clearly to the point that he's which is as these governments that are well intentioned, and the people that elect the governments and put them in power are well intentioned, then try to redistribute wealth by getting the governments to step in and play a market role. David Friedberg (00:18:28): The market role that they play causes inflation, causes degradation in economic opportunity, economic mobility and prosperity for most people. And you can see this in this chart, which we've looked at many times, but everything on the top of this chart. This is a chart that shows that 20 years of price changes of various goods and services in the United States. Everything that's gone up in price is something that the US government has a role in buying or paying for. Yeah. Controlling. Chamath Palihapitiya (00:18:57): Yeah. David Friedberg (00:18:57): And everything that's gone down in price is where there is a free market that has allowed people to access goods and services at a lower price over time as opposed to a higher price over time. And while the intention is that the government is doing good for people by making education, healthcare, and other, goods and services available to them, the government stepping in and intervening in the free market causes the price to go up, and ultimately, you end up in a really negative cycle that resolves in this collectivism approach that he's talking about. And that's why I just wanted to tie back what he said to what's going on in the US today. David the and I've harped on this a lot, but the growing role that the federal government is playing and the intention is good, but the impact is bad. Over time. And that's really, I think why it was such an important speech. He was so clear. It was so important for me to hear it. I'm sorry I harped on, but I just really the highlight? Jason Calacanis (00:19:47): The key of his speeches, hey, good intentions can lead to to a bad outcome here. Yeah. You want everybody to have health care. You want everybody to have education. The government is providing it and there's no customer and there's no market, there's no competition. And the products and services that you are referring to, they include medicine, they include college, they include tutoring. They they don't just include and they include air conditioning. They include refrigerators and televisions, smartphones, all of that. And, picking which system and which set of problems you wanna have, I guess, is what societies need to do and and free markets Chamath Palihapitiya (00:20:20): It's a weird reflexive loop though for governments because these people, what he also said was these aren't just well intentioned people. They're also a small class of elites that wanted to feel like They were better than everybody else by implementing things at work. And so there is a dark part of this as well, which is their desire for power. And I think it's important to not gloss that over. So this wasn't just a bunch of bumbling do gooders that screwed things up. This was also a bunch of folks that that irrespective of the data had an opportunity to gain influence and power. And I think that that's that's an important thing to acknowledge because it created a very negative reflexive loop that governments used. Meaning, if you look at Freeburg's charts, why did that happen? Well, part of what happened was the administrative state became more and more powerful. They were able to pass laws they were there to decide who the winners and losers were. That is a drug, and that drug is very addictive. And so what happened as this happened was the laws went and reinforced those dynamics of those people being able to decide winners and losers. The thing that it has that has not happened yet, though. And we're maybe we're beginning to see it in some of these markets that the government is too involved in. Is that it has bred a level of incompetence and incapability that we now have to unwind because the average everyday citizens' lives are either at risk or these services are just so expensive that it's just untenable. And I think that's where we are It's a great segue, Jason Calacanis (00:21:53): I think, into this Boeing issue that we've seen because here's an issue of regulation and safety where you won't the government and you want safe planes and you want some level of regulation, but then you get regulatory capture. So maybe Chamath Palihapitiya (00:22:04): But the government the government has not been the supporter of the safety agenda that citizens think. Yes. Meaning, when you look at what has happened in the US airline industry, there are a handful of end user providers, but those are all using OEM equipment from 1 of 2 vendors, Boeing or Airbus. So it's a duopoly, but in many ways, it's a monopoly the way that these folks fight with respect to tariffs and imports and incentives. So the United States airline industry is a monopoly of one company. Now if you look at what's happened, what they would say is what planes have become safer and safer and safer. Yes, but they become safer in some ways, in in the most simple and obvious ways, but they've become unsafe in that you have these fleets of planes that are now behaving very unpredictably. And if you look under the hood, what happens is Boeing as an example, and like the last 4 years, How much money do you think they've spent on lobbyists and Sacks? I'll tell you $65,000,000. How much have they spent just in the last year? Almost $11,000,000. They're like the 15th most active spender in in politics in Washington. Now what did they use that money for? Well, that's also documented. See, the crazy thing is this stuff happens in plain in plain site. So they were able to water down the safety regulations. What does that allow you to do? It allows you to have a situation like this unfold. And then on the other side, the pilots unions can be those same politicians who are taking money from Boeing and prevent systems that would actually make these planes safer. You can have more improvements in the guide by wire technology. You can have more improvements in GPS. You can have more improvements in a computer's ability to help improve and augment the capability of the pilot. Unfortunately, that will result either in fewer pilots or less Jason. And so that doesn't happen nearly as fast and obviously as it should. It's the same for air traffic control. Chamath Palihapitiya (00:24:10): And all of these issues build up because we've allowed monopolies to build up. So as much as we think we are a capitalist society, we have veered into this collectivism in certain markets and where it's measurable and obvious, we need to point at it and say, let's go fix it. Jason Calacanis (00:24:26): Yeah. And and this would be let me just tee up a little bit of what you're referring to in case people don't know, but everybody probably saw the news that on January 5th, the door blew off of, one of these Boeing 737 Sacks jets. You've heard that name before, it's because this isn't the first time that the Sacks Jets have had problems. This plane safely landed. Thank god. And there was nobody sitting in the row with a door blew off. And this has to do with some bolts on the doors, but this is just the start and problems with the 7 37 max. There's an incredible documentary if you haven't seen it. We'll we'll put it in the show notes, Boeing's fatal flaw. And the version before this. The 7 37 Sacks 9 is the one that had the the bolts come off your mouth. The max 8, if you remember, there were 2 really harrowing, instances where tragically 346 people died in these two instances because the plane, literally, the software on the plane, which is called Sacks, maneuverine characteristics augmentation system, which was designed because they were trying to get more fuel efficiency and they had positioned the engines in a weird way on on the wings. So they had to kinda help pilots, level this stuff into your point about regulatory capture. There was all this behind the scenes manipulation of the market to try to get these planes built to try to get them out the door because there was so much money at stake. Well, on these 2 terrible accidents, the plane, the nose literally dove, and the pilots were fighting it in both cases Right. They they just crashed and and everybody on board died. And for 20 months, the the 7 37 Sacks models were grounded, And, that cost the company over $21,000,000,000. So there is no competition to your point. And then in market. If there were 10 providers, would this be much different from off? Jason Calacanis (00:26:11): And Absolutely. Yeah. So I think that's what you have to realize here is that these do police, you'd think there's competition, and it duopoly there is in competition. Chamath Palihapitiya (00:26:18): No. I mean, like, for example, like, if you look at the car market, how many instances I think the last big incidents that I remember was, I think, Ford had an issue with the fuel tanks of some cars that were exploding. Right? Yeah. But the reality is when that happens, there are alternatives One is that there's legal requirement for Ford to just fix these things quickly. There are lawsuits that happened. There was Class actions. There were settlements, but there's also the ability for folks that can afford it is just to switch vendor and of which there are 50 other vendors to choose from. That is a healthy dynamic. So today, when you look at the auto market, what do you see a plethora of choice? And when you see fatalities or safety issues, they are overwhelmingly driver error. Yes. And we assume that and we get insurance to deal with that. When you look at airplanes, you have these three sections of risk that each are compounding because there is no competition. Number 1 is that the monopoly vendor has zero pressure to actually test these things adequately. Because on the other side of building something well, is shareholder pressure to deliver something sooner and faster so that they can reap more profits. Then second is you have a regulatory infrastructure that puts rules on top of rules, but then we'll bend the rules if you donate to them. Right? And that's measured and known. And then the 3rd are the folks that actually operate the planes who have this actual incentive to not see technical improvements because it defends their job for longer. And in all of these cases, there isn't enough competition to shine a light on this to say, how does society actually want this market Jason Calacanis (00:27:57): to operate? This is collectivism. It's not working. Friedberg, you have thoughts on this Boeing regulatory capture and the issue of only having 2 vendors there. And the complexity of these machines now in relation to David Friedberg (00:28:12): that. Nick, you can pull this up. This is an audit of the business model for a company called TransDigm Group TransDigm Group is a aircraft, aerospace, parts manufacturer. They sell certified, regulated, aircraft parts to aviation companies, as well as to airlines, private pilots and also the government. And they do about 7,000,000,000 in revenue, 3a half 1000000000 in EBITDA. So Tim off to your point a couple Sacks ago about what's the appropriate competitive EBITDA margin that a company can ultimately achieve their EBITDA Jason is 53 percent. Chamath Palihapitiya (00:28:53): This company. Better than Facebook. Insane. David Friedberg (00:28:56): On 7,000,000,000 of revenue and growing. Nick, if you wanna pull up their stock chart, you guys can see how the business has performed over