市场大涨、媒体裁员、得州对抗拜登、金融科技清算与 ARkStorm 2.0

Jason Calacanis (00:00:00): It's just Chamath Palihapitiya (00:00:00): a real picture. Is this helping you? Come on, stop. David Friedberg (00:00:03): No. No. No. This is how this Speaker 4 (00:00:05): is gonna David Friedberg (00:00:05): be blessed here. David Sacks (00:00:09): I recognize they've got very it's like a fingerprint. Jason Calacanis (00:00:17): Oh my god. Yeah. Chamath Palihapitiya (00:00:19): Look at this picture. Speaker 4 (00:00:27): He's like an evil. This is such a disaster. He's not really David Friedberg (00:00:31): I don't think you guys know there's a pressure If you go to Google images, you type in Phil's name and W SOP, Jason Calacanis (00:00:36): which is the last thing I would ever do. David Friedberg (00:00:37): Dozens of these, dozens. Every year, he dresses up in some outfit. Jason Calacanis (00:00:42): Oh my god. Chamath Palihapitiya (00:00:43): Let me see which ones I like. David Sacks (00:00:44): Yeah. The plunging V lines a little much. I could do without the plunge. Jason Calacanis (00:00:48): He does have a perky c cup. So you sometimes gonna use your Oh, my lord, Nick. Pull this one up. Speaker 4 (00:01:04): Oh my god. It's Jason Calacanis (00:01:06): it's just incredible. It's just incredible. It's incredible. Speaker 4 (00:01:10): Oh, Jason Calacanis (00:01:11): no. Wait. It's Poseidon's well. It's no. No. It's beside you. Chamath Palihapitiya (00:01:15): Oh, oh, Phil, we love you. We love you. Jason Calacanis (00:01:17): We love you, Phil. Chamath Palihapitiya (00:01:18): You, Phil. Jason Calacanis (00:01:18): And Phil loves attention. Speaker 6 (00:01:29): We open source it to the fans and they've discovered Jason Calacanis (00:01:37): Alright, everybody. Welcome to episode 163 of the All in podcast with me. Of course, the sultan of beep science. We'll find out his crop soon, David Friedberg, and David Sachs, the Wayne Man himself. And, of course, chairman dictator, Chamath. Let's get to work boys. Tons and tons of interesting topics on the docket. Markets are ripping jobs and inflation looking good as the Dow hits an all time high. Forget about soft landings, boys. Sentiment is now flipping to a market meltdown in 2024. The GDP numbers that just came out smashed at 3.3% year over year in fourth quarter. Expectations were just 2%. Dow and S and P 500 both hit all time highs in the past week. 1000 above 38,000 for the first time in history. CPI number reasonable up 30 basis points months over month. 3.4% from last year, getting close to that 2% target. And, the jobs data beat expectations 2023 jobs. Not so bad at 2,700,000. It's the 5th strongest year for job increases since 2020. Real test will be, of course, this year. We've seen a bunch of layoffs. We'll get to that later. Gas prices plummeted 40 percent from $5 a gallon in the summer of 20.22. Now just $3 a gallon and consumers are apparently feeling great about the Economy University of Michigan, which is the most respected report on consumer sentiment. Said it increased in the past 2 months the most since 1991. And the Federal Reserve Bank of New York survey found that Americans inflation expectations have reached their lowest point in 3 years. Kolshi, is a prediction market I like to use, and it says 37% chance of a cut by March. That's dropped So people are thinking the rate cuts are gonna get pushed back and prediction markets also think 4 to 5 rate cuts still in 2024. But again, people seem to think they're gonna get pushed towards the spring or second half. Shamoff, you alluded to this melt up. Jason Calacanis (00:03:33): I don't know. Was it, like, 3 or 4 episodes ago? That we might have a chance of a market melt up. Everything seems to be aligning here. What do you think? Chamath Palihapitiya (00:03:42): I think the important thing to note is that Tesla put out a pretty important missive at the end of market close yesterday, which essentially said that Expect a very different demand curve in q 1. And you have to understand that Tesla has done the best job of understanding supply demand and their pricing power and the pricing elasticity of their cars. And so the fact that they put this out, to me, says that we are now really in the belt tightening phase of this kind of like economic process. So I think that the next probably 6 to 9 months are more of these kinds of things where folks realize that the amount of discretionary income that people had is less. They will either lower prices or lower expectations And so the the thing is then what happens to the market. This is sort of why about a month ago, when we on on the pot, I was kind of like we're gonna be in the melt up. And it's because the economy will cool. Demand will cool. Inflation cools rate cuts come in. Again, it's not really worth debating whether it happens in 6 months or 9 months, but when we look back 18 to 24 months from now, The market will probably be materially higher because there's just so much money on the sidelines, and that just continues to grow and grow and grow. So 1,000,000,000,000 of dollars on the sidelines, cooling economic consumption, actually on the ground, meats, reasonable to resetting to lower expectations for some of these companies. I think that all roads lead to a continued meltdown. Jason Calacanis (00:05:34): Sacks you were just at the prediction show saying, hey. Maybe it's gonna be a little bumpy. So and again, this isn't none of this is investment advice for for dude's talking, but What are your thoughts on the the economic data and the melt up scenario versus the soft landing versus the rocket landing? David Sacks (00:05:50): Well, Jason, we're only 3 weeks into the new year. So there's plenty of time for bumps here, but this report was good. I mean, the GDP growth was good. Inflation continues to come down. So you know, we are on track here for the soft landing, it seems like. But, yeah, there's definitely potential storm clouds on the horizon. Like Chamath mentioned, there's some data points out there suggesting that the consumer may not stay as strong as the consumer has over the past year. There's a few other things, though, that are kinda going on. The Fed has announced that they're gonna end BTFP, the bank term funding program on March 11th. That could reveal weakness in the regional banking system. Remember, we had a banking crisis in March of last year that BTFP sort of tapered over. You also have what looks like a crash happening in China. The Chinese government took some actions to prop up the stock market there, which is a pretty negative signal. That mainly impacts the Chinese economy, not us, but it will have an impact on the global economy if China has, you know, a big crash. And then we still have a lot of geopolitical risks. I mean, I still think we'd get an oil shock in the middle east if this situation brought us into a larger regional war, maybe with Iran, you could get, you know, a shocking price of oil, and then that could have a big impact on the economy. So, look, I think the baseline is that the economic outlook is good, but there's definitely potential for things to still go wrong. Jason Calacanis (00:07:17): Freight, we've talked about the debt here in this country, 35,000,000,000,000 now. Or so. What are your thoughts in terms of how politicians are gonna look at the future now and spending when they keep spending and markets keep going up. And maybe it's good for elections and getting votes as well. David Friedberg (00:07:39): I put a chart from Paul Krugman here. He put out this tweet analyzing unemployment against inflation over the last 20 years and plotted on a graph how they're related. And as you can see, there's a pretty linear relationship between unemployment and inflation, except for the last couple of years since COVID, where inflation has spiked completely off the charts while unemployment has remained low. And I think if you look at what's happened from a federal debt perspective over this period of time, We've seen US Federal Debt climb from $22,000,000,000,000 at the end of 2019, to $34,000,000,000,000, which is where it sits today. An extraordinary increase in in federal debt in the last couple of years which largely explains what happened. We effectively took this massive hole in the economy that erodes from the pandemic. And the shutdowns around the pandemic, and we filled that hole with money. And we took on debt to fill that hole. And as we filled that hole, assets inflated, financial assets inflated. So the stock market went up. Even as, you know, core inflation and economic growth meant that we were paying more for less So things look good. The stock market as an indicator looks good, but it's largely been filled by the capital that we've now taken on into the economy through fiscal and monetary policy over the last couple of years, which has driven up inflation over this period of time. And now at some point, we're gonna have to pay the cost for the whole and the economy over the last couple of years. So we bridge the gap, but we've got a bigger problem looming on the horizon. If rates don't decline fast enough, I think I Friedberg do the math on this every day that interest rates are off are 1% higher based on the current federal debt level. We're paying an incremental $1,000,000,000 in interest payments per day. The US is. David Sacks (00:09:38): That makes sense. I mean, actually, let's pull up this chart real quick. I think the average interest rate on our debt is now around 3%. That's up from about 1 a half percent in 2020. So during the the zirp period. And the tenure is still at, what, 44.1%. So there's still room for that number to move up. Even with rate cuts on the front end of the curve. And you can see that if you annualize the q 4 interest that we paid, surround a $1,000,000,000,000, which makes sense. Right? You got about 34,000,000,000,000 of debt about to be 35,000,000,000,000. 3% is 1,000,000,000,000. And so if you were to your point 1,000,000,000 a day, 365,000,000,000 a year, yeah, that's basically 1% of a $35,000,000,000,000 debt number. So, yeah, that makes sense. David Friedberg (00:10:26): You know, it's pretty scary because it's already consuming a large chunk of the federal outlay, and we're still running $2,000,000,000,000 deficit. I'm not a single person talking about how we end that. Why is it important? We had to keep the stock market up. We had to keep financial asset prices up because we're so heavily levered. And if they fell down, pensions, retirement funds, everyone's housing value, where most people have most of their net worth tied up collapses, it creates a cataclysmic effect. So we had to inflate all these assets. And that's what happened. We filled that hole over the last couple of years. Now we've got the quandary of how do we get out of the hole that we're gonna have to pay back over time. Jason Calacanis (00:11:02): Yeah. And we cut these rates to lower our interest payments. What's gonna happen? People will take money that's sitting in cash as you've pointed to Tremont is 1,000,000,000,000 of dollars sitting in cash, and they wanna look for some returns on Alpha. They're gonna put it into markets Jason so then we have a rush into the magnificent 7 and maybe even, you know, the next tier of Sacks. Yeah. Chamath Palihapitiya (00:11:26): I think that's what's gonna exacerbate all of this because You you can't correlate stock market returns with the number of people that are actually making money. So even though the top 7 stocks are going up, those holdings may actually be concentrated enough that it's not the case that the millions of market participants are actually seeing those gains. It's just that a smaller percentage, that's gonna further exacerbate the sense of fomot that everybody has because they own all of these other stocks. Let's just take the top 500. So even if you own the S and P 500 or some component of it, There are 493 other companies that people just don't care about Jason Calacanis (00:12:10): right now. Chamath Palihapitiya (00:12:11): And that's crazy. So all of that pressure is just gonna create a lot of psychological necessity in people's minds at some point where they just see these things going up where they say I need to be a part of this. And I think that's what unlocks a lot of this money on the sidelines and then As long as you have rate cuts and reasonable inflation and reasonable growth, there's no reason to think that the that people will not reinflate risk assets. Jason Calacanis (00:12:38): And just so people know, about Sacks% of Americans own equities, it always goes between 50 Sacks. Interestingly, it kind of parallels the, homeownership in the country, which is also low Sacks. It went as high as, I think, 67 and 68% homeownership. Right before the great recession. So Sacks, 2007, it kinda peaked. So now everybody, Shamoff, runs into equities. Those go up. And then consumers, maybe some percentage of them feel affluent. They feel rich again, and they start spending again. And then the inflation might kick back up. Is that the cycle we might see here? Chamath Palihapitiya (00:13:14): I don't think so. I think