the years. And their business model has been relatively simple. They've acquired aerospace companies got that have certified parts they drop the cost and raise the price. And they do that over and over again, and here's the business over the last 10 years. This thing is, you know, a roughly 10 bagger 8 to 10 Vagger in the last 10 years. The market cap is 60,000,000,000 today. No end in sight. And so there was a government audit done of the business by using uncertified cost data, which is one of the most reliable sources of information form cost analysis, we found that TransDigm earned excess profit of at least $21,000,000 on a 105 spare parts. On a 150 contracts. So they're selling spare parts into the government. The government auditor came in, audited them, and identified because there's no Real audit. There's no real accountability in government as purchasers, but there is regulatory authority on deciding who are the winners and who are the losers in the market. Transstein has been elected a winner because they have regulatory approval to make and sell these parts. The cost to get approval to make and sell these parts is so high that it makes it prohibitive for startups to come in and compete in this marketplace. And now that they're a preferred supplier and they get these single contracts where there's no competition, to be a supplier, they can raise the price every year. Multiple audit reports over the last 23 years have highlighted the problem of the Department of Defense paying excess profits on sole source contracts where cost analysis was not used to determine fair and reasonable prices, and this problem continues to occur. Now I'm not necessarily saying that this is a negative on TransDigm. It's a fantastic business. It's well run. David Friedberg (00:30:40): It's one of the best run public companies with a multi $10,000,000,000 market cap in the world. But the condition is that the US government comes in and picks and chooses through its regulatory authority, which companies can make products. The cost to enter and compete becomes prohibitively high. And then the company has complete pricing power, and there's very little accountability in the overall system. And I think that this plays out not just with this company, but obviously also with Boeing and the fact that we've narrowed down the competitive market space to just a fuel sole source providers that have very little accountability and eventually these sorts of conditions arise. Either prices get too high, quality degrades, all the other things that natural market forces would keep a check up. Jason Calacanis (00:31:18): Yeah. And in in terms of competition, Shamoff, the, I guess, the only thing you could say is consumers could potentially maybe try to avoid the 7 37 Sacks. I know I did when all these accidents happen. I just told, you know, my my person who books the fly take do not put me on a 7 37 max period full stop. And you know what? You're gonna wind up paying a lot more. You're gonna have a hard time getting certain routes. You're gonna reduce it because you know, most airlines, I think, have these 737 Sacks in there. So you when you have such a few number of providers to your point about it's not like cars. It's not fragmented like that. You can't avoid a certain car type. A plane type the way you can avoid a car type. So just wrapping up here at your mouth. What changes should we see in terms of late stage Calacanis, something in the example air travel and and manufacturers, is there any way to unwind this reasonably, or is it too late because we're we're at this Chamath Palihapitiya (00:32:16): I I I go back to some of the examples that we've made fun of before. You have to rely on the government to actually be competent in key moments in time, I think this is one of them. The organization that could do something about it, for example, take the FTC or even take the DOJ We are investigating Amazon's purchase of the portable vacuum cleaner, Roomba, right? Critically important issue. And that is apparently for the American people higher than the sclerosis that the government has enabled enabled in the airline industry, which affects everybody. So could the right government agencies choose to actually focus on something important here and actually figure out Why is this happening? Because I think the door plugs issue is endemic of a much bigger problem. This is a company that's rotting because there is no accountability. And the reason there's no accountability is there's no real functional competition. And I have not seen any good answer to accountability other than competition. Jason Calacanis (00:33:30): Yeah. I mean, the the good news, is the FAA really took quick action to ground these 171 Boeing 7379 Sacks airplanes. Chamath Palihapitiya (00:33:41): But they don't they do not understand the scope of the problem if they let them back in the fleet and this is happening. Jason Calacanis (00:33:46): The bigger picture problem of lack of competition Yeah. They're they're No. Chamath Palihapitiya (00:33:50): No. No. My my Jason Calacanis (00:33:51): point is, yeah. Chamath Palihapitiya (00:33:52): My my point is, like, you had to adjudicate the interaction of very complicated hardware and software. In that first go around. Here is just a pure systemic hardware failure. So the point is that whether it's them or their suppliers, there's just a some complacency that sets in when you know you will always have the business to Friedberg point. It is a very corrosive thing in running a business trying to have motivated employees when they know on the back end of it that they could make anything in the world and they'll just be able to sell it to somebody and they'll have to take it. That's that example that Friedberg just cited. 20 odd $1,000,000 for just random stuff for What is it? 15 pieces? That's crazy. That's just straight up theft. And so when you have that, how do you expect the employees of that organization to give a I don't see how I don't see how you could expect that. And so my point is the FAA has a much bigger problem. So for example, like the DOE has a loan program to try to create a diverse energy infrastructure in the United States, maybe we need to look at some of these sectors and instead of building the administrative state, take some of that money instead and just create programs to get more competition. Alright. In other news, Adam Newman, you remember from WeWork infamy slash fame, has a new startup. Jason Calacanis (00:35:21): You may have heard of it flow. They've raised a ton of money. He started buying a bunch of apartment buildings, the idea. People can rent nice apartments in cool cities. That focus more on social interaction, and hacking out common spaces, all that great stuff. And there's also allegedly or reportedly some sort of rent to own where renters can receive equity in the company over time, and I don't think this has ever been released, but the idea would be maybe you own shares in Flow flow manages around 3000 units. Most of which were purchased by Newman after he left WeWork. You can you know, he took down a windfall as an exit package And so according to the real deal, this real estate publication, Newman had a 60,000,000 variable rate mortgage on, one of these properties in June, Sachs, maybe you could explain to us what's going on here since you have a lot of experience in real estate. David Sacks (00:36:11): Well, it's pretty simple. You can't make his interest payments. Jason Calacanis (00:36:15): Okay. David Sacks (00:36:15): So is is because he had floating rate debt. So if he had locked in his debt over, say, 10 years back in when he bought this building in 2021 or whenever it was when interest rates were extremely low. You know, that was during the the zirp period. Probably could have locked in long term debt at maybe even 3%, 3 or 4%. And instead, he got floating rate debt And if you look at where commercial debt is now, I mean, it's 789%. If you can get it, which is pretty hard, So he maxed out on debt when he bought these buildings. He bought them top of market. It sounds like in 2021, because real estate like a lot of things moves inversely to interest rates. So when interest rates spiked over the last year or so, then real estate valuations went down. So he bought a bunch of buildings top of market using a lot of debt that was floating rate, interest rates spike, perfect storm. Now he can't make his interest payments. Jason Calacanis (00:37:14): A crazy part about this when I was watching it happen, Chamath, and we talked about it, I think, on the program at the time, was Andreson Horowitz put in, like, over 300,000,000 at a $1,000,000,000 valuation, but they didn't do that in peak 0. They did that in 2022 when the writing was on the wall. What what are your thoughts on why they would make a a bet like that? And, yeah, just Tech VCs betting on real estate for a second time. How does that occur? Chamath Palihapitiya (00:37:41): Well, I don't think it occurs because they cared about real I think it allows them to take $300,000,000 of committed capital and put it out there so that they're $300,000,000 less available, which means that they're $300,000,000 closer to raising a new fund, which means that they can raise they can charge 2% on more money. That's why they did it. Got it. Jason Calacanis (00:38:03): Yeah. So just keep the money train, deploying capital. It's a place where Chamath Palihapitiya (00:38:07): you can put Jason Calacanis (00:38:08): a big, huge check and you can raise your next fund and, you know, Chamath Palihapitiya (00:38:12): why not? Jason Calacanis (00:38:13): Okay. Well, there you have it. David Friedberg (00:38:14): Let me let me let me offer Chamath Palihapitiya (00:38:16): I mean, I I don't disagree. Jason Calacanis (00:38:17): I think that candidly what you've said is exactly how mega funds are thinking about it. We have to deploy capital to raise our next fund. And if we still have capital in our Last fund, then we can't deploy it. Friedberg. David Friedberg (00:38:27): Well, if you're gonna have to deploy large amounts of capital, wouldn't you feel better deploying that capital with an entrepreneur who's actually run a big business before, even though the business failed. No. No. If you're if you're Chamath Palihapitiya (00:38:40): if you you are not optimized for fees, you would do what Peter Teal did and just have the fund and return the money. David Friedberg (00:38:46): Right. He and for for for the Chamath Palihapitiya (00:38:48): because he's already won. But for everybody else that's trying to win, the only way to win in a world where your your exits are not that great is to actually generate money via fees, even though that fees are taxed at current income, that's the way to win in Venture. It's not carried. It's by fees. And so It's and and I don't blame Andreessen. I think, like, that's that's smart for them to do. And if they have folks that are willing to enable that by giving the money they should do it, but are they gonna generate huge rates of return? Probably not because that's not what real estate is known for. Real estate is known for long, steady tax arbs. That slowly compound for the for the owner of the company over 20 or or the owner of the business over 25 to 35 years. That's not what a venture fund is supposed to be doing for a 10 year, 12 year return cycle. So, obviously, they're doing it for fees. That's okay. I think that's capitalism. What what Jason Calacanis (00:39:42): are the LPs then think, Sacks? If we look at this, you know, you're an LP and a technology firm. I'll take Andreessen out of it for a second, but let's just say some giant LP gives giant amounts of money to a venture capital firm, and then they're deployed in real estate What happens, you know, in their minds? And is there any kind of tension that would occur? Well Just handicapping the situation. David Sacks (00:40:04): You can never judge a VC based on one investment. If we were to do that, every VC would have a lot of egg on their face because we're supposed to take big swings and swing for the fences and try and hit home runs and grand slams. And a lot of them are gonna make you look foolish. You have to look at an investment portfolio and track returns over time. So I wouldn't judge any particular investor based on one investment, so I don't think that's fair. Now in the case of this investment, if you want me to explain what I think went wrong, I think Adam Newman had a compelling vision. His vision was to create a new experience in in, I guess you call it apartment living and that people would be willing to pay more for that. Because he would create this national brand in apartments. And right now, apartments are super local, and there's there is no brand in, you know, apartment living. So I think as a entrepreneur as an operator, he had a a great vision. And I think he actually achieved his vision. If you read these articles carefully, what they say is that his occupancy was high, and people were willing to pay at least a little bit more for the experience of being in a flow apartment. The problem for Adam Newman is that at the end of the day, his plan to raise rents by creating experience, even though it worked it just didn't raise rents that much. And what ended up being much more important were the moves in interest rates and how he capitalized these acquisitions and the price he paid on the acquisitions. So there's an old saying in real estate that you make money based on the buy, not on the sell, meaning that, you know, when you go and sell your apartment building, office building, or whatever, you're monetizing an acquisition that you did correctly. And if you don't buy at the right price, you're never gonna be able to make money on the sale. And I think this is a really good example of this where he bought at top of market, his capital stack was over reliant on debt, and he had floating rate debt. I mean, those are just financial mistakes and timing mistakes that you can't make up for no matter how good an operator you are in real estate. And in a way, I mean, this is the same thing that happened with WeWork, which is he delivered an excellent product. I mean, people love WeWork offices. Jason Calacanis (00:42:21): Absolutely. Yeah. They they pick them over other offices because of the vibes, because of the culture, because of the community. So he He is a he has some mastery of that, but to your point, entry price matters and the economics matter. David Sacks (00:42:35): If you look at WeWork, it didn't fail because the product was good. It was because he didn't pay enough attention to the financial aspects of the business. With WeWork, he leased a bunch of offices at the absolute top of the market, and then over invested in TIs tenant improvements. With Flow, he bought a bunch of real estate at the top of the market and sort of did it with the wrong capital Sacks. So this is the problem is that when you get into a real estate business, it doesn't really matter how great you are as an entrepreneur operator. If you're not good at, like, sort of the legacy old school real estate part of and the the old school real estate guys were were saying during WeWork, this is not gonna work. You know, this is this is Regis. But with a bad capital structure. And the old school real estate guys were saying something similar about this. And, you know, it just goes to show that if you are gonna try and disrupt a legacy industry, you do have to kinda understand the ins and outs of of that legacy industry. Chamath Palihapitiya (00:43:34): And the Jason Calacanis (00:43:34): great paradox of this, Sacks, was When he did Green Desk, which was the precursor to WeWork, when he did the first WeWork in San Francisco and other places, his playbook was find a building that's empty that cannot be leased. So he got 25 Taylor Street, like Sacks then market the worst area by the tenderloin, and we had an office there for a little bit, and I had my podcast extended there for a little bit. This was a terrible off this was a terrible area, but he made it hip and cool. And it was really cheap. And, man, it sold out, and it was packed, and the vibes were great. But then as you're saying, then he moved all of a sudden to Soma and he started opening up these glass filled ones and, you know, the he was renting them for less with all their giveaways and 6 months free and all this stuff, then they could have a report. David Sacks (00:44:18): So Jason Calacanis (00:44:18): He he kinda had mission drift, right? The playbook, they just they changed the playbook in an economic that was not viable. David Sacks (00:44:25): Well, the timing the timing got really bad. And, again, they didn't pay attention to the financial aspects as much as they should. In this case, I think that if he was trying to execute this play today and doing his acquisitions today, he could actually make it where he would he would need a lot more because he wouldn't be able to get as much debt financing. But if he had the equity and could do more of an acquisition based on equity, the prices he had paid right now will be much lower. And then as interest rates come down, he could ride that wave. He could refi, pull his equity out, and put debt on it that is cheaper as the price goes down. So there was a way to maybe make this work, but, you know, with real estate, the timing is just so important. Again, your cost basis of when you get in the investment is probably the most important thing in terms of whether you make money or Jason Calacanis (00:45:15): David you see this by chance the real estate piece in 60 minutes, the package they did last week, Saks? It was basically what we were talking about here a year ago. Super compelling, if you haven't seen it. Basically the all in podcast from 12 or 18 months ago. Has anything changed on the field in terms of commercial real estate, or is it just continuing to David Sacks (00:45:34): changed. I think that the all the commercial real estate guys, the the sponsors and the deal makers and so forth, they're all kinda hanging on by their fingernails. Waiting for interest rates to come down. Jason Calacanis (00:45:46): And all the leases are still coming off. Right? Like, people are still who had 6, 7, 8 year leases that were signed pre David, David Sacks (00:45:52): performance on the market. I mean, some of the some of the markets are are coming Sacks, but again, what this flow news show this Adam Newman news shows is that you could be fully occupied and you could still default And the reason is because your capital structure, the interest rates have spiked up. You're now paying, you know, all of your operating income is being eaten up by your debt service. The only way to to make it through that is you you go to your bank. It's one of these regional Sacks Jason you work out a deal to extend, you know, they call it pretend and extend. And they let you hang on there. You'll, like, you know, extend the term of your Jason Calacanis (00:46:34): Kick the can down the road. Yeah. David Sacks (00:46:35): Yeah. They'll they'll lower your debt payments in exchange for more term, and you just try to get to the other side of these high interest rates And then once you get to the other side, again, you're you're hanging on. You're not defaulting. That's what everyone's doing. So if rates don't come down as expected this year, you know, I think the market expecting 150 basis points of of rate cuts. If that doesn't actually happen, there's a lot of real estate sponsors who are in trouble. And in turn, there's a lot of regional banks who are in trouble because they're the ones who made all these loans to these sponsors. So everyone's trying to, like you said, kick the can down the road. Jason Calacanis (00:47:10): Yeah. And I the the the 60 minutes piece also talked about how there's some emergency rezoning going on in New York specifically where they take the floor plate in the middle which I think you talked about, Sacks, you know, you have to have windows if you wanna convert to residential, and they just make an empty space, the void they call it, in the middle of the building, that, you know, they'll deal with in the future, but they just have this empty space in the middle of a building that's not gonna get used. And then the rest that has windows, gets used to be converted into loss, etcetera, in New York. So people are starting to think creatively, if people don't come back to office. Okay. David Friedberg (00:47:44): Ask you a question just based on that comp the set of comments given Adam Newman's experience as an investor in this space and this general opportunity, wouldn't you rather back and known someone who knows and has been through the market and has experienced versus some founder who shows up and has never run a business in this space. I mean, this thing has more experience than anyone else. Jason Calacanis (00:48:04): It's such a great point. David Sacks (00:48:04): I don't know about that. Jason Calacanis (00:48:06): Well, here's the thing. Friedberg, the the great point about that is you don't see a lot of founders who explicitly come out and say, I wanna build a $100,000,000,000 business. I wanna build a giant business. They're so rare that VCs who have a lot of chips, they would like to back those, you know, swing for the fences folks. And so I do understand why people would back him again. David Friedberg (00:48:25): And they've at it before they've done it to some degree. I mean, Jason Calacanis (00:48:28): I think they failed to learn some mistakes. And this time around, he David Sacks (00:48:31): he learned some mistakes. Exact same mistake. Jason Calacanis (00:48:34): So, therefore, they made the bad bet. David Friedberg (00:48:35): I'm not advocating, by the way. Chamath Palihapitiya (00:48:37): I'm just asking. You know, Jason Calacanis (00:48:38): I understand, but to your point, Freeburg, I can understand people wanna bet on somebody who is crazy and swing for expenses, this entrepreneur clearly has not learned from their mistakes. I think both of those things could be true. Right, Chamath? Chamath Palihapitiya (00:48:49): What I would say is that I think that Where I've made the biggest mistakes in my investing career is when I confused what I was investing in. For one thing when it was the other. And so when I looked back and I had a small Dolly Sacks in biotech because I thought, oh, this gonna be more computational biology, and I understand computation. So this gives me an edge. Turns out I was wrong. There was another time where I've invested in certain sectors of the economy because I thought they were technology businesses, and at best, they were tech enabled versions of an existing industry. And when I look at those investments, the thing that I got wrong was not listening to the very experienced investors in those sectors and why they passed, and that has caused me no shortage of headache Jason grief. And so if I had to learn anything from all of this, it would be that if it looks like a duck and it quacks