that rates are probably I think that we're in a much more interesting and non obvious trend that I think is worth talking about, which is that for most of us, forget boomers for a second. So take people that are 50 years down. We've spent 20 years of our productive economic lives. So for us, Jason, that's 2 thirds of our productive economic life as workers. For younger people, it's a 100% of the reproductive economic life as a worker. In a 0 rate environment, and we adjusted and we made decisions because of some variables that were true, that may fundamentally no longer be true. And one of the things that I think we've never really understood is how to build a business in the face of sustained rates that are not 0, that are not always getting cut that don't have 1,000,000,000,000 of dollars of stimulus because of government stepping in as Friedberg, while David, to fill these holes. If that doesn't happen over the next 10 or 15 years, we're in a different phase, which we've not really seen for our generation. And I think that's really what is worth debating is, are we at this inflection point where rates will always be between 2 4% for a very long time? And then, you know, we said this last week. This is why there will be gross margin decay. This is why the governments will step into make sure that winners don't get much, much bigger. All of these things are about using the tools of capitalism to basically reallocate who the winners and losers are and to reallocate what the risk free rate of return will be in a world where it's just very different than what it was. And I think that that's that's the really big question that I have in my mind. Jason Calacanis (00:14:57): Yeah. And if we were to look at the fed funds rate, we've lived since 2010 with almost no, yeah, 0% interest rates essentially. But if you go back to the eighties nineties, when we were first starting our careers, it was a much different situation for mortgages and for. This is the fed funds. Right? Mortgages, you can add a couple points to this to get the equivalent. So what do you think that'll be, Sacks, if we're gonna be operating businesses differently in this environment What is the new discipline gonna be here, or do you think we're gonna get right back to, you know, when interest rates come down to 3% or 2% or whatever? We're gonna just get back to the party. David Sacks (00:15:34): Don't think it's ever gonna be quite the party that it was in 2020 2021 where both the Fed and the federal government were just air dropping money into the economy. That beginning of COVID, the economy was contracting at an annual rate of about 30%. And we ended up adding, what, 7,000,000,000,000 or so to the national debt to basically pay per over that problem that we largely created through the lockdowns. So in any event, it's never gonna be like that again because we're never gonna have that magnitude of money air dropped on the economy, but will things get a little bit frothier if rates go down? Absolutely. Yeah. But I think that just because short rates come down, meaning the Fed drops, the Fed funds rate from where is it now, like, 5 a half to, I guess, expect to come down to 4. Doesn't mean that the long term rates called the tenure will come down much. I mean, normally, the yield curve is upward slipping. So, you know, in a normal economy, it's not clear that the 10 year is gonna be gonna be going back down to 2, 3% where it was during the zirp period. It probably will be around 4% plus or minus. So just capital will be a little bit scarcer, and valuations will be lower, more normal, but things could pick up, for sure, relative to where they've been in the last couple of years. Jason Calacanis (00:16:53): Last couple years has been brutal, but, yeah, I'm I'm I'm with the rest of the panel here. I don't think we're gonna see. I don't think in our lifetime, we're gonna see that 2020 2021 again. I don't think that's happening for 20 years or so. Alright. Jason. Speaking of, like, the economy, layoffs have continued, not just at tech companies, but wanted to point out just how brutal this has been for media companies recently. In 2023, 20,000 job cuts, That's on top of 30,000 during the COVID era, and it's not stopping business insider just amounts 8% cuts. And A times cut over a hundred people. The billionaire owner of the LA times says he's getting close to a 1,000,000,000 lost owning that asset. Use air quotes on the term asset. Condi asked cutting 300 people, and all of this is happening while unions are hosting what I'll just call meaningless protests. Sports illustrated pitchfork, 2 really well respected brands. Obviously, They're done. Basically, they're cutting a 100 several sports illustrated. Fox cut another 4%. Jezebel shut down. Vice went bankrupt last year. It's just absolute complete chaos. And Bill Ackman is loving it. Business insider is a sleazy unethical defamer of some of our greatest heroes. It's a worth PO has ragged run by the lowest of the low in journalism. It is a stain upon humanity was his quote today. His commentary on the press. David Friedberg (00:18:17): Jason, you you've run, like, these media businesses before, like, what's the underlying economic condition here? That's changed in the last couple of years that's causing all these layoffs to happen. Like, what what do you think is actually Speaker 4 (00:18:31): Yeah. David Friedberg (00:18:32): Going on? Like, like, financially with these businesses. Is it our advertiser is running away or what is it? Jason Calacanis (00:18:38): Advertising and classified businesses got gutted and, obviously, print got gutted over the 20 years. Google and Facebook, all the gains and advertising have gone to those 2 firms and now TikTok, obviously. And Amazon Uber Building respectable ad businesses as well. So All of that takes ads out of publications and puts it closer to the point of purchase, right? You're on Chamath. You're you're right there. With the buy button. So would you advertise and the New York Times are there? So if you were to look at, like, say, a journalist salary, Speaker 4 (00:19:08): pick Jason Calacanis (00:19:09): a 100,000 all in fully baked. Most journalists are at 50, Sacks k in the United Sacks, you know, get up to 80, 90, a 100 k would not be abnormal. Well, your overheads gonna typically be 2 or 3 times that. So you can put that journal. Is that $200,000 or $300,000 in cost? You look at that, what can a journalist do in terms of the number of stories a week? If you had them as a beat reporter, maybe two stories a week, You do two stories a week. If you're, you know, a 100 k salary and then you have, like, maybe 2 or 300 fully baked with overhead and managers and salespeople, that means each story is costing about a thousand bucks. If you were to do a $10 CPM or RPM on that, That means every story to break even in today's market. We need a 100,000 people, a 150,000 people to read it. Obviously, that's not happening. So these publications are just hammering hemorrhaging cash. If you were to put that same journalist on a subscriber platform, I think they gotta get, 15, 20 subscribers per story for a year to hit their just their salary. So the economics are just hugely broken except for subscription business. There's a ton of other nuance, but I could draw it on and on about it. But the the math basically does not work. At the same time, Sacks, you have experts, right, who are now going direct. So if you want Draymond Green and JJ erratic to tell you about basketball, you can watch them talk about it. Yeah. I did a tweet on this the other day. Or if you want, this is, you know, just not to chew our own horn here, but we're the number one business and tech podcast, then we do this as experts in the field. We're not journalists obviously. So That's probably, I would say, experts encroaching and people going direct to sources. That's probably taking 20 or 30% of an already crippled business. So it's gonna get worse and worse. Jason Calacanis (00:20:48): And, of course, having unions and going on strike, Friedberg at the same time is, like, literally the kitchen staff on the Titanic. You know, like I just say doing a pro doing a walkout after the Titanic hit Friedberg. Like, it's completely meaningless. David Friedberg (00:21:01): I think that there's this, like, flow attrition over time away from centralized sourcing of data Speaker 4 (00:21:08): and centralized analysis of David Friedberg (00:21:08): that data to a more decentralized sourcing of data and then distributed analysis of the data, which is the evolution of the internet has enabled that to compete traditional media has largely had to create sensationalist approaches to taking the data that's out there and creating stories around it that are more sensational that bring emotion that make people upset, that make people happy, that drive an emotional reaction. If you look at the New York Times, and you can look at these archives online from the 19 Sacks, the articles are so damn boring. Like you read them, it's like literally just reading a ticker tape of information, there's nothing that we see today represented in the media of old, which was really the source of data. It and now it's had to have become a narrative that's had to have become a storytelling operation in order to keep people's attention and to drive clicks. The problem with that is that over time, the media businesses have lost the trust and faith of the viewership and the readership because they see how much of this is biased and opinionated and they don't just get pure analysis and pure data. So in the current model, which you're you've described well, I think it's more about fact that you've got all these crowdsourced citizen journalism type systems, whether it's Wikipedia or Wiki Sacks or Twitter where people are pro or YouTube, people are putting direct video, direct evidence, direct David, direct documents on the internet. And then analysts, like, we're a good example of four people on a frigging podcast that just talk about stuff that we're reading and data that we're picking up and we analyze it in a way that people then choose which analysts do they wanna go to for which understanding of data that's out there. And that model totally breaks the old media model which unfortunately is evolved into this, like, untrustworthy, biased and opinionated source to keep the business alive. So it's definitely a breaking that's happening. I think it's very hard for that model of centralized sourcing of data and centralized analysis of data to happen in one place to continue in that old form. David Friedberg (00:23:04): And this is definitely the breaking of the old. Chamath Palihapitiya (00:23:06): I went to trends.google.com, and I just compared wsg.com to bi.com to twitter.com to New Yorktimes.com. And what's incredible is 2 takeaways. The first is that media is really the least relevant it's ever been, and they really are on a lifeline. That's number 1. And second is if you just scroll down a little bit, Nick, Twitter is really like a a universally relied upon resource in the United States. The WSA actually also does a pretty good job, but if you look at, for example, business insider. It's really 3 States, Texas, California, and New York. And if you look at The New York times a little bit further down is a bunch of the traditional democratic states. So what you have is this regional kind of segregation that's happening in terms of information. But for the most part, nobody cares about these print outlets. And I think that that explains why you're forced to lie if telling the truth, which is basically a commodity. It's it's weird, but it actually is a commodity. It's just there. The truth is there. And you can't build the business by telling the truth. You have 2 choices. One is to opine on the truth, opinion, but that then is a function of frankly, to be honest, your intellect and how interesting you are as a person and how you relay that information, and you see the people that do that well you can debate the truthfulness of all of these people, but the Rachel Matas and the bench of heroes of the world Tucker. Tucker. They're just extremely eloquent interesting arbiters of the information. They they may take spicy takes on the truth. Yeah. But they don't outright lie. And then you have everybody else who's frankly not nearly as good as them, and the choice is to lie. And that's why Ackman can say this about business insider because business insider doesn't have for Rachel Maddow, nor do they have a Tucker Carlson or a Benjapiro. And so what choice do they have except to lie. Chamath Palihapitiya (00:25:11): And so for all of us, it's a very simple litmus test. You're better off trusting a really opinionated articulate Jason. Why? Because the thing that they probably don't wanna lose is their fame. But the anonymous person that business insider has gone into a totally different direction. They've decided to lie as a service. And so you just have to ignore it all. Speaker 4 (00:25:37): Yeah. Chamath Palihapitiya (00:25:37): Because you can't rely on it. That's my simple takeaway looking at it. Jason Calacanis (00:25:41): Yeah. No. I I like it. It's a good type. Hot tech. Spicy. David Sacks (00:25:44): Yeah. I mean, look, I think there's several things going on here. One is that outlets like business insider have an incentive to be sensational and to either lie or to cherry pick in the way that Chamath is saying. And basically, they put out a lot of clickbait deformation. I mean, that's basically what Akhmah is saying. Second, I think there's a glut of a lot of mainstream media publications all putting out the same thing. And it's not the truth. It's the official narrative. So, you know, how many political reporters do we need just being stenographers for the White House kind of party line. And if you're not gonna actually dig deeper to expose how the official narrative they're telling you is not the truth. If you're simply gonna print whatever they tell you to print, then why do we need so many of you? So I think that there's a glut of publications. It's all putting out the same official narrative. I think the third thing is there is a go, go broke dynamic going on. I mean, you talked about, like, the LA times. The reason why they're losing so much money is that family that bought it, they put their woke daughter in charge of it. And this is basically, a a woke nepo baby on steroids, basically an Alexander Soros type who's made the LA times that the most radical woke publication you know, within the range of the mainstream media. Remember, they're the ones who put out that ridiculous story on Larry Elder called the face of white supremacy or something. Yeah. In the case of sports illustrated, they they basically pulled a bud light, and they lost lost subscribers when they put a trans person on the cover. I mean, of Jason Calacanis (00:27:18): the swimsuit issue. David Sacks (00:27:19): The swimsuit issue. I mean, look, they had a formula that worked there. What their audience wants is Christy Brinkley on the cover, not Della Mulvaney. Okay? I'm not mean to offend anyone by saying that, is this the truth? And then I think the last thing is, Jason, what you're saying about the experts. I do think that the gel man, amnesia effect may be wearing off. Remember what Michael Creighton said about the gel man, amnesia effect, where Jason Calacanis (00:27:42): you read David Sacks (00:27:43): one part of the paper where you actually know something about the subject matter, and you realize it's all just lies or lazy reporting. But then you turn the page to some other part of the paper. You don't know as much about assume it's true. I think because experts are able to go direct for every section of the paper. Now people are realizing that the whole thing is bogus. And I think gel man, amnesia, is starting to wear often. People are realizing that they should just go around these official channels and get their news direct. So it's not because these publications are telling us the truth in a boring way that they're losing readership. I think they're losing readership because it's not telling us the truth at all. And I think a boring version of the truth would sell better than what they're doing right now. Jason Calacanis (00:28:24): And this is why I think subscriptions are starting to work. People are doing subscription podcast, subscription, newsletters. So, you know, it's a little bit of back to the future, but you can lower your overhead, have one person doing real journalism. And there you could actually the needle. You can get a thousand people to give you a hundred bucks. You can get 2 or 3000 people to give you a hundred bucks or two hundred bucks, and that's enough to cover a couple of solid legit journalists doing legit journalism. Chamath Palihapitiya (00:28:49): I have a question for you. Doug, do you think there's a business opportunity to actually build like an AP news, which is just basically like there's no byline, and they just write the truth. And they make it super cost effective for anybody else to just license the truth so that they know it. David Friedberg (00:29:07): But why do you need an arbitrator? Jason Calacanis (00:29:08): Well, somebody gotta be boots on the ground to go. Chamath Palihapitiya (00:29:10): Somebody checking boots on the ground to just tell the truth. David Friedberg (00:29:13): Doesn't the distributed model work for that? But people just post Jason Calacanis (00:29:16): You don't know. I mean, Jason. We we all the time have this when we're building the docket, like, Kane Kowa, you know, random Twitter account where, you know, Tyler Durden, you know, 0 hedge. Like, Who are these people? What are their motivation? You don't even know their names. That doesn't mean they don't get stuff right, but you may wanna have somebody actually go check that this person exists in the real world so to your answer your question, you know, you would need people to subscribe to that service. An economist, AP News, and Reuters are the closest to what you described. The economist doesn't use people's buy lines. They have people work on the story together, and the economist is the brand. APM Reuters obviously do typically have the journalist's names on it. But to describing news wires, they're they're not great businesses. Chamath Palihapitiya (00:30:00): I think APN Reuters are just as bad as everything else. I think what I'm saying is, like, you know, maybe Twitter should have like a new service, which is just like, here's the truth. Jason Calacanis (00:30:07): I'll argue David Friedberg (00:30:08): that page rank which is Google's algorithm for determining which sites to rank higher or lower. And the protocol for Bitcoin and other systems that operate on the internet have all kind of followed the same model where there's some system for scoring or for voting the quality of the site. In in page ranks case, it's how many links come in in Bitcoin. There's a voting system. That determines whether or not the, the transaction should be approved. And I think in Twitter, the number of followers seems to be a proxy for the quality of the account. There's some version of that Chamath that I think just naturally evolves on the internet versus saying, let's pick the arbiter of the data and let that state be static versus let it be dynamic and let the system of consumers dynamically vote on what is the arbiter of the data which seems to be working with Wikipedia seems to be working with page rank and other systems fairly well. Jason Calacanis (00:31:02): Unless you look at your own Wikipedia page and you realize it's completely biased. And, yeah, is the function of the people David Friedberg (00:31:09): trying to find. What happened to your work? Is there something bad on your Wikipedia of it? Jason Calacanis (00:31:13): I went to the early Wikipedia conferences in couple of years of Wikipedia. And the bios of living people, BLPs were the biggest problem they had because Right. You had people like let's say, you know, you had a company fail or something. Somebody was an investor in it. You know, they're motivated to write something on your Wikipedia page, you fired somebody, whatever. And so the the people who have the wherewithal to edit your Wikipedia page if you're a human, alive today, sometimes is your detractors. And that's just Yeah. David Friedberg (00:31:43): But over time, if you're doing that and you get down voted, you no longer have authority on Wikipedia. That's part of how that system works. I think that practically has Speaker 4 (00:31:51): to work. David Sacks (00:31:51): Doesn't work very well. It's been totally Yeah. It's been totally weaponized. Yeah. Speaker 4 (00:31:54): It's weaponized. I don't think David Sacks (00:31:55): it's been weaponized by people with money. I think it's been weaponized by interest groups. Jason Calacanis (00:32:00): Yes. David Sacks (00:32:00): Mainly left wing interest groups, activists who are well funded, and it's their full time job to basically disseminate. They're propaganda on sites like that. David Friedberg (00:32:10): Ideally, that becomes a temporal phenomenon that they're because if you picked an arbiter and you said this is my source of news, my source of data, my source of truth, Over time, that source becomes Sacks, it becomes biased in some way. And so I think having a system that's dynamic where those who are doing the editing, those who can be voted up and down, and ultimately the them, can be voted on by the consumers of the system. So anyway, I just think that's naturally how the Internet's gonna evolve anyway. David Sacks (00:32:35): I think it's crazy to rely on one source. Especially Wikipedia, although I do use Wikipedia for some things. But I guess what I do is I try to triangulate to the truth based on having a number of source I mean, isn't that what Jason Calacanis (00:32:47): you'll do? David Sacks (00:32:47): And that's why x, you know, formerly Twitter is the best way to get news. It's the main way I get my information. Is because I can triangulate towards the truth by looking at my feet and I'm following a couple hundred people who I take seriously, and you can kinda figure it out. Speaker 4 (00:33:02): Oh, yeah. Because if you saw Jason Calacanis (00:33:03): a business insider story over here and then you hear Bill Ackman give his side of the story, now you've got the principle in the story going direct. And and I think that's where going direct and experts have created that triangulation. You can listen to this podcast. You go to direct to Wikipedia and check our Sacks. You could look at people criticizing us or creating derivative podcasts of this one, of which there are many. And, like, you can kind of get all these, different vectors and angles to to kind of find the truth. But to your answer, Shamoff, rich people, you can't get rich doing what you're describing and running a company. So smart people are looking for opportunities to maximize their compensation. And that's it's kinda like teachers. It's we don't pay teachers enough. You can't pay journalists enough because system is broken. Therefore, you're just getting lower and lower quality people in the profession who the smartest people leave and become venture capitalists marketing communications, people, developers, whatever, or they do solo stuff. So I think the solo journalism, the independent voices is end up being the solution because nobody's gonna wanna try to hire a 1000 journalists for a 100 k each. And then if they get really smart, what do they do? They get hired by somebody like you. Right, Shamal? Become work for one of us or come work for one of our companies when they get to the ceiling of what they can do at business insider or vice or wherever, they're gonna go try to look for a $200,000 a year, John. Chamath Palihapitiya (00:34:24): I think this is important for the following reason. I think that society if society doesn't have a good way of getting to the truth. It just ends up really decaying in very bad directions. And there's all kinds of truths that are out there that we ignore because people can actually just totally change it where I would rather be in a place Jason there's the truth, then there's the opinion on the truth, and then there's fiction. And I I'm fine with all of it existing. It just needs to be better arbitrated because I think there's a lot of people who don't know any better who should know better and who will just make an assumption, and then that's a very limiting limiting decision for them. Jason Calacanis (00:35:10): The whole process begun is super messy, but that's actually a good thing to happen. The reason it's getting messy is because people are challenging sources of the news. So you don't just believe a politician about what's happening at the border. You don't just believe a publication about what's happening at the border. You see citizen journalists going to the border, whether it's Elon or RfK went to the border. People are going there and saying, well, I'm gonna go check it out for myself and see what happening there, actually. I'm not just gonna trust a publication. I'm not just gonna trust a politician. I'm gonna go myself. And and and that messiness has now led to a more vibrant system, but it's it's messy. Chamath Palihapitiya (00:35:47): I think it probably also led in part to Texas suing the federal government. Jason Calacanis (00:35:50): Yeah. Which we'll get to in a moment. Yeah. For sure. And, you know, if you think about that, we were trying to parse the numbers here. Remember, we had the number, and we were trying to parse the number of encounters. So we, we never were able to get a number. We still don't have a number. David Sacks (00:36:04): No. It's not true. The numbers David Friedberg (00:36:06): are I didn't Jason Calacanis (00:36:06): finish my sentence. We don't have a number knowing how many people have gotten past the border. We know how many people got intercepted. We don't have the number people who didn't get intercepted by definition, we don't have that. We only have the ones that are encounters. That's why they call an encounter, sir. David Sacks (00:36:21): You've been running interference on this point for like a year on this pod, like saying that we don't