like a duck, it's a duck. It's not a tech company. And so if that duck means it's a real estate business, I would talk to a real estate investor and and wonder to myself why they wouldn't have done this deal. Similarly, you know, when it's a biotech business, I have to ask myself, why wouldn't they have done it? They know more than I ever will in this Jason. And so similarly, I kind of look at this as an example of that, which is could be a very talented person in an industry. I think just like it's important for us to be very clear and lucid and intellectually honest about what industry that is. David Sacks (00:50:23): I think it's a great point. I mean, look, I think whenever you're dealing with a enabled business, which I would define as a more traditional business model with some sort of software layer, you know, on top of it. You have to kind of assess, like, how much of a difference does that software really make at the end of the day? In this case, This is a real estate business with a very thin kind of software slash operator slash. Jason Calacanis (00:50:51): Of a year of technology. David Sacks (00:50:53): Of ex yeah. The experience layer is a very small part of the overall, let's call it P and L of this business. Jason Calacanis (00:51:02): Such a great point. Sacks, I mean, the perfect analogy would be, like, if you have if you're taking a flight on United, the United app is delightful now. It's a really good app. I don't you this is a commercial airline. It's called United online Sacks, you pay for one ticket instead of the Chamath Palihapitiya (00:51:14): whole plan. But have you been to a McDonald's recently? Jason Calacanis (00:51:17): I actually went to McDonald's. Yeah. You order through an app now, and there's a big screen. Chamath Palihapitiya (00:51:20): You walk in there and it's probably not the McDonald's you knew 15 or 20 years ago. It's not about waiting in line and ordering, and it it that's not how it works anymore. There so the point is, is that a tech enabled business, or is that still a restaurant? Well, if you spend a lot of your time intellectually contorting your to try to justify why the next version of McDonald's is a tech enabled business. You're just gonna lose a lot of money. It's a restaurant. Now all restaurants need technology. And what you see by McDonald's is even the oldest and most established are running forward very quickly to implement technology because they know that it creates efficiency, which then flows to the bottom line for them. Yeah. So the reality is that We have lived in this Wonderland where we've looked at these softer businesses that have 80 and 90% gross margins and impose that expectation on other markets and then made investment decisions by trying to justify how that it's a tech enabled real estate business, a tech enabled health care business. Attack enabled energy business without being honest with ourselves that those businesses have over decades because of lots of competition found a consistent and reliable resting place in terms of gross margins far below 80 90 percent And so instead of willing tech enabled businesses to be at 80 and 90 and tricking oneself, I think it's more realistic to ask yourself, why are 80 and 90% gross margin businesses decaying 230 and 40% gross margins like every other part of the economy. When everything will be technology enabled, I think that that's a very reasonable question. And I think the answer is there is no safe place. I don't think that you can justify 80, 90% gross margins in software. When you can use a model and whip up a competitor. Chamath Palihapitiya (00:53:04): I just think that we are all going to a place where everything is Jason Calacanis (00:53:08): a tech enabled version of something. Marketplaces would be a notable exception there with network effects. So DoorDash versus the tech enabled restaurant, asset marketplaces, you and 9 Sacks have been involved in a bunch of different marketplaces together. Sometimes they're asset heavy. Sometimes they're asset light. When they're asset heavy, Man, it's really hard to make those businesses work on Sacks. David Sacks (00:53:28): Yeah. I mean, I think we should differentiate between gross margin and then the net operating margin or or or profit. Right? And so, you know, gross margin is what is the cost on the margin of providing one incremental unit. And the thing about pure software businesses is that on the margin, you can provision another instance of the product almost for free. I mean, there's a little bit of hosting cost at AWS or whatever. So on the margins, it's, you know, it's like the perfect gross margin business. Jason Calacanis (00:53:59): As opposed to a hamburger. David Sacks (00:54:00): As opposed to a a, yeah, a restaurant is gonna have very large cost of goods sold or cogs. The simple heuristic that I use is just does this company have large cogs cost of goods sold, and are they physical world cogs? If they are, it's not a software business. It's at best a tech enabled business. So just look for that, you know, does this business have large physical world cogs? Now what I would say is if the cogs are virtual, like, you know, it could be hosting costs or it could be paying Twilio for telephony or something like that, then at least It's still not, like, as good a business because the the margins aren't as good, but it's very scalable, right, because you're you're not you don't have that, like, huge friction of needing to scale up physical world infrastructure, physical world, supply chains, that kind of stuff. So I like virtual cogs a lot better. There were digital cogs a lot better than physical cogs. Jason Calacanis (00:55:02): I I love it when marketplaces, though. I mean, you could speak to that too, you know, when I had Dara on the pod the other week and when he launches an adjacency, hey, we're gonna sell alcohol. Hey, we're gonna sell groceries. Hey, we're gonna add this thing that's right next to the already, you know, portfolio of, of Uber offerings doesn't cost them much. Right? They just have to get the supply side up and running, but they already have the demand side. And I think that's where, like, these super Sacks are doing really well or Airbnb adding, you know, some inventory in a new city that they unlock. Right? David Sacks (00:55:30): Well, true true mark places are perfect gross margin businesses as well because they don't have fiscal inventory that they themselves own. What you'll see is with a lot of marketplaces, they'll cheat by buying the inventory themselves, at least to jumpstart the market and then selling it. Yeah. And so when you see that line item on the P and L, the, you know, that they have real cost of goods sold, you know, oh, wait a second. This isn't a true marketplace. They're providing the service. Jason Calacanis (00:55:59): Yeah. David Sacks (00:56:00): And so, again, is this a way to, like, catch whether the business is truly one of these great high gross margin businesses or whether it's more of a tech enabled business that's pretending to be a pure software business. Jason Calacanis (00:56:12): Yeah. Direct to consumer got people in a lot of trouble during the last cycle in venture capital. Chamath Palihapitiya (00:56:18): If you look at a lot of these companies, Even the best Sacks businesses have seen their gross margins erode by about 15 to 20%. It used to be that best in class software business can generate 90, 91 percent 88, high 80s to low 90s gross margins. Now that's not true. You see a lot of these best in class companies that are in the high sixties or low seventies. So it already just shows you that that pressure has has come upon the market. And so Is it that the software enabled business goes towards 85, or is that the 85% gross margin business goes towards 30? It looks like it's the latter. That's just what the data Sacks. David Sacks (00:56:56): Well, ma'am, just categorizing certain costs differently than you are, but I don't know why a software business would go all the way to 30, right, because, again, sales and marketing don't count in the gross margin. G and a doesn't count, even r and d doesn't count in the gross margin. It has to be, you know, a unit cost that you can attribute on the margin to that incremental instance of the product. So things like, again, paying Twilio for meter telephony or paying OpenAI for, like, meter to API Sacks, all of that is definitely in COGS. And I think some customer support costs that can be attributed on kind of a per instance basis that goes in there. But if if sales and marketing and r and d and g and a aren't going in there, I mean, I just I don't know why it go all the way to 30. I guess I'm just saying that I still think software businesses and marketplaces for that matter are still the best kinds of businesses on a margin profile basis. The problem is that there's a lot of fake software businesses or fake marketplaces out there that are pretending to be pure tech businesses when actually they're they're more like old school says that have the veneer of technology. Chamath Palihapitiya (00:58:07): And I think to your point, there like, the trick of saying I'm an 80% gross margin business, but having no profitability and who cares? So Yeah. That's true. David Sacks (00:58:17): That is true. Chamath Palihapitiya (00:58:18): When you look at the profitability of these businesses, again, you'll be in the to 20 to 30%. That's why when you see companies that are in the high thirties to low fifties, they're, a, very unique and b, you should expect that there is something fundamentally monopolistic about them. And that is a simplest way to filter out these companies because in a highly competitive market, you cannot extract those kinds of profit dollars. Cap Calacanis says you can't do So you can only do it when when you have an n of 1 or n of 2 kind of competitive dynamic where there's essentially a mutual to talk with your biggest competitor. David Sacks (00:58:57): Yeah. It is it is, a good point that just because you have good union economics with good gross margins doesn't mean that the business is profitable at the end of the day. David Friedberg (00:59:06): Yes. To be I mean, you can David Sacks (00:59:07): have 80% gross margins and still be losing a ton of money because you've got too much overhead. You've got too much sales and marketing. You talk too much r and d. Yes. Jason Calacanis (00:59:15): So you're selling to customers who don't really need it, and then they eventually cancel them. Right? Like, we see that a lot. Chamath Palihapitiya (00:59:20): Look at the streamers. Look at the streamers. That's just a big recycling exercise. It's just like people come to the top of the funnel. They use a product. And then they leave, and then you have to reacquire them over and over again. And it and it could be the case that Sacks actually looks a little bit like that too at the at the bottom line Jason Calacanis (00:59:35): when you hit your natural audience, it it does get challenging. Yeah. David Sacks (00:59:38): Well, this is why in in Sacks, there's a heuristic called the rule of 40. Which is for public market Sacks companies, you wanna see that their operating margin plus their growth rate equals 40 or is greater than 40 ideally. So in other words, you could have a Sacks business with a 20% operating margin and a 20% growth rate, and that would hit rule of 40, and that would be a very attractive business. Or you could have, I don't know, it could be growing 50% year over year, this operating margin could be negative 10%. And that'd be okay too because they're losing money, but at least the investment is leading to but well above average growth, you know, or you could be growing. You could, you know, be growing slower. You could have a 10% growth rate and have a 30% operating margin, and that would also be hitting the rule of 40. So it's just a simple way of like tracking whether this is a a good business at scale. I don't think startups have to worry about this until they get to kind of the later growth stage. Jason Calacanis (01:00:38): Yeah. When you're in your BC round, you're making 50, a 100,000,000. Yeah. You gotta be really thought about this. In the beginning, you're trying to get product market fit and triangulate on something. So Jamat just mentioned Streaming, NBCUniversal, if you Didn't know it David the NFL a $100,000,000 for the exclusive streaming rights to 1. That's right. 