know the numbers and Fox News. This is providing you know, biased footage, and it's not really a crisis at the border. And Jason Calacanis (00:36:35): No. I said I said I wanted to know the numbers but the only numbers we can get was encounters, not how many people have actually counted. David Sacks (00:36:41): And they're like 6,000,000 encounters since Biden Jason Calacanis (00:36:44): took off. They finally updated those numbers, Sacks. David Sacks (00:36:46): The numbers increase, like, hockey stick. Show the chart of it. It Sacks like a hockey stick. Every David Friedberg (00:36:50): year is last Jason Calacanis (00:36:51): year, it wasn't. That was the point. When I showed it last year, it was flat. David Sacks (00:36:54): Week, every month, every year is Jason Calacanis (00:36:56): a new high. When we looked at it last year, it was flat. I'll pull up the episode. No. David Sacks (00:37:01): It wasn't. Jason Calacanis (00:37:02): At the time, it was flat. It was it was only in the last year, David Sacks (00:37:05): and it started up like a rocket since COVID. Jason Calacanis (00:37:07): Okay. We'll we'll pull it pull it up. So if you look at this chart, this explains David Friedberg (00:37:11): it perfectly. Jason Calacanis (00:37:12): So let I'll explain this chart. David Sacks (00:37:13): Where's that from? Jason Calacanis (00:37:15): This is from the CB aspect, the border patrol. So this is the exact chart that we pulled up last time. And as you see, Yellow 2022 was essentially flat and then the dark blue 2023 2021 Sacks. See, this this chart is not correct. And then if you look, the one thing that does look like a massive spike is 2024, So there was David Friedberg (00:37:38): and I David at the time. Jake L, it's showing from June, December, a 50% spike. Jason Calacanis (00:37:42): Yes. That's what I'm saying. But if you look when we looked at this last year in 2023, Uh-huh. It was it was right there. June, when we started talking about last year at David Friedberg (00:37:51): this time, Jason Calacanis (00:37:52): it started to spike. But the other years, it was flat. It's my point. It was flat and then it just started the and that's why I think even trusting the numbers is my point. Like I mean, I don't know if numbers weren't changing Sacks. David Friedberg (00:38:03): Like, from October 21, there was a 100,000 encounters at the border to this last COVID, by the way. 300,000. Jason Calacanis (00:38:10): Look at the look at the yellow line. 2022. David Friedberg (00:38:13): It's like tripled since in the last 2 2 years. That's crazy. David Sacks (00:38:18): Like, here's another chart from the Wall Street Journal. This goes back a long way. This is from, I believe, October. So it's already four months old. But zoom in on 2020, like I said, it was at a low there you know, under Jason Calacanis (00:38:32): hiring a David Sacks (00:38:33): 1,000,000. Yeah. Well, yeah. And then but even if you go back, it looks to me like since about 2010, We've been holding it to under half a 1,000,000. And since 2020, basically, since Biden took over, it shot up like a rocket. And what I've been reading in recent articles, again, is since October every month, every week, every day is a new high. It's not a stable number because, obviously, there are millions, hundreds of millions of people all over the world who would like to come to the United States if they could. Yeah. So as the word gets out that we have an open border, they're gonna come. And that's what's been happening. Jason Calacanis (00:39:06): It's gone viral is what's basically happened. And also what what went viral was there are YouTube videos now of how to claim asylum. So everybody's kinda hacked it. It's completely I guess we could go which way do you wanna go? Do you wanna go right to the border now since we this has come up or Yeah. David Friedberg (00:39:23): Let's talk about what they're talking about. Is Texas gonna secede from the union, Seth? Jason Calacanis (00:39:28): Alright. What's gonna happen? Do you wanna just go you want me to tee it up or you wanna just start talking? Well, I David Sacks (00:39:32): think we should explain Jason Calacanis (00:39:33): Let's just talk about it. Last year, as everybody knows, Texas started installing razor tape, razor wire along the Rio Grande near Eagle Pass. Federal border agents, the feds removed it in October, Sacks sued the federal government to stop them from removing in December, a federal appeal court temporarily ban the border patrol agents from removing the razor tape, then the Biden administration asks the Supreme Court to intervene Then last week, Biden's office told SCOTUS that, a couple of migrants tragically died, a woman and 2 kids near that same area. We got a ruling on Monday. Roberts and Amy Coney Barrett actually voted against party lines and supported the feds The justices didn't explain their decisions, but this basically upheld the prior ruling. They gave the federal government so responsibility for border security governor Abbott has responded. And he is saying that he's gonna challenge the Supreme Court ruling and that Texas is under Jason, and it's going to defend itself. That authority is the supreme lord of the land and supersedes any federal statues in the country, you said. Speaker 6 (00:40:35): So, Jason Calacanis (00:40:36): Saks, what are your thoughts here? Is this And there I guess there's 2 things. I'll ask you that. Is the ruling a good ruling? And is it in terms of law and constitution? But is it a bad implementation given the circumstance of the board? David Sacks (00:40:49): Well, I think governor Abbott here is probably gonna lose in a court of law, but he's gonna win in the court of public opinion. The public by a huge majority once this border enforced. They wanna have border security. They can see the photos and the videos and the numbers and the charts. Of record breaking illegal immigrants streaming into the border. And again, it's not stopping. It's growing. So I think that governor Abbott is on his way to being a national hero for standing up to this. And it's outrageous that the border agents are actually removing the border security that Texas is added. We're supposed to have a border wall. You know, I'd rather have a wall than barbed wire, but if we can't have a wall, then you take the barbed wire, and they're actually cutting it down. And this is following in a pattern of the Biden administration. Remember, when Biden first came in, there were pieces of Trump's wall that hadn't been finished. And they basically stopped construction and they sold off these large pieces of wall that were just laying on the ground as scrap metal for 2¢ on the dollar. And remember that, Robert F Kenny flagged this when he went to the border at the beginning of his campaign and said that it was petty and outrageous that Biden had done that Then Biden changes the whole remain in Mexico policy, and he starts granting asylum to to what are basically economic migrants who are streaming into the country. And what the asylum rules say is that the immigration officials are required to de obtain asylum applicants who are not what's called, quote, clearly admissible. So if you're not clearly admissible, you're supposed to be detained. You're not supposed to be let into the country. And the Biden administration has basically paroled millions and millions of these economic migrants who are not clearly eligible for asylum into the country. They just hand them a tick and say show up in court in 3 years. David Sacks (00:42:47): We know that's never gonna happen. Has gotten to the point where the mayors of Blue Cities like New York And Chicago have tapped out and David, we can't handle this. We've run out of space. We run out of hotel rooms. We've run out of budget to accommodate all of these migrants. And these are sanctuary cities, and yet the Biden administration has persist in this policy. And now they're actually removing border security. They're actually cutting the wire. It's unbelievable. And when Texas has tried to reinstitute it, they've actually gone to the Supreme Court. I mean, to do that, Biden has to send his solicitor general to the Supreme Court to take on the state of Texas. So look, At the end of the day, governor Abbott may lose this case, but I think he's gonna win over the American people. And I can't understand why Biden in an election year is pushing this this losing argument. I mean, I think this is his worst issue. Maybe inflation is slightly worse, but there's not a worse issue for Biden and the Democrats than border security and to actively be fighting Texas on this. When Texas is just merely trying to reinstate a border. This seems to me like a crazy political strategy, and it just shows you how fanatically wedded the Biden administration is to this policy. Jason Calacanis (00:44:04): Yeah. And the country is not if you look at the CBS news poll, Chamath Palihapitiya (00:44:10): This is just from September to now should be tougher, 55% to 63%. Just just one second here, which is just it's important to note that I don't think Biden's contesting Texas has anything to do with their desire to actually keep the border opened. I think what they were saying again, we can debate whether it's right or wrong, but what they were saying is the federal government needs due access to all of these places. And we need to get we need to cut through this concertina wire to get access. And we can't now because this wire is there and the Texas National Guard, and all of these folks are there. And so just give us the due authority that that we have to do what we need to do. That was what they were saying in the lawsuit. David Sacks (00:44:54): Now Right. That sounds like total nonsense to me. Chamath Palihapitiya (00:44:56): The byproduct, David, is what you're saying, which is it does then facilitate more illegal migrants to be able to cross in the intervening time because I think that then what the government federal government isn't saying is here's our plan to secure the border. They're just saying we need access in order to render critical aid if one of these folks gets sick or drowns or what have you, and that's why these three people died. So cut, you know, remove this wire so that we can do what we need to do. That's what they're saying. David Sacks (00:45:23): Yeah. So on the migrants who who drowned point, what governor Abbott says is, look, if you actually had security along all of these points where you've put in the wire, it forces the migrants to go to the 20 something checkpoints where you actually have an organized process, which is where you want them to go. They wouldn't be trying to swim across the Rio Grande. And enter through all these different areas if you could funnel them through border security to the checkpoints. And the federal government does control those checkpoints Jason I'm sure that, you know, if Republicans could control it, Republicans like Abbott, they would be detaining asylum seekers that weren't clearly admissible, but they don't control those checkpoints. So the federal government can still implement the policy at once. I actually think that fewer people will be drowning the Rio grant if they were actually to again, push everyone to these checkpoints. So I don't really buy that argument, and it looks to me like the Biden administration has now crossed over from failing to do its duty because, again, it is a federal responsibility to enforce the border, and the president has a constitutional duty to enforce the laws of the land. So he's moved now from failing to do his duty to act as sabotage. I mean, this is actual sabotage where what little border security that we have in these parts of Texas, they're taking down They're cutting in the wire. I think to most Americans, they can't fathom that this is Biden's policy. Jason Calacanis (00:46:50): What is the reason that this if Biden wants there to be free flowing immigration, which he says he doesn't, but if he did, why would he want that? What's the What was the reason? David Friedberg (00:47:03): There's some arguments I've heard from economists that the fundamental value the US can gain from the flow of immigrants across the border at an accelerated rate is to lower the cost of labor. And so you get low cost labor to participate in the labor market we have skyrocketing costs for, you know, basic goods and services, many of which are tied ultimately to the cost of labor in the US due to the tight labor market. And so if you can open up more manual labor roles in the US or fill those manual labor roles, with a lower cost of labor, you can bring inflation down. You can bring the cost of goods and services down. So there's an economic argument for doing that. And it also grows the economy because fundamentally when you have more productivity through more participation of the labor force, you see the GDP grow and you also increase the consumption of goods and services in the US by the immigrants that are coming across the border. So the there's there's an economic argument that's Jason Calacanis (00:47:58): a theory. Yeah. David Friedberg (00:47:59): That's