1 for a round playoff game. For the NFL that happened last weekend between the Chiefs and the Dolphins. That was on their service Peacock, NBC's app, basically, their version of Netflix or Disney plus. It garnered 23,000,000 viewers, which makes it, the most streamed live event in US history. Even so, That's almost half of what the Packers and cowboys had about 40,000,000 lines versus Rams. Same weekend. 36,000,000. And so this has brought into question, what's going on with streaming? Have these businesses gotten ahead of their skis? Just to give you a couple of charts Disney Plus took off like a massive rocket peaked in q 4 of 2022 at a 164,000,000 subscribers are now at a 150,000,000. Here's a chart. I mean, just amazing how, quickly they got to Netflix ish numbers. Here's Netflix's chart. Again, this is quarterly. They're up to now an all time high 247,000,000 subscribers and the annual growth rate all the way back to 2001. Still pretty spectacular and their revenue also, very respectable for Netflix. However, they overspent massively during the peak streaming era 2019 to 2022, and that's when subscriber growth started to slow. Obviously, they were spending way too much and other entrants came in like Apple Plus and Amazon Prime where they really didn't even think that they had to make a profit. They were using streaming maybe to sell more Iphones or to get more Amazon prime subscribers. So here is the major problem. Here's the churn chart. Basically, churn means people cancel. Right? Jason Calacanis (01:02:35): And so as these services have cut what they're offering the number of Marvel shows or Disney, you know, having Star Wars shows, the churn goes way up people are also having subscription overload. I don't know how many of these I subscribed to, but I think it's all of them or maybe out of these 1, 2, 3, 4, 5, 6, 7, 8, 9 on the chart. I think I'm I have 7 of these. So there is definitely some unbelievable subscription burnout and The streamers, in order to get these businesses above water have raised their prices. We all know that. You've probably seen your streaming bills, you know, have 3, 4, 5 bucks added to them every month. And at the same time, they're cutting, how much they're spending. So you're paying more for last Chamath, your thoughts on this dynamic. Chamath Palihapitiya (01:03:20): If you bring the chart back up, here's the most important thing that's worth noting. Let's take Starz as an example. It churns which means that over a year, they've changed a 144 percent of their user base. That means that they have to basically turn their entire Membership base 1 a half times in order just to tread water. Right? So if you start with a 100, It's a lot of money that you have to spend to make sure you end the year at a 100. Forget about growing. If you look at Peacock, they're gonna lose a 100% of their subscribers in the year. If you look at discovery, they're gonna lose 75%. If you look at Sacks, they're gonna lose 50 odd percent. Apple TV, same Hulu and Disney plus will lose 60%. Netflix will lose almost 40%. So the only winner in all of this is Facebook and Google, The only winners are Facebook and Google because that's where the ads will appear to try to reacquire these folks. Right? So I guess that's a positive indication. But the reality is that money isn't infinite. And so what happens in a dynamic where you have a category where there's just a lot of consumer churn I think what happens is it evolves in phases and in phase 1, which is sort of where we are now, where there's a bunch of relatively well established Sacks, is that they are going to initially overspend on content because they are going to try to differentiate the cost of acquisition based on content, right, which makes sense. I have a tent pole. Come and watch it here. You can't watch it anywhere else. And I think that was the peacock example where they had this football game and all these people showed up. And they thought this is exactly why we're paying so much money for these rights because people will show up. I think the problem is that when everybody is doing it, Everybody's doing it. And so you don't know how to differentiate. Even in our group chat, look at the number of times in somebody randomly says, is there something to watch and everybody's got 50 recommendations? Chamath Palihapitiya (01:05:26): Guess what I do? I tune it all out because I'm like 50 across Sacks different services. I have no way to track it, and then I lose interest. And I'm like, you know, I'll just stick to YouTube. So I think what happens is in phase 1, folks spend a lot of content. In phase 2, they realize that actually what you need to do is spend on a long tail of content a much more disciplined way. So there's a company that that I know about. For example, they just signed a pretty big deal with Chamath. 100 of 1,000,000 of dollars. And I was trying to figure out, is that a lot or a little? And it turns out that Amazon's trying to get 3 or 4 or 5 versions of these going, which means that forward, we probably could have gotten 5 or 600,000,000, and instead you get 2 or 300,000,000. It's still an incredible thing, but it just goes to show you that there's a lot of competition. And so instead of having A single mode, right, if you were to grab something where there's a few pieces that just get all the money. Now you're smearing this content across all kinds of stuff. And I think that that makes it very difficult to keep Sacks. So I suspect that you're just gonna see a lot of churn I don't I don't like this category at all as an investor. Jason Calacanis (01:06:43): So clearly there's been an overspend here, but consolidation is coming. Friedberg, any thoughts on the streaming space? David Friedberg (01:06:49): I just think this is the opposite of what we were talking about earlier where there's a free market competing, and it's benefiting consumers. I mean, the point that you made is a really good one that there's a lot of great content to watch. Folks that raise prices, people cancel. So you gotta drop prices. You gotta offer good content. And I actually think this is a really good and healthy thing to see happen is competition that benefits consumers and there'll be some set of winners here and some set of losers, but I think ultimately it's just really good to see this how it all shakes out. Who's willing to put up the big Sacks? Who's got the smarter algorithm? That predicts how fresh your content has to be and how unique it has to be relative to other platforms to keep the audience attention. Would argue if you look at those numbers and you look at the performance over time, Netflix absolutely rules the roof in the sense. They're an incredible operating team. They have an incredible capability of predicting what content will work, how f how quickly they have to refresh content, how much they should be investing in content per quarter, per month, and they're clearly retaining users and making money. And others may be are that are newer to the game haven't figured that out yet, but it's just very good to see the competition I don't know how to predict what's gonna happen here, but it's good to see. Jason Calacanis (01:07:57): It's clearly gonna be a massive consolidation. Also, these folks are launching advertising based versions. So you probably saw Netflix has an advertising tier. And so a lot of these folks, didn't have those Disney plus, I think, is gonna have one as well. David Friedberg (01:08:09): You know what no one's paying attention to is YouTube TV. I don't know. Do you guys subscribe to YouTube TV? I'm a Hulu person. Chamath Palihapitiya (01:08:17): Yeah. I think it's fantastic. David Friedberg (01:08:18): If you look at some third party data on YouTube TV, the prescriptions are going through the friggin roof. And it's really interesting to see because with YouTube TV, you're basically rebundling the unbundling that happened in cable except you're doing it over the internet, and you can access it anywhere. So they've basically converted the pipe as the value to the service itself as the value, which you can access anywhere you want on any TV in any room without boxes while you're on the road, on your phone, on your laptop. And it seems to be kind of highlighting that maybe it wasn't necessarily the bundling that was the problem, but the way that the service was being offered So who knows? Maybe bundling versus all of this part and parcel. You gotta pick 5 different providers and buy content on the fly. Maybe that's not what consumers want. Jason Calacanis (01:09:01): Young people don't care about the live channels. Old people do, but, yeah, Hulu and YouTube TV are really wonderful products because they work really well on Apple TV. The apps work great, but they also work great on your iPhone, your iPad. So Yeah. You know, they're really spectacular in that way. Sacks? David Sacks (01:09:19): Well, this is high. This conversation back to what you're talking about with margins in Sacks and tech enabled versus real software businesses. I personally have never seen a B2C subscription business that works. The churn is just too high. I mean, what I've seen is that the monthly churn rates on a software subscription for consumers is somewhere in the 5 to 10% range. So on a full year basis, you're attaining maybe percent of your customer base. You're effectively rebuilding your business from scratch every 2 years. It's a very tough place to be. This is why I basically skewed towards b to b Sacks is because a good B2B SaaS business will have net expansion. Instead of 50% churn, you'll do a 120% expansion. And so you're actually building a subscriber base with long term value. Now how did Netflix do it? I mean, Netflix avoided that prohibitive level churn by spending literally 1,000,000,000 of dollars on content and original programming. And, again, it goes back to the point this is not a pure software pure tech business. It includes an old school studio, which is very capital intensive. And they financed a lot of that content acquisition with 1,000,000,000 and 1,000,000,000 of dollars raised during that zirp period from, I think, both equity and debt. And you have to wonder if that could be done again in this post zirp period where capital is just a lot scare I Jason Calacanis (01:10:47): think this is gonna work really well though. For Netflix and Disney, man, these huge archives that they own, these libraries are gonna get them to 3, 4, 500,000,000 global subs and has become money printing machines that I don't think they're gonna need a ton of new content. David Sacks (01:11:01): The question is whether you could recreate an archive of that level today given how much more expensive capital is. My point is that zerp help Netflix catch up Jason Calacanis (01:11:10): Yes. David Sacks (01:11:10): To these studios and create this huge library. But still, I think that what the streaming services have shown in their churn is that if you don't provide original content and original programming, then users will churn off that. So you have to kinda have both. You kinda have, like, the library as filler, but if you don't have a hot show come along every so often. The subscribers will turn off that. Jason Calacanis (01:11:34): Yeah. You need to have some new content depending on how deep the libraries feels like Netflix and Disney plus have done a great job with our libraries to give you an idea. Revenue for Netflix for 2023, 33.5000000000,247,000,000 subs, That's a ARPU yearly revenue for those Sacks, 136 bucks a year. Now the reason you're seeing that number not make sense if you're paying 15 bucks a month is because Internationally, Netflix is a lot, lot cheaper. But I I love those 2 businesses. I think they're gonna be extraordinary over time. That's the Chamath Palihapitiya (01:12:07): task to acquire a 100,000,000 people a year just to stay even. David Sacks (01:12:12): What's their churn rate? Chamath Palihapitiya (01:12:14): 4% a month. Jason Calacanis (01:12:14): I think it's fine. David Sacks (01:12:15): Right. So they're turning half their customer base every year. That's my point. Chamath Palihapitiya (01:12:19): A 100 million people. David Sacks (01:12:22): They're rebuilding their customer base from scratch every 2 years. How does that make sense? Jason Calacanis (01:12:26): It's totally fine because what happens is you have people coming off their parents plan, getting their own, people go through a bad beat, they don't like it, you know, whatever they unsubscribe, but they all come back. Back and forth back and forth, and then it just keeps growing over time. Chamath Palihapitiya (01:12:41): I think you're describing something that's true. I think David is describing why it's a shit business. Jason Calacanis (01:12:47): I mean, if they if they make more money than they spend, and I don't think they need to do a ton of advertising. David Sacks (01:12:52): Eventually, you churn through so much of the market that actually you can't maintain that growth rate. I mean, if you reactivate, maybe you can do it, but I Jason Calacanis (01:13:00): I think that's what's happening. Chamath Palihapitiya (01:13:02): From a business perspective, the only logical thing that I would do if I was running one of these businesses is attach it to another business where you can think about it in terms of LTV. So the only obvious example of that, I think, is Amazon video because you can stick it beside Prime and a bunch of other things and now you have a very different way of justifying LTV and minimizing churn. And that seems like a I buy that argument, Jason. I don't buy, like, a stand alone business like this trying to do it. Yeah. Yucky. Jason Calacanis (01:13:33): I no. David Friedberg (01:13:34): Sorry. Real quick. Have you guys dug in to Netflix's business? I mean, they're still growing top line. The EBITDA margin continues to expand. I mean, all those facts might be true, but that churn engine and that recapture engine seems to be working in a way that they're printing cash and growing. It's pretty impressive. I don't know if there's a limit there, but, I mean, I I haven't looked at the analyst, but I think that is the key. Yeah. Jason Calacanis (01:13:56): To the bundling point, Apple Plus, which is the TV component, not the hardware product, is bundled as part of this Apple 1 program, which is kinda like Amazon Prime. And so I think you're seeing a little bundling there. Netflix also added video games to make it even more sticky. So I think there's like a subscription super app coming, which the New York Times is kinda done, right, with Wordle, Crosswords, the athletic wire cutter and the New York time. So I think you're gonna start to see Chamath Palihapitiya (01:14:23): Honestly, you just had a jumble of names that went in one year and out the other. I don't remember a single one. You said this point for most people, Jason, not in a media efficient auto Jason Calacanis (01:14:31): like you. New York Times is doing fantastic doing this bundling. Some people come for the crosswords and wordle, and that's why they subscribe. They like the news. Other people come for the news. They discover crosswords and wire cutter and the athletic, and they stay for that. So I I do think there's gonna be an incredible business here. I'll take the other side of it. Yeah. They spent a lot on content, though, during that period where Disney plus came in. And I think everybody's now has a little more discipline in the budget came way down. If you didn't know the Hulk cost 250,000,000 or something, the She hulk, rather. And that cost 225,000,000 for 9 episodes. Chamath Palihapitiya (01:15:02): What? Jason Calacanis (01:15:02): The 1st vendor George 25,000,000. David Friedberg (01:15:04): Wait. Sorry. 225, 250,000,000 for for 9 episodes Jason Calacanis (01:15:08): of the Shee home. Yeah. Chamath Palihapitiya (01:15:09): And people criticize it for having bad CGI. Jason Calacanis (01:15:11): So It's I think there's, like, new discipline coming to us. David Friedberg (01:15:14): Was this a Netflix show? A Disney plus show. A Disney plus show. Yeah. No. Chamath Palihapitiya (01:15:17): I don't David Friedberg (01:15:17): I don't know about you guys. I've been rewatching the Sopranos. I find some of the content on Sacks to be the best content out there. Jason Calacanis (01:15:23): Oh my god. I've I've David Friedberg (01:15:24): watched this. There's so much rewatchability on it. Disney doesn't have that much rewatchability. I don't know. David Sacks (01:15:28): The only reason I keep my max is I'm waiting for a house of the dragon season too. I mean, if they didn't have that one show, I'd be like, yeah, cut it. You know? Yeah. I do think that this could help Netflix because a lot of these streaming services came along. We had way too many. Right? We got saturated with streaming services. And most of them you subscribe to. You may not even remember subscribing. You may just subscribe to a free trial to get an NFL game. And then you get billed because you forgot to cancel it. Chamath Palihapitiya (01:15:55): By the way, have you guys ever gone into Apple I cloud settings and looked at your subscriptions. Jason Calacanis (01:16:03): Oh, boy. Yep. Get in there on guys. Chamath Palihapitiya (01:16:06): Just rip go go if you have, like, an extra 5 minutes, you will Sacks so much money by going into subscriptions in your settings and just turning them all off. I was shocked. I was shocked. I mean, this David Friedberg (01:16:18): is part of your austerity measure? Absolutely. Chamath Palihapitiya (01:16:20): You know how many subscriptions to Disney plus I had? David Friedberg (01:16:23): How many? Chamath Palihapitiya (01:16:23): Well, this is what's so gross is why they even let me do this. I had 3. Jason Calacanis (01:16:28): What? Chamath Palihapitiya (01:16:30): 3. Yeah. How's it even possible? David Friedberg (01:16:33): 1 for the plane? 1 for the chance? Chamath Palihapitiya (01:16:36): I had 3. I had 3. I had 2 HBOs. I had 2 Netflix. Oh, no. Netflix keeps sending a message saying, hey, you need to update your payment information. But then I'm watching Netflix on my Apple TV. So I'm like, I'm clearly paying for it, paying for it somehow. Jason Calacanis (01:16:52): It's so confusing and I have the perfect solution for you. There are credit cards now where you can set a spending limit. And so what I do is every year, I just turn off the limit on that credit card. I just take it from unlimited or uncapped down to 0, and I do this for business as well. And then hold the subscriptions time out. You wanna call that? Chamath Palihapitiya (01:17:12): What? Jeff. Jeff does that for me. Jason Calacanis (01:17:15): Jeff does it for me. Yeah. But, I mean, having somebody go in David Friedberg (01:17:18): there, I Chamath Palihapitiya (01:17:18): have a Jeff. I have a Jeff. Jason Calacanis (01:17:20): Just know, but it's very simple. If you only use one card for subscriptions and then you turn it off every year and see which ones you wanna keep going, it Sacks really well. And then you move the other ones to a new card. Chamath Palihapitiya (01:17:28): Wanna say how many 1000 of dollars wasting on, like, dual lingo. I was like, I'm paying for dual lingo, and then I was paying David Sacks (01:17:35): for Italian. Chamath Palihapitiya (01:17:36): It's still terrible. Yeah. Terrible. And then I had I had like Jason Calacanis (01:17:39): a case against that. No. Chamath Palihapitiya (01:17:40): Then I had dual lingo and I had Babble and I had Rosetta Stone. So I'm like, my Italian is not improving because of any of these three but I was paying them collectively like $400. I had a whoop subscription. I don't even have a whoop. When Rick Thompson started manscaped, I was I signed up for Manscape. I get all this bald deodorant. I've never used it once. We know. Jason Calacanis (01:18:02): We know. We sit down Chamath Palihapitiya (01:18:02): here in poker. Jason Calacanis (01:18:03): We know. It's not Chamath Palihapitiya (01:18:05): working, bro. Just a message to Manscaped. I have tried to cancel. I have called. I have emailed. I took it upon myself to try. It's in possible to cancel. They won't even let you reset your account so you you can get a link to cancel. It's so hard. And still, your balls are terrible. Yeah. My balls are phenomenal. Damn. Jason Calacanis (01:18:25): I sat next to you in Speaker 5 (01:18:26): poker, man. Jason Calacanis (01:18:26): Not real. Okay. Let's get into plastics and get off Chamount's balls. I mean, how did we get here? Subscription services. Subscription services. Yes. Streaming is that across words and across roads, apparently. So They're David Sacks (01:18:42): really trying to make that bald deodorant happen, aren't they? Chamath Palihapitiya (01:18:44): They're trying to make it happen. David Sacks (01:18:46): Well, they're trying to make fetch happen. Ball the odor, and it's not happening. I'm sorry. Jason Calacanis (01:18:49): I mean, what are you supposed to do? Squat and swipe? How does that work? I mean, is it a spray? Are you lifting and spraying? Are you, David Sacks (01:18:56): like, giving points to creativity? Trying to create, like, a new thing, but yeah. Chamath Palihapitiya (01:19:00): I was trying to support my friend in signing up for a subscription service and now I can't cancel. That's my problem. That's my predicament. Could you also take a shot Jason Calacanis (01:19:09): from yourself? I don't know. Just Bro. Chamath Palihapitiya (01:19:11): Put it Jason Calacanis (01:19:11): out there. Chamath Palihapitiya (01:19:12): I I'm I it's the what's going on in there Tremont? Jason Calacanis (01:19:15): Does it Chamath Palihapitiya (01:19:15): have to do with the product? I signed up because Rick was the venture investor that seeded it and started I supported my friend Yes. And now I want out, and I cannot get out. Every every time I try to get out, they pull me back in. Jason Calacanis (01:19:29): I'm just gonna say when it comes to landscape, no No testimonials, please. No testimonials. Chamath Palihapitiya (01:19:33): The worst part is, like, you you know, it comes to the house and