a theory that folks don't wanna say out out loud. They don't wanna be very public about it, but there is kind of an underlying kind of economic story that behind closed doors, folks that are making, about why you wanna see this happen particularly now. Jason Calacanis (00:48:11): Chamath, what do you think of that theory as proposed? I'm not saying that you're endorsing that Friedberg, but I have also heard people say that that's the reason. And why would Democrats be in favor of that over say republicans? Wouldn't both of them wanna see the economy grow and have more labor available in record low unemployment, you know, whether you agree with her or not. So or is it just become a political weapon now. Yeah. What do you think? Chamath Palihapitiya (00:48:37): I think that theory is stupid. If that theory were to be valid, let's let's try to steal man why that theory could be true even though it's was probably thought up by a nitwit. You would want to know, first of all, All of the different types of labor shortages that exist, and then you'd wanna know all of the different types of labor inputs that these people can provide. And then you'd need to know all of that labor demand by geography, and then you could sort of like do a reasonable job of allocating that supply and demand. So if that was really the case, it's even more reason to have an organized border. Why? Because as David said, you get them through very specific points that allow you to actually enumerate these details about these people and then actually send them to the places where they are actually needed so that then they can become a productive part of the economy where they can lower labor costs, etcetera. What that explanation does is actually tell put a nice lie in front of what is the actual truth. I think that there are a lot of people who feel fundamentally guilty because a lot of the quality of their life, they didn't earn necessarily. And so they have this self loathing that they feel like they can appease by allowing all of this other stuff to happen. And one of them in this weird way is immigration. But if you actually ask an immigrant, somebody like me, I kind of feel that it is very unfair for those of us who actually stood in line who waited years, and in some cases, I know decades highly skilled individuals to try to actually fill this labor gap that you talked about, who are prevented or who are slowed down from actually doing what you say that theory is all about. So I I just think that this is just frankly like a lot of folks that live in a very, very comfortable way who feel fundamentally guilty. And so they're like, let me share my largess and riches with other people. And maybe that comes from a good place But the manifestation of that is bankrupting all of our major cities, and it's creating an enormous security vulnerability for this country. Jason Calacanis (00:51:08): Yeah. I mean, you could describe it to having an open heart and and wanting more people to come into the country, but it's crazy because you have to have at least some control over this Chamath Palihapitiya (00:51:18): Zach, we talked about this control. What about just documentation and awareness? Of course. Yes. Jason Calacanis (00:51:23): I mean, terrorists could be flowing across the border right now. Chamath Palihapitiya (00:51:26): But, Jason, what about something even as simple as, like, communicable diseases? Jason Calacanis (00:51:32): I mean, yeah, more criminals. David Sacks (00:51:34): Members, the cartels. Jason Calacanis (00:51:36): Gang members and and criminals also. Like, we should we we've talked about this before point based systems and merit based immigration. David Sacks (00:51:42): Yeah. We could have a skills based system. But that wouldn't get in as many people as quickly as just having an open border. Speaker 4 (00:51:48): Yeah. David Sacks (00:51:49): And look, I think there was an economic rationale for this a while ago Speaker 4 (00:51:53): Yeah. Jason Calacanis (00:51:53): We talked about that. Yeah. Republicans were in favor of it. 20 years David Sacks (00:51:57): ago. Journal editorial page, like, 30 years ago, wanted to support a constitutional memo have an open border. I mean, they just saw the world purely in economic terms. And having free trade, free movement of capital, and free movement of labor was all part of that conception. I think it was naive in a lot of ways. And I think now If you're still supporting it, I don't think it's for economic reasons. I think it's mostly for political reasons. And, look, there's this clip from Tucker that would just went viral today explaining it. I mean, if you wanna play it, Speaker 7 (00:52:28): No. And the numbers you need to understand. Yale University released a study last week by 3 researchers all in liberal, I believe, who concluded that the actual number of illegal aliens in country is not 11,000,000. It's north of 22,000,000. 22,000,000. Sacks 1, FACT 2. The Democratic Party is now as a matter of policy calling for the legalization of all illegals in this country. Citizenship voting rights. 22,000,000 new voters Sacks 3. The overwhelming majority of first time immigrant voters vote Democrat Sacks 4. The largest margin in American presidential history was 17,000,000 votes. 19 80 Sacks, Rod, an outstanding 4 election between Mandale and Reagan. Jason Calacanis (00:53:06): And Reagan. Yeah. Speaker 7 (00:53:07): 17,000,000. You would add to our voter rolls 22,000,000 at least permanent electoral majority in perpetuity. That's what this is about. It's not about making a country better serving our labor needs, helping the population. It's about putting Democrats in power David Friedberg (00:53:23): How do you how do you react to that? Jason Calacanis (00:53:24): How do how do I react to it? Chamath Palihapitiya (00:53:26): Yeah. Could David Friedberg (00:53:28): you ask the question? Like, why would the Democrats wanna do this? That's a that's Speaker 4 (00:53:32): a 2 Jason Calacanis (00:53:32): different votes. David Friedberg (00:53:33): Basically, 2 different votes is what he's saying. Jason Calacanis (00:53:35): We we just had a conversation here that oh, just I think it was on the predictions episode that we all felt that, more immigrants, people of color were going into the Republican party. So there there's only that. I don't think all 22 become magically liberals. We we talked or Democrats here. So I I don't know if that part of the article holds up. Chamath Palihapitiya (00:53:54): I think what people are saying that if you I think what Tucker is saying effectively is that if if 22,000,000 people are converted to US citizens by a given political group, they will be rewarded by the vast majority of those people with at least one cycle vote in their favor. Jason Calacanis (00:54:10): You believe it, Chamath? You believe that that's why Biden's Sacks an open borders to give votes? Chamath Palihapitiya (00:54:13): No. I think that actually my opinion is what I just stated, which is I think that highly over educated liberal elites have a certain amount of self loathing about their lifestyle that they believe is not earned. And so they have this weird thing of, like, they need to feel better. Well, instead of just like looking at the truth, which is Yeah. They didn't earn it, and a lot of it was given to them by their rich parents and just move on and do something good with their life. They wanna just destroy them. Jason Calacanis (00:54:46): Sacks, you believe it? And you believe Chuckers' argument there that this is a democratic vote getting conspiracy? David Sacks (00:54:52): Well, I don't think it's a conspiracy. I mean Jason Calacanis (00:54:53): Your strategy. David Sacks (00:54:55): Democrats have actually said on a number of occasions that this type of immigration is good for the country because, a, diversity and b, it these people will eventually vote democratic or, you know, when they get citizenship or they'll have kids. And because of birthright citizenship, they are more likely be Democrats. Democrats will say this and say it's a good thing, but then when someone like Tucker says it, they'll basically say it's great replacement theory. It's a conspiracy. It's racist. No. He's saying the same thing that you're saying. He's just saying it's a bad thing, and you're saying it's a good thing. Jason Calacanis (00:55:25): So But I never said it's a good thing. No. It's it's a good repair. No. David Sacks (00:55:28): But I've said I'm talking about other people. Jason Calacanis (00:55:30): Oh, okay. So I didn't I didn't get my opinion yet. Yeah. Chamath Palihapitiya (00:55:32): What are you using, Jason? Well, I I Jason Calacanis (00:55:35): wanted to hear Sacks. Sachs, do you agree with him that this is a strategic move by Biden to get more votes? David Sacks (00:55:39): I think it's like a lot of things. It's an issue where the party that's championing it can claim that it's kinda like doing well and doing good. They think that they're doing good but it's also highly motivated by their own desire to Jason Calacanis (00:55:54): benefit themselves. Yeah. I'm with the rest of the country. We should have an orderly process here, and it should be merit based. I've said that a thousand times on this podcast that we should be a point based system, and we should rerecruiting people. We should have some compassionate slots, and then everything else should be a wait list. And we can we should pick a number of how many people we could absorb. Based on the labor markets and do it very thoughtfully. Maybe we need a half million teachers. No. You've just got Chamath Palihapitiya (00:56:20): your solution many times. Just rest it for your opinion on what type which is sent. Jason Calacanis (00:56:25): I would go with Saks's position that it's probably convenient that you, yeah, it might go Sacks, 7030 for votes. I don't think it's 100% of them are gonna vote there. I think this could blow up in Democrats Sacks if if it is their strategy because a lot of people who are coming here immigrants don't wanna be part of the Democratic inning, the liberal woke Democratic party. They wanna be part of the Republican hardworking party. Chamath Palihapitiya (00:56:50): I wanna go 2 for 2. Last week, Sacks I mean, Friedberg pulled up stats that showed that A bunch of people got really angry and quit the pod when I said that and recent basically put in the money to generate AUM. And we were joking in our group chat that it was all the VCs that stopped listening. Jason Calacanis (00:57:11): They all hit the stop button at once. Chamath Palihapitiya (00:57:13): Yeah. Because it was, again, the truth, the uncomfortable based truth. So I wanna ask you guys, just a reaction to my comment that there is an amount of self loathing amongst liberal elites that causes them to embrace some of these ideas that are not rooted in actual logic But are rooted, I think, in their own insecurity. Can I just get your reaction to that? You guys think that's true. David Sacks (00:57:34): I think that among this, elite, this call it woke elite, who defines our politics in terms of social justice, which basically means you divide the world into oppressor and oppressed groups, and you try to figure out with every issue who the oppressed group is and you take their side. That's basically how politics works for this group. So in their view of the world, all these poor migrants are streaming across the border. They're the oppressed group, and so we should help them. We should let them in. You saw Gavin Newsom in California just extended health care to illegal immigrants. So all these government services basically being provided and they think that's a good thing. That's official policy. So I do think that there is this ideological view that we should be doing as much as we can, to provide help and benefits to these people. I think that at a certain point, it gets to to a place where the system breaks. And, again, you have mayors of New York, Chicago, other blue cities saying it's breaking. We can't afford this. There has to be some common sense around what we can afford, you know, can we afford the social services, the hospitals, the schools, the infrastructure? Do we have enough housing for all these people? And I think we've just, like, become completely unmoored from common sense. Now I think that's the ideological people on the party, but I don't know if that's Biden and the Biden administration, I do think that for the administration, they think more about some of these other calculations. But even so, I don't really understand their motivations and their actions because recruiting more democratic voters is more of a long term proposition. It's something that they can achieve over the next couple of decades, but Biden could lose the election this year over this issue. I mean, this is Jason Calacanis (00:59:21): his worst issue. Part. This is what I see. David Sacks (00:59:24): Spotlight on this. I mean, he's actually sending his solicitor general to this new court to get permission to cut the wire at the border. Right? And, you know, again, he's shining a spotlight on an issue where the vast majority of the country and even I think half of the Democrats don't agree with this policy. So I just don't I I don't which you're Jason Calacanis (00:59:47): a 100% right on Sacks. This is, like, for republic this is, abortion is to Republicans as the border is to Democrats. You you have to solve this problem. Look at this chart to be so disconnected from the populace. Only 7% of people reported, and this is a recent poll, This is from this year that it's not much of a problem in the situation of the border. 45% and 30% very serious or a crisis. That's 70 think it's a crisis or very serious. And then 18% thing is some serious. That is the majority overwhelming majority of Americans and you just have to change your policy here. This is, there's too many people flooding across the border, period, full stop. David Sacks (01:00:24): Right. Jason Calacanis (01:00:25): Just like for Republicans, like, they they shouldn't have to overturn Roe VUE and and we should shut down the border, you know, on the democratic side, but I come from a blue collar firm. I can tell you there are 2 democratic parties right now. There's the the working class democratic party that totally doesn't understand what Biden is doing with the border because They wanna see wages increase. They wanna see low unemployment. They want to see their wages increase and not have to deal with illegal immigrants. You know, fighting for jobs, that's a real thing. Wages have gone up in this country because of low unemployment. That's great for the bottom half of the country. And and they live in New York, and New Yorkers want to see services for their families not for families that are shriment across the border. It's that simple. And so what you're saying, Chamath, about, like, woke liberals, that's not the majority of people in New York. That's like a really elite David Sacks (01:01:18): control the democratic party. That's the thing. Jason Calacanis (01:01:20): They control it for now. They control it for now, but I think they're losing control. David Sacks (01:01:24): Yeah. And this is why Biden did that huge debt forgiveness program that from court found unconstitutional is because Yeah. Jason Calacanis (01:01:29): Of course. David Sacks (01:01:30): Professional elites, college graduates, and specifically Ivy League graduates, are the people who run the Democratic Party as well as the media and all these other professional institutions. They're the center of gravity and the power within the party. And the blue collar, the lunch pale type Democrats, the union rank and file, not the leadership, they are starting to move to the Republican Party, the working class, in bigger and bigger numbers. And I think that's Trump's appeal is he actually knows how to appeal to those those people. Jason Calacanis (01:01:58): Absolutely. He does. Knowing a Chamath Palihapitiya (01:01:59): lot of both my experience is there's a lot less self loading amongst Republicans right now than than there is among Democrats. Jason Calacanis (01:02:06): A 100% of my middle class family does not want an open border. David Sacks (01:02:09): They may move to the Republicans one day, Jason. Jason Calacanis (01:02:11): Oh, I no. They are. They they they're they're literal people in New York, proving my in Brooklyn in you know, the boroughs who are looking at it saying, like, I I don't understand this world crazy ideology. I don't want any part of it. And and they might they might vote Republican. David Sacks (01:02:27): Chamath is right. It is self hating. It's self destructive. It's the same thing that we have with these DAs, you know, who are letting all the criminals out of prison. You know, the depository movement? Jason Calacanis (01:02:36): No. We're democrats want law and order. Chamath Palihapitiya (01:02:38): Jason, you keep saying nobody wants that, but it it I think the people that are making these decisions live in high rises that are 50 stories up where there's doorman insecurity, or they're living behind a gate with private security, and so they can make these decisions because they don't feel the impact. Not yet. This is why what's happening in these elite cities is so important because for the first time, the broad infrastructure of a city is getting crippled in a way where these folks have to live with the implication of their decision and actually understand for themselves why did I endorse something that is so fundamentally destructive to me and the people around me? And this is the first time, and so in many ways, what the southern states have been doing by sending migrants to all of these major cities is it is actually con allow The leadership of the liberal elite in these cities to confront, why have I been proposing these pro and these solutions in this way. They've never Jason Calacanis (01:03:37): had to feel the maximum. Same thing that's happening to the Republican party as well. Their leadership, Nicki Hallie, etcetera, the the neocon war mongering Republican party is now losing to Trump as well. Everybody's going populous now. The you and you'll you need only look at the statistics. The majority of people want the border closed. That is across both parties. The majority of people don't want to be involved in foreign wars. That's across both parties. And that's why, you know, Trump and RFK are just crushing it in the polls. And that's why they're they're both having such a great shortness because they're appealing to the majority of Americans, and the majority of Americans don't wanna be involved in foreign world. So it's not a Republican positioned Republican positions the opposite. They're neo cons. They wanna go to war. Chamath Palihapitiya (01:04:18): Let's go to fintech. Jason Calacanis (01:04:19): On the topic of fintech and, more journalism, a bunch of news has been leaked recently. We can get into that aspect of the story as well. Confidential financial data from Sacks Intropic relief this week. If you don't know Brex, they offer credit card and expense management software. It's pretty dope, actually. Very hot startup. They raised a 1,000,005 between 2017 22, and they were last valued at $12,000,000,000 earlier this week, it was reported that Brex was burning 17,000,000 a month, 200,000,000 a year on net revenues of 280 These are select leaks. We don't have, like, the full p and l here. So we we can't tell you exactly what's reality or what parts of this are true, but later that same day, after the leak, Brex announced it was cutting 20 percent of its staff, 300 jobs, which it said would help it extend its runway by 2 years, anthropic, one of the breakout AI companies that's building a proprietary large language model called Claude. It's really dope actually as well into the cool product. They've raised over 7,000,000,000 at a $19,000,000,000 valuation recently, and their gross margin was leaked. This week. 2 anonymous sources said it was between 50.55%. Obviously, we talked here about SaaS software being a 70 to 80% margin business. So, Freiber, you wanna maybe I don't know which way you wanna go with this. Stuff being leaked by the press or the finance side. David Friedberg (01:05:41): I wanted to ask you guys your opinion. Do you think It's almost like the gossip version of business when you get private companies financials and report on it with, like, an angle of being effectively disparaging towards the business. Look how much they're burning. Look how bad the business is. It hurts employees. It hurts shareholders. Any one of us who have been investors in or involved in or on the board of a company where the press then writes an article where they got a hand on confidential financial information about the business, always hurts the business. It's almost like taking photographers outside of celebrities' homes and taking photos of them through their windows. I don't understand the true news worthiness. And I, I just like to take a step back because we always kind of dive into these conversations and treat it as totally appropriate when private confidential information about businesses is leaked and discussed like this, and we kind of have accepted it as the standard. But you know, do we really identify the newsworthiness in this, or is this really just like the gossip fodder for hurting businesses and it's the kind of sensationalism? That we've kind of come u gotten used to in in in the news in general. Speaker 4 (01:06:48): Who does David Friedberg (01:06:48): the the reporting benefit? Jason Calacanis (01:06:50): What the journalists would say is it gives the public the ability to understand business and trends at a deeper level, and that's good in a free society. That's what they would say. But you could argue, like, what's the point of this. David Friedberg (01:07:02): Isn't it a sensational story? It's like, oh, look how much money this company is burning. Oh, wow. That's why we should all talk about it. Like, Jason Calacanis (01:07:08): they would say maybe it's speechless. David Friedberg (01:07:09): Look at the look at the megay yacht that the billionaire is on, you know, or, like, look at the Yeah. Look at the celebrity at the beach, you know, like, look at how they're dressed. Jason Calacanis (01:07:16): The journalists who reported this would say it's no different than us talking about the zerp era or overspending, and it's just part of the reporting on that trend. Speaker 4 (01:07:24): You know, David Friedberg (01:07:24): that's a general framing of That's what Marcus said. Speaker 4 (01:07:26): I don't know. David Friedberg (01:07:27): I just think like going in and getting confidential financial info, it hurts the employees. It hurts the shareholders. It hurts the board. It hurts the company. And the customers of the company then ended up questioning the business. From a journalistic perspective, there's nothing about this that to me seems to benefit the public at large by revealing all of the salacious information. It's a private business that's not required to disclose their financials, and all of their shareholders privately owned the stock someone took some private company data and and leaked it. Jason Calacanis (01:07:52): I can tell you in, you know, when we ran and gadget, 90% of the leaks, 95% of the leaks were calls from within the building. David Friedberg (01:08:00): Yeah. This is disgruntled employees. Speaker 4 (01:08:02): Well, I Jason Calacanis (01:08:02): I think in this case, it's actually an investor who doesn't wanna see them burning 17,000,000 a month. And wants the runway to go further, and they leak this because that's who would have access to it. The accountants and lawyers would have access to it, but that would be the end of their careers and their firms if they did leak it. So somebody who has a financial interest in this, typically an earlier stage investor or an investor who's frustrated with the management that they won't cut the burn, leak this in order to create pressure. So in other words, the press is just a tool being used by the insiders, and that's how this went down. 95% of the time David Sacks (01:08:34): I think it's more likely to be a low level employee. I think that's typically where this comes from. A board member has a fiduciary duty to basically keep proprietary data secret. I really don't see most investors wanting to take the chance. Of it coming back on them by, again, violating their Delaware obligations, their future duties. Furthermore, I think even passive investors who aren't on the board generally don't wanna hurt their investments. I think it's generally disgruntled employees who do this, I'd say lower level disgruntled employees. And the reason they do it is that either they feel like the management of the company is asking them to do something unethical or is non responsive to their concerns. So I think it is the motivations you're talking about Jay Cal, but my view on it is that lower level employees have less David Friedberg (01:09:28): to lose. Like, what do you think the journalists', like, objectives are besides sensationalists here at headlines on, like, what's the newsworthiness to the public on reporting these stories? David Sacks (01:09:39): Well, I mean, you talk about how damaging these stories are, and they hurt the company. So why would the reporters do it? And the reporters are like, right. That they're not there to help companies. They are there to hurt companies and sell clicks by doing it. So now is it newsworthy? What I would say is it's annoying when the media gets a hold of proprietary information and puts it out, but it's hard to argue that it's not newsworthy. I wish the media would do it in a non clickbait way. Like, if they're gonna put out some numbers, don't cherry pick 1 or David Friedberg (01:10:11): 2 of the worst ones. So so But by that vein, shouldn't the journalists go out and try and get the private financials of every private company in Silicon Valley? David Sacks (01:10:19): They would if they could. David Friedberg (01:10:20): Just publish it on our website. Jason Calacanis (01:10:22): Okay. But if they did ask for that explicitly, that would be illegal. So they can take inbound, but they