Jason Calacanis (01:19:37): oh, somebody opens your ball deodorant and puts it on your desk. Chamath Palihapitiya (01:19:40): That they do. And, no, they might be right. Jason Calacanis (01:19:42): I don't know what you have. Chamath Palihapitiya (01:19:43): They do. Well, that's what's so funny. They put it right on the kitchen counter. So as I walk through Jason Calacanis (01:19:50): I grab it. And I'm like, who's seen this bottle? Oh, there it is. What is it? This bottle's good man. Chamath Palihapitiya (01:20:00): Oh Jason Calacanis (01:20:03): my god. So how do you apply it? Is it just a little dabble, do you? Chamath Palihapitiya (01:20:08): No. I mean, you know, Jason Calacanis (01:20:09): I just It's apparently an ointment, Sacks. It's an ointment. This is far too much information. David Sacks (01:20:15): Yeah. I'll try it. Jason Calacanis (01:20:16): Don't you guys get sex on that? David Sacks (01:20:17): I'll try it. Chamath Palihapitiya (01:20:18): Oh, no. Jason Calacanis (01:20:19): It's coming David Sacks (01:20:20): to get Chamath Palihapitiya (01:20:20): iris because David Friedberg (01:20:20): you know what? I'm gonna Chamath Palihapitiya (01:20:21): give you my my subscription. Jason Calacanis (01:20:25): That's kinda choppy. Oh, fall to you. David Sacks (01:20:30): Oh. Why not? Jason Calacanis (01:20:31): Oh, man. For 10% off your Chamath Palihapitiya (01:20:34): Use them as broke dig tater. You get deference. Okay. You can never cancel when you get there. David Sacks (01:20:41): That is dick. Tater. Jason Calacanis (01:20:44): Dick tater. Yeah. Use the Yeah. Chromium a dick tater. Get 10% off your bald deodorant at Manscave. Alright. Friedberg, it's your turn to shine. No. Not ball deodorant. We wanted to talk about microplastics. Study came out it's terrifying. We've known plastics have been terrible for years. Obviously, it turned into some sort of political discourse with straws and everything, but plastics are horrible. We shouldn't be using them but this study confirms a bunch about drinking microplastics educate us on this study that everybody's talking about right now. Doctor Friedberg. David Friedberg (01:21:17): I I wouldn't start with the statement that plastics are awful. Plastics are polymers which are long chains of what are called monomers. This is hydrogen, carbon, and oxygen that comes together to form these specific molecules And then we can kind of bake them into crystal like structures. And the reason the plastic industry took off is because it ended up being very cheap to create materials that we could turn to chairs that we could turn into bottles, to move stuff around, a lot of applications, everything from solar, photovoltaics, to our computers, to our laptops, to our phones, everything has some form of these polymers in it. The polymers that are commonly used for making, bottles that we consume beverages out of are a PET, plastics. These PET plastics are made from a combination of natural gas and crude oil. So we kind of have a production process where we get the carbon, hydrogen, and oxygen that's naturally found in natural gas and crude oil convert it into these molecules that we turn into long chains and we turn them into bottles and fill those bottles and band up being a lower carbon footprint than using glass, about, 5 x, the carbon footprint to use glass instead of plastic in in, in making a bottle to store stuff and move liquids around. 40% cheaper and a lot of other kind of reasons why the industry and the world adopted plastics, not just for bottled beverages, but for other applications. So in bottle beverages, because these are polymers, there are these long chains of little molecules that are stuck together. Some of those chains break. And then some of those little chunks of those molecules end up floating around in the liquid that we're consuming. And what this study did that kind of highlighted, a set of data that hadn't really been studied well before is they used a form of spectroscopy. So kind of a multispectral light system, shining light at different wavelengths on the liquid in a bottle, in plastic bottle, to figure out how many of these little plastic particles there were in the liquid. And in doing that, they found that there was on the order of 10,000 little plastic particles per liter of water or per liter of soda or drink or gatorade or whatever beverages that you're drinking the real question then is, well, how risky is that? So if you look at a lot of the the health agency studies, the kind of well adopted and and well research efforts on is there toxicity associated with PET plastics on its own? David Friedberg (01:23:47): They find that there's very little genotoxicity or no genotoxicity, meaning it doesn't doesn't change your DNA. There's no carcinogenicity so it doesn't cause cancer. But there are other studies recently that have shown different mechanisms by which these little tiny microplastics might end up in your cells because they absorb into your body, and they're small enough that they can cross into barriers. They can get into your brain. They can get into your cells when they're in your cells. There are other mechanistic studies that are done in a petri dish as opposed to being studied in the body where they've demonstrated that they could actually disrupt the function of organelles like mitochondria, endoplasmic reticulum. So all these little things that operate in your cell They can cause irritation. They can trigger chemicals to be produced that might cause allergies, that might cause inflammation, and so on and so forth. So while the general molecule of PET itself isn't known or shown in any way to cause cancer or to cause changes in your DNA, there are other mechanisms by which these little tiny plastics might be disrupting cellular function, might be causing other health issues. And that's now gonna open up a big area of research that that's gonna be predicated, I think, on the fact that this study now shows that there are thousands 100 of thousands of little pieces of tiny plastic in these plastic bottles that we're drinking water and soda and juice from that are getting into our body and into ourselves. Chamath Palihapitiya (01:25:06): 40,000 little pieces in in the average 1 liter plastic bottle. David Friedberg (01:25:10): Yeah. It's a pretty scary statistic when you see that number Chamath Palihapitiya (01:25:13): enough to cross the blood brain barrier. David Friedberg (01:25:16): Right. And in rats and mice, they've shown that these little microplastics can actually accumulate in the brain if they consume enough of them Now the reason this hasn't been well understood or studied in the past is we kind of look at the aggregate amount of plastic that's in a liquid. And it's like, oh, the amount is so small. It doesn't matter. But when you start to look at how small these little pieces of plastic are and add them up, the cumulative effect over time that they can actually cross into cells, cross the blood vein, brain barrier, maybe are not getting removed from the body. That's opening up a whole lot of research because there's no easy way to just scan a body and say, is there plastic in it? How much plastic is there? Cause there isn't a good chemical signature for it. And what these guys did is they used light to look in the liquid to find the plastics, which we can't easily do in the body today. Jason Calacanis (01:26:01): So Friedberg, you're gonna drink plastic bottle water anymore. David Friedberg (01:26:04): I'm not. Okay. Chamath Palihapitiya (01:26:05): Jamal, I've already stopped. This started for me about 4 months ago, my wife basically said we're getting rid of all class And at first, I really pushed Sacks. And I'm like, this is crazy. And she just kept talking to me about it and showing me all this data. And Yeah. About a month ago, I would say I switched. So now I use glass and a carafe like this. Jason Calacanis (01:26:26): Yeah. Much better. Chamath Palihapitiya (01:26:27): We got rid of all of the plastic in our our house in the gym, no more bottles. Jason Calacanis (01:26:31): It's wasteful anyway. Like, why not you have beautiful filtered water at home, put it in a crack. Chamath Palihapitiya (01:26:36): Sure. But the the scary thing. I mean, it's a little bit more inconvenient. I'll be honest with you, but it is very scary. And I think that it does alter the phenotype of the human body over time. And I think you would have to be insane to bet against that. And I suspect when you look the rates of depression and autism and Alzheimer's and dementia and autoimmune diseases, Crohn's, rheumatoid arthritis, to think that all of these environmental factors have no impact, I think, is, is taking a very scary bet. Jason Calacanis (01:27:08): Here's what I do. I buy these glass bottles on Chamath, you know, 2 or 3 cases of them. I have the best water filter system at home. We filled them. We put them in the refrigerator, and we haven't bought plastic in years. Saks Wow. In years. In years only because Chamath Palihapitiya (01:27:25): I care about the environment because I'm a good person. Yeah. David Friedberg (01:27:29): Jason, I'll also say, like, that that application is a pretty small, like, I think on the order, if I'm right, 80% of bottled beverages are drunk outside the home. So people are buying stuff at convenience stores, at gas stations, at markets, taking them with them to work. And that's how a lot of plastic bottles are consuming. Remember, you have us as such a small percentage of the global population. You go to Africa. You go to Brazil. You go to China. There isn't a great, like, people don't have these amenities that we have in our upper and middle class America that plastic bottles has provided access to products that consumers around the world. Yeah. But otherwise, wouldn't be able afford. So there's a reason they exist. But, by the way, I I also want to just be really clear. There isn't conclusive evidence or science that shows these plastic micro particles or nanoparticles are causing these health effects. There's certainly a lot of questions that it brings on what is the cumulative effect of these little things getting into cells? Did they get into cells? Chamath Palihapitiya (01:28:24): Why they David Friedberg (01:28:24): do when they're logging in there? Chamath Palihapitiya (01:28:26): Why would anybody bet that it's 0? David Friedberg (01:28:28): Right. So that's the other side. Right. Well, the outside is that people get to access cheap beverages on the street that otherwise people that are living on $13,000 a year that can buy a, you know, a a plastic soda for 25¢. And you can also buy Chamath Palihapitiya (01:28:41): That's what I can, though. David Friedberg (01:28:43): Yeah. So that's that's definitely an alternative. They're a little more expensive, generally. Just became the cheapest container. Sacks. You're adults. David Sacks (01:28:51): Sorry, guys. I stepped out to get a a a drink here. Did I miss anything? Jason Calacanis (01:28:56): It would be better if you had put a straw in your water bottle than which raking Chamath Palihapitiya (01:29:02): Now I understand your level of depression. Jason Calacanis (01:29:06): It's just causing it. So, actually, just killing those arrow water bottles. David Sacks (01:29:10): Did I miss something? Speaker 5 (01:29:11): Because it's high score I David Sacks (01:29:12): stepped out. Jason Calacanis (01:29:14): Also, I I use, these beautiful contigos. I think some people use yetis or other kind of things. And, I actually carry them with me only because I try to, like, think about the environment. Just the amount of Sacks being created I don't know if you've seen this, but like you go to Whole Foods now or you go to any supermarket, and you see this wall of Sacks, Friedberg, like, this is unconscionable. Like, the we're literally giving people salad in a giant plastic box. David Friedberg (01:29:44): Let me just say a couple things about this because there's this conception that this is just awful, awful, awful, but plastics, there there is a degradation of these PETs when they're posed to sunlight. There's a recycling system that many of much of this material ends up in. Chamath Palihapitiya (01:29:59): Much of it? David Friedberg (01:30:00): Yeah. I mean, not not Chamath Palihapitiya (01:30:01): a lot. Jason Calacanis (01:30:01): Actually correct. Not a lot. But David Friedberg (01:30:02): what would the alternative be? Right? So the alternative is you put in a glass thing and you charge people $15 for a couple pieces of lettuce, The reason the reason plast the plastic industry emerged is because it provided a low cost way to transport materials. And that's we're all very wealthy. So we have to just step outside of our bubble for a second and recognize that most people, you know, the the dollar difference is a huge difference for most consumers. They're not gonna make that dollar leap. So, you know, the fact that plastics emerged is to support a consumer market that's grown over the world. Yeah. But how Jason Calacanis (01:30:32): how does this make sense? Look at these bananas. Just as an example, to give people an idea, bananas already come with a case. Chamath Palihapitiya (01:30:39): Oh, that's crazy. Jason Calacanis (01:30:40): And they're they're literally wrapping bananas in plastic now. And, you know, I think this is where regulation makes sense. David Friedberg (01:30:48): There must be a gas in here or something because they're trying to keep the bananas from going bad. That's what I wanted to put Chamath Palihapitiya (01:30:53): in there. Jason Calacanis (01:30:53): I wanna shout out. Like, this is where I think regulations actually do work. France, Spain, a lot of countries now are just saying, you know what? For fruits and vegetables, like, yeah, don't put them in plastic, please. We're not gonna allow you to do that. And and I think David Friedberg (01:31:07): I'm not pro plastic, by the way. I'm not drinking plastic from plastic bottles, but we have to be cognizant of where this industry emerged from. What the science says about it. Chamath Palihapitiya (01:31:14): Like, I David Friedberg (01:31:14): don't I don't wanna just be flipping about it. Okay. Like, on to all plastics of that issue. Jason Calacanis (01:31:18): In the oceans, Friedberg is unconscionable. Like, this this is not like a do gooder thing. It's just David Friedberg (01:31:24): It's awful. Jason Calacanis (01:31:24): There's no reason that we need to have plastic dressing things. It should be better. David Friedberg (01:31:28): I'll give you some good optimism around this. There's a lot of efforts right now to develop microbes that can actually biodegrade these PET plastics. So There's, so we're engineering these microbes that will produce enzymes. These are little bacteria that'll produce enzymes. Those enzymes can then be made in the plastic itself. So then the plastic will biodegrade within a year after you use it. So there's a lot of this kind of effort on how do you make naturally biodegrading plastics using bio sources and biological molecules as part of the production process. And a lot of big plastic, packaging companies industrial biotech companies are investing in this area. Jason Calacanis (01:32:06): This is where collectivism can do good. You know? Like, if we actually as a society say, we wanna do sustainable packaging, like because of the tragedy of the commons, like you're saying, Friedberg, because it's cheaper Calacanis, like There's no floor here, you know, to stop people from doing this, and stop from using plastics unnecessarily, like wrapping bananas, etcetera. Alright. Listen. It's been an amazing episode. Of the all in podcast for the dictator. Chamath Palihapitiya (01:32:33): Wish me luck today, boys. Wish me luck. Jason Calacanis (01:32:35): Use the promo code Dick. David Friedberg (01:32:36): We'll be following the live stream on the chat. Jason Calacanis (01:32:38): You're following the live stream. Use promo code Dick to get 20% off your ball deodorant. Hey. Chamath Palihapitiya (01:32:42): What do you guys think about actually, like, running some poker tournaments through the year called the David Friedberg (01:32:47): All in. 100%. Chamath Palihapitiya (01:32:49): That would be super fun, though. 100%. Jason Calacanis (01:32:52): I think we could replace the WSOP pretty quick. I mean, it'd be pretty Replace the WS. So I'm not kidding. We have still helmet on our squad. Chamath Palihapitiya (01:33:01): I think Jason's right. I I'm not just helmet. I think you can get all the pros because I think the problem is, like, those championships have been so watered down. Right? There's, 52 of them just in Vegas in June July, and then Now you have, like, the circuit rings. So now there's bracelets and rings. And then there's the European 1, then there's this one. There's the the hummus. You can't have, I think, in order to be a world Chamath. Can you really have, like, a 150 winners a year? David Friedberg (01:33:30): Sachs, are you bored with Holden? David Sacks (01:33:31): Well, I'll I'll play with you guys, but, yeah, I'm kinda bored with it. Jason Calacanis (01:33:35): Yeah. I played a tournament yesterday, Big O, 37 players, I came in first. I don't know if you played gig. David Friedberg (01:33:41): Where did you play? I had a Jason Calacanis (01:33:42): speaking gig yesterday in LA. After the speaking gig, I was going to the airport. I had a little time And I just stopped by Hollywood Park where, Chamath Palihapitiya (01:33:49): you know, you went to a new one. You're the David Friedberg (01:33:54): bad And David Sacks (01:33:55): I don't know. There's nothing more boring Jason Calacanis (01:33:57): than playing a tournament David Sacks (01:33:58): with people you don't know. Jason Calacanis (01:34:00): Oh, it was great. It was great. There was, like, a fight for gas forever. David Sacks (01:34:03): I mean, I did the WSOP couple of times. And, you know, I think I lasted, like, 3 days. It's a long time to be playing poker at table. Some people Chamath, Jason Calacanis (01:34:11): I got to the final table. And they wanted to chop. And I was a short snack. I was like, well, you know, my flight's in for in a couple hours. I I'd rather not chop. And this woman I I got in a fight at the casino almost. This woman was wearing a mask and she goes, this mother ever won't chop And I said, ma'am, I I it's my option to not show up. David Friedberg (01:34:34): Madam, madam. Jason Calacanis (01:34:35): Madam. I said, ma'am, madam, whatever. They them, and she went crazy. And the floor came over and said, ma'am, you have to sit down. She called me a a a mother effort twice to my face. David Friedberg (01:34:45): How much did you win? You went on to win. Jason Calacanis (01:34:47): I was the short Sacks, and I went on to win the tournament. Chamath Palihapitiya (01:34:50): I kid you not. How much did you win? 1400 bucks. So we what is your What is David Sacks (01:34:54): the hourly rate on that? You make, like, $14 an hour. Jason Calacanis (01:34:57): It's a $100 buy. So, yeah, it it was, 200 bucks an hour, but here's what happened. So I had this guy massively You played for 7 hours? 6 hours, maybe. It was awesome. It was great. I was I had the time of my life. It was the first time I played in a tournament for, like, since we played the one drop. That time. I haven't played in a tournament system. It was so much fun. Chamath Palihapitiya (01:35:17): Jason goes from playing the 100 k Blinds. $100 prize. Jason Calacanis (01:35:21): I had a time of my life because I've never played Big O before. It's where you have 5 cards and you it was high low. It was so dynamic and fun. Chamath Palihapitiya (01:35:28): Oh, yeah. Jason Calacanis (01:35:28): Yeah. Big O. Yeah. Yeah. Yeah. Chamath Palihapitiya (01:35:29): Big O is so fun. David Friedberg (01:35:30): I've never played it. Jason Calacanis (01:35:31): And it's high low. So I I was like, I'll learn Big O. I've never I've literally not played one orbit of Big O. I won the tournament. It was awesome. And so then it's me and this one guy. And, you know, I've got, like, I've got him, like, 3 to 1 or whatever. And, he's like, Jason. I gotta go. Please. I got my kids. I was like, no problem. I'll chop it with you. If we take 400 off the top for the dealers, a dealer cried. He was like, what? And I was like, yeah. Just I'll I'll chop it with you evenly. And so I won and I I I just chopped it up and gave a big tip. Chamath Palihapitiya (01:36:01): What what did you did you get, like, a a certificate like that. Jason Calacanis (01:36:04): They put you on the website or something like that. Like Pull it up. Yeah. It's on the poker classic website that I I, or I don't know if it's called the poker classic, whatever it is, My point is we would have a great tournament. We do each of the games. Each of us gets a free roll into the game, and then everybody else buys it and I like it. Chamath Palihapitiya (01:36:19): Sacks you like PLO, or you just like chest now? David Sacks (01:36:22): No. I like the hold them, but I'm just saying I wouldn't play with a bunch of strangers. Jason Calacanis (01:36:26): You know, David Sacks (01:36:27): I like playing with friends, you know, but Jason Calacanis (01:36:29): to goof off and have fun. Yeah. David Sacks (01:36:30): Yeah. Yeah. Yeah. Yeah. Like sitting, the problem with tournaments. Chamath Palihapitiya (01:36:33): Your RSVP to my game show up at 6 and David Friedberg (01:36:37): show up at 8:30. Yeah. Chamath Palihapitiya (01:36:39): And then listen to yourself on the pod and then leave. Yeah. Jason Calacanis (01:36:42): Just editing the pod on the table. There's David Sacks (01:36:43): a lot of things you can do while at a poker game. You can watch your podcast. You can edit your podcast. Jason Calacanis (01:36:49): For the sultan of science. The king of David Friedberg and, yeah, definitely the rain man himself. We're live from Davos. We'll see you next year. Bye bye. Chamath Palihapitiya (01:36:59): Wait. Did you give me the shout out? Am I Jason Calacanis (01:37:01): I did for the dictator himself. Use the promo code chairman. Dick no. Chairman dictates. Chairman dictator. Use the promo code chair, man, or Dick. To get 10.20 or 30% off, Chamath Palihapitiya (01:37:13): Can somebody from Manscape? Please let me cancel. Please, please. I it's like 10 bucks a on. It's just ten bucks a month. I I'll Jason Calacanis (01:37:22): give you the money. David Friedberg (01:37:23): I just don't want to Jason Calacanis (01:37:24): get I wanna be able to catch tell you ten bucks a month to send you all the utterance. Chamath Palihapitiya (01:37:30): We'll let your winners ride. Rainman, David, Saturday. Speaker 5 (01:37:37): And it said, we open source it to the fans, and they've just gone crazy with it. Uh-uh. Chamath Palihapitiya (01:38:01): We should all just get a room into have one big you, George, because they're all exclusive. It's like this, like, sexual tension, but we just need to release them out. We need to get murky's