can't go out and try to steal it themselves, obviously. Right. David Friedberg (01:10:30): So why wouldn't someone just set up a WikiLeaks for private financial information? Jason Calacanis (01:10:33): If you look at every journalist now, they have a PGP key or whatever. They have an a phone number. They say anonymous. Hit me on these anonymous services, and that's how this is done. Having been on the other side of it, it's back in the engagement days, people used Yahoo. I think they use I just reacted David Friedberg (01:10:48): kinda negatively when I see these stories, and I'm always like, what's the point here? Why are we reporting and hurting companies based on, like, reporting financial David Sacks (01:10:57): That is the point to hurt them. Speaker 4 (01:10:58): Well David Sacks (01:10:59): But the media has a different incentive than using it. Jason Calacanis (01:11:01): To get a subscriber, if you put this behind a paywall, and you have all the salacious details and you have one story like this every week, then, you know, the 5th time somebody comes to the payroll, they're like, you know what? Yeah. This is great insider information. I'm getting smarter because of it. I'll pay the 25 bucks a David Friedberg (01:11:15): month. Right. Jason Calacanis (01:11:16): If people in our industry didn't wanna see this happen, they shouldn't subscribe to the publications that do this. Chamath Palihapitiya (01:11:21): Freber, did you read the article? David Friedberg (01:11:23): Yeah. It just got some numbers. Speaker 4 (01:11:24): I mean, David Friedberg (01:11:24): I got it. Right. Speaker 4 (01:11:26): So you Chamath Palihapitiya (01:11:26): did read it. Yeah. Yeah. So they accomplished their goal. David Friedberg (01:11:29): Oh, I I read it because you guys sent it to me. But I hate all these articles that I see on the Internet that people Jason Calacanis (01:11:34): to the publications that do this fundraising? David Friedberg (01:11:36): No. I don't subscribe to any of that. David Sacks (01:11:38): No. I don't David Friedberg (01:11:38): either. I don't I don't wanna read about every startup is a challenge. Every startup is a disaster until it's suddenly not. Like, that's reality. And it's it's really awful for years to have seen, like, a tech reporter after tech reporter who's supposed to be kinda covering the news, the innovation, the progress in the industry, target and focus on the inevitable failure that every business is dealing with on a frequent basis and make that the headline story which just ultimately hurts the business, hurts the employees, hurts the ecosystem, hurts progress, doesn't really benefit anyone Sacks their viewership. Chamath Palihapitiya (01:12:09): Thought you wanted to talk about the quality of these businesses. David Friedberg (01:12:12): Let's talk about the quality of the businesses. Jason Calacanis (01:12:13): I David Sacks (01:12:13): think it's hard to have a conversation about the quality of these businesses based on a couple of these data points. Because I think they could be cherry picked. I think one of the problems of these articles is you don't get the p and l. You just get, like, 1 or 2 numbers. I can't tell you based on David Friedberg (01:12:26): Yep. David Sacks (01:12:26): Mean, look, 17,000,000 of burn is not good. That's almost always a red flag, but I don't know if that was 1 month or, like, the steady state need to see the p and l. David Friedberg (01:12:36): I can tell you 5 minutes David Sacks (01:12:37): if it's a good business or not by looking at the p and l. Chamath Palihapitiya (01:12:40): Yeah. In the Brex case, if we if for those of us that know the The founders. They're really sharp guys. Enrique is a really, really sharp guy. So But, David Friedberg (01:12:49): Adam, are you guys in in that company? Anyone? Jason Calacanis (01:12:51): I am not. Chamath Palihapitiya (01:12:52): No. But I'm friends with Enrique, and I think he's wonderful. Jason Calacanis (01:12:54): If they are cutting the burn by 20%, who knows? We we don't, like, Sacks is saying, we don't know the denominator here. We don't know the total spend. We don't know how net revenue is defined. It's just impossible. Chamath Palihapitiya (01:13:05): Use on fintech? Go ahead. Jason Calacanis (01:13:07): Is fintech a great business or not? I mean, is it a tech based business? Do you believe in the category? David Friedberg (01:13:12): So I started Metro Mile, which was an online auto insurance business with a telematics device that plugged in the cars back in 2010. And the term fintech wasn't used at that time. And in the years that followed fintech became a term where it was like technology companies or software companies reinventing financial services in different ways. And, you know, so we're now 14 years past that. And a lot of, quote, fintech businesses are looking like thin businesses without the tech, meaning their margins and their LTV to CAC or their return on invested capital It looks the same, or in some cases worse than the traditional Financial Services businesses that Speaker 4 (01:13:50): they're meant to disrupt. David Friedberg (01:13:50): And so this spans insurance to lending to banking because the, the technology advantage was meant to Speaker 4 (01:14:00): accrue either a better margin or a, you David Friedberg (01:14:00): know, better return profile or a better, call it LTV to CAC, meaning you can acquire customers for less, or you can get more money from those customers by retaining them longer and get more money over time. I always used to sit at the board meetings at Metromile, and I would scream, guys, if if we don't demonstrate margin advantage, the business will eventually trade like the market trades, which is one times revenue. And if we trade at one times revenue, we're already overvalued, and we've burnt so much money. It was always a challenging conversation about pulling up the margin, pulling out the LTV to CAC numbers. The truth is over the years, a lot of fintech companies fell into the same prep that D2C businesses David. Which is to grow. They started acquiring customers through Facebook and Google, and Facebook and Google became all the page views on the internet. And then they ultimately got competed away, and the price went up, and the conversion rates went down. And so the CAC went through the roof. There was a lending company I was involved in early on as a main shareholder, and we were spending $4 to acquire a customer making 12 bucks a month in gross profit. Fast forward 24 months, And it was costing north of $30 to $60 to acquire a customer, and gross profit per month declined to $2 to $4. So, you know, this, this margin advantage went away as the business scaled and the CAC went up. And so the LTV to CAC ratio started to look worse than traditional lenders. What do the fintech companies do in response when this happens, which many of them faced if they had some inherent margin advantage or some inherent growth advantage that over time got competed away Well, they start giving product away for free. In FinTech, it's really easy to grow by giving away a dollar for 90¢. David Friedberg (01:15:40): So you could drop the price of insurance, and suddenly everyone buys your auto insurance, and your revenue growth goes through the roof. But your margin profile is terrible. You'll lose money over time because you'll have higher loss ratios. And same in lending. In lending, you can offer people a lower rate. Revenue goes through the roof. Everyone signs up for loans from you. And over time, you end up having defaults that eat away your gross profit and you end up losing money on that product. So many of these fintech companies, it takes a couple of years for those economics to play out, are now starting to run into that headwind, which is they couldn't just grow through some, unique margin or CAC advantage. They acquire traffic. When they couldn't acquire traffic with a good LTV, the Sacks ratio, they have to start doing this, give it stuff Jason, and then the margins get eaten up over time when the business gets unprofitable, and they can't get out of that cycle. I think we're in this kind of like realizing the truth, which is that a lot of fintech businesses are just fin businesses. There are a few that are doing great, but many of them for many years, I think masqueraded as having some unique tech advantage until those numbers started to play out, which demonstrated that in fact they did not. Jason Calacanis (01:16:40): Yeah. And you can understand the customer acquisition costs. That's what tax stands for for those of you who don't know. Very easily because I was an investor in Robinhood, and one of the genius things they did was a give to get program. It's called in the referral space. If you if I get you to sign up with my referral they would give me a share of a company, and they would give you a share of a company. So you get a free share, but you have to then sign up, you know, and put your bank account in and all that kind of They'll pay a referral program a couple of hundred bucks, Etrades, etcetera, of the worlds, to get a funded customer. Robin Hood was able to do it for giving away 2 fractions of a share, and you weren't getting, like, a $300, you know, Tesla share. You were getting, whatever. 1% of that, you get $3 worth of Tesla shares or whatever. And did it with a little device, like, a mystery box. So it Sacks quite addictive. And in the mystery box, they would have dollar shares, $2 shares, whatever, and they would and they would net that out to be well below tens of dollars instead of 100 of dollars. And I I maxed out the problem because I tweeted it and got 250 people. Now they're doing one where if you move your money into the account, they give you 1%. So if you move a $1,000,000 of shares in, they'll give you, like, $10,000 to build up their assets under management. So You need to have something that is cheaper than what's in the market. Like, TV is very expensive too. Chamath Palihapitiya (01:17:54): I'll say two things which are build on what I've said before and maybe I'll try to make the point clearer. Do you guys know what the average gross margin is of the S and P 500 and how it's changed over time? David Friedberg (01:18:06): My guess is gross margin. Jason Calacanis (01:18:08): Yeah. My guess is 28%. Chamath Palihapitiya (01:18:14): Wrong, but it's a good guess. It's about 43% over the last kind of 25 years. Except in 2 years, and those 2 years were on the tail end of the web 1.0 bubble bursting. So the average is about 43% in 22,002, it went to 30 percent 2003. It went down to 23%. So a half right, of the steady state average. That's one comment. But the second comment is when you actually look at the S and P 500, right, so it all of these different sectors, but this is the 500 best companies in the world. Right? Everything else is much worse than this. And you look at who has the highest probability and the highest correlation over long periods of time of generating high gross margins, It's actually the companies in the markets with the lowest gross margins. So if you put these two things together, what is it saying? It's saying that high gross margin companies are rewarded for growth, but they generally speaking have a very poor Sacks track record of 2 things 1 is generating profitability, and 2 is actually doing it in a consistent manner. And so I think this is just a way of saying what I said last week, but I'm just gonna keep harping on this because I think this is a huge trend over the next decade is Technology, free brew to your point, is no longer a definable sector. I know that we wanna point to a company and say it's the tech company but I think it's much you'll be much safer if you say this is a tech enabled version of x and x is all of these other historical sectors of the economy that have existed energy, consumer staples, consumer discretionary materials, IT, industrials, real estate utilities. Whatever it is, it's actually that company. And those companies have a prevailing gross margin, a prevailing gross profitability, a prevailing ability to convert gross margin to gross profit. And that has not changed that much. And so all of these companies that are massive outliers to these trends are gonna go through a process of getting refactored and maybe your example of fintech being more fintech is a very early sign of what may be happening to the rest of all of these companies that we point to and say, that is a tech company actually, that may just be a real estate company that's tech enabled. David Friedberg (01:20:43): Yeah. It it used to be the case that tech companies sold technology to traditional companies And now traditional companies are getting rebuilt, quote, as technology companies, but maybe don't have as big of an advantage as the incumbents who can easily adopt technology themselves. It becomes ubiquitous that technology is, you know, the way the market evolves. Chamath Palihapitiya (01:21:03): But could you imagine if we have a mean reversion to the average gross margin profile. Oh, by the way, the other thing was a gentleman made a very, I think, misguided when we posted the pod last week about how gross margins can never change, and this is crazy. And I just wanted to explain that for a second. Let's just say you have a software company that has 80% gross margins, but you have an accounting rule now all of a sudden that changes the capitalization of r and d. I think Sacks, you said it last week, but I'll reiterate it. If all of a sudden these companies go totally paired weight, pear shaped, because of these kinds of accounting rules where you can't capitalize these investments over 5 years, but now you can only You pay for them up front, but you can deduct them over 15 or 20 years, which is what is happening right now. Companies will lobby the standards bodies change the definition of gross margin so that those gross margins look very different because they'll wanna deduct them immediately. And now you'll see gross margins decay by a 1000 and 2000 basis points. All of this is to say that This may not be new and different. It just may be a rhyming version of the past, and we know what that pass looked like. And the new the numbers are kind of unavoidable. Jason Calacanis (01:22:22): Sacks, any thoughts on this fintech reckoning, bubble, or some other perspective you might have. David Sacks (01:22:30): I think you're right. It is a reckoning. And the reason for that is because FinTech is one of the hottest spaces during the bubble. I have the saying that the hotter they are, the harder do they fall. And so when a space gets really frothy and speculative, obviously, the the reckoning is gonna be that much bigger. In terms of your question about revenue multiples and how to think about that, I agree that it's a big mistake to think of fintech revenue as having the same quality as say SaaS revenue. I mean, the gross margin profiles of fintech business typically are very different. A good software business, 70, 80% gross margin, fintech businesses typically have transaction costs on every transaction that are pretty high. So like Friedberg mentioned, if you're making loans, you're gonna have a loss rate on that portfolio. If you're doing insurance, you're gonna have claims payouts. If you're doing payments, you're gonna have transaction fees that you pay to save Visa and Mastercard. And, certainly, we saw this at PayPal where the margin on any particular payment was pretty low. And I I do think that investors who are putting 100 times plus multiples on fintech revenue definitely were not taking the the margin profile into account. You know, another mistake that I think investors make is they'll think and turn This is certainly true with with payments companies. I mean, I could I saw this all the time after PayPal is that people will confuse gross payment volume and revenue with a payments company. What you have to understand is, you know, take up a payments business that's doing maybe a $1,000,000,000 in payment revenue. That sounds like a lot. Right? But if they charge 2 a half percent transaction fees on that, that's only 25,000,000 in revenue. Okay. Now let's say that of that 2 a half percent, 1 a half percent on average goes a Visa or Mastercard and another 50 basis points is fraud losses. And another quarter point is customer support costs on transactions where there's a problem. Okay? Now Your real margin, your real gross profit on that transaction is 25 basis points, 10%. So, really, of your 25,000,000 of revenue, you only have 2a half 1000000 of true net revenue. David Sacks (01:24:48): And then you have to use all of that revenue to pay off all the overhead of the company. All the r and d, all the sales and marketing, all the the G and A, the overhead. Jason Calacanis (01:24:57): Kind bars. David Sacks (01:24:58): Yeah. Exactly. So you very quickly shrink from a company that's doing a $1,000,000,000 of payment volume to one that really is only doing 2 and a half 1,000,000 of net revenue. So, I mean, unless you're a company like, I don't know, like, only fans is able to charge 10% transaction fees, but they're rare, you know, and they tend to be kind of in these you know, subprime or kinda sketchy spaces. So people just don't really understand that the scale that you need to make a payments company work. I mean, it needs to be not just like a 1,000,000,000 is not enough. You need to be doing tens or 100 of billions of volume to make these businesses, like, exciting at all. And I think there's something probably pretty analogous with some of these other areas like loans of various kinds or insurance because of the losses The margins are just way smaller than people think, and therefore, you just need huge volumes to make them interesting. Yeah. So I think that's part of what's going on here. Jason Calacanis (01:26:00): Yeah. And people conflate the numbers, especially in the early stage of startups, people were referring to Airbnb and Uber and DoorDash's revenue as the gross market, you know, transactions and, like, well, yeah. David Sacks (01:26:13): Airbnb is taking, what, like, a 15% rate, and it's all Jason Calacanis (01:26:17): Yeah. But, you know, people would take the whole, you know, 5 day stay and attribute that to like, oh, this is the revenue of Airbnb. It's just until actually dishonest. Alright. Friedberg. I haven't seen a bunch of tweets about this arctic storm, hitting California. Is this gonna be amazing snow? Is this going to be floods and disasters? Is this the day after? What's reality here? David Friedberg (01:26:40): Yeah. There's this, like, rumor that is you know, not corroborated by science that this Arc Storm event is gonna hit us in the next week or 2. In California, which is this massive storm. Nick, if you pull up that tweet that I sent you last night so this is the two hundred mile crawl specific jet screen. Jason Calacanis (01:27:02): Oh, yeah. I saw that. David Friedberg (01:27:03): With, you know, very hot and moist specific. So a lot of energy that the ocean temperatures are hotter than they've ever been on record. So, this causes the air to move more quickly. It causes more moisture to go into the air. And then it gets moved and pushed all the way to the Western United States. And so some people have said, wait. This is gonna lead to an Arcstorm event. So what's an Arcstorm event? In 18 Sacks to Sacks in California, there was a atmospheric river event for 43 days. So water poured down for 43 days straight, completely flooded the Central Valley, Sacramento, Los Angeles, All of these regions were underwater for 6 months at the time causing a $100,000,000 in Chamath, and the USGS, the United States geological survey, did a analysis and what they projected would happen if such an event were to happen again this day and age, these sorts of events are predicted historically to happen every 150 to 200 years, But based on the warm temperature in the oceans, we see it's now predicted that these will happen every, call it, 25 to 50 years or much sooner. And these high temperatures are driving a higher increased frequency and severity of these sorts of events. So the most recent model called Arcstorm 2.0, which was an analysis done by the USPS showed that if this sort of an event were to occur again, would drive over a $1,000,000,000,000 in Chamath. In California. So based on the image that you just saw, which showed this massive two hundred mile an hour hot wet jet screen plowing towards the Western US, A lot of people on Twitter started speculating. It's art storm 2.0. It's coming our Jason, and a lot of meteorologists have looked at the ensemble, which is the simulation model forecasts and said, you know what? It's not gonna be Arcstorm 2.0. It's gonna be wet over the next couple of weeks. It could be very wet. But this isn't the big mega flood event that everyone's been worried about. David Friedberg (01:28:52): So rest assured it's not imminent. I know a lot of people are talking about it saying it is imminent, but I do think it's worth being aware of and cognizant of this art storm 2.0 type scenario. And, you know, it's the kind of thing that folks are waiting for. And now, you know, predicting every other week is is about to happen when these sorts of things happen. Jason Calacanis (01:29:09): Last year, they referred to the storms we had in California as atmospheric river and the arc the AR in at in Arcstorm is for atmospheric river, I see. So last year, we had flooding. We had damage to our house. I think like $50,000 in Chamath. David Friedberg (01:29:23): Tahoe was nice. Yeah. The snow in Tahoe, the floods in the Bay Area. It was crazy. Jason Calacanis (01:29:28): It was it was bonkers. And how many days was that? It was only, like, 10 days. Chamath Palihapitiya (01:29:31): So, basically, it's gonna be, like, wet, warm, moist, but it's really not gonna be, like, dripping Jason Calacanis (01:29:42): and, like, I got it. It's not gonna be drenched. It's gonna be drenched. It's gonna be wet. But not drenched. It's gonna be wet for 25 days. There David Friedberg (01:29:53): you go. Anyway, it's worth being cognizant. We talked about the hurricane event in the Pacific a couple Sacks ago. These sorts of events more frequent, more scary, more significant, hotter oceans are driving these events, but this doesn't seem to be the mega flood event. But it could happen. Some point, gotta be cognizant. That's the reality. Jason Calacanis (01:30:15): There are, you know, people are buying, like, sandbags and stuff like that and putting things around their homes these days to to prevent this kind of stuff. So, yeah, And then, hopefully, it hits you. I gotta leak in my office here right now. David Friedberg (01:30:25): I gotta tarp on my roof. Jason Calacanis (01:30:26): You gotta tarp on your roof? Chamath Palihapitiya (01:30:28): This is at your house, or this is at your office? David Friedberg (01:30:30): It's my house. My office at my house. Jason Calacanis (01:30:32): Your home. David Friedberg (01:30:33): Started leaky. It's like water was pouring in through the roof. The other day, we started. Speaker 4 (01:30:36): Do you Chamath Palihapitiya (01:30:37): have wood shingles, or do you have Jason Calacanis (01:30:38): other No. David Friedberg (01:30:39): I've got composite shingles. But apparently underneath it, there's some holes they gotta redo the roof. Anyway, I Chamath Palihapitiya (01:30:45): have to take I have to take the wood shingles off because we can't get the insurance people to Jason Calacanis (01:30:50): Yeah. She proves no longer allowed because of fires in Calacanis. And you can replace up to 30% of them is what I was told. And so you can do, like, patchwork Chamath, but if you wanna, at a certain point, they won't let you do it. And you just have to replace the whole damn thing. This happened to me in Brentwood. And those wood shakes that you have, the sun dries them, and they become like Tinder, basically. So you actually don't wanna have those those shake rooves anymore. It's super nice. Speaker 4 (01:31:13): I think Chamath Palihapitiya (01:31:13): that I think they're treated to be fire retardant. But they look so beautiful, and now we have to replace them with composite shingles or like, you know, anyways, we're we're about to start. But We don't we can't even get 5 days straight of good weather for the folks to come in. So that's what's so crazy about this thing is we can be sitting here Sacks months from now. Jason Calacanis (01:31:31): And have 25 days of moisture. Yeah. Chamath Palihapitiya (01:31:34): I mean, 40 days I'm gonna tell him that. 40 days straight of wet moisture, wet, and moist. Yeah. But not dripping, not drenched. No. 40 days. Consistently 40 days in which consisted 40 days of just, yes, wet and warm moisture. Jason Calacanis (01:31:51): Jason, listen, if you were up in Tahoe, it would be flurries and, yeah, soft, powder, which is what I'm hoping for. Speaker 4 (01:32:03): Alright, everybody. For the day, while Jason Calacanis (01:32:06): she laughing, Keep it together, please, for the dictator, Chamath Polyhopatea. And is there when we look at these atmospheric things that occurred, is any way does this have any kind of, gravitational pull, any planetary effects, that might pull the oceans out, like the gravity of the moon? Or David Friedberg (01:32:27): I'm turning off my microphone. Chamath Palihapitiya (01:32:29): Maurice. You're Jason Calacanis (01:32:31): nothing. None of those. Wood classes. Alright, everybody. Goodbye. For for the Sultan of Science, David, regarding the dictator, chairman dictator. Shamar Fai, Javier. 10. David Sacks. I love you, miss. Yeah. Love me, Vasce. Chamath Palihapitiya (01:32:45): We'll see you next time. Speaker 6 (01:32:49): To let your winners ride. Jason Calacanis (01:32:52): Rainman, David Sacks. Speaker 6 (01:32:56): And it said, we opened sit to the fans, and they've just gone crazy lately. On airliners line. Besty's our car. Home13. Speaker 4 (01:33:12): That is why they know. Chamath Palihapitiya (01:33:22): Think you, George, because they're all just useless. It's like this, like, sexual tension, but they just need to Speaker 6 (01:33:26): release her mouth. Jason Calacanis (01:33:33): We need to get Murphy's